What is the ‘Colombia factor’ that is affecting the price of the dollar

The price of the dollar in Colombia has reached historic highs and is already close to 5,000 pesos. A value that has further accentuated the devaluation of the Colombian peso than in so far in 2022 is positioned close to 25%.

However, there are several factors that have made the situation worse.

(Read: This is the price the dollar should have without the ‘Colombia factor’).

Analysts agree that much of the rise in the dollar is due to international factors such as The increase in rates by the United States Federal Reserve to curb high inflation figures.

Also, it encourages the war between Russia and Ukraine that has been taking place since the beginning of 2022 and has impacted certain supplies and inputs.

On the other hand, to a lesser extent, is the ‘Colombia factor’. referring to the set of economic and political situations of the country that have an effect on the exchange system.

Currently, the Colombia factor is determined due to the country’s fiscal deficit.
Which in turn has been determined by the constant pronouncements on the changes in tax terms proposed by the new Government.

(See: The dollar in Colombia remains ‘on the prowl’ of 5,000 pesos).

Along with this, the pronouncements of President Gustavo Petro and other members of his cabinet, which have generated uncertainty about the economic future of the country.

Experts agree that a key point has been the doubts about the energy transition raised by the Government where it has been discussed suspension of new oil extraction contracts.

Given this, the markets react with uncertainty since a large part of the country’s income comes from the hydrocarbon industry.

In colombia, hydrocarbons contribute 3.3 percent of gross domestic product (GDP), while oil represents 40 percent of what Colombia sells to the world.

(Also: Dollar, ‘in the clouds’: so you can avoid impacts on your pocket).

Along with this, another national factor is the forecasts of the decrease of the national economy for 2023.

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