Colombia Trims 2013 Foreign Debt Issuance Plan to Curb Peso

Colombia will scale back its 2013 overseas borrowing plan to reduce its foreign debt and help curb a rally in the peso, Finance Minister Mauricio Cardenas said.

The Andean nation will trim external debt this year by borrowing less in the international market than the amount the country must repay, Cardenas told reporters in Bogota last night. The country won’t prepay its overseas bonds or multilateral loans, he said.

“Colombia plans to cut its overseas debt this year by having less issuance, fewer external credits, while sticking to planned amortizations,” Cardenas said. The government will employ “internal resources” to cover the lost funding, he added.

The expansion of the Andean nation’s oil industry, which accounts for about half of exports, has contributed to a 26 percent rally in the peso against the dollar since the start of 2009, causing complaints from farmers and manufacturers who say it is making it difficult for them to compete. President Juan Manuel Santos told coffee growers yesterday that his government will use “all the weapons in its arsenal” to prevent the currency’s appreciation from damaging the country’s producers.

In its 2013 financial plan, the government said it would sell $2.6 billion of bonds overseas. It has sold $1 billion so far this year.

The central bank increased daily dollar purchases by 50 percent between February and May to at least $30 million. The government also asked state-controlled oil company Ecopetrol SA to borrow mainly in local currency this year. The measures should weaken the peso to its equilibrium level of 1,950 per dollar, Cardenas said Jan. 29.

The peso depreciated 0.2 percent to 1795.44 per dollar at 8:26 a.m. in Bogota.

Counter-cyclical

Colombia’s annual inflation rate unexpectedly fell to a near three-year low in January. This “magnificent” result gives Colombia room to implement counter-cyclical monetary policy if international conditions make this necessary, Cardenas said.

“This was an excellent result and also gives us the opportunity to use an instrument as fundamental as the interest rate in a counter-cyclical manner,” Cardenas said.

Annual consumer price increases eased to 2.0 percent last month, from 2.44 percent in December, the slowest pace since April 2010. Colombia targets inflation of 3 percent, plus or minus on percentage point.

To contact the reporters on this story: Oscar Medina in Bogota at omedinacruz@bloomberg.net; Matthew Bristow in Bogota at mbristow5@bloomberg.net

To contact the editor responsible for this story: Andre Soliani at asoliani@bloomberg.net

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