Reuters: US Dollar Report: Colombia not mulling capital controls to stem peso rally

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Colombia not mulling capital controls to stem peso rally Sep 5th 2012, 16:13 Wed Sep 5, 2012 12:13pm EDT * Government to continue buying dollars, leave funds abroad * Will try to rely less on foreign debt BOGOTA, Sept 5 (Reuters) - Colombia will continue buying U.S. dollars in the foreign exchange market and will avoid tapping into funds abroad to fight currency appreciation, but does not plan to impose capital controls, said incoming finance minister Mauricio Cardenas. Cardenas, who replaced Juan Carlos Echeverry at the helm of the finance ministry late last month, said the government's efforts to put a break to the peso rally will be made in conjunction with the central bank, which has been buying dollars since the beginning of the year. "The appreciation has to be contained with effective measures, and the most effective measure is central bank intervention, but also managing public finances, saving more funds abroad, or using savings to pay foreign debt," Cardenas told reporters on Tuesday night. He said the government and the monetary policy authority will implement measures that will be "much more effective than capital controls." The government has bought more than $700 million in the past three weeks to bolster efforts by the central bank to hold back the peso, one of the world's top gaining currencies. So far this year the peso has appreciated around 6 percent versus the dollar, down from a peak of 8 percent reached in mid-August. Cardenas also said that the Colombian government will try to depend less on foreign debt and will continue holding the funds raised through previous debt issuances overseas, as it has been doing for the past couple of years. "We'll continue cutting our dependence (on foreign debt) so that we shield ourselves, but also so that we avoid bringing dollars into the Colombian economy," he said. The Colombian peso traded at 1,822 per dollar on Wednesday morning, a 0.16 percent rise from the previous day. A military crackdown on drug-funded insurgent groups has made Colombia much more attractive to investors, once fearful of visiting the nation as Marxist FARC rebels and paramilitary groups bombed corporate installations and kidnapped workers. Even as economic growth is expected to slow in 2012, the new optimism may attract as much as $17 billion in foreign direct investment this year, putting more pressure on the peso. Meanwhile, Colombia's tax office said on Wednesday that tax revenues in the January to August period had increased 31.7 percent compared to the same period last year. In the first eight months of the year the DIAN tax office collected 78 trillion pesos, which puts Colombia on track to reach its target of raising 100 trillion pesos in taxes in 2012. Link this Share this Digg this Email Reprints

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