“There have been statements about prohibiting new exploration projects and others saying that a decision has not yet been made.” “The government has not been clear about what the decision on this matter will be,” she said. Yessica Prieto, consultant at Colombian energy advocacy group Crudo Transparente, told The Bogotá Post that it is precisely these mixed signals about the future of Colombia’s oil industry that is spooking investors. And since he has come to power, the government hasn’t been too clear about what exactly will happen. The long-term perspective of future oil exploration is shaky as Petro has said he would like to wean the country off it. Colombia depends heavily on oil revenues as it remains the country’s biggest export. Photo by Alexander Mils on Unsplash Mixed signals on oil dollar has strengthened against most other currencies in recent months. He said that various factors are contributing to investor fear and “raising the country’s risk profile.” These include “domestic circumstances including Petro’s statements criticising the central bank” as well as “the Finance Ministry’s lack of detail about planned spending increases and how they will be paid for.” The U.S. Colombia Risk Analysis founder Sergio Guzman told The Bogotá Post that all this has led to a decline in the value of the peso. This, combined with other global macroeconomic factors, is scaring off foreign investors. El ascenso de la tasa de interés va contra el crecimiento económico y el empleo de los colombianos.- Gustavo Petro October 5, 2022 La Corte constitucional ordenó al Banco de la República ajustar sus decisiones al crecimiento de la economía y el empleo. There’s also a lack of clarity over the extent of his proposed reforms, and their financing. JPMorgan analysts said this brought volatility to the Colombian markets. Investors are worried by some of the things Gustavo Petro has said and what he may do.Īn example: This month, he criticised the central bank’s independence in a string of tweets. This is partly because there is financial uncertainty under the country’s new president. The peso is falling in value too – last week it was one of the world’s most depreciated currencies. There is some relief for exporters who receive dollars – they are currently very competitive internationally.Ĭolombia, however, also imports a lot from the US and Europe, like farm machinery and computer equipment a weak peso means the country has to pay more for these foreign goods.īut this isn’t just about the dollar’s surge. Why? Partly because their debt is denominated in dollars, so paying it back gets more expensive. This is not good news for less wealthy countries like Colombia. At a retail level, people are less likely to borrow cash and invest, instead preferring to hold onto greenbacks. This means many people are buying dollars for various reasons, pushing the price up. The US is perhaps taking the most aggressive action by upping interest rates in an attempt to tame 40-year high inflation. Nearly every country around the world has been hit hard and many are taking drastic measures to get it under control. You’ve probably heard about inflation and how it’s hurting citizens’ wallets the world over.
But what does this mean for Colombia, and why is everyone talking about it? This is because the dollar now is fast closing in on COP$5,000 per $1 – something that has never happened before. It seems the US dollar’s unstoppable rise – and the Colombian peso’s fall – has got lots of people taking notice of tedious economic issues. You know it’s a hot topic when the kids are making Instagram memes about it. The Colombian peso is the weakest it’s ever been against the dollar. As the USD nears ever closer to COP$5,000, Mat Di Salvo takes a look at why this is happening and what it means for the country.
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