Colombia’s currency increasing value against the dollar makes it harder for local farmers to compete in foreign markets, reported Wall Street Journal.
Struggling banana and plantain farmers protested last week demanding that government react by decreasing the growing currency value, Wall Street Journal reported on Wednesday.
The increasing currency has made it more difficult for Colombian farmers to compete on the international market.
With the peso surging, the country’s exports are becoming more expensive, which in the end reduces profits for exporters, when they convert their earnings back to pesos.
Colombian peso experienced its biggest one-day growth in two years on March 19 and since then the currency has risen 7.3%.
Colombian stocks and bonds have since March seen $5.8 billion in inflows, and over the next months analysts predict an additional inflow of $2 billion to $4 billion.
Although investors argue that the peso might not continue its increasing curve. In June the Central Bank announced a plan to weaken the peso by buying up $2 billion American currency between July and September.
The currency growth was caused by the multinational bank and financial services holding company J.P. Morgan Chase & Co, who announced plans to invest in Colombian bonds.
This encouraged other investors to buy Colombian bonds, and along with speculators some investors also invested in the peso and Colombian stocks, which made the currency value rise.
J.P Morgan stated the reason for their investment was improved transparency and accessibility for international investors. In addition the Colombian government reduced the tax, which foreigners are obligated to pay to hold Colombian peso bonds.
Sources
- Colombia Wins Investors’ Favor—And That’s the Problem (Wall Street Journal)
