The strong increase in the price of the dollar against world currencies, among which is the Colombian peso, which this Wednesday was the second most devalued in Latin America -about 13 percent in the last month-, together with the drop in price of Brent oil, which yesterday managed to fall below 100 dollars a barrel; to an imminent recession in the United States and a global slowdown, are taking the Colombian economy to a crossroads that requires forceful actions to mitigate the negative effects of this international situation.
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“It is necessary to act with prudence, quickly and forcefully”, agree some economists.
The dollar completed three series records yesterday and took today’s official rate to 4,348.68 pesos, but the currency was only 3 pesos away from overcoming the psychological barrier of 4,400 pesos, a price that market analysts had anticipated at the beginning of this year, motivated by the results of the presidential elections in Colombia, although global uncertainty is also putting pressure on its behavior.
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So far this year, the dollar has become 367.5 pesos more expensive, with which the Colombian peso has lost 9.2 percent of its value against the US currency.
Rudolf Hommes, economist and former Minister of Finance, drew attention, through his Twitter account, to the speed with which the Colombian peso has devalued in the last month, which is not equated with the behavior that other currencies bring. region of.
“Between June 6 and today (yesterday) the Colombian peso has devalued 12.96 percent. In the same period, the Chilean peso devalued 3.4 percent and the euro, 3.3 percent. It is not correct to think then that the accelerated devaluation of the peso is ‘a world phenomenon’ when it is devalued 3+ times more than the others”, warns the former minister.
And he adds in a second trill that “there are other national factors that are causing a much faster devaluation. It has not been possible to create confidence on the evolution of the economy, but on governability. It is going to be necessary to announce what the tax and fiscal reform is going to be”, before which he suggests that these announcements be made soon.
Exits to the crisis
The truth is that the country has to act quickly to prevent the Colombian economy, which would have the second best global performance this year, 6 percent, from stagnating.
Mauricio Cárdenas, also a former Minister of Finance, maintains that under the current situation the country’s room for maneuver is reduced and the Government must be aware of this.
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“Raising public spending and the fiscal deficit at this time would endanger the economic situation of millions of households who would suffer the consequences of higher inflation and capital outflows,” he says.
For this reason, there are those who consider that it is necessary to act quickly because the situation is quite challenging.
Luis Fernando Mejía, director of the economic studies center Fedesarrollo, proposes a formula with four fundamental points to avoid economic collapse.
“It is a difficult situation due to the risk of a recession in the United States and a global slowdown. In addition, due to the increase in inflation that exceeds 9.6 percent and maintains an upward trend, ”he points out.
In this sense, the economist suggests a faster rise in the intervention rate by the Banco de la República, which would allow inflation expectations to be ‘reanchored’, which is key in the current context. The Issuer’s intervention rate is at 7.5 percent after last week’s adjustment. The second, he warns, has to do with the fiscal adjustment, since it is estimated that this could lead to about 6 percent this year, but that adjustment must be rapid “with a credible plan that allows reducing both the fiscal deficit and the debt public of the country.
For Mejía, it is also key that complementary measures be adopted, such as extending the reduction of tariffs to industrial inputs and the manufacturing sector, which may be temporary.
And, lastly, he believes that it is essential that the incoming government implement public policies to increase the productivity and competitiveness of the countryside, industry and services, since “expansive monetary and fiscal policies will have to be eliminated in the short term, then they will not be able to continue stimulating economic growth.”
“You have to know how to manage the drop in crude oil”: Duque
President Iván Duque referred to the sharp drop (10 percent) in oil prices, which led a barrel of Brent crude to trade below 100 dollars yesterday, and said that this drop in the cost of that raw material “We have to know how to manage it fiscally, but without losing certainty about the mining-energy sector.”
He said it during the presentation of the balance of the ‘Pacts for growth and employment’, where he stressed that “If the price falls, and additionally fears are generated in the hydrocarbon sector so that there is more investment and more production, the blow for the country is twice as big”.
The fall in international oil prices has affected the performance of Ecopetrol’s stock in recent weeks.
Only yesterday the title of the Colombian oil company added a drop of close to 1 percent, which took its price to 2,152 pesos, that is, about 1,150 pesos below the value registered at the beginning of June of this year.