Ups and downs of the dollar in Colombia tense the nerves of consumers and sellers

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BOGOTA (Sputnik) – The ups and downs of the US dollar against the Colombian peso keeps uncertainly different economic sectors of the country that see how in a matter of days the currency accelerates to values ​​never seen before in the country and then contracts in a way significant.

"With such a variable dollar, you don't know what to expect, this is the time when I don't know whether to keep the stocks I have until they run out or if I ask for others before the dollar goes off even more," Felipe Libreros told Sputnik , a small importer of electronic gadgets, such as wireless headphones and smartwatches, that imports from China and sells them online for the popular market in Bogota.
Felipe imports around 80 watches and 40 wireless headphones every month at an average value per unit of $ 4.3 and sells, each, for $ 9, but with the ups and downs of the currency in recent weeks the business became unstable .
"In June sales were very good, sold between 15 and 20 units a day, but today at most five come out on the day; they are items that people with very few resources buy but who like technology, but who they also claim for any minimum increase in the final price as a result of dollar increases, "he explained.

Record number

Last October 2 the US dollar registered its highest price in the recent history of the exchange market of Colombia against the Colombian peso and it was quoted at 3,503 pesos per dollar part-time, although later it contracted and reached an average price of 3,497.28 pesos per dollar.
Since then it did not reach a higher figure and, on the contrary, it contracted significantly up to 37 units, like this Friday, when it closed at 3,428 pesos for each dollar.
However, the nerves for what can happen in the exchange market remain high among consumers, especially among those who expect to travel for Christmas and New Year.

"We have a son who lives in Barcelona for study reasons and we hope to see him in December to spend the holidays together, so we bought the air tickets since March to pay them in 24 installments, but with the dollar increase we will end up paying a lot more than budgeted, "Nancy Velasco said at a Western Union branch, where she turns money to her child for support.
The rise in the US dollar caused the Colombian peso to devalue 19.1% in the last year, which means that citizens must pay 555 pesos more for each dollar.
"The fact that Colombia's economy is not dollarized, like that of Ecuador or Argentina, makes the effects of the rise in the dollar not so obvious for some sectors as for others; for example, an average housewife may not notice it immediately in the basic family basket, but if she is going to buy a fridge (refrigerator) or even a vehicle she will certainly notice it, "said Javier Vargas, a teacher and researcher at the Faculty of Finance of the Externado University, in Bogota.

The phenomenon is known as "pass through" and consists in the possibility that the rise in the dollar is transferred to products that are "tradable", such as appliances, computers, vehicles and air or cruise tickets, among others.

Long-term effects

If the dollar continues to rise, its effects for the bulk of Colombians will be reflected after several months through inflation, since 30% of the 443 products that make up the so-called "tradable" will be affected, and not It even escapes some brands of powdered milk and fertilizers, whose applications in the agricultural industry impact the pocket of the final consumer.
"The deterioration in global growth prospects, explained mainly by the trade war between the United States and China, looks like one of the biggest bullish risks on the exchange rate, "the Corficolombiana securities firm said in a recent analysis of the situation.
But the changing dynamics of the market, derived from the recent trade truce between the US and China, as well as the worldwide optimism that the United Kingdom achieves an orderly exit from the European Union with Brexit, also has an impact on the confidence of Colombians so that the dollar return to more moderate values.
"I do not understand very well what the external has to do with what is happening in Colombia, but apparently things are going to be a bit more flexible because (Donald) Trump in the end did not impose as many tariffs on China as expected; in any case the Banco de la Republica (issuer) should do something to control that rise, "says a user of the Transmilenio public transport system.

Issuer will not intervene

But the Bank of the Republic does not contemplate intervening in the market to curb another possible rise in the dollar even above the 3,500 Colombian pesos, since its board of directors maintains that the depreciation of the peso is not yet transferred significantly to the prices at consumer.
"No exchange intervention measures are being discussed within the board … we have not seen any inflationary effect, which does not mean that there cannot be," said the director of the Bank of the Republic, Jose Antonio, in a recent interview Ocampo, according to the local economic newspaper Portafolio.
Be that as it may, the Colombian peso lost 7.5% in the last three months, which makes it the currency with the worst performance among emerging markets after the Argentine peso.

Although sectors such as local tourism, coffee and flowers, as well as others linked to exports, benefit from an increase in dollar prices, the reality is that for most Colombians, whose salaries are paid in pesos, the reality is very different.

He minimum wage in Colombia, of 828,116 pesos (241 dollars), currently represents 46 dollars less than a year ago on account of the devaluation, which for some is just a symptom of the fever that will occur when, perhaps earlier than later, the dollar reaches values ​​never seen before in the country.



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