The Acting Secretary of State to the Embassy in Colombia
A–125. The Executive Board of the International Monetary Fund met on Sunday, October 28, to consider an exchange proposal by the Colombian Government involving immediate devaluation of the buying rate for coffee exchange from pesos 2.0875 to 2.17 per dollar and progressively thereafter until after a period of forty months the rate for coffee exchange would be unified at the buying rate of pesos 2.50 per dollar which now applies to all other exchange proceeds.
The Fund Executive Board took the following decision:
- Since the authorities of Colombia desire to proceed with the unification of the buying rates of exchange, and considering the not unfavorable exchange prospects of Colombia, the Fund makes no objection to a change in its multiple currency system by an immediate devaluation of the coffee buying rate of exchange from Ps $2.0875 to Ps $2.17 per US dollar, and progressive devaluations by Ps $0.00825 per US dollar every month for forty months until that rate is completely unified with the buying rate of Ps $2.50 which already applies to all other exchange proceeds.
- It is understood that the authorities of Colombia will consult with the Fund if for any reason they should contemplate departing from any projected rate adjustment. If conditions should change in Colombia, the Fund can at any time suggest that the projected devaluation be modified or postponed.
- To minimize the risks of inflation and exchange
speculation attending the proposed devaluation of the coffee
buying rate, the Fund recommends:
- That the authorities of Colombia continue as long as possible the participation of the Government in the exchange profits, and either substitute other sources of fiscal revenue for the exchange profits once they have disappeared in the process of exchange rate unification, or reduce public expenditures accordingly; and that the authorities of Colombia continue to take other appropriate anti-inflationary fiscal and monetary measures.
- That the authorities of Colombia retain, and if necessary strengthen, the regulations governing the surrender of the exchange proceeds from coffee exports, particularly a high minimum surrender price and a short surrender period.
While the Fund issued a press release on October 29,1 the release included only paragraphs Nos. 1 and 2 of the decision quoted above and all of paragraph No. 3 remains confidential. The Fund understands that the exchange rate plan was announced in Colombia on October 29.
- Not printed.↩