Uruguay discourages short-term capital inflow to ensure macroeconomic stability

Wednesday, August 15th 2012 - 23:50 UTC

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Uruguay's central bank unveiled measures on Wednesday aimed at cooling the local Peso's appreciation by discouraging foreign investment in the bank's short-term debt. To combat the Peso's rise, officials ordered that 40% of new foreign capital invested in central bank bills be frozen in an account at the central bank. Read full article

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ChrisR
This is a good move if it avoids any devaluing of the UYU Pesos.
Aug 16th, 2012 - 12:11 pm - Link - Report abuse 0
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JoseAngeldeMonterrey
Countries in protectionist bloc have to discourage short-term capital inflows in order to maintain their currencies from getting over appreciated. But the real solution is to diversify trade and to allow a more balanced trade with the rest of the world.

Modern open economies like the UK, US and other do need to control short-term capital inflows, which are necessary for all economies, they don´t need to because their current account deficits will act to depreciate any currency bubles.
Aug 17th, 2012 - 03:43 am - Link - Report abuse 0
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ChrisR
@2

Excellent post.
Aug 17th, 2012 - 11:08 am - Link - Report abuse 0
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numnumnum
Comment removed by the editor.
Aug 17th, 2012 - 02:18 pm - Link - Report abuse 0
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Elena
I agree 2) JAM :)

But I have a question, what happens when the deficit like in the US economy, is in trillions and grow is not enough to cover that deficit? Also, as US currency is actualy the world currency, what will happen if it depreciates?
Aug 17th, 2012 - 02:41 pm - Link - Report abuse 0
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ChrisR
5 Elena

It already has because of quantitve easing aka printing money.

28% fall during 2011/12 but it makes little difference to Americans as we, the trading partners, are caught out by it, not them. Their debt just dropped by 28% making repayment that much easier, the value of our store of dollars just fell by 28%.
Aug 17th, 2012 - 03:52 pm - Link - Report abuse 0
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Elena
Thanks Chrisr

That is why I think as trading partners of the US, countries should aks themselves this problem and the way it affects our economy so we can deal with the crisis while it last, especially now that it along with Europe´s crisis is beggining to affect even the economy in Asia.
Aug 17th, 2012 - 05:19 pm - Link - Report abuse 0
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