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JOURNAL OF INTERAMERICAN STUDIES AND WORLD AFFAIRSAs a result of these pressures, the Peruvian government enacted a range of policies to conserve the limited foreignexchange reserves available. First, imports were greatly restricted through licensing requirements and bureaucratic delaysthough, even before this time, the ability to import was highly regulated.2 Also, the government imposed various impediments on importers, as well as on exporters who need access to foreign exchange, particularly US dollars.3 Exporters were required to sell their dollars to the Central Bank and to receive "CLDs" (cetificados de libre disponibilidad or foreign exchange certificates) in exchange. The CLDs were financial instruments denominated in US dollars, with maturity of 90 days, that yielded local currency (Intis) at the dollar exchange rate of the day at maturity. They did not pay out in dollars, and they sold at a discount in the financial market of Peru during their 90-day life span.In addition, importers of most goods had to purchase foreign exchange at the CLD rate, which was much more costly than the official rate that was allowed for imports of necessary goods (such as food and some machinery) and for servicing foreign debt. This cost was added to the cost of import-licensing, which was implicitly high because of the bureaucratic delays involved, and the fact that a significant percentage of requests for licenses were not acted upon in time for the transactions to take place. Because of these various limitations on access to foreign exchange, a significant black market in foreign currencies was born, which has grown, over the decades, to make up a very significant part of total foreign exchange dealings in Peru.
Reasons For Black Markets In Foreign ExchangeBlack markets in foreign exchange have arisen in many countries throughout history in response to government controls on access to foreign exchange. Typically, the controls are imposed to try to protect a government's limited stock of foreign exchange reserves. The need for this protection, in turn, is caused by trade deficits and/or capital flight that result in net demand for foreign exchange at the central bank. Once a This content downloaded from 169.229.32.138 on Fri, 9 May 2014 13:20:27 PM All use subject to JSTOR Terms and Conditions
GROSSE: PERU'S BLACK MARKET IN FOREIGN EXCHANGEgovernment imposes the limitations on holding foreign exchange, or on transferring it overseas, demand for an alternative source of that currency arises. In response to the...
