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SANTIAGO DE CHILE, Chile – After the Central Bank of Chile announced it would be selling a large quantity of dollar reserves to finance an economic stimulus plan, the national currency gained five percent in a single day. On 23 February, La Tercera reported that Chile's Ministry of Economic Affairs requested the Central Bank to sell more than US$3 billion.
The aim of the measure is to obtain Chilean pesos to finance an economic plan to combat the effects of the world financial crisis. The Economy Ministry's instructions were to sell US$50 million per day.
The stimulus plan will cost Chile around US$4 billion, of which US$1 billion will be obtained from a state contingency fund, the Social and Economic Stabilisation Fund (FEES), which, according to La Tercera, currently has reserves in excess of US$20 billion.
Most of this money comes from copper exports, Chile's main mineral resource, reported El Mercurio, and the total cost of the plan represents one fifth of the country's savings, accumulated during a period of high international mineral prices.
In a statement to El Mercurio, Alberto Puente, an economist from BBVA bank, said: “The announcement of this measure through the purchase of pesos with dollars could lead to lower exchange rates, giving the Central Bank more freedom to lower the monetary policy rate without affecting the exchange market”.
Chile's Diario Financiero reported that on 22 February the Chilean peso was buying at 592 and selling at 593 pesos per dollar. After the 24 February collapse, prices stood at 624 and 624.5 pesos to the dollar respectively.