Colombian Peso At Record Low; Gustavo Petro Pleads Not To Send Money Abroad
Colombian President Gustavo Petro claimed higher US interest rates are sucking money out of South America, and he urged investors to maintain their investments in Colombia despite the peso’s record low.
“Don’t send money overseas en masse, because in Colombia there are opportunities,” the recently elected leader said on Wednesday.
On Wednesday, the Colombian peso led developing market losses, falling 1.6% to a record low of 4,840 per dollar. Local peso bonds due 2031 fell as well, raising the yield to 14.36% by 25 basis points.
Colombian assets fell due to investor fears about the agenda of Colombia’s first leftist president in the country’s history. In an impassioned address to the United Nations General Assembly, Petro antagonized the coal industry as he demanded more action on addressing the climate crisis.
“The climate disaster that will kill hundreds of millions of people is not being caused by the planet, it is being caused by capital. By the logic of consuming more and more, producing more and more, and for some earning more and more,” he stressed.
Petro compared the coal industry to cocaine, of which Colombia is the world’s largest producer. He highlighted that the war on drugs must stop as it has failed and implored fellow Latin American nations to do the same.
“What is more poisonous for humanity, cocaine, coal or oil?” he asked, adding an ironic comparison that “the opinion of power has ordered that cocaine is poison and must be persecuted, while it only causes minimal deaths from overdoses … but instead, coal and oil must be protected, even when it can extinguish all humanity,”
In his call to keep the peso within the country, the president stated in his speech that the capital now flowing out of Colombia was originally created through oil and coal exports. He also stated that the country is threatened by high interest rates in the United States as well as a worldwide economic catastrophe.
“It takes capital out of South America and sends it there, leaving us empty,” Petro said.
Since Petro’s presidential election victory in June, the peso has fallen 19%, the most among major emerging markets behind the Argentine peso. The local currency continues to drop despite attempts from Finance Minister Jose Antonio Ocampo to calm investors.
“We’re going to have responsible macroeconomic policy. We’re going to comply with the fiscal rule. There won’t be any exchange controls,” Ocampo told reporters on Tuesday. “We expect this commitment to macroeconomic stability to be recognized by the markets.”
Petro’s plan to halt new oil drilling, as well as his earlier this month hint that he might examine controls on “hot money” flows, has alarmed some investors.
Information for this briefing was found via Bloomberg and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.