QCOSTARICA — A low dollar exchange with respect to the colon and the fact that the Central Bank has less pressure to control inflation and interest rates are the main consequences of Costa Rica having $US14 billion in monetary reserves.
The reserve figure almost doubled compared to a year ago, when it was US$8.55 billion, after reporting an average monthly increase of US$478 million.
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This generates more peace of mind for the market and for investors who want to come to the country and undoubtedly improves the image before the risk rating agencies, since the Central Bank can respond in a better way to a new global economic crisis by injecting dollars into the economy.
Also, the advantages of a cheap dollar makes many economists recommend that the monetary policy rate be reduced even further so that the reference rates for loans can be lowered.
International monetary reserves are assets that the Central Bank maintains in foreign currencies, especially in dollars; They include bonds, treasury bills, and other government securities and to a lesser extent cash.
This money supports the activities of the Central Bank and allows it to influence monetary policy, so the larger the reserves, the more degrees of freedom the economic entity has to make its decisions regarding economic indicators.
Having the vaults full of dollars leaves behind the need to think about whether it is the right time to pay the loan from the Fondo Latinoamericano de Reservas (Latin American Reserve Fund) for an amount of US$1.1 billion, a recommendation that has been given by financial analysts and economists.
“You can pay in advance and although there is a small penalty, there is an advantage in terms of interest savings that compensates for the penalty charged,” said Rodrigo Cubero, former president of the Central Bank.
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Currently, the amount of reserves is considered within the acceptable range by that organization.
“The Central Bank adopted the IMF reference in relation to the calculation of the appropriate range (100% to 150%) and it is located at 132%, therefore, it is considered a strength of the country to cover external debt (amortization + interest ) for up to a year without the need for financing, as well as various risks, such as capital outflows, potential losses due to the fall in external demand and possible portfolio exits,” Amedeo Gaggion, regional director of Treasury at Scotiabank, told La Republica.
He added that this proportion of reserves is within the suggested range and this provides peace of mind to the economy and the population in general that the country has the strength to face external shocks.
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