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Colombia Strengthens Capital Controls to Stem Peso Appreciation

Colombia Strengthens Capital Controls to Stem Peso Appreciation
http://www.bloomberg.com/apps/news?pid=20601086&sid=ajdR_4IY16rU

By Andrea Jaramillo

May 30 (Bloomberg) -- Colombia's Finance Ministry announced measures to strengthen capital controls as it seeks to ease the peso's five-year rally.

The government raised deposit requirements on new portfolio investment into the country, such as the purchase of local bonds and stocks, to 50 percent from 40 percent, the Finance Ministry said in an e-mail statement.

Foreign direct investment will now be required to remain in the South American country for a minimum of two years, the ministry said.

To contact the reporter on this story: Andrea Jaramillo in Bogota at ajaramillo1 at bloomberg.net

Last Updated: May 30, 2008 09:54 EDT

By sloopskipper on May 30, 2008, 09:31 in Friendly Talkzone.

Buongone says on May 30, 2008, 09:46:

Good. Maybe the Yankee Greenie will inch back up !!

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sloopskipper says on May 30, 2008, 09:47:

Here's hopin'.

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guacharaca says on May 30, 2008, 10:14:

That is interesting. This could affect some future "investment visa' seekers too.

Colombianos: Las armas os han dado independencia, las leyes os daran libertad. (Santander)

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sloopskipper says on May 30, 2008, 10:15:

For SURE!

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panthdave says on May 31, 2008, 04:40:

Peso is getting stronger...Sorry..Slowly but slowly it will..This week perfect example...Now it will hover around 1750.00 probably for a couple months...4th Quarter I am seeing 1400-1600

panthdave Miami

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BillBigD says on May 31, 2008, 08:13:

Your earlier prediction yesterday was 1720 COP

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rocinante says on May 31, 2008, 08:35:

It has always been tough to hot money in and out of the Colombian bond market.

This hurts equities (which has tremendous upside potential anyway) and adds a slightly higher speed bump than the speed bump already there, but what it really does is curb COP volitility meaning the peso will gain slower. The curbing of volitility shows a MORE stable and steady economy because the COP chart will be more predictable. Long term serious investors like that. Also this helps out the Colombian banks who are receiving a 10% increase in free money, in essence raising the gringo tax if you will. In other words "you foreigners are are taking advantage of something we have here and we want to make MORE money on it."

However it is still attractive to foreign investors.

I think dreaming of a 2000 exchange rate is just that. Dreaming. Unless the Central Bank pegs the peso (which ain't happening) little attempts like this just retard the inevitable and puts more money in the Colombia economy and the banks here.

Quote from the article:

"A year ago, the government imposed capital controls on foreign portfolio investment in a bid to stop the peso's appreciation. In spite of the measure, the peso gained 11% against the dollar in 2007."

"World economic indicators point to a democrat winning 2008. It will surely be Obama. Peso 1400 by November" Feb 5, 2008

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