Colombia’s Treasury will continue to buy dollars next week to try to weaken the peso, said Juan Carlos Echeverry, who resigned as finance minister today.
The dollars are not for a repurchase of debt, Echeverry said in an interview in Bogota after his resignation. Echeverry said he will urge his successor, Mauricio Cardenas, to continue lobbying the central bank to step up its own dollar purchases.
The central bank “still has a very precise way of looking at intervention,” Echeverry said. “But we can change their minds, so we will keep trying.”
The peso has rallied 7.1 percent this year, the biggest gain of 170 currencies tracked by Bloomberg after the Hungarian forint and the Chilean peso. Cardenas’ main challenges are to keep the economy growing above 4 percent amid the European debt crisis, and to help industry and agriculture weather exchange rate appreciation, Echeverry said.
Echeverry declined to say how many dollars the Treasury will buy in total.
“Part of the strategy is to have room for maneuver to intervene when it’s necessary,” Echeverry said.
The dollar purchases don’t form part of any debt repayment plan, Echeverry said.
“This is just placing liquidity abroad, and we have excess liquidity domestically because tax collection was better than expected,” Echeverry said. “It’s not that we are using that money to repay debt, it’s a strategy basically domestically geared to supporting the exchange rate.”
Colombia’s so-called fiscal rule, which determines a path for spending and the deficit, means the country will pursue similar policies whoever is finance minister, Echeverry said.
“We created the fiscal rule which determines a very narrow path for the minister to make it foreseeable for the markets what the fiscal behavior of Colombia will be,” Echeverry said.
Cardenas holds a doctorate in economics from the University of California, Berkeley. He has headed the Mines and Energy Ministry since September after leaving a post as director at the Brookings Institution in Washington. The minister has previously held government positions including transport minister and national planning director.
Cardenas is politically and economically conservative, Echeverry said.
“Economically, he is a conservative, but nobody is perfect, he’s from Berkeley and I studied at New York University,” Echeverry said. “His flaws come from his West Coast education.”
Echeverry, a former teaching assistant for Fed Chair Ben Bernanke, said he is looking for a university to employ him in the United States, and will also work on his consultancy firm and spend more time with his three children, aged 2, 4 and 6.
To contact the reporters on this story: Matthew Bristow in Bogota at firstname.lastname@example.org; Oscar Medina in Bogota at email@example.com
To contact the editor responsible for this story: Philip Sanders at firstname.lastname@example.org