Remittances to Colombia Surpass Coal As Dollar-Revenue Source

The rise in commodity prices and the strengthening US dollar have favored oil prices and remittance values, but not coal

Remittances to Colombia bring in more US dollars than coal exports
July 19, 2022 | 09:59 AM

Bogotá — So far this year, the Colombian peso has depreciated 6.4% against the US dollar, and is the third currency in Latin America that has lost the most value against the greenback, only surpassed by Argentine and Chilean pesos, which have seen depreciations of 19.89% and 12.53%, respectively.

According to a Credicorp Capital report, “the worse relative performance of the two Andean currencies [Chilean and Colombian pesos] reflects the deterioration of several of their fundamentals, and idiosyncratic factors, particularly high political uncertainty, with key events in the coming months that keep the risk premium high”.

In Colombia, the dollar reached a high of 4,600 pesos last week, and although it managed to stabilize a little, it remains above 4,300, while at the close of 2021 the currency was trading above 4,000 pesos per dollar.

The strength of the dollar, at a global level, has helped Colombian exports as well as remittances sent by Colombians abroad to their relatives back home.

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And a report by the economic research team of Banco de Bogotá highlights that foreign sales of Colombian oil in the last year to May totaled $16 billion, making it the largest generator of US-dollar revenue for the country.

Although the price of coal has also rebounded, it has done so to a lesser extent, so much so that it has lost ground compared to other dollar-revenue generators, and is surpassed by remittances. As of May, in a 12-month reading, external sales of coal amounted to $7.8 billion, while in the same period remittances to Colombia exceeded $8.8 billion, according to the report.

According to the bank’s researchers, “the higher price of raw materials has generated an additional boost for exports, allowed them to gain participation in total foreign sales. Data to the end of May shows that exports in the month grew 47% annually, with a contribution of more than 30 percentage points of sales of traditional products”.

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And in the accumulated 12-month period, the figure is $48 billion, a high not seen since May 2015.

“This result shows a 45% annual growth, of which more than 35% comes from traditional goods. This trend woill continue in the coming months, with exports likely surpassing the $50-billion threshold, benefiting mainly from higher commodity prices,” the report states.

Finally, economic analysts at Banco de Bogotá say that “traditional exports will support the adjustment of the trade balance in the coming months”.