Wednesday, February 24, 2021

Strong peso hits Colombia’s exporters

In the lush green hills of central Colombia, Daniel Otero, a flower producer, is gloomy. “This is such a beautiful business, I wouldn’t want it to get rotten. We need a devaluation, soon”, he says, smelling a bunch of his roses about to be shipped to the US. “The economy in general is strong – maybe too strong.”

Although Mr Otero’s industry represents a meagre $1.2bn for the Andean country’s economy, it highlights the woes of Colombia’s manufacturers and non-commodity exporters, whose margins are shrinking due to an appreciation of the peso.

- Advertisement -

Juan Manuel Santos, Colombia’s president, says he understands their concerns but says the agricultural and industrial sectors combined represent only 20 per cent of the country’s gross domestic product.

Energy is far more important. Thanks to the commodities boom, Colombia has been taking advantage of investor interest in the resource-rich parts of the country that were off-limits during the peak of its drug-fuelled, guerrilla and paramilitary violence. Today Colombia is the region’s fourth-largest oil producer by volume and the world’s fourth-largest exporter of coal by volume.

“There are still some things to work on. But the fundamentals are strong,” Mr Santos told the Financial Times.

Since taking office two years ago, the president has set about expanding exports. Recently signed trade agreements with the US, EU, Switzerland and South Korea will be in place by the end of this year. And, after relations with Hugo Chávez’s Venezuela soured during the tenure of his predecessor Álvaro Uribe (Mr Chávez was once reported to have sent tanks to the border), Mr Santos has succeeded in restoring amicable ties. As a result, he believes exports to Venezuela could reach $3bn in 2012.

- Advertisement -

However, like Brazil, Colombia has been on the receiving end of a wave of money pouring in from the crisis-stricken northern hemisphere as investors seeking returns find Latin America a tempting prospect.

Foreign direct investment to Colombia soared 26 per cent in the first half of the year, reaching $9.3bn in the six months to June as companies piled into oil and mining, according to central bank figures.

This has raised the problem of sustained dollar inflows. The Colombian peso is among the world’s best-performing currencies to date this year, rising more than 9 per cent against the dollar.

“The appreciation is a real problem. Look at Brazil,” says José Antonio Ocampo, Colombia’s former finance minister. “Colombia will have to do something to regulate capital inflows.”

Colombia’s large neighbour has seen spectacular economic growth in recent years, but is expected to expand by only 2 per cent this year as a soaring currency, high costs and competition from cheaper imports send its industrial sector into recession.

Late last month, Colombia’s central bank cut its benchmark lending rate for the first time in two years, by 25 basis points to 5 per cent.

- Advertisement -

“We are prudent. We are not Brazil. We have been much more disciplined,” said Carlos Caballero Argáez, a former central banker now at the University of Los Andes in Bogotá. “We are not going to hit ourselves against a wall like them.”

The central bank also trimmed its GDP projection for 2012 to 3-5 per cent, compared with growth of nearly 6 per cent last year. But the economy expanded only 4.7 per cent in the first quarter from a year earlier. Growth is likely to slow in the second quarter to between 4.3 per cent and 4.5 per cent, as the global downturn cuts demand.

“Our growth average in recent years has been 4.5 per cent. So, if we end the year there, I’ll be happy,” says Juan Carlos Echeverry, Colombia’s finance minister.

There are indeed reasons to be cheerful. Colombia’s fiscal policy has been extremely prudent and the impressive growth has helped lift 1.2m out of poverty, according to government data.

But, although June data show more than 1m jobs were created year-on-year, Mr Santos has done poorly in recent opinion polls. His weakest front is unemployment, with only 25 per cent of Colombians saying he is doing a good job on the issue.

“We have to be careful about perceptions,” Mr Santos says. “We are working on what needs to be done.”

Source: The Financial Times

- Advertisement -

We strive for accuracy in its reports. But if you see something that doesn’t look right, send us an email. The Q reviews and updates its content regularly to ensure it’s accuracy.

"Rico" is the crazy mind behind the Q media websites, a series of onlinemagazines that includes Rico brings his special kind of savvy to online marketing. His websites are engaging, provocative, informative and sometimes off the wall, where you either like or you leave it. The same goes for him, like him or leave him.There is no middle ground. No compromises, only a passion to present reality as he sees it!

Related Articles

Bogotá, Medellín and Cali: the cities with the most violations of measures against covid-19

QCOLOMBIA - Since the mandatory isolation began in Colombia, 1,400,387 finess...

What happens if a Colombian does not attend the scheduled covid-19 vaccination appointment?

QCOLOMBIA - A few days after starting the National Vaccination Plan,...


What happens if a Colombian does not attend the scheduled covid-19 vaccination appointment?

QCOLOMBIA - A few days after starting the National Vaccination Plan, Colombians still have some doubts regarding their immunization process and there is fear...

We do not move even half the passengers we would have on a normal day: Transmilenio manager

QCOLOMBIA - The public transport system in Colombia has been one of the worst-hit sectors since the start of the coronavirus pandemic, as quarantines...

Colombia Suffered Its Deepest Slump Since 1905 Last Year

(Bloomberg) -- Colombia’s economy suffered its deepest contraction in more than a century last year, leaving it wracked by soaring debt, mass unemployment and...

Colombia receives first batch of vaccines

QCOLOMBIA - Colombia advanced the start of the immunization campaign against the coronavirus to February 17, three days ahead of schedule, after receiving the...

There’s A Good Chance Your Valentine’s Flowers Come From Colombia

QCOLOMBIA - If you send a bouquet of roses for Valentine's Day, chances are they were grown in Colombia. It remains the No. 1...

Colombia begins 2021 with a reactivation of 55% in flights

QCOLOMBIA - The end of the year travel season arrived with important expectations of recovery for the tourism sector. The improvement in the tourist...

Pope thanks Colombia for efforts to protect migrants

Q REDAQTED (Vatican News) - “I always look with gratitude at the efforts of those who work for migrants,” Pope Francis said on Sunday...

Colombia okays US$38 billion dollar reactivation plan

QCOLOMBIA - Colombia’s economic and social policy council (Conpes) has greenlighted a 135 trillion Colombian peso (US$38 billion) economic reactivation plan, which will be...

Colombian Clever Leaves made first shipment of medical cannabis to the U.S.

QCOLOMBIA - Clever Leaves, a Colombian company authorized to handle pharmaceutical grade cannabinoids, announced that its subsidiary, Herbal Brands, managed to establish a strategic...


Get our daily newsletter with the latest posts directly in your mailbox. Click on the subscribe and fill out the form. It's that simple!