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Nicaraguan Gov. Suspends Online Currency Purchases for Banks and Affects Trust

The Central Bank of Nicaragua (BCN) notified commercial banks this week of the suspension of the mechanism to purchase dollars online. As of this Monday, they will have to request the purchase of dollars in writing, 48 hours in advance, stating the amount, objective and the persons involved in the transaction.

Sources linked to four banking institutions confirmed to Confidencial the change in the rules in the currency market. But, they excuse themselves from showing an official document from the Central Bank, because until now it is non-existent: “We have nothing in writing, we were only notified through a telephone call,” they stated.

Three independent economists consulted by Confidencial, indicated that the new measure that would have been dictated by the President of the Board of Directors of the BCN, Ovidio Reyes, can be considered some sort of financial “pre-corralito” (alludes to the restrictions imposed by the measure).

What is understood by “financial corralito”, the decision not to give all their dollars to customers who have their deposits in that currency, and offer them “cordobas” in exchange. That type of measure means a great risk of devaluation of the cordoba, if citizens fearful of the devaluation run to purchase dollars, which would raise the price of that currency.

“This is a de facto “financial corralito”, it is an attempt (by the Central Bank) to initiate controls” over the withdrawal of dollars. But, it can be extended to control the accounts of individuals, warned Nestor Avendano, President of Consultants for Entrepreneurial Development (Copades), when interviewed on the television program “Esta Semana” (This Week) broadcasted on Sunday evening by Channel 12 TV.

Until a week ago, the purchase of dollars was done by the Automated Clearing House, with each bank buying online the amount of dollars required, and paying in the same way to the Central Bank.

It is not always necessary to send an armored truck to collect the cash. Partly, because bank customers do some transactions online, so those resources are “moved” virtually. In the case of purchases and sales made in cash, what banks do is to deduct from the amounts purchased from the BCN, from payments and deposits, to the Central Bank itself.

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