The Colombian peso closed Tuesday at COP$3,730 to the U.S dollar, exhange rate not seen in the country since June 2021. The strengthening of the Colombian peso, which on January 5, 2021, was trading above COP$4,000 to the dollar comes as other Latin American currencies are also heading for strong quarterly earnings given high global demand for oil, coal and industrial metals. Brazil’s real also rallied Tuesday to a two-year high, closing at 4.6 per dollar.
The Colombian peso has strengthened almost 7% to the dollar since the start of the year. “The great trigger has been the increase in the price of commodities, which began shortly before the Russia invaded Ukraine, as well as a rapid recovery in demand for commodities after the shock of Omicron at a global level,” said Alejandro Reyes, chief economist of BBVA Research Colombia to Efe. “The conflict in Ukraine has accelerated much more the prices of commodities, greatly favoring the Colombian peso.”
While a strong peso drives domestic exports, and lowers the price of imported goods, Colombia’s macro-economic forecast over the next quarter remains cautious given inflationary pressures impacted by rising food prices, especially those harvested with foreign manufactured chemicals and fertilizers. In a move to increase borrowing costs, the country’s Banco de la República – Central Bank – raised interest rates last week 1% to 5%, with a further half-percentage point increase expected this month.
With inflation pushing 1% in March, compared to 0.5% for the same month last year, and estimate that the year will close above 8%, the Colombian government announced that it will eliminate all tariffs for 12 months on another 39 agricultural products essential in agriculture. Among the products that will have 0% tariffs are animal feed; seeds; Urea; nitrogen; sodium hydroxide; magnesium nitrates; propionic acid salts; citric acid; drugs with hormones for veterinary use and insecticides. The most recent decision complements 165 goods that had import duties lifted under Decree 307 on March 3.
“Today, we have more good news for the country, result of President Iván Duque’s commitment to face a phenomenon that is global, such as high inflation and which affects the pockets of consumers,” remarked Minister of Agriculture Rodolfo Zea. “We are showing our farmers that they can continue to harvest, and that 39 of the most important products used in agricultural production will enter the country free of import duties.”
Colombia’s Finance Minister José Manuel Restrepo highlighted that the new measures are necessary to “ease the pockets of Colombians.”