Colombian peso and stock market rally so far in 2016

The Colombian peso has rallied incredibly in the last month, registering its biggest 30-day climb since 2009. Unsurprisingly, the Colombian peso’s rise has closely tracked the rise in oil prices. During the last 30 days, the peso has climbed more than 8%, also driven by lower interest rates in Europe and fear that the United States might wait longer to boost its rates.

El Espectador reported that the International Energy Agency somewhat cautiously announced that oil prices had bottomed out, and that there could finally be some signs of light after the industry passed through such a long and dark tunnel. The Agency explained that high-cost oil producers have been forced to cut production, allowing oil prices to recover by 50% over the extreme lows they reached earlier in January. El Espectador noted that this most recent report by the Agency contradicts last month’s report, which had warned that oil prices could continue to fall, given that the market was drowning in oil.

Barrons noted that, in addition to the rise in oil prices and the Colombian peso, the Colombian stock market has also started to recover. Colombian equity prices have climbed 12% in 2016, among the best performers in South America. Both Bancolombia, Colombia’s largest commercial bank, and state-owned oil company Ecopetrol have seen their share prices jump by 20% in 2016, as investors expect commodity prices to stabilize in 2016.

These investors could also reap benefits from the likely peace agreement between the Colombian government and the FARC guerrilla group. Simón Gaviria, the director of the National Planning Department, estimated that Colombia could save $2.2 billion a year in environmental damage if a peace agreement is reached. A peace agreement could mean an end to attacks on oil pipelines, a decline in illegal mining, and an end to deforestation in conflict zones.