In the first nine months of the year the Bank of Guatemala has intervened in the exchange market with $1 billion in order to keep the Quetzal from appreciating further.
The increasing flows of remittances coming into the country are the main reason behind the appreciation of the Quetzal against the Dollar. So far this year the Bank of Guatemala has had to intervene by acquiring more than $1 billion, thus increasing monetary reserves.
A record amount of $1.938 billion in gross international reserves has been recorded in the country, a reflection of the stability and economic growth in recent years.
Mario Arana, former president of the Central Bank of Nicaragua (BCN) notes that the policy of fiscal discipline that has been maintained, has allowed the reserves to accumulate, which provide an optimistic outlook on any external shocks generated by the current problems of the industrialized economies.
Savings must be made and reserves accumulated during booms times, so that those funds can be used in times of national crisis or contraction.
The creation of funds to build up currency reserves during periods of economic expansion from specific high-revenue sources, such as China's trade surpluses, Chile's copper or Norway's oil, is an option to be considered in Panama, which does not have a central bank to control monetary policy or act as a lender of last resort.
The current amount would pay the country’s entire national debt.
The country's strong economic performance, the increase in remittances and a rise of almost 20% in exports has allowed the growth of international reserves, an important macroeconomic indicator which measures the country's payment capacity.
As of May reserves amounted to $6421.1 million, while external public debt amounted to $5337.6 million.
The Central Bank of Costa Rica (BCCR) reported the acquisition of $ 7.5 million to defend the lower limit of the band system governing the exchange rate.
The BCCR´s intervention on the foreign exchange market increased liquidity in Colones, which in principle, and given current conditions of the monetary system, it did not have the usual inflationary effect.
The Central Bank finished 2009 with $2.11 billion in reserves, 14% less than in 2008.
In 2009, the bank lost $343.7 million worth of reserves when compared to 2008. The current reserves cover 3.4 months of imports, slightly above the accepted minimum of 3 months.
"Sandra Martínez de Midence, Central Bank president, reported that this reduction can be explained by internal and external reasons, such as a reduction in remittances, the suspension of international aid and less exports", reported Elheraldo.hn.
A precautionary agreement signed by the previous administration in January has been reactivated.
This was announced by President Mauricio Funes, who remarked that even though the agreement had a validity of 6 months, it had been rendered ineffective by lack of compliance with the established conditions.
In the second quarter of the year, the IMAE index grew at an annualized rate of 5.9%. In the first quarter it had dropped 0.9%.
In June the Monthly Economic Activity Index (IMAE) grew 0.34%. For the past 12 months it contracted 2.2%, less than the 2.8% drop registered in May. The highest 12 month contraction was -5.1%, recorded in February 2009.
For the second quarter of the year, the index grew at an annualized rate of 5.9%, while it dropped -0.9% in the first quarter of the year. Accordingly, in the first half of the year economic activity diminished 3.9% when compared to the same period of 2008.
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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