* Efforts to stem peso gains have muted effect
* Strong currency hurts exporters, manufacturers
* Could use savings from local debt management
By Helen Murphy and Nelson Bocanegra
BOGOTA, Feb 5 - Colombia may retire foreign debt
before it matures, by drawing on budgetary resources freed up by
lower-than-anticipated domestic bond servicing costs, the
country's finance minister Mauricio Cardenas said on Tuesday.
Colombia's peso softened after Cardenas' remarks in which he
said he would every tool in the government's arsenal to weaken
the peso, which he said was about 10 percent
overvalued against the dollar.
"The government could make an additional effort because we
have reduced the cost of domestic debt servicing, interest on
TES bonds has fallen...so we have savings that could be used to
prepay external debt," Cardenas said, speaking in an interview
on local radio.
"We are also considering general spending cuts," Cardenas
added, referring to the 2013 budget.
The peso gained 9 percent against the dollar last year. In
2013 it has retreated only negligibly.
By drawing on peso-denominated coffers at home to buy
dollars to prepay foreign debt, the government would put
downward pressure on the peso, analysts said.
The central bank cut its overnight lending rate a quarter
percentage point last month to 4 percent and increased purchases
of dollars on the spot market to $30 million a day from $20
The price of the domestic Treasury bonds, known as TES,
have now reached a record, meaning that their interest rates
have fallen. Bond prices and interest rates move in inverse
In Tuesday morning trade, the peso weakened 0.14 percent to
1790.30 pesos to the dollar. So far this year, it has softened
barely 1 percent against the U.S. currency.
Despite government efforts, economists reckon the peso will
not react much to the measures as its strength comes mostly from
record dollar inflows into the economy as security in the Andean
Colombia has been the victim of its own success in recent
years as improved security over the last decade opened up many
parts of the country to more investment from oil and mining
companies, whose dollars are a key contributor to the peso's
A strong peso hurts exporters who receive dollars for sales
but pay costs in pesos while local manufacturing suffers from an
influx of cheaper imports.
The government has vowed to keep dollars from overseas debt
sales abroad and asked state-run oil company Ecopetrol not to
take on dollar debt for financing. It also uses excess funds
from the Treasury to buy dollars.
In its regular assessment of Colombia's economic health, the
International Monetary Fund said on Monday the peso appeared
over valued on a real exchange-rate basis by between 1 percent
and 8 percent, though the strength also could reflect
improvements in economic fundamentals.