Macroeconomic Forecast Colombia

Colombia's inflation rate dropped slightly to 3.27% in August, in line with our full year forecast of 3.6% for 2011. Low inflation is expected to persist in the face of a weaker peso, despite the potential for imported inflation. The Colombian peso, like several other Latin American currencies, experienced a sharp selloff in September, losing about 5.8% of its value since the beginning of the month. Central bank Governor José Dario Uribe and Finance Minister Juan Carlos Echeverry welcomed the fall, with Echeverry indicating that an exchange rate around COP1900/US$ was near equilibrium. A weaker peso will ensure that Colombia's major exports, particularly oil, remain competitive, and will also increase its modest trade surplus.

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