Uruguay tightens terms for the inflow of short-term capital inflows

Friday, June 7th 2013 - 05:40 UTC

Full article 4 comments

Uruguay announced on Thursday new measures to discourage short term speculative capital inflows that have appreciated the Peso, eroded the country’s international competitiveness, made imports cheaper than domestic production and threaten an already stubborn inflation. Read full article

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ChrisR
Restricting M1 (the supply of money to the market) will result in higher prices for goods in pesos and push those that can do it into dollars.

As this approach was used until 2006 can someone explain why the country has grown far more wealthy in the last 5 or 6 years?

Was this approach one of the elements that helped cause the default?
Jun 07th, 2013 - 01:59 pm - Link - Report abuse 0
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JoseAngeldeMonterrey
This approach clearly does not work, inflows and outflows of money into domestic markets must not be touched but rather discouraged or encouraged by central bank policies, not regulations.
Jun 08th, 2013 - 10:03 am - Link - Report abuse 0
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CJvR
Perhaps the rates doesn't work either. Fighting the imbalances from external factors with the rates could be devastating to the domestic economy. Although in the long run rates are the superior tool.
Jun 11th, 2013 - 09:05 am - Link - Report abuse 0
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ChrisR
3 CJvR

The rates do not work because, despite the statements to the contrary, BROU doe not use the government rate for the domestic market.

My main investment, just renewed via BROU, exceeds the published rate!
Jun 11th, 2013 - 12:36 pm - Link - Report abuse 0
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