Ecuador International Reserve: How does it work and at what moment? | Economy | Notice

La Reserva Internacional (RI) del Ecuador closed in February at $ 5,790 million, if a minor figure of $ 1,405 million is compared with the figure recorded in the December 2020 finals ($ 7,195 million). It is embargo, it is a high figure, in relation to the reservation of the reserve from 2010, and that it is already $ 4,000 million.

The International Reserve, which is in compliance with the rules of private and public banks, Decentralized Autonomous Governments (GAD), IESS, National Treasury, between October, March 2020 and a minimum of $ 1,990 million, precisely when the country is living the straits of the pandemic and in the middle of the confinement entities banks and other sectors require money from the Reserve.

In agreement with Jaime Carrera, Executive Secretary of the Tax Policy Observatory, the International Reserve, he acknowledged that public and private entities belong to the Central Bank. Part of these arrears is the bank account (a percentage of deposits) and which serves to give security to depositors in the case of bank corridors and other problems.

Carrera explains that the Reserve is basically in inversions that can collect liquidity of intermediate means and that is in the international bank of Switzerland, in physical money in the BCE and in other monetary matters.

Questions and answers about the Ecuador International Reserve

The current problem, however, is that the liquid assets in Alcanzan cover all private bonds, such as bank deposits. To cover this amount you have to pay $ 1,000 million to BCE. And to cover all public sector deposits, $ 5,000 million more is required.

For Carrera, at the moment it is not recommended that any Gobierno take money from the Reserves, there may be major problems.

Julio José Prado, President of Asobanca, mentions that a key function of the Reserve should allow him to have an intermediate way of financing pagans in the exterior, both the private sector and the public sector. These diners can pay combustible imports, external debt, issue cards for private imports.

It is a giro without restrictions, the economist Guido Macas, doubles, indicates that the decision to dispose of these resources is from the Government. And the radical peligo when the levels of the reserve bay, as evidenced in March 2020, when the quarantine by COVID-19 was implemented. The $ 1,990 million reserve.

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“For that matter, the reserve is important and I have a lot of money and I have to make a mistake. You can reserve the amount you can finance, support. If nothing happens in the world and Ecuador does not sell, it does not have dollars. The same if not my performance, if no high exports, entones, What do I salve ?, and if I start to reserve the reserve”, Señala Macas.

But there are levels considered “good” or “positive”: from $ 6,000 million, according to the economist. And then the 2020 hubo is the $ 7.195 million reservation, a large part of inversions, deposits in places and titles. Y off January 2021 saw $ 6,590 million.

Prado indicates that there is no exact calculation of what the level is which must be tener. But consider the minimum level of reserves should cover the financial reserves of BC.

“If this is the case, in Ecuador there will be a change in that the international reserves will be around $ 8,000 million. In addition, the optimal series that does not only cover financial reserves, are all eligible liabilities ”, explains.

Tanto Prado como Macas enfatizan que, in a dollar economy, the management of reserves is essential for responding to intermediate forms.

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“A failure to cover the reserves may affect international transactions that take place with the rest of the world”, exemplifies Prado.

And Macas say that another scenario of low levels of reserves in the country is chaos. “Reservations are like oxygen: at the moment the reserves can generate chaos, speculation, and the people are assisted; therefore, the important position of the monetary reserve is important, ”he said.

In the last months, the role of the Central Bank has been debated in the management of the reserve.

Initiation of dollarization, this entity was a reserve bank that allowed the compensation of internal and external payments, with the prohibition of granting credit to the public or private sector.

Without embargo, the actions applied in 2010 will allow the denominations to be implemented Domestic inversion operations and the reforms to the Organizational Monetary and Financial Code implemented in 2014 will transform “the essence of the Central Bank” and the potential assets of a commercial entity, to allow investments in papers of the Ministry of Economy and Finance, dice Prado.

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Agrega that these actions pusieron en riesgo el manejo apropiado of his resources, lo cual afektó las reservas porque el BC no cuenta con la misma liquid de antes.

However, since August 2018, the Fomento Productive Act has been in force, there is an express prohibition that the BC should pay the State, which impossibility will continue to operate this type of operations. (I)