It’s been exciting these days watching the $COP cruise through 2700 against the $USD. It was back in 2002 (see chart above) when the $COP was trading in this range and Colombia in 2002 was a very, very different country than 2015. The ghost of Pablo Escobar was still fresh in the minds of Colombians, Alvaro Uribe had just been sworn in as president, violent crime rates including murders were more than 200% the levels of 2014, and coca production was also twice where it was today. A very different country indeed the last time the $COP was trading at 2700 to the $USD.
So how do we explain why is the $COP at 2700 today? We can presume according to market commentators that perhaps it is a risk aversion affecting many emerging markets at the moment, or maybe Greece, a Chinese slowdown, a flight to $USD safety, rising interest rates expected in the US, or falling oil prices. Maybe all of the above.
But on the negative is it maybe the FARC or some reverse in the Colombian security situation? No. A recession? 4% GDP growth says no. Economic crisis? Not here. Reckless bank lending? Keep looking…There don’t seem to be a lot of good reasons for the $COP/$USD to be trading at these levels.
FYI – It’s important to note (see chart above) that the long term average exchange rate for the COP/USD from 1992 to 2015 is 1856 to the $USD or 45% higher than where we are this week at 2700. Also, the all-time low for the $COP was recorded in January 2003 at 2977 to the $USD so maybe this run isn’t over yet. COP 3000 anyone?
Currency speculation is beyond my realm of experience but the opportunity to take advantage this kind of opportunity and put your USD/EUR/CAD/AUS/GBP to work in high income producing assets like Colombian real estate at these levels is probably one that won’t last for very long. As the $COP will surely revert to historical averages sooner or later, investors today at 2700 are poised to gain 45% in currency appreciation alone. And to our investors who converted more than $1M USD this week (thank you, [email protected]) snapping up property in our core rental buildings, our new projects and a home in Laureles, bravo and congrats on amazing market timing.
Happy house hunting, and let us know if we can help!
Brad Hinkelman – [email protected]
Founder/Owner – Casacol SAS