NEW YORK, May 11 (Reuters) - Colombia’s peso, which has fallen roughly 30 percent against the greenback, has entered a new range due to the recent stabilization of oil prices, the Andean nation’s finance minister said on Monday.
The peso has weakened to 2,391 per U.S. dollar from 2,057 pesos six months ago.
Finance Minister Mauricio Cardenas, speaking to reporters during the Colombia InsideOut business conference in New York, said much of what happens now to the exchange rate depends on oil prices.
“As we have seen in the past few days, an increase in oil prices, we have also seen an appreciation of our currency. But we don’t expect oil prices to go back to the $90 or $100 range. That means we don’t expect the currency to go back to the levels we had six months ago,” Cardenas said.
“I think the exchange rate is in a new range, which corresponds to the new range in oil prices, which is between $60 and $70 per barrel in the case of Brent,” he said.
Brent crude oil was trading around $64.54 a barrel on Monday . That is up 45 percent since January, but the Brent price tumbled 60 percent in the last six months of 2014.
Oil accounts for 5 percent of Colombia’s gross domestic product, Cardenas said. The drop in prices has hit the economy, pulling gross domestic product growth expectations down into the 3.5 to 4.0 percent range for this year.
However, Cardenas said that within the current four-year presidential cycle the government expects GDP growth to return “to the 4.5 percent range” because the economy is diversified and not reliant solely on oil.
Part of the government’s plan to increase economic diversification is development of the country’s road, rail and waterway infrastructure. The government is now trying to get the program, referred to as 4G, underway, with plans for financing of some of the projects coming toward a conclusion, Cardenas said.
“What we are seeing is that the concessionaires executing these projects are looking at international markets. We have heard that some of them are inclined to issue bonds in international markets,” he said.
“In fact those bonds can be issued in dollars or Colombian pesos. And the idea of bonds being issued in Colombian pesos is very attractive to us because it suggests that the exchange risk will be hedged directly by the markets.” (Reporting By Daniel Bases; Editing by Peter Galloway)