Colombia’s currency is tumbling against the value of the dollar, descending to over 2,400 pesos on Friday. While all oil exporting countries have been hit by falling oil prices, the peso has fallen by 21% since June, second only in losses to the Russian ruble.
The slump in oil prices – over 40 percent since June – has opened a hole in the Colombian budget, and lowered growth forecasts. Colombia’s exports are dominated by crude oil, which raise over a quarter of government revenues.
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The crisis has already forced the government to develop new taxation rules to cover the shortfall in revenue, which some commentators have warned will deter foreign investment.
Colombian manufacturers engaged in exports will be among the winners, as are those Colombians with saving in dollars. Normal Colombians will however notice that all imported goods are becoming more expensive, and those with debts to importers or debts held abroad will be hit.
“We have to start to buy more locally, and to invest here because, suddenly, Colombia has become cheap,” says Jorge Restrepo, analyst of RCN Radio. While disputing whether the national economy was facing a crisis, Restrepo predicted a “scenario of less growth where you will have less demand and, especially, where the financial assets have lost a great deal of value.”
The rising costs of imports threaten to boost inflation, but some are questioning how long the current strength of the dollar and the low prices of oil will last.
Central Bank director Jose Dario Uribe told press that “we don’t know what will happen with the price of oil, or if on the contrary [the peso] will deepen its fall. We never used to make predictions because the price of the dollar depends on multiple factors and many of them are unpredictable.”