FACTBOX-Steps Latin America is taking to counter hot money

Jan 4 (BestGrowthStock) – Chile has become the latest Latin
American country to intervene in its currency market, taking
aggressive measures to protect exporters.

Foreign investors have poured money into the region’s
attractive economies, shunning markets in developed countries
still struggling to recover from the global financial crisis.

Below are the main steps Latin American countries have
taken to curb the strength of their local currencies:

CHILE ANNOUNCES LONG-AWAITED FOREX INTERVENTION

* Central bank announces record $12 billion in dollar
purchases during 2011. It stresses that intervention is
exceptional, warns against “addiction” to it.

* Peso plunges (CLP=CL: ) from near three-year high after
central bank announcement.

* Chilean President Sebastian Pinera says no plans for
capital controls.

* Central bank lifts limits on pension funds’ overseas
investment.

* Bank slows pace of interest rate hikes, citing peso.

— Story links: [ID:nN04206531] [ID:nN04221079]

BRAZIL BUYS DOLLARS, FIGHTS INFLOWS, LOOKS TO TAX BREAKS

* Central bank resumed daily dollar purchases soon after
the financial crisis, recently buying as much as $1 billion a
day via double auctions.

* Sovereign wealth fund authorized to buy dollars on spot
market but has yet to act.

* Government triples tax on foreign purchases of bonds to 6
percent to curb inflows into fixed income market.

* Government increases tax on derivatives margins to
dissuade short-term investors.

* Raises bank reserve requirements to cool a credit boom
and ease the currency situation by paving the way for lower
interest rates.

* Aggressive measures including targeted tariff increases
and tax breaks in the works to address effects of strong real
(BRBY: ).

— Story links: [ID:nN30113578] [ID:nN04214108]
[ID:nN03188472]

COLOMBIA INTRODUCES DOLLAR PURCHASES, STRUCTURAL MEASURES

* Government kept $1.5 billion abroad last year, which
included $1.4 billion in government dividends from state oil
firm Ecopetrol.

* Plans to possibly hedge up to $3.7 billion in external
debt service payments in 2011.

* Will only use external financing this year to meet
outside obligations to ease pressure on peso (COP=: ).

* Eliminated tax exemption on foreign loan interest

* Central bank buying at least $20 million daily until at
least March 15.

— Story links: [ID:nN29291838] [ID:nN16108112]
[ID:nN02213742]

PERU BUYS DOLLARS, ENCOURAGES INVESTMENT ABROAD

* Government trims average tariff to 3.4 percent from 5
percent, possibly resulting in increased imports and less
appreciation pressure on the sol (PEN=PE: ).

* Central bank buys about $9 billion dollars on the spot
market in 2010, equivalent to around 6 percent of GDP. The
treasury also bought around $500 million.

* Banking regulator SBS drawing up rule to curb use of
short-term derivatives called non-deliverable forwards (NDFs)
to limit pressure on the sol.

* Central bank raises deposit requirements on bank
accounts, especially those tied to foreign loans, in a bid to
limit speculation on the sol.

* Regulators allow pension funds to invest more abroad.

— Story links: [ID:nN26131354] [ID:Nn31130618]

MEXICO ESCHEWS INTERVENTION, PESO SET TO OUTPERFORM

* Central bank buying $600 million per month by selling
dollar put options as a means to build up its reserves.

* Mexico has said capital controls do not work.

* Mexican peso (MXN=: ) lagged gains in other markets, yet to
firm back to pre-crisis levels.

* Strategists see intervention measures across Latin
America boosting attraction of free-floating Mexican peso.

— Story links: [ID:nN10261374] [ID:nN15182353]

FACTBOX-Steps Latin America is taking to counter hot money