Colombia will continue buying dollars in order to keep its currency competitive, said Finance Minister Mauricio Cardenas on Wednesday.
Colombia will continue its current policy of dollar purchases at the rate of $750 million dollars per month in an effort to tame the peso’s rise against the dollar after a rally during 2012 brought aches and pains for Colombia’s coffee industry and others who rely on exports.
“The government’s policy is very clear and very simple,” said Cardenas. “We are going to maintain the same rhythm of dollar buying… 750 million dollars per day. This will help us find a more competitive currency and a higher [exchange] rate.”
After a boom of oil and energy sales throughout 2012, demand for Colombian currency on the international market sent the peso soaring toward the end of the year, finally reaching COP1759.5 to the dollar in early January.
In response, Colombia’s Finance Ministry has taken up aggressive measures to stem the peso’s rally. Cardenas says that its three-pronged strategy could get the peso to COP1900 to the dollar this year.
The Finance Minister pointed to the government’s decision to double its dollar purchases compared with last year, to pay its foreign debt in dollars, and a recent stimulus to plan called PIPE, as the means for revaluing the peso. Continued quantitive easing by the Federal Reserve Bank of the United States could help steer the peso’s revaluation as well, said the official.
Analysts have set their eyes on Colombia’s manufacturing sector and its exports, an indicator of whether or not the dreaded Dutch Disease, a condition where sales from energy commodities push up the currency and hurt exports, could reach a dangerously symptomatic stage.
But adhesive manufacturing Saint-Gobain’s chief executive for the Andean region Duber Pereira told Colombia Reports that from his view, “Dutch disease is a little premature.” Pereira added that factors like the choked demand from the Eurozone malaise and how “exports to Venezuela are almost extinct” might be stronger factors in Colombia’s export aches.
Original Reporting, Duber Pereira, Executive at Saint-Gobain
US dollar to Colombian peso exchange rate data (Google Finance)