The Colombian stock market experienced its worst drop since 2008, costing Colombia’s top 35 companies $10.8 billion.
According to economic magazine Portafolio, the five day fall was due to wavering international markets, with the S & P index lowering the United States’ long-term credit rating from AAA to AA+ and the risk of Europe not paying its debts.
Since August 1, the IGBC index (the official Colombian Stock Exchange index) dropped from about $190 billion to about $179 billion, a 5.6% decrease. The index decreased 4.1% Monday, the worst fall since the middle of the global financial crisis in November 2008 when it dropped 4.3%.
However, the record fall was the lowest of the major neighboring stock markets in the region. Argentina, Brazil, Peru, and Chile also experienced significant drops in their markets with decreases of 10.7%, 8.1%, 7.0%, 6.9% respectively.
Meanwhile, the dollar rose against the peso to its highest rate since May 2011, reaching to about 1,811COP to one U.S. dollar. While the appreciation of the dollar could increase Colombian exports because the dollar could buy more goods, the turmoil in the American and European economies could lead to a drop in foreign purchases.
In the face of the recent economic collapse, Colombia has adopted measures to create an economic cushion in case markets continue to drop. According to Portafolio, in an extreme scenario, there is a possibility that Colombia would not meet its expected growth rate but would still maintain modest growth.