Colombia’s strong credit market, strengthening currency and continuing woes in Argentina will all combine to maintain the country as the third largest economy in Latin America, said a financial analyst Thursday morning.
“Colombia has now passed Argentina as the third largest economy, in part because of strong growth in Colombia during the commodities boom,” said emerging markets economist David Rees, speaking with ColombiaReports this morning from Capital Economics HQ in London.
“We have seen a decade of growth in Colombia, as the security situation improved and foreign investors have begun to flood in.”
“[In contrast,] The devaluation of the Argentinian peso is the result of more than 10 years of extremely poor policy making.”
Bigger than Argentina
According to a Capital Economics report released Monday, Mexico and Brazil occupy the top spot in Latin America, but recent trouble in Argentina has pushed Colombia up to third in the rankings, which are based on a combination of GDP and the strength of the currency.
“Colombia and Argentina are both fairly dependent on commodities and reacting to the same pressures,” said Rees,
“So we can expect Colombia to stay ahead of Argentina for the foreseeable future.”
Rees also said that growth would cool in the medium term in Latin America, as the domestic credit market reaches saturation and the commodity market cools.
A tale of two pesos
Another factor in Colombia’s passing Argentina is inflation. The government Argentina in recent weeks has admitted inflation for 2014 will likely reach an alarming 20%, compared to the 2.19% experienced in Colombia last year and the 1% predicted for Colombia in 2014 overall.
The result is that Argentina’s peso is losing value rapidly while the Colombian peso actually lifted this week against the US Dollar.
“Colombia [and its currency the peso] has done pretty well this week because of the strong economic data that came out recently.” said Rees.
Colombia’s GDP growth since 2000
MORE: Colombia GDP statistics
Sources
- Interview with David Rees (Colombia Reports)
- Colombia Surpasses Argentina As Latin America’s Third-Largest Economy Due To Inflation, Currency Changes, GDP Growth (International Business Times)