Dollar: this is how the high price of the currency affects Colombians' pockets - Sectors - Economy

The rise of the dollar around the world with respect to other currencies, which began in June due to growing fears of a recession in the United States and the rest of the planet, has been felt very strongly in Colombia since the first days of July.

In the first half of the month, the currency hit historic levels, reaching 4,627.4 pesos per dollar on Wednesdaysurpassing even the strong rise that occurred when the pandemic arrived.

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With this, the Colombian peso not only ranks as the second most devalued currency between mid-June and mid-July, after the Chilean peso, showing a depreciation of 11.1 percent, but also has several economic sectors that they deal in imported items, or that sell products and services in dollars, accounting for a possible drop in their sales.

“In the last few weeks, all the cars have gone up several million, and we are working with a projection of a dollar at 5,000 pesos,” says a commercial agent for a well-known vehicle brand in Bogotá. who does not hide the concern about how difficult it becomes to materialize a sale because buyers now think twice about assuming debt for a new car.
But it is not the only sector of the economy in which there is concern about the effects that an expensive dollar can bring.

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According to Camilo Herrera, founder and president of the firm Raddar, an expert in consumer analysis, although in an environment in which inflation and interest rates are on the rise, many buyers decide to go out and acquire the products they require before they continue raising its price, and the effect of the devaluation on imported products is usually delayed in local prices, there are purchases in which the effect of the strong devaluation is direct.

An example is the consumption in international trade portals such as Amazon, in which if people buy products these days, they are more expensive. And even more so if they pay them with a credit card in dollars in installments.

Javier Díaz Molina, president of Analdex, the Colombian foreign trade union, points out that it is rational that, given an exchange rate as high as the current one, people postpone expenses that are not essential or luxury, such as the purchase of jewelry. , high-end vehicles, technology and even home appliances, waiting for things to settle down.

On the other hand, Herrera recalls that in the country, electronic technology products, that is, computers, tablets and mobile phones, among others, whose value is less than 22 units of tax value (UVT), that is to say that by 2022 they cost less than 836,088 pesos in commercial establishments, do not have VAT.

But with the devaluation that has taken place in the last 12 months, many of these items that were without VAT now do. “It is an effect that we are having, which is significantly reducing access to tablets, cell phones, computers and printers for a certain population in Colombia, and of which few have spoken.”, assures the expert.

More hits

Another line in which the soaring dollar produces uncertainty about the pace of sales is that of trips from Colombia abroad, since such an expensive currency can further raise the costs of tourist packages, and in view of this, many travelers could postpone their departures abroad.

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Paula Cortés Calle, executive president of the Colombian Association of Travel and Tourism Agencies (Anato), explains that there is still no noticeable effect and the mid-year season was already sold in advance, people are waiting for what is going to happen. happen, which could affect future bookings. “We are uncertain about the devaluation of the peso, which could discourage the departure of Colombians abroad in the coming months”, he says.

And it is that, before the strong rise in the dollar starting in July, between May 2021 and June 2022, the price of plane tickets in the country had an increase of 23.68 percent and, according to Dane figures, only during June the rise was 10.15 percent, that is, almost 20 times the inflation of the month.

For Herrera, it is clear that if the new government’s announcements about not carrying out the third day without VAT materialize, planned for December, very surely the households that were waiting for the day will think about making the purchase another day, such as Black Friday, to try to mitigate, through promotions, the effects of a devaluation that could last several months.

And it is that, For Javier Díaz, president of Analdex, to the extent that there is uncertainty, slowdown and fear of a recession, people seek refuge in assets such as the dollar and that leads this currency to strengthen, which can lead to a much higher exchange rate for a long time.

For this reason, the growing fear and uncertainty among those who in their businesses are subject to the variation in the price of the dollar are the product of the strong rise that the currency showed between July 1 and 13, when for seven consecutive days its The price set record levels, reaching last Wednesday an unprecedented rate of 4,627.46 pesos, for a rise of 476 pesos since the beginning of the month.

However, from that day until Friday the currency had a significant correction, of 231 pesos, with which the week closed at 4,395.63 pesos per dollar, the official price that governs between Saturday and Monday. In fact, only on Friday the decline was 124 pesos, as a result of a day of greater calm in the international markets and the fall of the North American currency against the largest currencies in the world, according to Andrés Langebaek, Rueda, director of Studies Economics of Grupo Bolívar.

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Juan David Ballén, director of Strategy and Analysis of the firm Casa de Bolsa, He maintained that the dollar was overbought and at any moment a reduction greater than that which occurred in recent days was foreseeable.

In this regard, Felipe Campos, manager of Investment and Research Alianza Valores, explains that the markets have already finished discounting the effects of record inflation in the United States, while a rumor of higher data in that country was denied, with which 9.1 percent per annum would be the highest level and would prompt the US Federal Reserve (Fed) to make a less sharp rate hike in July.

However, the current value of the dollar in Colombia is still higher than it was on March 20, 2020, when the world oil crisis was just beginning, amid measures to contain the expansion of covid-19.

And although the factor in the United States looks a little calmer today, the crisis in Ukraine and the uncertainty about world growth could lead to a drop in demand for oil and a drop in the price of crude oil to much lower levels than the current ones, which are around 100 dollars, a scenario that also favors the purchase of dollars as a refuge asset, and its possible increase.

“In the short term, the bias on the price of oil is inclined to the downside, due to the risks of lower demand in a context of slowdown”, assured in a recent report the Economic Research team of Banco de Bogotá.

In this sense, Andrés Langebaek, director of Economic Studies of Grupo Bolívar, considers that the record of 4,627.46 pesos may not necessarily be the maximum price seen in the dollar in the Colombian market, since everything depends on the value it has. crude globally.

“If we had a very bad recession and the price of oil went down to 75 or 80 dollars, the price of the dollar could pick up again”, he assured.

The most disturbing of all is that nobody dares to predict when this storm will end. The US growth data expected for this month will give some clues.

ÓMAR G. SMOKED RED
Business and Economics Deputy Editor
@omaahu