* Government mulling more measures to weaken peso
* Verbal intervention seen limiting currency strength
By Nelson Bocanegra and Eduardo Garcia
BOGOTA, April 17 Colombia's central bank chief
said on Wednesday there are "objective reasons" why the
country's peso currency should ease against the U.S.
dollar, while the government said it is considering more
measures to weaken the peso.
The firmer peso is cutting into the revenues of exporters
and causing problems for manufacturers who struggle to compete
with cheaper imports.
"There are objective reasons that lead one to think that the
Colombian peso should devaluate and hopefully it will continue
the (downward) trend that it has shown in the past two months,"
Jose Dario Uribe, the central bank head, told a local radio
Investment in Colombia's capital markets has soared over the
last decade and foreign direct investment has reached record
levels, boosting the peso further and forcing the central bank
to buy at least $30 million a day in the spot market to weaken
the national currency.
The government and the central bank have rolled out numerous
measures over the past year, using verbal as well as actual
intervention, to slow gains in the peso.
Their efforts have curbed the rise in the currency, which
began in 2009, bringing the peso down 3.74 percent against the
U.S. dollar so far this year.
The peso weakened 0.85 percent on Wednesday, when it closed
at 1,849 versus the U.S. dollar.
Uribe said he thinks the peso could weaken because he sees a
possible stabilization or reduction in the value of Colombia's
exports compared with the value of imports, and because the
government has taken steps to increase demand for dollars.
MULLING MORE MEASURES
Finance minister Mauricio Cardenas has made weakening the
peso a priority since taking office last year. Earlier this
month he called the strong peso "the mother of all problems."
He unveiled a stimulus package on Monday designed to
revitalize the economy and encourage pension funds to invest
more money abroad, a move that could prompt them to buy $5
billion in the local currency market.
"Going forward we expect a very limited impact on the
Colombian peso coming from the measures. However, verbal
intervention from Cardenas has proven effective," Nomura
Securities said in a report on Wednesday.
"We expect him to continue intervening verbally every time
the Colombian peso rallies, which should limit its strength."
Deputy finance minister Andres Restrepo told Reuters that
the government is considering further measures to weaken the
"We are studying all the possible mechanisms ... We're still
looking at the menu of options," Restrepo said when asked if he
thought the measures announced on Monday would be enough to stem
However, he said the effect of the stimulus package on the
peso will be felt in the coming weeks and that he is confident
Colombia's currency will reach the 1,900 pesos per dollar
"optimum" level, although he did not say when that would be.
"I think we will start to see a stronger (downward) trend in
the next few days, but in general, the idea is that this process
will continue," Restrepo added.