Despite the fact that the Minister of Finance, José Antonio Ocampo, said on Tuesday night that the Government is going to “have a responsible macroeconomic policy, we are going to comply with the Fiscal Rule, there will be no exchange controls, we are going to diversify exports,” The markets continued to punish the peso yesterday, since today’s Market Representative Rate registered a new maximum, de $4,815.09, that is $71 more than the one in effect yesterday.
With this, the devaluation of the peso against the dollar in so far in 2022 is 20.94% and compared to a year ago it is 27.82%.
(Read: The collapse of the peso is due to the fact that they are “taking out dollars”, says Petro).
Analysts consulted say that although the minister’s words are from the person who manages the day-to-day economy, the market needs elements that inspire greater confidence.
Diego Gómez, Corficolombiana’s foreign exchange market specialist, considers that Minister Ocampo has been sensible in laying out the Government’s proposals, “But the market needs more forceful things with regard to issues such as mining and energy policy and possible capital control.”.
In addition, he emphasized that “Colombia is distinguishing itself in the depreciation of its currency and although there are international elements that affect it, at this time it is the local factors that rule.”
The analyst warns that the risks inside and outside are still latent and this situation I could go on for at least a month as long as there is no unified discourse on economic policy.
The director of Fedesarrollo, Luis Fernando Mejía, said on the social network Twitter that since July 1, “The average depreciation in the region has been 5.4% and in Colombia 12.8%. International factors explain part of the loss in value of the peso, but local factors also play a role. This explains the reason for yesterday’s announcement by Minister Ocampo.”
In his turn, the financial analyst Diego Rodríguez is clear in mentioning that the market has overreacted due to the doubts about the economic program of the new government.
“The president’s defense of the proposals of the Minister and Vice Minister of Mines and Energy of not contracting more exploration and carrying out an energy transformation that does not seem very gradual, has the international market nervous about the Colombian economy,” he assured.
In the same way, he says that “The bias of a government to generate anti-market policies also generates speculation that this will happen (like Turkey)”.
Rodríguez also thinks that the dollar-peso market has little depth and liquidity since trades of volume greater than US$50 million they generate a high impact on the price and reveals that the weakness of the currencies against the dollar is generating problems to manage the inflation of each country because “a high dollar generates problems in the management of the debt in that currency and even in the local debt ”.
(Also: Why should the rise in the dollar matter to you, even if you earn and spend in pesos).
An Anif analysis says that worldwide, prices have increased due to the stimuli granted by governments during the pandemic, the increase in freight costs and the crisis in Ukraine and its impact on the commodities market (basic goods). In addition to the effect of the increase in interest rates, the risk factor is present and, given the uncertainty that threatens the global economy, it is preferable to protect capital in dollars, which is the refuge asset par excellence.
He explains that the fact that the volatility in the exchange rate is not the same for all countries indicates that there are factors specific to each country that intensify or leverage the risk or interest factor and in that sense the Colombian peso has been one of the most affected currencies.
He mentions that the risk of the Colombian economy has increased since the beginning of last year due to internal economic issues, such as the external sector and the fiscal situation, but the bulk of the explanation corresponds to political factors.
(See: What opportunities are there with the expensive dollar and who wins in the country).
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