Saturday 25 June 2022

President blames former gvt for spending US$2.3 billion in international reserves

The money was spent by the Carlos Alvarado administrion to intervene in the exchange rate. “The house is in such a mess that we have to go into billions of dollars a year in debt,” said Chaves.

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25 June 2022 - At The Banks - BCCR

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QCOSTARICA – President Rodrigo Chaves blamed the government of the former president, Carlos Alvarado, for spending us$2.3 billion of international reserves for the intervention of the exchange rate.

Chaves emphasized that fuel prices remain on the rise due to the exchange rate, which currently exceeds ¢684 at most banks, while the Central Bank’s reference rate remained at ¢679 over the weekend.

President Rodrigo Chaves on Sunday (May 22) before leaving for Switzerland to promote foreign investment in Costa Rica

Chaves assured that the previous government used the reserves when inflation was contained, which he described as a public policy error.

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“That public policy error occurred when world inflation was contained and the United States Federal Reserve (FED) had very low (interest) rates. Now that global inflation is skyrocketing and the Fed is raising rates, we have no reserves,” he said.

The statement was made on Sunday within the framework of a press conference on concerns about fuel prices.

“Now that world inflation is skyrocketing and the US Federal Reserve is raising interest rates, we don’t have the degrees of freedom to respond to the global crisis, including fuel prices.

“It is not only the rise in the international price (of oil) as a result of Russia’s attack on Ukraine but also that the exchange rate is skyrocketing and we have US$2.3 billion less in reserves to face the crisis situation,” he said.

The president was emphatic that his administration has little room for action regarding international reserves due to the “hole” inherited by the previous administration, alleging that he was left with “little” space to mitigate the effects in the price of fuels.

On January 16, the international monetary reserves were at US$6.949 billion. This amount was US$1.16 billion below what it was on March 6, 2020, when the pandemic began. At the beginning of the previous government, they were at US$8.01 billion.

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The dollar exchange has maintained an upward trend since mid-2021, which coincides with the increase in international prices, first due to the economic rebound caused by the pandemic and then due to the war in Ukraine.

According to experts, the dollar exchange rate in Costa Rica could exceed the euro price in the coming weeks.

The increase in prices of foreign products means that Costa Rica has to spend more foreign currency to buy the same amount.

What can be done, according to Chaves

Regarding the dollar exchange rate, Chaves said that it is possible to work to bring foreign direct investment, promote tourism and ask Congress to approve international loans that, in itself, the country needs to pay its expenses and honor its indebtedness.

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“This is what we can do immediately. Know that the situation is difficult, but that the Government is not only working but also putting specific measures on the table to alleviate the situation that has many external elements”, he said on Sunday, minutes before leaving to travel to Davos, Switzerland, to the World Economic Forum, to promote foreign investment in Costa Rica.

“The house is in such a mess that we have to go into billions of dollars a year in debt,” he added.



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