The Colombian Peso Experiences a Decline Against the Dollar
In 2023, the Colombian peso saw a drastic decrease in value against the US dollar, diminishing by more than 988 pesos over the course of the year. The exchange rate, which ended the year at 3,822.05 pesos, was the lowest recorded in over 18 months, reflecting a considerable decline from its peak at 4,500 pesos.
The decline in the dollar’s value came late for Colombian travelers aiming to enjoy a destination abroad. However, analysts predict that 2024 will continue to experience high volatility in the currency market, potentially leading to a return to previous levels close to 4,500 pesos.
Despite the Colombian peso’s devaluation, it outperformed other Latin American currencies, attaining a 20.5 percent revaluation against the dollar, ranking it as the best-performing currency in 2023, ahead of its counterparts from Mexico and Brazil.
Factors such as the rates of the Federal Reserve (FED) and moderation of investors in relation to the country’s political climate have contributed to the strengthened value of Latin American currencies, including the Colombian peso.
Looking to the future, expectations for the dollar’s performance are mixed. Some predict a potential climb above 4,200 pesos, while others foresee a return to 4,450 pesos due to pressures on the currency, such as reduced interest differentials with developed economies.
Furthermore, the increasing flow of remittances to Colombia is also expected to put pressure on the exchange rate. Already surpassing $9.18 billion in 2023, the country anticipates a new record that could exceed $10 billion, contributing to the downward pressure on the exchange rate.
Despite concerns about the decline of the exchange rate, the rise in remittances to Colombia is seen as a support for households and the economy at large, potentially serving as a countercyclical instrument in light of economic challenges.
As the global economic landscape evolves and various domestic and external factors influence the exchange market, the future value of the Colombian peso will remain uncertain, and market participants will continue to closely monitor these developments.