The Colombian peso has been struggling in recent weeks to stay below $4,000 to the U.S dollar, despite rising commodity prices and tightening of interest rates. Like other currencies in the Andean region, economic uncertainty culminated in the election of left-wing candidates in Chile and Peru. In Colombia, with just five months to go before the Presidential elections on May 29, the political roadmap remains one of half-baked coalitions and no clear front runners, expect for the left-wing candidate Gustavo Petro who maintains a steady 24% in voting intention.
The deepening crisis in Ukraine with some 100,000 Russian troops amassed along the border, as well as the recent announcement by the Biden administration to escalate U.S military presence in the region with possible deployment of thousands of combat-ready troops has rattled Wall Street and stoked fears that a NATO-Russia showdown would send oil and gas prices soaring.
As investors dump equities and tech for safe havens in commodities, emerging markets are bearing the brunt of global volatility, and Colombia is no exception despite GDP growth for this year expected to out-perform regional players.
With supply-chains disrupted by Omicron, vaccine mandates for truckers and an energy crisis looming in Europe, uncapped inflation is also gouging away at confidence in international monetary policy, ahead of the first meeting for the year of the U.S Federal Reserve. As the FED mulls a rate hike to fight inflation, and one of many predicted this year, the IMF cut its 2022 forecast for global growth to 4.4%, more than one percentage point lower than the OECD’s benchmark of 5.5% for Colombia.
Even though a strong peso has been good for key agricultural exports – flowers, coffee, avocado – inflation shows no sign of dropping below 4.4% this year, and number less than DANE’s (Department of National Statistics), 6.7% inflation target that will affect the household incomes of the country’s most poor.