Brazil & Southern Cone - September 2007 (ISSN 1471-4431

The Banco Central de Paraguay announced on 18 September that it would not intervene in the foreign exchange market to break the fall of the dollar against the guaraní­. The president of the central bank, Germán Rojas, said that the bank did not want to distort the exchange rate. 

The dollar has fallen heavily in the past three weeks. On 24 August, the dollar fetched G$5,128. By mid September it was down to G$4,980. 
Rojas claimed that the dollar usually weakens at this point of the year as dollar export receipts from the soya crop, beef and remittances flood into the local money markets. The bulk of the US$600m Paraguay gets every year from expatriates comes from the US and Spain. 

Exporters are unhappy at the slide of the dollar. The Federación de Cooperativas de Producción said that the dollar's weakness was hurting competitiveness. More likely, it is squeezing their margins. Businessmen want the central bank to buy dollars to help them. Rojas said that the only businessmen who were being badly squeezed were those in the textile industry. 

Rojas said that the traditional exporters were benefiting from surging commodity prices. He noted that wheat producers were now getting over US$300 a tonne while maize prices were now US$140 a tonne. A year ago they had been between US$80 and US$90 a tonne. 
Inflation: Inflation surged by 3.4% in August, well above the 0.4% rate in July. This brought the 12 month rate to 10.9%. In 2006 the rate was 12.5%.