Colombia Peso Leads Latin America Gains as Isagen Sale Revived

  • Court clears way for government's sale of its stake in Isagen
  • Colombia currency rallies to the strongest since mid-August

Colombia’s peso gained the most in Latin America as a court ruling cleared the way for the government to sell its stake in hydropower producer Isagen SA.

The Colombian peso posted the biggest advance among major Latin America currencies as investors speculated the government’s sale of a majority stake in Isagen would bring inflows, after the court lifted a four-month suspension on the sale process. It strengthened 0.4 percent to 3,037 per dollar. The peso earlier rallied to 2,983.53, the strongest level since mid-August.

The government is seeking to fund highway projects with the sale, which would raise at least 5.3 trillion pesos ($1.8 billion) at the minimum offer price announced in May. Finance Minister Mauricio Cardenas said an investment bank should analyze whether the price should be adjusted after the suspension.

“Investors were very pessimistic, and they weren’t counting on flows from the sale,” said Camilo Perez, the head analyst at Banco de Bogota. “It generated a market move that triggered stop-losses on those negative bets on the peso.”

The speculation about inflows outweighed Friday’s slump in oil, the country’s biggest export. As crude prices tumbled over the past year, Colombia’s currency has plummeted 35 percent, the third-worst performance in emerging markets. Colombia’s currency reached a record low on Aug. 26.

Colombia’s economy expanded more than analysts expected in the second quarter, as a boom in the construction industry prevented a deeper slowdown in the broader economy amid falling commodities prices. Gross domestic product rose 3 percent from a year earlier, compared with 2.8 percent in the first three months of the year, the national statistics agency said Thursday.

The peso has weakened due to very strong terms of trade shock, Colombian central bank co-director Juan Pablo Zarate said Thursday at an event in Cartagena. He said the peso was probably slightly undervalued.

Yields on Colombia’s benchmark peso bonds due 2024 were little changed at 7.97 percent.

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