Trouble lurks ahead for Colombia’s economy
This week the Colombian peso fell to a one-year low at just under 3100 Colombian pesos to 1 US dollar. This represents a dramatic change from only four years ago, when $1 dollar bought only 1750 pesos.
Despite efforts by the national government to stimulate the services sector, Colombia’s economy is driven almost entirely by commodity exports, principally petroleum (34%), coal (14%), and coffee (7%). As oil is the country’s most important export in an export driven economy, the country is therefore vulnerable to changes both in price and production levels.
While the Colombian economy was booming from 2011 through 2015, falling oil prices have created an account deficit in the Andean nation. The dramatic change in prices, from over $100/barrel to less than $45/barrel, means less tax revenue for the country. Perhaps more importantly, lower prices also mean less investment in the oil sector.