Colombia’s peso strengthened to a multi-month high against the dollar for a fourth day Wednesday as investors cheered the possibility that a free trade deal between Colombia and the U.S. could finally be reached.
The peso’s rate against the dollar was around COP1,828.00 for $1 in intra-day trading in Bogota, according to data from the central bank. That’s the strongest level its seen since November and compares with Tuesday’s close of COP1,834.00 for $1.
After trading in rather narrow ranges throughout the first three months of the year, the peso began to break free April 1 as investors bet the economy will continue to rise and heavy inflows of dollars will be seen through foreign direct investment projects.
A key area that’s seeing plenty of dollars flow is into Colombia’s booming mining and oil sector, where companies are exploring new regions of the country, spending hundreds of millions to bring in new technology. Oil production data Tuesday showed output hit a new record high of 884,000 barrels a day in March, putting the country on track to hit its goal of 1 million barrels a day near the end of the year.
The positive sentiment toward Colombia was ratcheted higher Wednesday as news from Washington pointed to an imminent accord between Colombia and the U.S. that could lead to ratification of a permanent free trade agreement, perhaps before the end of the year.
Colombia signaled its willingness to institute broader protections for labor union activists and officials, which was one of the sticking points preventing U.S. lawmakers from approving the U.S.-Colombia FTA, which was first proposed years ago.
The U.S. is by far Colombia’s main trading partner, representing about 37% of Colombia’s exports and 28% of its imports, according to U.S. State Department data. U.S. exports to Colombia in 2009 were estimated at $9.45 billion, while U.S. imports from Colombia are estimated to be $11.31 billion.
The government has said if the peso were to surge too much against the greenback it might look for new tools, including possible capital controls, to rein in the currency, as an overly-strong peso hurts the country’s exporters.
The central bank already buys some $20 million a day in the forex market to tamp down the peso, and it plans to continue doing so for at least a couple more months.