Remittances are not leaving the same amount of money in Colombia as in 2023

The slow economic recovery that Colombia is experiencing, although it is a point that worries many, also has a good side or at least that is what can be seen when reviewing the behavior of the currencies and remittances that are entering the local market, taking advantage of the loss of strength that the peso has been showing compared to its peers in the region and other foreign currencies.

A recent analysis by BBVA Research reviewed how the economy is doing on this front and reported that although more US dollars are entering the country than last year, they are not achieving the same value as in 2023, since although the peso has been devalued, the slight recovery of recent months has had its effects.

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Andrés Felipe Medina, an analyst for this team, began by saying that the results obtained show that remittances are strong in dollars and somewhat timid in pesos and that during 2024, income from remittances in dollars from workers has shown solid growth, since between January and July, remittances accumulated a total of US $ 6,634 million, with an increase of 17.7% compared to the same period in 2023.

“In July (last month available), remittances reached US$1,006 million and increased by 32.1% year-on-year, although partly explained by a lower base in 2023, when the only annual drop that year of -14.4% was recorded,” he initially said.

He added that “this flow of income, which, among other factors, complements the income of Colombian households and encourages consumption, and even spending on education and housing, has acquired significant importance, currently representing 59.7% of export revenues (as of June) of oil and coal, and 27% of total export revenues.”

Although the cumulative growth of remittances during 2024 has been solid in dollar terms, Andrés Medina warns that it has been less significant when converted to Colombian pesos, since so far this year (as of July), income from Remittances in Colombian pesos have grown by 2.6%, much lower than the 17.7% indicated above.

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“This result is due to an average exchange rate, January – July, that has been lower during 2024 compared to 2023 ($4,517 in 2023 versus $3,940 in 2024), which has decreased the value of remittances in local currency. However, whether in dollars or pesos, remittances continue to grow.

Remittances are a key complement to local family income recipients and should be leveraged to maximize their impact on spending on education, home purchases and, in general, on household consumption,” he explained.

Colombian pesos.

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This makes it clear that those who depend on currency exchange to do business or make profits may have to wait a little longer to make changes, given that in the coming months, factors such as fear of a recession in the United States and the elections in this country are expected to generate uncertainty and this will influence a strengthening of the dollar due to the law of supply and demand.

Regarding what lies ahead, BBVA anticipated that the good dynamics observed in income from remittances will continue, driven by a depreciation of the exchange rate and supported by the low unemployment rate in the main countries from which these remittances originate; with which they warned that There are points that can be taken advantage of, although without losing the caution that these moments require.