Colombian Peso and President Petro’s Approval Sinking

Written by Joseph Cain | November 19, 2023

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The Colombian Peso (COP) sank 1.4% to 4,081.60 COP to the U.S. Dollar after President Petro requested the Colombian Congress to overturn its Balanced Budget Law that governs government spending on November 15^th. Among emerging market currencies, the COP has been the biggest loser for two days in a row. Additionally, the two-year swap rate dropped eight percentage points to 9.2%, the lowest since early September. Furthermore, the Colombian economy just suffered its first year-on-year contraction since 2020. Sectors that were largely responsible for this contraction were construction (-8%), manufacturing (-6.2%), and transportation and trade (-3.5%).  

President Petro is seeking to boost public spending to boost growth. To do so he needs the Congress to overturn the law, which as it stands is unlikely, according to Benito Berber, chief Latin American economist for Natixis. Another way President Petro is seeking to stimulate economic growth is by cutting interest rates, which are currently sitting at 13.25% (among the highest in the region) but has so far been unable to persuade all the decisionmakers needed at the Colombian Central Bank to do so. President Petro is likely seeking to boost the economy to improve his rapidly dropping approval ratings and prove his brand of politics can benefit Colombians. Recent regional and local elections that resulted in massive losses for Petro’s political allies were an indicator of the Colombian public’s increasing impatience and disapproval with the Petro administration. Looking to the future, the electoral results highlight that the Presidential pendulum is likely to swing back to the right in 2026, barring a major economic turnaround by Petro.