4 Ways to Cope with the Dollar’s Rise and Oil’s Fall

4 Ways to Cope with the Dollar's Rise and Oil's Fall
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A strong rise in the dollar’s price against world currencies, including the Colombian peso, which this Wednesday was the second-highest devaluation in Latin America—about 13 percent in the previous month—along with the fall in the price of Brent oil, which hit $100 yesterday. managed to fall below the barrel; For an impending recession in the United States and a global recession, Colombians are taking the economy to a crossroads that requires vigorous action to mitigate the negative effects of this international situation.

Some economists believe, “It is necessary to act quickly and wisely.”

The dollar completed a three-series record yesterday and took today’s official rate to 4,348.68 pesos, but the currency was only 3 pesos away from overcoming the psychological barrier of 4,400 pesos, Prices predicted by market analysts earlier this year were driven by the outcome of the Colombian presidential election, although global uncertainty is also weighing on its behavior.

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The dollar has become more expensive by 367.5 pesos so far this year, with the Colombian peso losing 9.2 percent of its value against the US currency.

Rudolf Holmes, economist and former finance minister, drew attention via his Twitter account for the speed at which the Colombian peso has devalued over the past month, which is not on par with the behavior that other currencies bring. area of.

“Between June 6 and today (yesterday), the Colombian peso has devalued by 12.96 percent. In the same period, the Chilean peso devalued by 3.4 percent and the euro, by 3.3 percent. There is a ‘world phenomenon’ when it is devalued 3+ times more than others”, warned the former minister.

And he says in a second trill that “there are other national factors that are devaluing very rapidly. It is not possible to build confidence on the growth of the economy, but on governance capacity. It will be necessary to announce that tax and fiscal reforms.” What will happen”, before he suggests that these announcements will be made soon.

get out of trouble

The truth is, the country will have to act fast to stop the Colombian economy, which will be the second best global performance this year, at 6 percent, from stagnating.

Mauricio Cardenas, who is also a former finance minister, says the current situation has reduced the scope for maneuver for the country and the government should be aware of it.

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“Rising public spending and fiscal deficit at this juncture will jeopardize the economic condition of millions of households who will suffer the consequences of high inflation and capital outflows,” he says.

For this reason, there are some people who believe that it is necessary to take action as soon as possible because the situation is very challenging.

Luis Fernando Mejia, director of the Center for Economic Studies Fedesarolo, proposes a formula with four fundamental points to avoid economic collapse.

“This is a difficult situation because of the risk of a recession in the United States and a global recession. Further, due to increase in inflation which is over 9.6 per cent and maintains an upward trend,” he says.

In this sense, the economists suggest a rapid increase in the rate of intervention by the Banco de la Repubblica, which would allow inflation expectations to ‘realign’, which is important in the current context. The issuer’s interference rate is 7.5 percent, after adjustments for the previous week. The second, he warned, has to do with fiscal adjustments, as it is projected to be around 6 per cent this year, but that adjustments must be rapid “with a credible plan that aims to reduce both fiscal deficit and debt.” Allows the people of the country.

For Mejia, it is also important that complementary measures be adopted, such as a reduction in tariffs on industrial inputs and manufacturing, which may be temporary.

And, finally, he believes that it is essential that the incoming government implement public policies to increase the productivity and competitiveness of rural areas, industry and services, because “expansionary monetary and fiscal policies will be eliminated in the short term.” have to do, then they will not be able to continue to accelerate economic growth.”

“You need to know how to manage a fall in crude oil”: Duke

President Ivan Duque referred to the sharp drop (10 percent) in oil prices that caused a barrel of Brent crude to trade below $100 yesterday, and said that this drop in raw material costs “we need to know.” How to manage it financially, but without losing certainty about the mining-energy sector.”

He said this during the presentation of ‘Balance of Agreement for Growth and Employment’, where he emphasized that “If the price falls, and furthermore the fear in the hydrocarbon sector to generate more investment and more production, the blow to the country will be twice as big.,

The fall in international oil prices has affected the performance of EcoPetrol’s stock in recent weeks.

Just yesterday, the Colombian oil company’s title fell by close to 1 percent, bringing its price to 2,152 pesos, or about 1,150 pesos less than the price recorded in early June of this year.