Cardenas Says Colombia Must Do Everything It Can to Weaken PesoOscar Medina
Colombia’s government should do everything it can to weaken the peso to protect the Andean nation’s exporters, Finance Minister Mauricio Cardenas said.
That could include extending the central bank’s program of at least $30 million in daily dollar purchases beyond the scheduled end date in May and looking for other, “creative” ways to curb the peso’s rally, he said. The bank will accumulate about $10 billion during 2013, if it continues to buy dollars at the pace it did in February.
“The question is whether the central bank can do a bit more, can intervene still more aggressively in the exchange market, and I believe it can,” Cardenas told flower growers in Bogota today. “‘Every day, the president calls me and says we need to be more audacious, more creative.”
Coffee farmers and other agricultural producers blocked highways from Feb. 25 to March 7 over falling incomes, which they say has been aggravated by the peso’s strength. Central bank governor Jose Dario Uribe on March 18 said he would welcome a weaker currency and that increased dollar purchases are “a possibility.”
The peso has strengthened 24 percent since 2008, the second-best performance among 25 emerging market currencies tracked by Bloomberg, provoking complaints from exporters. The bank bought $819 million in February.
Cardenas said the government of President Juan Manuel Santos will announce a stimulus package to help agriculture and industry in the coming days or weeks.
The central bank will cut its benchmark interest rate by a quarter point for a fifth month at its March 22 policy meeting, according to 27 analysts surveyed by Bloomberg. Three analysts predict the bank will hold the rate at 3.75 percent.
Cardenas said he hopes the bank’s policy committee, which he chairs, will continue its cycle of interest rate cuts.
“Analysts overwhelmingly believe that this is the moment to cut interest rates, to continue with this policy,” he said. “We still don’t know where it will stop, that depends on how the economy performs.”
Colombian’s annual inflation rate fell to 1.83 percent last month, the lowest since 1955, while the economy operates at less than full capacity.
Gross domestic product expanded 3 percent in the fourth quarter from a year earlier, the weakest pace in the Andean region, according to the median forecast in a Bloomberg survey of 27 analysts. The national statistics agency reports on 2012 and fourth-quarter growth tomorrow.
Cardenas says the Colombian economy can grow 4.8 percent per year without stoking inflation.