Oil prices drop Colombian peso to record low

Bloomberg reported that the plummeting Colombian peso has worsened the prospects for Colombia’s current-account deficit. According to an unnamed central banker quoted by Bloomberg, the deficit is Colombia’s “Achilles heel.”  The Colombian peso fell as low as 3400 pesos to the U.S. dollar, and Colombian Finance Minister predicted that Colombia’s current-account deficit would continue to worsen if oil remains at $30 per barrel.

Daniel Escobar, the head analyst as Global Securities in Bogotá, warned to Bloomberg that, “Oil is as always the key driver. The tax reform is also starting to become a concern. Delaying it would not send a good signal to the market. Colombia needs a tax bill that will help balance its budget in the next few years.”

Bloomberg also spoke with Adolfo Meisel, co-director of Colombia’s central bank. Meisel stressed that, “Maintaining growth is the biggest challenge. You don’t achieve 3 percent just through will-power.” He explained that Colombia will continue to raise interest rates in an attempt to tamp down inflation, so long as Colombia can maintain its rate of economic growth.

In other Colombian macro-economic news, Finance Minister Mauricio Cárdenas told reporters during an interview in Davos, Switzerland, that Japanese banks have expressed interest in lending Colombia the $1.5 billion it plans on raising via a foreign bond sale later this year. Cárdenas added, “Here in Davos, we have been contacted by some Asian banks which have a lot of liquidity, particularly Japanese banks, which are interested in offering credit lines for these $1.5 billion dollars. This could be an opportunity for Colombia