Colombian Finance Minister Mauricio Cardenas said the peso’s drop to an 11-year low is beneficial for the nation’s economy and its impact on inflation is not a concern for now.
“It’s positive,” Cardenas said in an interview at a Bloomberg event in Bogota. The pass-through of the weaker peso onto inflation “hasn’t been a problem among other things because our consumer basket doesn’t include imported goods.”
With oil accounting for around half of Colombia’s exports and about 17 percent of government revenue, a 51 percent drop in crude prices in the past year has pushed the peso to its lowest level since 2003. While Cardenas said he hadn’t expected the peso to weaken to current levels, the decline is a response to lower oil prices and the exchange rate’s flexibility is important as the economy adjusts.
The peso has plunged 35 percent in the past year, making it the worst performer after the Russian ruble among 31 major currencies tracked by Bloomberg. It rose 0.2 percent to 2,855.56 per dollar at 12:50 p.m. in Bogota.
Cardenas reiterated the Colombian economy will grow 3.6 percent this year, adding that expansion will accelerate in 2016.
Colombia will present a tax bill to Congress, using recommendations from an independent committee that will hand over its report in November, Cardenas said. He declined to provide timing.
Among other tax initiatives, the government is considering a further reduction in the 14 percent levy on foreigners’ local bond profits, the finance minister said.
Colombia lowered the bond tax for the local bonds, known as TES, in January 2013 to 14 percent from 33 percent in a bid to spur demand and reduce borrowing costs. The move helped increase foreign holdings of peso bonds to about 16 percent last month from 3.7 percent in December 2012.
Overseas investors in the TES market are welcome, Cardenas said.