Colombian peso, the worst in the region, according to the Big Mac Index

Devaluation of the peso, a good business for remittances

Although the numbers of remittances grow, when an average of the transfers is made, it is noted that “the amount is less than dollars, and that they have decreased from US$280 to US$255”, explained Juan Ricardo Hoyos, remittance manager at Banco W.

However, the Colombians who benefit from this money sent by relatives, they have not felt the impact of the increase in the dollar rate that has offset this decreaseemphasizes the manager.

(Read: TES rates do not stop worrying the markets).

In January of this year the official dollar rate opened at $3,891with which a transfer of US$280 that month equaled $1,090,000.

However, at present, with an average dollar at $4,881a transfer of a smaller amount, of US$255 dollars, is equivalent to about $1,244,000, that is, they draw less, but it compensates with the loss of purchasing power of the local currency.

In this way, whoever receives the transfer in Colombia sees more money but experiences that they buy less than at the beginning of the year, with less money.

For 2023, a significant impact is expected in the sending of remittances to Colombia, as a result of several factors abroad such as the increase in rates, the economic contraction (or very low growth) and the possible increase in unemployment.”, says Hoyos.

The manager, head of remittances at Banco W, assured that as a Colombian company “we hope that the response from Colombians abroad will be countercyclical so that it allows them to continue supporting their families during 2023, as they have been doing in the past.” recent years despite all the adversities”.

(Also: expensive dollar does not help hass avocado exports, why?).

The figures for the year set records

At the end of October of this year Colombia had received remittances for US$7.763 milliona historical figure, which presents an increase compared to the previous year of 11.77%.
According to Bank W, what this figure shows “is the tenacity, drive and resilience of our compatriots abroad, however, it is important to review the impact that the behavior of the economies that host them has on these shipments” that both help their families and loved ones in Colombia.

In the case of the United States, where more than 53% of remittances are generated, our compatriots are being affected by inflation that, although it has decreased, the national average from 9.1% to 7.7% (October), their expenses from day to day exceed that average”, indicates the analysis of Bank W.

For example, the price of gasoline went from US$3.31 in January to US$5.02 in June (51% increase) and has been declining in recent months to settle at US$3.81 in October.

On the other hand, the cost of electricity (reviewing 12-month increase) for the month of July it rose 32.9% and fell to 17.6% in October.

In a similar situation, other items and other important economies could be compared in remittances such as Spain, Chile and the United Kingdom which have inflation rates of 8.90%, 13.70% and 10.10%, respectively.

(Keep reading: Would tax reform affect financing costs?).

“This increase in the cost of living in other countries leads migrants to cut back on their expenses,” Hoyos commented.

According to figures from the Banco de la República, the departments of the Valle del Cauca and Antioquia receive 42.9% of remittances in Colombia.

The good results registered so far by the economies of the United States, Europe and Chile (the latter, which has been increasing its participation in sending these resources), are responsible for the good figures in remittances, which compete with it. in volume to Foreign Direct Investment.

With US$1,138 million at the end of the first half of the yearthe department of Valle del Cauca consolidated itself as the largest recipient of remittances, representing 25.5% of the national total.


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