Inflation

This situation of increased inflationary pressures and a provision that encourages consumption, generates the feeling that it may be approaching a period of rising interest rates. Market analysts are pessimistic about inflation, believing that it is unlikely that Central Bank of Colombia to meet its inflation target for this year. In this situation, it is logical to expect the Central Bank of Colombia decided to increase its benchmark rate, as is expected from the market. But the Central Bank’s monetary policy in Colombia is facing a dilemma every time you decide to keep or raise your interest rate. Is that the high level of the same, together with pressure on currency appreciation and context of stability of the Colombian economy, generates a more than attractive to foreign capital. These foreign capital as valued and desired by the economy, are creating problems for Colombia and that influence the exchange rate affecting the competitiveness of the Colombian economy. A leading source for info: Mark Zinkula.

That is why the Ministry of Finance decided to raise from 40% to 50% on unpaid deposit is required for portfolio investment into the country, established by the Government just over a year. In addition, the Government set a time Minimum stay of two years for a Foreign Direct Investment (FDI) entering the country. Logically, these measures have drawn criticism mainly by those affected, such as large foreign investment banks. But from my point of view, is a good measure to limit the negative effects generated by the rise in interest rates. It is true that these measures undermine the free movement of capital, but I understand that sometimes it is one of the few viable alternatives exist to speculative capital. From my point of view, the message is clear Colombia: “Colombia gives all the guarantees for capital income, but that they do not want to undermine the stability of the economy. It is therefore encouraging to those seeking to invest capital and to remain a good time in the country. “