* Move aimed at combating rising peso currency
* Government positive about 2013 economic growth
By Nelson Bocanegra and Jack Kimball
BOGOTA, Feb 13 Colombia's government will reduce
global bond issuance this year by $1 billion to replace them
with dollar purchases on the foreign exchange market to combat
the rising peso currency, Finance Minister Mauricio Cardenas
said on Wednesday.
Colombia, like other commodity-producing emerging economies,
has been battling a strengthening currency as its relatively
high yields, and expansive monetary policy in developed
countries, attract a flood of U.S. dollars.
Cardenas, speaking at an economic forum in Bogota, said the
government would lower global bond issuance by $1 billion and
buy the same amount on the foreign exchange market to pay debt
amortizations and interest.
The government will pay for the new dollar purchases from
savings due to lower interest payments and domestic financing
needs following a debt swap with state companies, according the
The move lowers total 2013 external financing, including
multilateral loans, to $2.6 billion from $3.6 billion before.
Wednesday's announcement coupled with the issuance of a
global bond worth $1 billion in January means that Colombia only
has $600 million left to sell in 2013 plus the remaining $1
billion in multilateral loans.
Investment in Colombia's capital markets has soared over the
last decade and foreign direct investment, mostly in the oil and
mining industries, has reached record levels, boosting the peso
and forcing the central bank to buy dollars.
The government and central bank have rolled out numerous
measures over the past year, using verbal as well as actual
intervention, to slow gains in the peso against the U.S. dollar.
The peso rose nearly 9 percent in 2012, making it one of the
world's strongest gaining currencies, and that trend shows
little sign of reversal this year.
The peso closed at 1,778.05 versus the dollar on
Cardenas has repeatedly said that the currency's equilibrium
is about 10 percent weaker than the current rate.
"I'm convinced that the exchange rate is going to find a new
equilibrium. I can't tell you that it'll be tomorrow, or next
week or in a month or in six months, but the exchange rate is
going to find a new equilibrium, of that I'm sure," he said.
INTEREST RATES AND GROWTH
Cardenas, a member of the central bank's seven-member board,
said easing inflation gave the monetary authority space to
continue cutting interest rates from the current 4 percent, its
lowest since May 2011.
"If you ask me whether I see space to lower interest rates,
I say, absolutely yes," he told reporters after his speech on
Lower interest rates boost economic growth and make yields
on its debt less attractive to investors. Therefore, the amount
of dollars coming into the economy should lessen, helping to
weaken the peso.
Controlled inflation has allowed the bank to trim 125 basis
points from the lending rate since mid-last year.
At the same economic meeting, central bank chief Jose Dario
Uribe said that growth was dragged down "almost entirely" in
2012 by weak investment, mainly in public works.
The central bank estimates 2012 economic growth at 3.3
percent to 3.9 percent and between 2.5 percent and 4.5 percent
this year. The government is more optimistic. It says expansion
should be near its potential of 4.8 percent in 2013.
"If you ask me, of all the reasons I'm confident that this
year we'll perform well in terms of growth, the main one is the
dynamism that household consumption has," Cardenas said.