In Costa Rica several banks expressed their disagreement with the new standard which will prevent them from deciding how much of their capital will be denominated in dollars and how much in colones.
In an attempt to gain more control of the risk involved in foreign exchange transactions by banks and their impact on the exchange rate, the Central Bank has changed therules for foreign exchange cash operations, forcing banks to change the composition of their assets so that the proportion denominated in dollars is equal to the proportion of assets in that currency.
Starting December 22nd 2016 a new rule applies that prevents banks in Costa Rica from deciding how much of their capital they want to hold denominated in dollars and how much in colones.
In an attempt to gain more control of the risk involved in foreign exchange transactions by banks and their impact on the exchange rate, the Central Bank has changed the rules for foreign exchange cash operations, forcing banks to change the composition of their assets so that the proportion denominated in dollars is equal to the proportion of assets in that currency.
The Central Bank is not ruling out intervening in the exchange market when it considers that the movement of the dollar against the Colon could jeopardize keeping inflation under control.
At a time when exporting companies insist on giving more flexibility to the exchange rate in order to favor a devaluation to improve their competitiveness abroad, the central bank is standing firm in its position to intervene in the exchange rate when necessary to maintain stable inflation.
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A project is being promoted for price risk management in order to reduce losses caused by constant changes in the international price of grain.
The Association of Producers and Exporters in Nicaragua (APEN) together with the Agricultural Exchange, SA (Bagsa) is promoting a digital platform on which producers can consult the international prices of their products and the development of a hedging instrument, ie insurance against falling prices. The proposal also aims to cover producers of rice and sorghum.
In order to moderate the decline in the dollar the Bank of Guatemala has made two interventions so far in 2015.
During 2013 the Guatemalan currency gained about 3% against the dollar, making exports less competitive. Due to the fact that the trend has continued, the Bank of Guatemala has started to apply the rule of exchange participation in order to moderate behavior of the currency.
The volatility of the exchange rate (measured by the standard deviation of 15 days MONEX) is at the lowest level of the year and similar to the levels recorded in December 2013, when the exchange rate was quoted at the "floor" exchange rate bands.
In the last 30 days the price of the dollar against the Colon went from 557 colones to 540.4 colones in the Monex wholesale market.
The decision to remove the non-fiinancial public entities from the wholesale market and less demand for foreign currency in recent weeks are the reasons for the drop of 17 colones in the price of the dollar.
A proliferation of articles, reviews and editorials on the exchange rate is the best example of the prevailing concern in a market waiting for a clear definition of the exchange rate policy by the Central Bank.
In recent weeks, and while the President of the Central Bank of Costa Rica (BCCR) is denying it , warnings have been given over interventions in the foreign exchange market by the monetary authority. Under the supposed premise of preventing undue fluctuations in the exchange rate, the BCCR is intervening daily in a market where there aren't any fluctuations that warrant such intervention.
Three banks are offering companies hedging instruments to combat volatility in the exchange rate.
Banco Nacional, Citibank and Davivienda bank are the financial institutions in Costa Rica authorized to offer currency hedging instruments which enable companies to fix a certain exchange rate for future transactions, eliminating the uncertainty generated by the price volatility of the foreign currency.
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Represents the Company RTS INTERNATIONAL, Inc. of Kansas Cyty, TX, USA, for the territory of Guatemala and Central America. RTS finance exports through Factoring system.
Operates in Guatemala
Phone: (502) 2369 5408 - (502) 5709 2986
Caribbean-Central American Action (CCAA) is a private, independent organization that promotes private sector-led economic development in the Caribbean Basin and throughout the Hemisphere.
Operates in Panama, Nicaragua, Honduras, Guatemala, El Salvador, Costa Rica and Caribbean Community
Phone: (202) 331-9467