The dollar in Colombia continues to rise and is close to reaching 5,000 pesos

( Spanish) — The dollar price in Colombia is unstoppable and continues to reach historical highs with a daily rise that has it ad contributions of 5,000 pesos.

This Monday, the Colombian peso reached a new low against the dollar and closed with a fall of 1.46% to 4,990 pesos per dollar. This is the sixth consecutive session down, reported Reuters.

This Tuesday the dollar opened at 4,968 pesos, according to data from the Bank of the Republicwith many fears that its price may increase during the day or even continue to rise in the coming days, as has happened in recent days.

Just twenty days ago, the Colombian peso was the most devalued currency in Latin America, reporting losses of 0.68% on October 6. That day the dollar closed at 4,672. This October 24, he was only 10 pesos away from breaking the barrier of 5,000 per dollar.

What happens to the dollar in Colombia?

Fears of a world recession is one of the factors that has world currencies in trouble, because although in the first quarter of the year, in particular the Colombian peso had appreciated against the dollar, the truth is that with fears of a global recession, the measure was reversed by depreciating local currencies, Corficolombiana said in an analysis published last week.

The US dollar is up roughly 10% through 2022 against other currencies.

On the other hand, the aggressive increase in interest rates by the US Federal Reserve is another factor that is pushing the dollar towards all-time highs, said Corficolombiana.

“The strength experienced by the US dollar in Colombia and globally is mainly due to the aggressive increase in the Fed’s interest rate in the US in its effort to contain inflation, and to the search for safe-haven assets in the face of fears of a global recession in the coming months,” analysts Julio César Romero and Diego Alejandro Gómez Gutiérrez wrote.

According to them, in the last four months—with Colombia making a transition from the right-wing government of Iván Duque to the left-wing government of Gustavo Petro—the Colombian peso has depreciated by about 25%.

These are the external reasons for an increase in the price of the dollar, but there are fears within the country due to economic policies, especially those that have to do with the exploration of hydrocarbons in the country.

This, because President Gustavo Petro has spoken of “de-escalating the extractivist model” and reducing Colombia’s dependence on oil and coal, which has increased fears that the country will be left without its flagship export product, which places it in the 18th position in the ranking of oil exporters, with the US and China as its main destinations. In other words, 55% of the dollars that enter Colombia come from the sale of oil, Guillermo Sinisterra, doctor in Economics and professor at the Javeriana University, told en Español.

But both the president and his finance minister have dodged criticism that Colombia will run out of oil exploitation and exploration. “Oil, coal and gas exploitation contracts continue normally… There is no prohibition,” Petro said last week.

According to Petro, oil and gas “will continue to be produced normally.”

But these statements by the president and some ministers regarding hydrocarbon exploration have had an impact on the dollar, according to José Antonio Ocampo, last week. Ocampo these days has dedicated himself to putting out fires caused by the volatility of the dollar, while he defends a tax reform, one of the banners of the Petro government.

“It is a matter of the perception of some statements by some colleagues,” Ocampo told reporters about the increase in the price of the dollar.

And he continued: “Regarding the issue of oil, it has been the subject of much concern because it is Colombia’s main export product, but let’s say today’s tweet (October 20) from the president of the republic, which clarifies, on the issue of contracts, is that we are going to fully respect the contracts”, for the exploration and exploitation of hydrocarbons.

For President Petro, although the “world situation is critical”, an increase in the dollar could also benefit Colombia because “it could allow it… export much more to the US”.

But, according to Corficolombiana, these fears of a possible “early withering of the oil industry are generating greater uncertainty in the market and could push the exchange rate to new historical highs (above $4,700 pesos) in the coming months.”