The Colombian peso broke another nefarious benchmark against the USD, trading early Wednesday above COP$4,800 to the greenback, and setting off the alarm bells, once again, over capital outflows, declining confidence in the economic policies of the country’s first leftist government and “fast track” tax reform – reforma tributaria – that is rapidly losing support among political parties that initially backed President Petro’s large Congressional base.
Breaking daily records to the US dollar over several weeks, and on course to become the most devalued currency in South America, on Tuesday, Finance Minister José Antonio Ocampo faced the microphones to calm financial markets, assuage investors, and rule out capital controls.
In statements that appear to do “damage control” while explaining how the government of Gustavo Petro will ratchet up social spending and stay within fiscal debt limits, Ocampo confirmed that the government will cut back next year sales of peso bonds, known as TES, to become less dependent on foreign debt. In just over three months since Ocampo took office with the new Petro administration, the peso has devalued 17%, and close to 20% this year.
Should the rate of devaluation continue, the peso could reach COP$5,000 by the end of this month.
The slump of one of the region’s strongest currencies is being compounded by fears of a global recession, rising inflation and cost-of-living crisis for vulnerable, emerging nations. Global issues that were raised at the recent General Assembly of the International Monetary Fund, and compounded by energy insecurity, record high debt levels and downturn in projected growth of the US, European and Chinese markets.