A new tweet from President Gustavo Petro made the market nervous, this time after warning about a possible default.
“If the third commissions do not approve the project, simply, either there is a cessation of payments or I have to declare an economic emergency. I won’t hesitate to do it. So I invite the third commissions to fiscal responsibility. Government and opposition in Congress must unite in this project and purpose,” said the president in his X account.
This, within the framework of the approval of an increase in the nation’s debt ceiling, a comment that soon drove bonds and the local peso downward.
Emerging currencies
The downward trend of the dollar changed after the president’s comment. This caused the peso to erase gains and become one of the worst performers in emerging markets yesterday. At the close of yesterday’s market, the currency fell 0.2% and was the fourth worst among emerging markets.
In line with this, the North American currency gained strength, as it closed at $3,877.92 on average, $20.34 above the TRM, which yesterday was at $3,857.58. In intraday quotes it reached a minimum price of $3,842.20 and a maximum price of $3,909.15.
“Before it was said that foreigners were very calm with the Petro Government and it was more local nervousnessbut very delicate warning signals are being given to foreign investors,” said Juan Pablo Vieira, CEO of JP Tactical Trading.
He also added, that this week it was learned that foreign investment has been falling sharply and that the Bank of America also issued alerts regarding the fiscal issue in Colombia, Well, they assured that it is no longer so attractive to invest in the country.
Added to the national movements was that at an international level the dollar was on the risea after better-than-expected US business activity data forced traders to push back rate cut expectations by a month.
Bonds to 2050
Bank Of America this week said that you have to be very careful with bonds and public debt securities because they do not compensate for fiscal risk. So in three days the 2050 bonds fell 3.8% to US$65,369. “We also see the Government talking about how it is running out of money, so everything is generating many alerts,” tothe bank added.
He also made the reservation regarding Moody’s Ratings’ rating of Ecopetrol, which lowered the company to b1 from ba3 in credit risk.. “There are many rating downgrades for companies in Colombia and the country risk is increasing, so this makes bonds, stocks and the dollar fall,” said Vieira.
Cessation of payments
Faced with the cessation of payments, Petro did not specify which ones would be suspended. However, the Ministry of Finance and Public Credit expressed in a statement its confidence that Congress will approve the bill before June 20, when the legislature ends. The presidency did not immediately respond to written requests for comment.
“He is looking for any reason to declare an economic emergency,” Camilo Pérez, an economist at Banco de Bogotá, told Bloomberg. “In the past, Congress has always raised the debt limit without problems.”
