The dollar’s rally around the world against other currencies, which began in June due to mounting fears of a recession in the US and the rest of the world, has been strongly felt in Colombia since the early days of July.
In the first half of the month, the currency reached historic levels, reaching 4627.4 pesos to the dollar on Wednesdaysurpassing even the strong spike that occurred when the epidemic arrived.
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Thus, the Colombian peso not only ranks second in the list of currencies with the most depreciation between mid-June and mid-July, after the Chilean peso, which shows a decrease of 11.1 percent, but also has many economic sectors that they deal with in imported items, or that sell products and services in dollars, which is a potential decline in their sales.
“In the past few weeks, the prices of all cars have gone up by several million, and we are working with a forecast of one dollar at 5,000 pesos,” says a dealer for a well-known car brand in Bogotá. Who does not hide the concern about how difficult it will be to materialize a sale because buyers are now thinking twice about taking on debts to buy a new car.
But it’s not the only sector in the economy where there is concern about the effects that expensive dollars can have.
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According to Camilo Herrera, founder and president of Raddar, an expert in consumer analysis, although in an environment of rising inflation and interest rates, many buyers decide to go out and get the products they need before they continue to increase. Its price, and the effect of devaluation on imported products usually lags behind in domestic prices, and there are purchases in which the effect of a strong devaluation is direct.
An example is the consumption in international trade portals such as Amazon, where if people buy products these days, they are more expensive. And even more so if they pay them with a credit card in dollar installments.
Javier Diaz Molina, president of Analyx, the Colombian Foreign Trade Union, points out that, given an exchange rate as high as the current one, people would put off unnecessary or luxury expenses, such as buying jewelry. , high-end vehicles, technology, and even home appliances, waiting for things to settle.
On the other hand, Herrera points out that the country’s electronic technology products, that is, Computers, tablets and mobile phones, among other things, have a value of less than 22 units of value-added tax (UVT), that is, by 2022 they cost less than 836,088 pesos in commercial establishments, are not subject to VAT.
But with the currency devaluation that has occurred in the past twelve months, many of these items that were without VAT are now operational. “It’s an effect we’re having, and it’s dramatically reducing access to tablets, cell phones, computers and printers for a certain population in Colombia, of which there are few.‘ asserts the expert.
Another line in which a rising dollar causes uncertainty about the pace of sales is flights from Colombia abroad, since such an expensive currency can increase the costs of tour packages, and in view of this, many travelers can postpone their departure abroad.
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Paula Cortes Calle, CEO of the Colombian Association of Travel and Tourism Agencies (ANATO), explains that there is still no noticeable impact and that the mid-year season is already sold out, and people are waiting to see what happens. , which may affect future bookings. “We are not sure about the devaluation of the peso, which may discourage the departure of Colombians abroad in the coming months‘, it states.
Before the strong dollar rise that began in July, between May 2021 and June 2022, airline ticket prices in the country rose by 23.68 percent, and according to Danish figures, the rise was only during the month of June. 10.15 percent, which is nearly 20 times the month’s inflation.
For Herrera, it is clear that if the government’s new announcements about not implementing the third day without VAT, planned for December, come true, then surely the families who have been waiting for today will consider making the purchase on another day, such as Black Friday, in an attempt To mitigate, through promotions, the effects of devaluation may last for several months.
and that is , For Javier Diaz, President of Analdex, to the extent that there is uncertainty, slowdown and fear of recession, people turn to assets such as the dollar which strengthen this currency, Which could lead to a much higher exchange rate for a long time.
For this reason, the growing fear and uncertainty among those who are subject in their business to the change in the price of the dollar is the product of the strong rally shown by the currency between July 1 and 13, when it has been for seven consecutive days. The price reached record levels last Wednesday, reaching an unprecedented rate of 4,627.46 pesos, an increase of 476 pesos since the beginning of the month.
However, from that day until Friday, the currency saw a significant correction, at 231 pesos, closing the week at 4,395.63 pesos to the dollar, the official rate that governs between Saturday and Monday. In fact, Friday’s decline was only 124 pesos, the result of a day of greater calm in international markets and the decline of the North American currency against the largest currencies in the world, according to Anders Langbeck, Rueda Director of Grupo Bolívar Economics Studies.
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Juan David Palin, Director of Strategy and Analysis, Casa de Bolsa, He confirmed that the dollar was in overbought territory and at any point a drop was expected to occur even more than that which occurred in recent days.
In this regard, Felipe Campos, director of investment and research Alianza Valores, explains that markets have already finished ruling out the effects of record inflation in the United States, while the rumor of higher data in that country has been rejected, with 9.1% each. The year will be the highest and will urge the US Federal Reserve to raise interest rates less sharply in July.
However, the current value of the dollar in Colombia is still higher than it was on March 20, 2020, when the global oil crisis was in its infancy, amid measures to contain the expansion of Covid-19.
And although the factor in the United States appears calmer today, the crisis in Ukraine and uncertainty about global growth could lead to lower demand for oil and a drop in the price of crude oil to levels well below current levels. , which is around $100, a scenario that also favors buying dollars as a haven asset, and their potential increase.
“In the short term, the bias for the oil price is bearish, due to the risks of lower demand in the context of a slowdown.,” as emphasized in a recent report by the Banco de Bogota Economic Research Team.
In this sense, Andrés Langebaek, Director of Economic Studies at Grupo Bolívar, argues that the record figure of 4,627.46 pesos may not necessarily be the maximum for the dollar in the Colombian market, since everything depends on its value in crude globally.
“If we have a really bad recession and the price of oil drops to $75 or $80, the dollar price could go up again‘, he confirmed.
What is even more worrying is that no one dares to predict when this storm will end. Expected US growth data for this month will give some clues.
ÓMAR G. Red smoker
Deputy business and economics editor
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