Because at that time, the prevailing view was that the State should actively intervene to encourage economic development. From this perspective—before fully understanding the costs and risks of such strategies—central banks were expected to direct savings toward strategic sectors through loans granted on preferential terms, aiming to accelerate economic growth.
What measures did the Monetary Board take to address these problems, and what effects did they have?
Beginning in 1978, the Monetary Board created mandatory investments that required financial institutions to allocate part of the resources they raised (such as those obtained through certificates of deposit (CDs) to financing the development funds. Although this reduced the inflationary impact, it also generated distortions: it reduced returns for savers, increased interest rates on ordinary loans, and raised borrowing costs for credit users. Problems of transparency and efficiency in the allocation of public resources also persisted.
Related Blog BanRep: The Role of Banco de la República as a development bank
According to the prevailing view in Latin America of the mid-20th century—which saw active state intervention as essential for promoting development—central banks were assigned a significant role as development banks. On this basis, they were expected to direct part of domestic savings under favorable conditions to key productive sectors to boost economic growth...
