BOGOTA Aug 20 Colombia's Finance Minister
Mauricio Cardenas said on Tuesday that under current economic
conditions he would like to see the central bank maintain
efforts to stem gains in the currency and extend its dollar
purchasing program beyond September.
Cardenas, who represents the government on the central
bank's seven-member board, also told Reuters that the 3.25
percent benchmark interest rate is the "correct level" for
The monetary authority has bought millions of dollars daily
on the spot market for months in a bid to weaken the peso and
ease problems for sectors like manufacturing, which struggles to
compete with cheap imports, and exporters, which face high local
costs and low dollar earnings.
Cardenas has said he wants a currency at between 1,900 and
1,950 per dollar. The peso closed at 1,922 per dollar on
"Under current conditions I think it's necessary to continue
as we are, if everything continues as today it would be
desirable to maintain the policy," Cardenas said of the dollar
purchases which end on Sept. 30.
The peso has strengthened steadily over the last decade -
with a respite in 2008 - from about 2,800 pesos per dollar at
the end of 2003, prompting heavy lobbying by exporters and
industrialists. Last year it gained 9 percent, but a potent dose
of government and central bank intervention, both verbal and
actual, has brought it down more than 8 percent this year.
Gains in the peso have also been tempered by expectations
that the U.S. Federal Reserve will soon pull its stimulus
program, a move that may draw investment away from emerging
markets like Colombia.
The central bank has balanced a monetary policy that aimed
to prevent the currency strengthening too much while also
bolstering sluggish economic growth. Policymakers cut borrowing
costs 200 basis points from July last year before holding them
steady at the last four board meetings.
Economic growth slowed to 4 percent last year from 6.6
percent in 2011 and the central bank expects 4 percent expansion
again this year. Cardenas estimates the economy will accelerate
4.5 percent in 2013.
"Under the actual conditions the interest rate is at its
correct level, conditions are right to maintain rates," said
Investment has soared over the last decade as a military
offensive against Marxist rebels and right-wing paramilitary
groups improved security, making it easier and safer to do
business in Colombia.
Growth began to flag last year as the side-effects from the
global financial crisis hit consumer confidence and overseas
sales - a double whammy for manufacturers.