How Colombians feel about the rise in interest rates and usury

The Board of Directors of Bank of the Republic (Banrep) and the Financial Superintendence of Colombiarespectively updated the new intervention and usury interest rates for the month of Aprilleaving them at 13% and 47.09%.

This responds to the Bank’s position that, in the next two months, inflation in the country will reach its ceiling and, thus, begin to drop. However, the effects of these adjustments could have a direct and negative impact on productivity and national consumption in the coming months, with a projection for the month of May, as explained to Portfolio Henry Amorocho Moreno, professor of Public Finance and Budget at the Universidad del Rosario.

(Other credits to which the rate reduction would also apply).

“Raising intervention interest rates and usury interest rates is punishing the two lines of the economy: entrepreneurship and consumption”.

According to the teacher, the increase in interest rates can be seen reflected in the price of inputs that goods companies acquire to manufacture their products, which, after all this process, will be manifested in the final price. to the consumer.

(Current bank interest rates: what they are and what they will be used for).

Likewise, Amorocho also added the value of Colombian peso with respect to dollarsince the Colombian currency has had an enormous fluctuation of its value against the American one and, being the dollar the reference currency for the quotation of prices in the international market, It makes the prices that are handled in the Colombian internal market have a constant change, whether they are up or down.

“The effect of interest rates has an immediate effect on the ventures, because with a volatility of the exchange rate and with an inflationary policy like the one we have, they generate a strong effect on prices, causing production costs to increase.”, he explained.

(As of January, 10 of the 28 banks had a balance in the red.)

Regarding the usury rate, the expert assured that the Bank, by raising this concept to a figure close to 50%, seeks to limit consumption, which in a context of inflation that closed in February at 13.3%may be an explainable measure.

However, this adjustment, according to Amorocho, goes against the actions of private banks, which, during the month of March, decided in stages, lower interest rates on some of its products in order to encourage consumption.

(The new interest certificates announced by Superfinanciera).

“What is happening is that the delinquent portfolio is increasing and the demand for loans is decreasing. However, the Superfinanciera, by giving that reading to usury rates that are going to rise, basically with the same application of the intervention rates, leads to the conclusion that this will have effects in a very short time on the levels of productivity and, of course, in the increase in costs, not only in production, but also in consumption”.

Therefore, the financial authorities expect that, with the new rates, an inflation ceiling will be reached from which this factor will begin to fall, however, this would be taking place under the risk that the productivity of the companies has a relapse. , thus reducing the supply of products, which would be offset by the increase in prices, also affecting the final consumer.

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