Echeverry Seeks More Ammunition for Colombia Currency War
Colombian Finance Minister Juan Carlos Echeverry stepped up pressure on the central bank to boost dollar purchases and damp a rally in the peso that threatens to undermine local industry and farmers.
“We are in a currency war and those who don’t fight lose,” Echeverry said in an interview today in Bogota. “We need more ammunition for this war.”
The comments come five days after Echeverry said several policy makers agreed with him on the need to increase intervention in the currency market. That same day, July 27, bank Governor Jose Dario Uribe said the bank would keep buying a minimum of $20 million daily in the spot market until at least Nov. 2. The peso has rallied 8.5 percent against the dollar this year, more than any other of the 170 currencies tracked by Bloomberg.
Echeverry also said local governments need to start spending more money set aside for infrastructure in order to achieve his growth target of as much as 4.8 percent this year.
“The best thing that can happen is with the wave of spending that we’ll have and with currency measures, agriculture and industry, which are the ones that are hit, can recover,” Echeverry said. “Those measures would make it easier to achieve that goal.”
Colombia’s central bank on July 27 reversed course and unexpectedly cut borrowing costs for the first time since 2010 to buoy growth as the European debt crisis hurts export revenue. The bank also lowered its 2012 economic growth forecast to a range of 3 percent to 5 percent from a previous 4 percent to 6 percent.
While all members voted for a rate reduction, according to the statement following the decision, Echeverry told lawmakers this week that he and another board member voted for a 50 basis- point cut.
The quarter-point cut to 5 percent surprised 24 of 35 economists surveyed by Bloomberg, who had predicted no change.
“A couple of us thought the signal should have been stronger, but we feel fine with the signal of 25 basis points,” Echeverry said today. “The cut is what sends the strongest signal. From here on we’ll see what is needed.”
The sale of Ecopetrol (ECOPETL) SA next year “isn’t indispensable,” Echeverry said.
The government will present a bill to Congress this year to allow it to sell a stake in Colombia’s largest oil company, Echeverry said. The Andean country will only sell a stake when it needs to, he said.