What Jumps Out – The Peso

No it is not a bird, or a plane or even superman, it is the Colombian Peso which has been hitting record lows this week and causing all manner of consternation. There is all manner of factors involved from as far afield as Ukraine to here at home in Bogota – perhaps the biggest concern is the perception of mixed messages between President Petro and Finance Minister Ocampo. The bottom line is that the currency is painting the Central Bank into a corner where rates will likely need to rise again. Whether it be Fedesarrollo, Bloomberg or the same Central Bank, analysts’ surveys continue to adjust their estimates for GDP, inflation and interest rates upwards for both 2022 & 2023 and in the current climate it is hard to argue.

Ocampo has publicly opposed further interest rate increases as the CPI in the system is driven by the supply side but the more conservative increase than expected of 1% in September, before the strong inflation reading for the same month is now looking like a questionable decision. Ocampo, in what has been a busy week, also reiterated that the government would not be wasting money defending the Peso and that, in a bizarre collision of my motherland and adopted home, that Colombia cannot be compared to the UK, as Colombia is trying to rein in the debt levels.

The latest Import data from the DANE only added fuel to the interest rate fire with yet further evidence that domestic demand remains very robust. August Imports totaled $7.29bn USD – an all-time record driven by the manufacturing sector which was well above expectations. This in turn led to a record monthly trade deficit of US$2.16bn – that is simply a massive amount of money and only adds to the challenge of a finance minister who is trying to balance the books.

Rupert’s opinions & analysis as an independent expert contributor are his own and not necessarily those of Finance Colombia or the BVC.

In terms of the markets the COLCAP continues to follow the global herd but despite the suspension of further TES bond sales we have seen the 2031 bond hit 14.85% – Ocampo reported that after 11 months of being large buyers, foreign funds have sold US$1bn in bonds this month. November will be interesting – Colombia is a country that has an impeccable debt record and with the Peso at the current levels that carry trade is going to be very tempting.

All of this is beginning to impact on Gustavo Petro’s support as the latest Invamer survey sees his approval rating drop from 56% to 46% – honeymoon periods don’t last long in Colombia.

Overall a very complicated week for Colombia and there is a feeling that what the country needs is a period of calm and for the tax reform and minimum wage to be resolved, thereby allowing the country to move past this period of turbulence.

Please find below a link to the video report to be found on LinkedIn :

https://www.linkedin.com/posts/rupert-stebbings-927b6316a_what-jumps-out-is-it-a-bird-no-it-is-not-activity-6989186959726235648-n-y0?utm_source=share&utm_medium=member_desktop

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That is about it for today – remember these are just themes that jump out at me – please refer to your local analyst, economist, salesperson or soothsayer for more details.

My regards to all,

Roops