During the period January 2000-December 2012, the Peruvian central bank intervened in the foreign exchange market, buying an average of 227.5 million dollars each month, and a total of 35,493.1 million dollars during the 13-year period.Considering the net monthly value in soles of the transactions (dollars bought minus dollars sold times the average exchange rate of the corresponding month), we find that the central bank spent a total of 101,638.5 million soles during the that period. Considering, on the other hand, an exchange rate of 2.541 soles per dollar at December 2012, we find that the value of the 35,493.1 million dollars bought during the 13-year period was 91,146.3 million soles (35,493.1 x 2.541).
So, as we can see, the Peruvian central bank spent a total of 101,638.5 million soles in buying a stock of dollars whose current value in soles is 91,146.3 million, which give us a loss of 10,492.2 million soles (that is, 4,085.8 million dollars). This loss results from the diminishing value of the dollar during the last ten years: the highest value of the dollar was 3.62 soles in September 2002, and it has since fallen almost continuously to a value of 2.57 soles in December 2012.
It must be recognized that our exercise is not completely accurate, as we are using only the net monthly values of the operations, and the average monthly values of the exchange rate. Besides, we are assuming that the U.S. dollar was the only foreign currency bought or sold by the central bank. Nevertheless, we are confident our estimate gives us a good idea of the relative magnitude of the losses (monthly imports during 2012 had an approximate value of 3,500 million dollars).
Another observation is that these are only balance-sheet losses, and we are not considering the economic effects (gains or losses) resulting from the impact of the central bank operations on the behavior of the real exchange rate.
In any case, our main point is that the Peruvian central bank has been buying dollars trying –as almost every other central bank in the world– to prevent a devaluation of the dollar, that results –in time– from a supply of dollars that is larger than the demand for dollars in the domestic market. A growing portion of the supply of dollars results from the inflow of foreign capitals into our economy, which –in time– has to do with the extremely low (if not negative) returns on capital in the international markets. That is, those capitals are coming in attracted by (what investors see as) the good situation of our economy, seeking refuge from the adverse conditions prevailing in international markets.
And this is a situation from which we should be taking advantage: a tax on short-term capital inflows would be a way to restrict such flows, and equivalent to collecting seigniorage on the capitals coming into our country (and using our currency). But the authorities at the Peruvian central bank prefer to continue paying seigniorage for using a currency whose real value in the mid- and long-term can only go down. In effect, the 10,492.2 million soles lost by the central bank since the year 2000 should be seen as seigniorage paid to the U.S. Federal Reserve.