BOGOTA, Aug 20 (Reuters) - 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 current circumstances.
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 Tuesday.
“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 Cardenas.
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.