By changing the exchange rate rule and issuing certificates of deposit in dollars, the Banguat aims to minimize the downward trend that has been seen for months in the price of the dollar against the Quetzal.
An increasing inflow of remittances coming into the country is the main reason behind the excess of dollars in the economy, a figure that the Bank of Guatemala has estimated at $1 billion.
Although the export sector continues to denounce the loss of competitiveness because of appreciation of the quetzal against the dollar, the Central Bank insists that the exchange rate will remain dependent on market factors.
A year ago the complaint was the same.Exporters asked the Central Bank for a review of the exchange scheme to induce a devaluation that would allow them to recover some of the competitiveness lost abroad because of the exchange rate.The situation today has not changed, and exporting companies have asked for the Ministry of Agriculture to intervene in this matter.
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.
Exporters resent the strength of the local currency against the dollar, which reduces competitiveness at a time when export volumes are falling.
Since the beginning of the year until mid-August, the price of the Quetzal against the dollar has gone from Q7,63 per dollar to Q7,50, a difference of 13 cents resulting in a decrease of competitiveness for exporters and sectors that generate revenue in the US currency.
Strong growth of remittances and savings in the oil bill are two of the factors responsible for an increase in the supply of dollars which is putting downward pressure on its price against the quetzal.
Appreciation of the Guatemalan currency against the US currency is also due to lower demand for dollars in the local market, according to statements made by the president of the Bank of Guatemala to S21.gt.
Given the claims of loss of competitiveness by the export sector, the Bank of Guatemala is insisting that the dollar be made more expensive for reasons exclusively to do with market factors.
Guatemalan exporters are looking at the possibility of a devaluation of the quetzal induced in an international context where the dollar has tended to rise. However, the policy of the Bank of Guatemala (Banguat) is that the current exchange rate regime is adequate, and obeys market supply and demand. "The exchange rate is stable and does not favor or disfavour any economic sector", said the acting president of the Banguat Sergio Recinos to Prensa Libre.
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 increase in remittance income is the main factor that has led to the value of the local currency against the dollar rising to its highest level in the past two years.
While in other Central American countries local currencies have tended to lose value against the dollar, in Guatemala the strong flow of foreign exchange into the country has put upward pressure on the supply of dollars causing an appreciation of the quetzal, which was quoted on 5 October at Q7,63 to the dollar.
Appreciation of the quetzal against the dollar has affected the income of exporters who are asking the monetary authority to stop overvaluation of the local currency.
The President of the Guatemalan Association of Exporters (Agexport) reported that the strength of the quetzal is causing products in the country to be more expensive and therefore a change in monetary policy is needed.
U.S. currency rose last week after having been at its lowest value for the last five years.
The upward trend that the dollar began showing last week against the quetzal, could continue in the coming months as it seems that factors that pushed the dollar down are no longer present in the Guatemalan economy.
Investors are focusing on local currency due to its renewed value and the issuance of bonds at higher interest rates.
Elperiodico.com.gt outlines, "The Bank of Guatemala (Banguat), informed that payments in foreign currencies reached Q21.3 billion in December and Q23.0 billion during February, while payments in Quetzals went from Q106.2 billion to Q105.6 billion over the same period of time. This means there are fewer Quetzals in the economy, triggering an appreciation of domestic currency against a greater presence of foreign exchange."
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