Perhaps one of the words that has been mentioned most in the recent context of Colombia is reactivation. This in a scenario in which the slowdown has affected several sectors of the economy, while the Bank of the Republic maintains its fight against inflation and the National Government works on a reactivation plan. which has been repeatedly announced, but has not yet shown concrete actions.
The economic situation has reached such a point that, beyond the requests made by Casa de Nariño to make economic policy more flexible, the private sector decided to take the first step from the banking sector and start a ‘rate war’ with which they focused mainly on housing loans, in a strategy that aims to give industry and construction a break.
Interest rates
Beyond the strong term derived from the word “war,” what actually happened is that in less than two weeks nine financial institutions decided to adjust the interest rate they currently charge Colombians for loans they currently make for the purchase of a house or apartment. These are Bancolombia, Davivienda, Banco Popular, AV Villas, Banco de Bogotá, Banco de Occidente, Bbva, Confiar and Banco Caja Social.
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Of the nine contenders in this war, six placed their types at 10% annual cash for the purchase of non-VIS housing and seven reduced the interest rate for the purchase of VIS housing to the same percentage. Although there are some differences between what has been done by some and others, the reality is that everyone is trying to contribute their grain of sand to the economic reactivation, while waiting for the Government to do its part.
Interest rates
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Beyond the praiseworthy nature of this measure adopted by the financial sector, the market has been closely following the effect it may have on the cost of living, since it cannot be overlooked that in June the Consumer Price Index had an increase above expectations and stood at 7.18%.
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Gregorio Gandini, from Gandini Análisis, maintains that these changes do not generate any major alarm, since the rates would have to go down in consumer credit so that there is really an impact on consumption and eventually on inflation.
Interest rates.
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“It is important to understand that the sharp rate cuts we are seeing are in mortgage loans, so consumption will not necessarily increase. However, if rates continue to be cut in consumer loans and credit cards, it should have an impact on consumption and eventually on inflation,” he explained.
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However, economic research centres are keeping an eye on this ‘rate war’ and any effect it may have on inflation, since while lowering rates may facilitate access to credit and encourage investment in housing, there is also a risk that an increase in general demand could push prices up.
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For Sergio Olarte, chief economist at Scotiabank Colpatria, the key will be to balance economic recovery with measures that contain inflation, ensuring sustainable growth without compromising price stability, while explaining that the measure adopted by the banks has a clear objective and that is housing.
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“Specifically, there is talk of a reduction in mortgage rates. However, this is a market that takes time to recover, and construction is still lagging. Although it is possible that it will improve, we do not expect a quick recovery. In addition, the usury rate has decreased significantly, which has led to a slowdown in the growth of the economy. a reduction in interest rates on consumer loans, especially credit cards,” he explained.
Buying a home
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Meanwhile, for Andrés Moreno Jaramillo, an expert in financial markets, the reactivation of hard-hit sectors such as real estate and tourism is key, and does not necessarily generate inflation, which is why he welcomed this measure, which he hopes will translate into a boost for the economy at this time.
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“What you are looking for, initially, is to activate those people who can “People are going into debt and they have not wanted to do it because the rates are too high and they have preferred other investment alternatives or not to spend. The idea is to tell them to spend, but it is not necessarily aimed at triggering excessive consumption precisely because people are not having enough money due to the inflation that there was. The economy is still adjusting,” he said.
Colombian money
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This expert added that “moving the economy and making real estate move, making some sectors that have been hit begin to rotate, does not necessarily translate into inflation. It translates into productivity, it translates into people being able to equalize their salaries to compensate for inflation.”
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Julio Romero, an economist at Corficolombiana, expressed the same opinion, highlighting that for now what is projected is a gradual economic recovery, with greater private investment key to stimulating the labor market and consumption.
“The labor market is also key here, and when we talk about employment or the labor market, we must necessarily think about reactivating the economy through investment by the private sector. Ultimately, the private sector is an ally of recovery and the priority must be to find ways to stimulate sectors that are stagnating, especially in the construction sector,” Romero said.
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Finally, for Camilo Herrera, founder of the firm Raddar and expert in In terms of consumer issues, it should not be forgotten that before taking this type of measure, banks usually thoroughly analyse any repercussions or effects that may arise, in order to prevent the cure from being worse than the disease.
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“If you have the possibility of buying a house, you have to pay the down payment, you have to keep paying installments and so on, so that reduces your purchasing power for a number of categories. To the extent that you get more into debt and have to make recurring debt service payments every month, then you have less purchasing power for a number of things, which is what banks look at very carefully when assigning credit to people,” he added.
Interest rates
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Thus, for these analysts who spoke with Portafolio, what must be done now is to invite the Government to follow the example of the private banks and present their proposals for reactivation, since the country’s economy cannot wait and It is necessary to stop the slowdown before it spreads to other sectors of the economy.
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