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September 15, 2024
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How does the rise or fall of the dollar affect the Colombian economy?

How does the rise or fall of the dollar affect the Colombian economy?

For decades, the US dollar has held the upper hand in the list of world currencies. But, Have you ever wondered why this currency plays such an important role in the international economy?

(Read more: Is it possible to reverse the dollarization of an economy?)

The first thing to keep in mind is that the United States has remained at the forefront in this area, thanks to factors such as Its dynamic market, the stability of its economic system, its high level of investment in innovation and the strength of its institutions.

This context has allowed the ‘greenback’ to not only become the reference for many transactions between countries, companies and others, but It has also established itself as the main reserve currency and a key piece in global trade.

All of the above has allowed the dollar to have an impact on global financial markets, including of course Colombia.

In our specific case, this is the main currency with which the products that the country buys and sells are traded. This includes products such as oil, coffee, flowers, among others.

The US currency also plays an active role in the national economy as it is the means of payment for Colombia’s external debt, as well as other financial obligations.

(Read more: The direction that the dollar could take in the coming months, according to analysts)

Dollar and Colombian peso.

iStock

(See: Countries with the largest gold reserves in 2024: is Colombia included?)

Effects on the Colombian economy

The financial services company, Skandia, points out that two of the elements that can impact the behavior of the dollar are: imports and exports.

In the first case, a strong dollar can translate into more expensive imports, since more pesos are needed to buy the same amount of goods and services abroad. As for exports, this implies more income, since more Colombian pesos are received per dollar of sales made.

This currency can also have an effect on inflation. This is explained by the fact that variations in the exchange rate have a certain impact on prices, especially for imported products.

(More news: US vs. China: Which is the world’s most powerful economy?)

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