On Feb 11, 2016 the USD/COP exchange rate hit a high (or low in COP terms) of 3436.80, an unprecedented and uncharted low for the Colombian COP at the time. Back in February there was a lot of market panic and talk of oil at $20, a global risk aversion to emerging markets and a US Fed eager to find a higher interest rates in response to a strengthening US economy.
Thursday Feb 11 coincidentially happened to be the day before a Canadian client of ours was set to close on a 3 bedroom penthouse, and by sheer, dumb luck he converted 90% of his closing funds from USD to COP on that day. His attorney and I were sitting down a week later as the COP dropped to 3300 wondering … did he actually hit the top? “That’s how good at I am at economics“, the client said (he was kidding, he’s an oil and gas executive). However there was a real feeling of pessimism at the time that the COP could hit 4000; people were seriously entertaining the idea.
But over the last few months as the COP was strengthening to 2850 and now most recently settling in (post Brexit!) in the 2900-3000 range, it got me thinking, did we actually see the bottom of the COP on Feb 11?
I think everyone agrees that a USD/COP rate at/near 3000 is something that can’t persist forever. However I see investors every day trying to time the market and worried about whether the COP is going to go up or down. None of us have any control or any way to predict current moves in the USD/COP. Oil will inevitably find a new trading range, the Colombian economy outside natural resources continues to do well (tourism, foreign investment, exports) and the strong USD will invariably see a day of reckoning. However as my friend, investor and retired Wall Street currency trader Andrew likes to tell me, “markets can remain irrational for a lot longer than we can all expect” (I think he stole that from someone)…Andrew, I hope you’re right and the rest of 2016 should be a unique opportunity to continue investing in Colombian real estate.
Brad Hinkelman – [email protected]
Founder/Owner – Casacol SAS