The price of the dollar in Colombia has presented an unprecedented escalation, reaching historical maximums. Such is the case on Friday, July 8, in which the foreign currency has reached a average trading price of $4,383.93.
(Read: ‘Everything is expensive’: the foods that raised inflation in June).
The Chilean and Colombian pesos have been the currencies of Latin America that have been devalued the most so far this year compared to dollar. Added to this is Japan. This has caused fear of a global economic recession to be established.
What explains the rise in the dollar?
The Economist Jorge Restrepo explains that this rise is taking place worldwide. “The strengthening of the dollar is explained because, when there is fear of a global recession, many investors turn to the dollar, liquidate the positions they have in risky assets, such as those linked to emerging economies, and seek the dollar as a safe haven. in the face of this uncertainty and risk,” he points out.
This would be causing the devaluation of the Colombian peso and other emerging currencies.
The expert also clarifies that in Colombia the currency has been devalued much more than other of these economies due to other factors. For example, according to Restrepo, due to the uncertainty beforeThe economic policies of the new government, the formation of the new cabinet and the capacity of the Banco de la República to control inflation.
(Also: Difference between the dollar Spot, Next Day, TRM and in exchange houses).
On the other hand, the economist Beethoven Herrera explains that they are both finternational and internal actorsthat influence these increases. For him, the price of the currency depends on the increase in prices within a country. “If there’s inflation, it can’t be driving down the price of the dollar,” he explains.
In this sense, the crisis is explained by an inflation that is worldwide, which is due to oil prices, the lack of fertilizers that came from Ukraine and Russia and increases in interest rates in the United States. With these changes, investors move their assets to other places with less risk, according to Herrera.
“In Colombia there is also a political issue because there is going to be a change of government, a candidate won with a considerable margin, his victory was recognized by various parties, but he has not yet said how the change in oil and the land,” he says.
This lack of precision about how these changes will be generates a lot of uncertainty that will affect the price of the dollar, according to the economist.
What impact does it have on the economy?
Restrepo states that these hikes have a effect on ability to compete of the Colombian economy with other economies that have seen their currencies devalued.
At first, he explains, imports become more expensive and make Colombian exports more competitive. However, the definitive effect will only be clear “when the storm that is being experienced passes.”
What’s next in the coming weeks?
Finally, the ability of the incoming government to adjust public spending is going to be decisive in being able to curb the sharp devaluation of the Colombian peso.
“It will only be known at the end of the year, before it will be a period of uncertainty with a much more appreciated exchange rate than what was expected at the beginning of the year. That is, above 4,000 pesosRestrepo explained.
For Herrera it is difficult to talk about trends in the coming weeks. The expert believes that as long as uncertainty continues in the political and economic landscape the foreign currency will continue to fluctuate in value.
MARIANA GUERRERO ALVAREZ
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