November 2017 - What has happened with the Colombian exchange rate during 2017?

During the last decade (2005 – 2014), the exchange rate between the Colombian peso and the US dollar has remained under 2,500 pesos per dollar. Additionally, between the year 2009 and 2013 it was steadily close to the 1,800 pesos per dollar. However, during the 2014’s drop in oil prices, the exchange rate strongly devalued, reducing the Colombian peso value by 70% during only 13 months. During 2017, the volatility of the Colombian exchange rate and the effect of the international oil prices over it has declined. Additionally, the contrary relationship of these variables in the last few months has shown that the exchange rate is sensitive to other variables, such as politics in the U.S and the Federal Reserve interest rate.

October 2017 - Pension System Debt and Fiscal Deficit: Where Are We Going?

Even though the Colombian government is trying to maintain a fiscal deficit that is coherent with the established rules and sustainable, there is uncertainty regarding the sustainability of public finances due to the growing debt of the pension system, which generates liabilities that prevent the non-compliance of payments to the retired people of the country. The road we take will depend on the possibility of the government to promote reforms that generate structural changes in the pension system or in policies that promote formal employment and, therefore, increase the number of people that contribute to the pension system.

September 2017 - Why is the Colombian economy decelerating?

The growth forecast of the Colombian economy that Econometría Consultores made for the year 2017 fell from 2.1% to 1.3%. The decline in expectations of economic growth came from the publication of the real GDP growth of the economy during the second quarter of this year, lower than the levels between 1.6% and 2.0% expected by analysts. Although some short-term factors such as affectations on hydrocarbon production have had an impact on this behavior, there are also long-term trends such as the decline in exports and the low growth of investment, which have a significant effect on the low expansion of the economy.

August 2017 - Colombian exports’ perspectives for the second semester of 2017

In 2017, the behavior of Colombian exports has shown a positive tendency and, as a consequence, it has generated high expectations for this economic sector. The change presented in the course of the year, compared with previous years, is reflected in the optimism of the exporting sector about the following six months. However, expectations about a positive tendency may be reverted in the remainder of the year due to the persisting productivity failures present in the country’s exporting sector (not competitive freights, deficient logistics, etc.). Even though the behavior of the year’s exports remains uncertain, it is necessary to improve the conditions of this sector.

July 2017 - Labor Informality in Colombia: Evolution, Composition and Possible Causes

According to the National Administrative Department for Statistics (DANE), the labor informality rate in Colombia stood at 48% of the total number of people employed in April 2017. The economic activities that generate the most informality are: i) commerce, hotels and restaurants and ii) communal, social and personal services. One of the reasons why there is a high informality rate is the existence of a large number of family businesses that don’t meet the necessary requirements for their employees to be considered formal. A high labor informality has negative consequences in the country’s economy; it generates low quality jobs, reduces the tax base, congests the health system, among others. Therefore, it is important that the Colombian economy finds a way to reduce rapidly since, in the last 8 years, it has only been reduced by 10%.

June 2017 - Colombia’s Central Bank: Trend, Expected Effects, Danger and Reasons

The trade-off between risk of inflation and economic growth is at a critical point in the Colombian economy. The GDP growth of the first trimester of 2017 was the lowest since 2008 and preliminary information does not suggest a very dynamic second trimester. At the same time, inflation is recovering from a harsh 2016, when inflation reached its peak (8.97%) of recent years. Therefore, if Colombia’s Central Bank decides to lower the interest rate at a very fast pace, the effects may be positive regarding consumption and investment, but it exposes the country to an external shock that may affect the economy and the inflation rate. 

May 2017 - Colombia’s Country Risk: Improving after the Oil Crisis

Even though Colombia has improved its country risk in the last few months, risk ratings are still subject to exogenous factors. As an attempt to revert this situation, the government promoted a tax reform to increase its income. However, the reform was not structural enough and, as a consequence, it is likely that another one is needed in the near future. Additionally, the economy is still vulnerable despite the attempts to turn the country less dependent to international oil prices, hence, it is difficult to predict if the country risk will maintain its negative tendency.

April 2017 - Colombia in its way to the OECD: What’s its progress and what’s missing?

Despite there isn’t a consensus regarding the effect that Colombia’s entrance to the OECD will have, the country has had significant progress in achieving the standards required by this organization. Colombia has had significant improvements in subjects such as the reduction of poverty and access to health care. Nonetheless, it still has to improve in other aspects like the effectiveness of subnational governments, public expenditure efficiency, labor informality, inequality, infrastructure and access to international markets. In spite of such problems, if the government concentrates on achieving the missing components, which are now few, it is very likely that Colombia will be the OECD’s newest member.

March 2017 - Lower economic growth in Colombia, but higher than expected

Even though the Colombian economy had its lowest growth in seven years the result was, comparing with other South American countries and the expectations of economic analysts, acceptable. The events that negatively affected the Colombian economy during the 2016 were the low oil prices, the Fenómeno de El Niño and the contraction in investment. It is expected that the economic growth in 2017 is given by more investment in infrastructure, foreign direct investment and an improvement in the terms of trade.

February 2017 - New monetary policy expectations

The new expectations of monetary policy will be closely linked to the behavior of the economy, mainly in terms of growth, inflation and the exchange rate. The Board of Directors of the Banco de la República will be challenged to make interest rate decisions to control inflation, while encouraging investment and avoiding trends towards a revaluation of the Colombian peso that may affect trade, the cost of production and market stability.