Colombian peso reaches new lows against the greenback

By Ignacio Portes

The Colombian peso reached new lows on Monday, approaching the COP 5,000 : USD 1 mark and furthering a trend that has put it among the weakest currencies in Latin America this year.

The peso has seen a 32 percent devaluation since June, when it was trading at COP 3,750 : USD 1 as left-winger Gustavo Petro was facing populist Rodolfo Hernández in a race to succeed right-winger Iván Duque as the country’s next president.

Mr. Petro’s June 19 victory does not fully explain the peso’s weakness, as the US dollar has been on a global surge over the same period, with the DXY index reaching its highest value in two decades last month.

The president himself highlighted this on Friday, saying people are being “lied to” when they are told the Colombian currency is the worst in the world, as many others around the globe have performed worse throughout 2022.

But some of Mr. Petro’s economic plans have caused uncertainty among investors. These include his proposal to halt all oil exploration on environmental grounds and his land purchase program, which experts believe could force Colombia into raising more debt. 

The country is also struggling with high fiscal and trade deficits, while Mr. Petro’s tax reform proposal, which looks to raise levies in order to finance an expansion of the country’s welfare state, is going through multiple negotiations in Congress before it can take its final form.

Among the region’s big six economies, only the Argentinian peso has performed worse than its Colombian counterpart over the same period. Argentina, however, could be seen as an outlier given its sky-high inflation levels (inflation is expected to end the year at around 100 percent), which makes the Colombian peso the weakest currency among Latin American countries with moderate inflation.

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