The major currency of Columbia, the Colombian Peso has posted the biggest increase among all of the Latin American currencies. The speculations are rife that the policy makers of the country will opt for further tax cut to lure the foreign investors in the country. The Columbian Peso actually increased by 0.3% against USD. It is currently priced at 1758.89 per USD. Incidentally, the currency reached 1750.50 on 2nd January, marking its strongest level within a day in last 18 months. In the last month, the currency has gained a total of 2.2%.
Incidentally, the direct foreign investment in Columbia increased by 11% in 2012 and was at $16.7 billion. To boost the overall demand and cut the borrowing costs, The Columbian Government went ahead to cut the taxes on the foreign investors’ earnings from the domestic securities (From 33% to 14%) on starting days of the New Year.
According to Camilo Perez, who works as the Head Analyst of Banco de Bogota SA, the 2nd biggest bank of the Latin American country, Columbian Peso is mainly being driven by the expectations of inflows, rather than the actual inflows of foreign investments happening at this moment.
Incidentally, the Governor of Central Bank, Jose Dario Uribe, on 2nd January stated that the increase of Peso is a concern for the country’s economy and Banco de la Republica will be buying a minimum of $20 million every day through the 1st quarter of 2013, so that the advancement of Columbian Peso can be curbed. Incidentally, the Agricultural Minister of Columbia, Juan Camilo Restrepo requested the Finance Ministry to increase the amount of Dollar purchases so that the advancement of Peso can be stopped. Peso being on such high figures is directly affecting the banana, flower and coffee exporters of the country.
The economist of Royal Bank of Scotland Group, Felipe Hernandez stated that the Peso may actually rally up to 1.650 per USD by the 2nd quarter of 2013. Hernandez commented that as the companies which convert USD to Pesos will pay their income tax in February, April and June, Peso will be helped further.
The overall yield on the 10% Peso denominated debt which is due in July, 2024 has gone down by 2 basis points and is at 5.42% currently. This is the lowest figure ever for the securities since its launch in 2009.