- Crude oil resumes declines, signaling wider trade deficit
- Cardenas says spending cuts, interest-rate hikes are options
Colombia’s peso tumbled the most among major currencies on Monday as the nation’s finance minister said the rout in oil prices means new steps must be taken to control the current account deficit.
The currency weakened 2.6 percent to 3,398 per dollar in Bogota, making it the worst performer among 31 most-traded currencies tracked by Bloomberg. The peso has tumbled 30 percent in the past year and reached a record low of 3,406.5 last week.
Cuts to government spending or interest-rate increases need to be considered amid forecasts for the widest deficit in at least 30 years, Finance Minister Mauricio Cardenas said at an event in Bogota on Monday. Oil makes up about 40 percent of exports, and the tumble in crude prices helped widen Colombia’s current-account deficit, the broadest measure of trade in goods and services, to $5.25 billion in the third quarter. Brent crude slipped 3.1 percent to $31.12 a barrel, leaving it down 70 percent in the past two years.
“We have to send a clear message: For Colombia it’s not good, it’s not desirable for the deficit to widen,” Cardenas said. “We have challenges, of course we need to adjust to the lower oil price, and surely that’s going to require a new dose of austerity versus what we had been thinking when oil prices were at $50.”
The peso’s devaluation and the moderate increase in the minimum wage implemented this year will also help keep the deficit in check, Cardenas said.