Today, March 9, the
Central Reserve Bank of Peru (BCR) celebrates its first centenary, 100 years during which it was given the task of establishing a monetary system and ensuring price stability —a constitutional function that has allowed the country to enjoy one of the lowest and most stable inflation rates in the region over the past three decades.
The BCR was the first central bank to be founded in the region and was established under the name of Banco de Reserva del Peru (Reserve Bank of Peru).
This bank centralized the issuance of bills and coins, as well as the reserves that supported them. Its functions included exchanging existing checks in circulation issued by the Surveillance Board, lending rediscount operations to banks, and mobilizing deposits that would turn into Peruvian gold pounds or into physical gold.
It also determined the rediscount interest rate to regulate the availability of the currency in circulation in accordance with the needs of the economy. In other words, its functions included adapting the increase in the means of payment to the economy's requirements. In addition, it could intervene in the foreign exchange market so as to stabilize it.
The institution was headed by a Board of Directors, which was composed of distinguished personalities with the highest professional qualities from financial and commercial spheres. The Executive Branch appointed jurist Eulogio Romero as its first Governor.
The Reserve Bank's essential stabilizing role allowed Peru to face the most important shocks in the 1920s: the 1925 El Niño event and the stock market crash of 1929.
However, the Great Depression, the subsequent drop in international prices, and restrictions on international credit made it difficult to finance public spending and caused a sharp depreciation of the national currency.
This scenario encouraged then BCR Governor Manuel Olaechea to convene an economic mission —led by Edwin W. Kemmerer, a renowned U.S. professor at Princeton University.
In 1931, the delegation presented various proposals to strengthen the institution's role in the economy, including the transformation of the Reserve Bank of Peru into the Central Reserve Bank of Peru, whose function was to maintain the stability of the currency, establish Sol de Oro as the country's monetary unit, and transform the structure of the Board of Directors into a more independent one.
Manuel Augusto Olaechea and Pedro G. Beltran were elected to assume the presidency and vice-presidency, respectively.
Challenges
Throughout its institutional life, the BCR has faced a number of challenges that highlighted one of the key aspects in the management of all central banks: independence.
Said autonomy, enshrined in the 1993 Constitution, has been one of the factors that allowed the Central Reserve Bank of Peru to fulfill the purpose of maintaining monetary stability in the last three decades.
At present, the Central Reserve Bank (BCR) is viewed as one of the most reliable public institutions in the country, thanks to the results obtained in terms of monetary stability, technical management, and meritocracy, which has been embraced for generations.
(END) NDP/VLA/RMB/MVB
Published: 3/9/2022