Is it possible that the dollar reaches 5,000?  This is what experts say

Is it possible that the dollar reaches 5,000? This is what experts say

A few hours after the victory of Gustavo Petro as the next President of Colombia was known, some media and users on social networks even speculated on a rise in the price of the dollar up to 5,000 pesos.

(Read: Dollar: what are historical highs due to and what is coming for the currency).

In recent weeks, the foreign currency has registered a significant escalation in its price, positioning itself above 4,300 pesos. However, experts agree that this is due to both international and local factors, and that they have nothing to do directly with the current political situation in the country.

Juan Eduardo Nates, senior foreign exchange associate at Credicorp Capital, assures that there is a probability that the dollar will reach 5,000 pesos in the event that some factors that are devaluing the Colombian peso continue to deteriorate.

One of these is the rise of the inflation in the United States and Europe, which implies a high expectation of continuing to increase interest rates and, therefore, has an impact on currencies.

It also ensures that: “In Colombia, despite the fact that we have had very good financial results since last year, the reduction of the fiscal deficit is threatened by an expensive dollar. Along with the drop in the price of oil”.

For Nates, the United States is trying to control inflation with interest rate hikes and generating an expectation that there will be no demand for basic goods, such as ‘commodities’, for a possible recession. This implies that the price of oil falls and, in the case of Colombia, it translates into less income, a greater current account deficit and a greater fiscal deficit due to the country’s external debt.

In Colombia, the next step is to increase interest rates more aggressively. Now we are less competitive in interest rates than countries like Chile and BrazilNate says.

On the other hand, Jeisson Balaguera, executive director of Values ​​AAA, says the Representative Market Rate (TRM) is having a very big change in the Colombian stock exchange because there is a lot of demand for dollars.

“Many pesos are being transformed into dollars and are taking refuge in countries like the United States, because, although interest rates are high, there is a more stable political landscape than that of Colombia,” Balaguera points out.

Who benefits or harms

The rise in the price of the dollar has the potential to impact the prices of imported goods, which today weigh about 15% in the family basket of the Colombians. Likewise, it can impact the construction sector, according to Herman Dávila, professor at the Faculty of Business, Management and Sustainability of the Grancolombiano Polytechnic.

A rise in the dollar will imply a greater collection of taxes associated with imports. This, of course, represents higher revenues for the State, but in turn, these imports with higher costs can be transferred to consumers, as in the case of imported cars, which will surely rise in price, affecting consumption. of those households that wish to acquire vehiclesDavila explains.

Other affected will be Foreign investment, since the uncertainty with this scenario makes foreign companies cautious when investing in the country, thus affecting the generation of employment in Colombia. And to the extent that there is no foreign investment, there will be no tax collection and income for the Colombian State, says Dávila.

For Balaguera, the dollar with a high price benefits exporting companies, since they receive income in dollars and increase your purchasing power in pesos. Likewise, for those who earn in dollars or euros and have expenses in Colombian pesos.

The rise in the dollar will be reflected in the increase in the prices of imported products and local foods, “since the animals we use are fed with imported grains; and the food and vegetables are being fumigated and treated with imported fertilizers,” assures Nates.

(Also: Subsidized regime proposes improvements in the EPS, but not eliminate them).

“By paying a higher price for these inputs, their final price will also increase and will have an impact on inflation,” Balaguera points out.

And there will be a consequence for the State in its fiscal commitments, specifically when paying debts and interest in dollars.


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