The president of Colombia’s stock exchange BVC said Monday to be confident his country is well-prepared to deal with an economic crisis in Europe.
In an interview with investment website DataiFX, BVC director Rafael Aparicio said Colombia’s economy is in a healthy state and that the country’s central bank has the ammunition it needs to protect Colombia’s GDP to be affected by the ongoing economic trouble in Europe whose currency hit a record low on Friday.
However, the stock exchange director said that Colombia’s economy and Colombia’s stock exchange will feel the effects of the euro crisis.
“Despite the fact that corporate results are quite good and the Colombian economy is enjoying good health — we are foreseeing a 5% GDP growth — the external conditions do directly affect stocks independent of this process. This is happening at all stock exchanges in Latin America,” Aparicio told DataiFX.
The fear of Colombian stock investors is the possible withdrawal of European investors “which will lead to price drops that affect the domestic” investor.
For Colombia’s economy, the stock exchange director foresees “a drop of external finance sources” and a “drop in exports” that could affect the Colombian peso, consumer confidence and short-term consumption.
However, “the central bank has the ammunition to confront a possible crisis, like dropping the interest rates and using its international reserves for example to protect itself against volatility in the exchange rate. Colombia is able to overcome this crisis well.”
Colombia’s exports are mainly dependent on the Americas. When it comes to foreign direct investment, Colombia is more dependent on the eurozone as The Netherlands and Spain were Colombia’s main investors in 2011.