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Inflation
continues on downward path.
In August, consumer prices picked up again after two consecutive decreases
experienced in June and July. Despite the 0.3% price increase, the
annual inflation rate dropped from 9.3% in July to 9.1% in August, which
bodes well for the government’s intentions to keep inflation below the
10% target for this year. Consensus Forecast panellists anticipate
that the inflation target will be slightly overshot this year, however,
due to increased price pressure resulting from the pickup in domestic
economic activity.
Interest
rates rising as currency depreciates steadily.
Despite favourable inflation figures, interest rates continue to rise
primarily due to a steady weakening of the peso since March. The
peso depreciation has experienced a notable quickening since March,
weakening by 11.6% to reach 2,208 pesos to the US$ at the end of August.
The benchmark DTF interest rate rose a further 28 basis points in August
over July, which brings the increase since March to 160 basis points.
Plan
Colombia receives strong endorsement.
In his visit to Colombia on 31 August U.S. President Clinton announced
that the United States would support President Pastrana’s 3-year Plan
Colombia with some US$ 1.3 billion in assistance. The US endorsement
provides over 30% of the US$ 4 billion in international assistance sought
under the US$ 7.5 billion peace and economic development plan. The
U.S. assistance package is focused principally on human rights, judicial
reform, counter-narcotics and increased narcotics interdiction efforts but
also provides funds for alternative economic development and opens the
possibility for further easing of trade barriers for goods coming to US
markets from Colombia. Indirectly the assistance enables the
Pastrana administration to free resources for social and economic
priorities and promises to give a boost to investor confidence, as
Colombia is more likely to progress favourably in negotiations with
multilateral organizations.
Note:
The above text is an abridged version of the LatinFocus Consensus Forecast
briefing on Colombia. For more details please click here.
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