Chile seeks weaker peso amid trade deficits- finance minister
NEW YORK, Oct 24 (Reuters) - Chile is trying to weaken its currency to close a recent spate of monthly trade deficits but accommodative monetary policies in the developed world have made the mission difficult, Chilean Finance Minister Felipe Larrain said on Wednesday.
Chile has been able to reduce government spending to a growth rate that is less than the economy, and it is promoting ways to hedge against currency risk along with government loans to small- and mid-sized businesses, to spur exports, he said.
In 2011, the central bank spent $12 billion in foreign reserves to buy dollars in a bid to slow the Chilean peso's appreciation, Larrain said in a speech at the Americas Society.
``This is what we are doing and I would also say that, although many times you are forced to do things that in some cases you do not like, we do not believe in capital controls. We will refrain from having capital controls,'' he said.
Chile has seen its peso currency appreciate as the country faces an increased amount of money in circulation from the United States, the euro zone and Japan as the central banks in those countries lower interest rates to spur economic growth.
Chile's overnight rate is 5 percent, compared to a U.S. overnight rate that is less than 0.25 percent, a gap that attracts capital to the South American nation.
The currency appreciation is also a sign of an economy that is growing more than 5 percent this year, which has helped spur a consumption boom.
The country's trade deficit was $37 million in September, $843 million in August and $95 million in July, and Chile has now posted four monthly trade deficits this year, the most since 2008.
In September, Chile filed plans with the Securities Exchange Commission to sell up to $1.7 billion in debt, but Larrain declined to say when that money might be tapped.
``We've always said we'll keep our options open, and we'll come to market when we see a good opportunity,'' he said. ``We will never rule out coming to the markets when the conditions are right.''
Larrain gave a presentation in which he said Chile, regarded as the economic jewel of Latin America, expects to become a developed country in 2018 as defined by per capita income of $22,000. That goal requires about 3 percent growth a year, or about half the growth rate of the past three years, he said.