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Colombian goverment annouces new measures to curb Peso rise

Colombian authorities announced a set of measures intended to curb rising prices and counteract the peso's rise against the dollar.

Exporters, such as coffee and flower growers, have been demanding the government put the brakes on the peso, complaining the strengthening local currency is making their products less competitive abroad.

Under the new measures announced Sunday night, companies that borrow abroad will now have to leave 40 percent of the loaned money with the central bank for six months. The central bank will not pay any interest on the money, said the bank's governor, Jose Dario Uribe.

The central bank said commercial banks have been borrowing funds abroad at lower interest rates and then lending the money to customers in Colombia at higher interest rates.

As a result of the wave of dollars coming in to the country, the Colombian peso had strengthened 8.5 percent between the end of 2006 and Friday.

Daniel Escobar, head of research at Gesvalores, said the measure will not have much impact on the peso, as foreign borrowing contributes marginally to the peso appreciation.

"Based on my calculations, foreign borrowing is responsible for only 15 percent of the peso appreciation," Escobar said. "The strong impact on the peso comes from foreign direct investment and no one can stop that."

The central bank will also raise commercial banks' reserves on deposits made by customers starting on Monday. The measure aims to slow down inflation by restricting the credits granted by commercial banks, Uribe said.

Starting Monday, the commercial banks will have to send the central bank 27 percent worth of new checking accounts made by customers, 12.5 percent of saving accounts and 5 percent of certificates of deposits.

Copyright 2007 Associated Press. All rights reserved. This material may not be published broadcast, rewritten, or redistributed

By Brians on May 8, 2007, 06:24 in Friendly Talkzone.

aztec says on May 8, 2007, 07:36:

Thanks, Brians Would you please post the URL for the article.

0 funny, 0 helpful.

gorgonabob says on May 8, 2007, 07:43:

http://biz.yahoo.com/ap/070507/colombia_currency_measures.html?.v=1

The peso will go where its going to go and the Govt cannot do much about it... There are a lot of people investing a lot of money in colombia and that is only going to continue as the economic and security situation improves...

0 funny, 0 helpful.