or any of the other posters who want to chime in....
I looked at the Central Bank website and saw a couple disturbing facts:
1) trade deficit for past quarter of US$800million.
2) foreign currency reserves drawn down by about US$200million to a net value of about US$750million.
The Centra Bank used the foreign reserves to defend the peso earlier this year. The peso continues to fall.
Q1: this annualized US$3.3B trade deficit is more than 10% of the GDP. This is a very large number, since it represents about the same amount of money the central government collects on a yearly basis. Is it dangerously high?
Q2: if this trade deficit continues to grow, it significantly increases the demand for the US$. Does this have serious, long term devaluation implications? Note that with such a small amount in reserves, the Central bank is powerless in open market interventions.
thanks in advance,
mondongo
I looked at the Central Bank website and saw a couple disturbing facts:
1) trade deficit for past quarter of US$800million.
2) foreign currency reserves drawn down by about US$200million to a net value of about US$750million.
The Centra Bank used the foreign reserves to defend the peso earlier this year. The peso continues to fall.
Q1: this annualized US$3.3B trade deficit is more than 10% of the GDP. This is a very large number, since it represents about the same amount of money the central government collects on a yearly basis. Is it dangerously high?
Q2: if this trade deficit continues to grow, it significantly increases the demand for the US$. Does this have serious, long term devaluation implications? Note that with such a small amount in reserves, the Central bank is powerless in open market interventions.
thanks in advance,
mondongo