The Colombian peso completed 2023 as one of the currencies with the shortest distance against the dollar in the world. The amount discounted by the local currency from the US currency in these 365 days was more than 988 pesos, but due to the volatility that prevailed for most of the next year, this difference was at times as high as 1,240 pesos. A few hours left to finish.
The representative market rate (TRM) at which 2023 ends and next year begins is 3,822.05 pesos. This is not only the lowest level of the year, but also the lowest level in more than 18 months, as a similar level was last seen on June 10 last year, reaching 3,833.34 pesos, according to Republic Bank statistics.
Although the decline in the dollar may come a little late for thousands of Colombian travelers who are currently choosing an overseas destination to ring in the new year, those who see the decline in the currency’s price as an investment opportunity will have a few coins in their hands. There is little time for this to happen, as analysts see 2024 continuing to be marked by strong volatility that is a product of coming adjustments in the world’s major economies, particularly the United States. The currency is expected to return to levels close to 4,500 pesos.
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Except that one, The peso had the best performance among Latin American currencies in 2023. Its revaluation against the dollar rose above 20.5 percent, placing it first among 25 major currencies, including Latin American currencies such as the Mexican peso (12.85 percent) and the Brazilian real (8.20). 8.96 percent consists of Swiss franc, 4.84 percent sterling and 3.65 percent euro.
The United States central bank’s interest rates, the Federal Reserve (FED), raw material costs and domestic investors’ softening of the penalty imposed on Colombia due to the political issue, as in other countries in the region, strengthened Latin American currencies, especially the Colombian peso.
Grupo Alianza economists say that structural changes in the economy are always reflected in the foreign exchange market and note that, for example, when the oil crisis occurred, the currency reached 3,450 pesos, during the epidemic this jump increased to 4,200 pesos, and during the oil crisis this figure increased to 4,200 pesos. During the last political crisis, the exchange rate exceeded 5,000 pesos.
However, Felipe Campos, Investment and Strategy Manager of that group, explains that what is happening with the currency in Colombia today is in line with what is happening in Latin America and the world, where the dollar has weakened significantly due to the current crisis. global situation.
But, One factor that analysts strongly emphasize is the change in foreign investors’ perceptions of the domestic political context. They believe that there will be no more structural changes, and this is also reflected in the decrease in country risk.
According to Juan David Ballén, Director of Analysis and Strategy at Casa de Bolsa, the behavior of the US currency in the last half of the year is also linked to the lower trading volume of the dollar in this season. being higher than expected causes volatility to increase, “especially downward this year, reducing the likelihood of the FED reducing interest rates in 2024.”
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Despite When we look at next year, the outlook looks a little clearer, A new recovery in the dollar is expected, at least given the possibility that the world’s leading central banks will start adjusting interest rates and the local political issue has almost been resolved.
Grancolombiano Polytechnic School of Business and International Development teacher Marisol Salamanca argues that we should always pay attention to the Fed’s monetary policy decisions.
“At the local level, the confidence voices of the National Government are decisive, which increases the prospects for economic growth, which is expected to exceed 1.5 percent,” he said, adding that “the level of security and confidence”. This assistance to investors will play a very important role in the economic equation of the country .”
What do you think, The currency could reach 4,200 pesos in the first half.
At Scotiabank Colpatria, they don’t see a huge jump in the currency in the short term, but they do see a big swing as some problems in the economy need to be fixed.
While Sergio Olarte, the organization’s chief economist, explains that this strong volatility expected next year will be due to the markets waiting for the time when the central banks will start normalizing interest rates, he says on the domestic front: “In Colombia, we expect the decline in inflation to consolidate, the Central Bank’s interest rate cut and a decrease in economic activity.” “We expect some recovery.”
Something Credicorp Capital’s Chief Currency Officer Alejandro Guerrero agrees with. The performance of the dollar will continue to depend largely on how the sovereign risk issue and the Government’s policies continue. Knowing what to expect internally on the foreign exchange front (structural reforms, investments, confidence building). “Current levels are similar to those seen in presidential elections, but volatility will continue.”
(Continue reading: Challenges of an economy that will grow below the Latin American average)
At Credicorp Capital, they expect the dollar to be above 4,200 pesos, so they recommend buying at current levels. BBVA Research, on the other hand, expects the dollar to return to 4,450 pesos as a result of various pressures on the currency. These include reducing interest rate differentials with developed economies.
Although the global economy in 2023 will be characterized by weakening, and only in Colombia this year it is estimated to grow by around 1 percent in the best-case scenario. The amount of resources sent to the country every year by millions of Colombians living abroad, especially in the USA, Spain and Chile, has not decreased.
Moreover, analysts predict that a new record will be broken on this front in 2023, with a figure that may exceed $10 billion; If this figure is exchanged at an average rate of 4,322 pesos, as they estimate it will be this year, there is talk of foreign revenue of around 43.2 billion pesos, a figure that exceeds Bogota’s budget for next year by 10 billion.
Considering that approximately 9.18 billion dollars entered the country for this concept without December data, it will not be difficult to reach this figure. During 2022, the country received remittances of approximately $9,429 million.
According to Marisol Salamanca, a professor at the Grancolombiano Polytechnic School of Business and International Development, we cannot overlook this figure, which could put downward pressure on the exchange rate.
“It is important to highlight the increase in foreign exchange flows to Colombia, which has brought a significant number of currencies, indicating a decline in the exchange rate,” he notes.
Although the lower price of the dollar means that the person purchasing these resources in the country receives less foreign currency income, it is also true that: In the context of the slowdown, these higher volumes of remittances constitute a huge aid to people and the economy in general. In fact, a recent analysis by Grupo Bancolombia shows that “Remittances can serve as a countercyclical tool, especially if they can be channeled into sectors that encourage savings and investment, such as the construction industry and the financial system.”
He also argues that “although these resources have created positive changes in terms of poverty reduction and served to support households in overcoming the challenges of the economic cycle, their potential is yet to be explored.”
CARLOS ARTURO GARCÍA M.
On X: @CarlosGarciaM66
artgar@eltiempo.com
Source: Exame
I am Bret Jackson, a professional journalist and author for Gadget Onus, where I specialize in writing about the gaming industry. With over 6 years of experience in my field, I have built up an extensive portfolio that ranges from reviews to interviews with top figures within the industry. My work has been featured on various news sites, providing readers with insightful analysis regarding the current state of gaming culture.
