NO CAPITAL OUTFLOWS!

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Alpineprince
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NO CAPITAL OUTFLOWS!

Postby Alpineprince » Thu Sep 05, 2013 9:14 pm

Apparently suggestions by other posters were "off base"!

No capital outflow from Peru, Cenbank's chief says

Lima, Sep. 02 (ANDINA). Key economic indicators pointed out Peru will not experience capital outflow this year despite the current international finance turbulence, said Julio Velarde, president of the Central Reserve Bank (BCR) of Peru.

The top official stressed that the appreciation of the green back over the last months was not due to an output of U.S. dollars from the country, but due to the demand of private pension fund managers (AFPs) and banks.

"Foreign investors offered US$ 67 million between May and August," Velarde noted.

Likewise, he singled out that Peru's current net international reserves amount to more than US$ 67 billion, thus surpassing the amount the Andean country has during the 2008 crisis (US$ 33 billion).


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caliguy
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Re: NO CAPITAL OUTFLOWS!

Postby caliguy » Thu Sep 05, 2013 9:30 pm

i would really like to know what the hell the government is doing with all its reserves. there are plenty of ways to spend money on improving Peru, still waiting.
every place has it's own spirit. you just need to tune into it.
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Re: NO CAPITAL OUTFLOWS!

Postby Alpineprince » Fri Sep 06, 2013 8:54 am

The "Reserve" is what attracts foreign investment and confidence in our "bonds" and is a major part of the reason Peru's credit rating is investment grade! The excess of taxes collected over money spent (infrastructure,social programs,etc) goes in to the "Reserve". Having said that this year the BCR has spent about 4 billion defending the currency and it is reported that Arequipa (as one example) has not spent almost $4 billion dollars that was given to them!
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tupacperu
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Re: NO CAPITAL OUTFLOWS!

Postby tupacperu » Fri Sep 06, 2013 9:04 am

Example China: Forex Regulator: No Capital Flight From China

China's foreign exchange regulator said that the country is not seeing capital flight despite signs of funds exiting from emerging markets.

Peru:
Key word? This year....
Foriegn investment has fallen drastically. This is why GDP has fallen from 8% a few years ago to 4.4-5%.
Capital Flight will happen when investors can no longer make money on their investment.

The otherside is imports. Imports are driving internal consumption which means that the profits are going to foreign countries. Profit are flowing out of Peru in an import economy.

Emerging Market (6 days ago).

Capital flight from emerging markets doubles to $6bn

http://www.telegraph.co.uk/finance/fina ... o-6bn.html
Last edited by tupacperu on Fri Sep 06, 2013 9:30 am, edited 1 time in total.
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tupacperu
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Re: NO CAPITAL OUTFLOWS!

Postby tupacperu » Fri Sep 06, 2013 9:29 am

I would not rely on what Peru's Central bank is stating, they have a dog in the fight.
I would look at where the total Emering markets, Global view.

Peru is holding onto reserves until the Fed removes QE. This way the can react to the effects of the global market. They have been buying Soles to stem the appreciation of dollars. If the sol should slip too much local investors will also start moving their money to external market looking for a better ROI.
QE is inevitable, it's affect will be felt globally.

11 Days Ago
http://m.youtube.com/watch?v=Y5N9hK2oBo ... 5N9hK2oBoo
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craig
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Re: NO CAPITAL OUTFLOWS!

Postby craig » Thu Sep 19, 2013 10:12 pm

caliguy wrote:i would really like to know what the hell the government is doing with all its reserves. there are plenty of ways to spend money on improving Peru, still waiting.

Perhaps you mistakenly think the reserves are money that the government has saved (from tax revenues or something) and squirreled away. That is not what the reserves are. And spending them to buy stuff is not what they are for.

The BCR acquires reserves (mostly) in the following way. Peruvian businesses export goods and are paid for them in dollars (or euros, etc.). Those businesses need to buy soles with those dollars (or euros) to pay their expenses. If they bought soles in the purely private market that would drive up the value of the sol relative to the dollar. Exporters would not like that and the BCR thinks it should act so as to prevent too rapid a rise of the exchange rate of the sol. So, the BCR creates new soles out of thin air and buys the dollars from the exporters with the newly created money. The dollars the BCR buys this way constitute (most of) its reserves.

The reserves are available to buy back the soles that have been printed, if necessary. That is their purpose; they are to provide "backing" for the Peruvian money issuance. If they were spent then there would be no way to redeem Peruvian money.

The local price inflation you have seen in Peru in recent years is the result of the soles that were created out of thin air by the BCR to buy the dollar revenues of Peruvian exporters. In effect, what has happened is that the inflation of the US money supply by the FED has been exported to Peru. In this way, the price inflation (consequent to Bernanke's QE) appears in Peru rather in the US. Americans get Peruvian goods cheap. Peruvians pay through higher domestic Peruvian prices to subsidize exports for American consumption. Think of Peru's dollar reserves as foreign aid that Peruvians are sending to Americans.
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