Colombia Exporters ‘Learning to Survive’ Strong Peso, Trade Minister Says.

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Fuente: Bloomberg.


Colombian exporters can’t expect the government to protect them from the effects of a strong currency and “are learning to survive” by boosting productivity and seeking new markets, Trade Minister Sergio Diaz Granados said.

“The plan is to encourage our companies to improve their productivity and the quality of their products, enter new markets,” Diaz said in an interview in Bogota yesterday. Exporters shouldn’t seek “artificial protections through the exchange rate that aren’t sustainable over the long term.”

Colombian exporters are having to contend with a peso that’s strengthened 23 percent over the past two years, the most after Brazil among Latin America’s six major currencies. The central bank and Finance Ministry have sought to ease the peso’s gains without resorting to capital controls as in the past, said Diaz.

“We have used them in other occasions, in 2007 and 2008, and the result was more a cost to the reputation of the country than a benefit to the exchange rate,” Diaz, 42, said. “We are providing a soft landing to the problem by devising appropriate policies.”

Finance Minister Juan Carlos Echeverry on April 29 said the government would create an overseas fund with as much as $1.2 billion from dollars bought in the local spot market through the end of 2011. The government would forgo repatriating funds from abroad for the rest of the year, Echeverry said.

The dollar purchases are in addition to the central bank’s plans to buy a minimum of $20 million daily until at least June 17.

Peso Weakened

Since the measures were announced the peso has weakened 1.6 percent. Today, the peso fell 0.34 percent to 1,794.1 per U.S. dollar at 12:11 p.m. New York time.

In 2007 the central bank attempted to reduce incentives to bring short-term capital into Colombia by ordering companies and investors to deposit 40 percent of loans raised abroad with the bank for six months. The Finance Ministry also imposed deposit requirements of 50 percent for two years on new portfolio investment in the country, including the purchase of bonds and stocks. The controls were abolished in 2008.

Central Bank Chief Jose Dario Uribe reiterated yesterday that the cost of using capital controls to ease gains in the peso outweighs the benefits.

Transport, Electricity

Diaz said that while the Finance Ministry and central bank “have the last word” on capital controls, his ministry aims to help exporters weather a strong peso, which makes their goods more expensive in dollar terms, by improving transport and making their use of energy more efficient.

Even with the gains in the currency, export levels haven’t declined, said Diaz, a lawyer who did postgraduate study at the Inter-American Institute for Economic and Social Development in Washington. Last year exports rose to $39.8 billion from $32.9 billion in 2009, according to the statistics agency.

Foreign direct investment will likely reach $8 billion this year, rising to $13 billion in 2014, Diaz said.

As part of the government’s strategy to seek new export destinations, Colombia is joining Mexico, Chile and Peru to form a trading bloc that will enable them to compete with Brazil for Asian markets. Chile, Peru and Mexico are already members of the Asia-Pacific Economic Cooperation group, known as APEC, while Colombia isn’t.

‘Distant Markets’

“It will let us bring in investment from distant markets like Europe and Asia,” Diaz said. “ We are using this as a platform to enter APEC.”

The outcome of Peru’s presidential race between Ollanta Humala, who has pledged to seek a new constitution and redistribute wealth, and Congresswoman Keiko Fujimori, who says she favors increased foreign investment and the sale of state companies, is unlikely to threaten the accord, Diaz said.

“Both have expressed their interest in the process,” he said.

Diaz, who will travel to China with President Juan Manuel Santos in September, expects negotiations for a free-trade accord between the two nations to start within four years.

Colombia plans to open trade offices this year in Singapore, Seoul and Tokyo as well as an embassy in Indonesia, he said. Free-trade talks with India may begin in three or four years.

Diaz said he doesn’t see the likelihood of any fresh holdups by the U.S. congress in ratifying a free-trade agreement with Colombia, and didn’t rule out passage by August.