Historically in Peru currency crises have been because there were no dollars. Now thanks to the good economic management of the past 20 years and the relatively favorable international circumstances, our problem is an excess of dollars. That means that the exchange rate of the dollar declines, which makes imports cheaper and reduces the cost of living, but also discourages exporters and companies competing with imports mainly industrial companies.
Now we are reaching a point of crisis, and we may be already in crisis. Explained. Since the outbreak of the financial crisis in 2008-2009, starting in the United States, the major central banks, mainly the Federal Reserve and the Bank of England and European Central Bank have made huge efforts to avoid recession printing over the "machine" a shower of notes. This has lowered interest rates in these countries to a minimum and made large institutional depositors in these countries, especially the United States, seeking more profitable markets. One of them is Peru, the fastest growing economy in South America with the lowest inflation. Then, little by little, has been growing tide of dollars that come here.
The gradual appreciation of the exchange rate of the dollar has allowed sunlight have lower inflation and businesses, but not all, have been gradually adapted by improving their "competitiveness". But now we come to a crisis: the fact that the United States Congress and the Obama administration could not really deal with the so-called "tax gap", and now the end of February there will be a tremendous battle in Washington, makes tide of greenbacks to intensify. The Central Reserve Bank has purchased billions of dollars in recent years, but in recent weeks the tide has risen and the dollar has dropped more quickly. That does, as speculative investors know that the Bank is there to buy their dollars further come outside. But change is touching S/.2.50 per dollar, which is already very difficult for companies to defend themselves. If this trend continues and we S/.2.40 or 2.30, that level would lead to a real crisis in several sectors: agricultural exports, textiles and various other industrial products, with layoffs and bankruptcies. It's time to fight back in a much more aggressive.
Obviously, the central bank has to keep doing what you've been doing, but you must add the two other instruments have already used: purchase dollars and increase reserve requirements. It is essential to add to these measures, they both have their disadvantages, allow AFPs increase their investments abroad, if they wish. They are all almost the limit of 30% of its assets when legally could reach 50%. But to decide that the central bank will probably need the support of a decision of the full Board. Very unfortunately, the full Board does not exist because Congress has failed in the last year and a half to agree to appoint three directors missing. This indecision, irresponsible and regrettable, can have serious consequences for our economy. It is urgent to make decisions and appoint capable people, class, and has no questions. To that list we must add the Ombudsman and members of the Constitutional Court even not nominated.
There are other possible measures: one would allow companies to be Peruvian dollars abroad, and very considerable sum, to prepay and reduce some of these debts in exchange for a reduction of 30% withholding tax on these payments outside.
I think it is important to give a cry of alarm in time, so that does not happen what happened in neighboring countries that were left away by exaggerated appreciation of its exchange rate. Cite the case of Brazil, which last year grew only 1%, in part by an unsustainable appreciation of the real. Cite Chile's textile industry, which disappeared, and several Colombian companies that have faced the disaster and bankruptcy because their authorities were unable to cope with the wave of foreign dollars. We live in a time that is not normal: it is normal for the U.S. Treasury, about to face a serious fiscal crisis, is paying only 0% for three-month loans. That's not normal and so here we have to take extraordinary measures and not fall asleep. And Congress should take their responsibilities, because otherwise they would be jointly responsible for a serious problem for our economy.
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Saludos Cordiales
Cesar Moran - Moderator
SKYPE: CZRMORAN
