Investor Interest in Colombia Feeds Strong Peso

The peso’s drop in volatility is making it more appealing to investors who buy higher-yielding currencies with funds borrowed in countries with lower interest rates; however, the raising in interest rates and the rally of the peso has ‘strongly’ hurt coffee, flower, and banana exporters, and the currency’s jump has sparked outcries from companies dependant on sales abroad – who say jobs are at risk as they get fewer pesos for their sales in dollars.

Augusto Solano, president of the Association of Colombian Flower Exporters, has said that 20,000 jobs in the flower industry have been lost in the past few years because of the peso’s rally, and he urged the government and central bank to adopt further measures to stem gains.

‘It’s very worrying,’ Solano said. ‘The pressure is so big some just can’t take it anymore.’

Agriculture Minister, Juan Camillo Restrepo, has also asked the central bank not to ‘add fuel to the fire’ by raising interest rates and further harming Colombian export industries.

In September, Banco de la Republica ended a one year-program of purchasing a minimum of $20m daily in the currency market to stem gains in the peso.

‘The trend for a stronger peso will continue,’ said Andres Pardo, head analyst at Corp. Financiera Colombiana. ‘There’s so much investor interest to explore Colombia, it’s now on everyone’s radar screen.’

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