The Colombian peso is the official currency of the South American nation of Colombia and is issued and managed by the Central Bank of Colombia. The Colombian peso, like other frontier market currencies, has been weakened against larger curencies by the 2008-2009 financial crisis and has been particularly badly affected by the Venezuelan economy's decline.
The Colombian peso was first introduced as the official currency of Colombia in 1837 at a value of eight reales to the peso, and ten years later was decimalized to 10 reales (later decimos). In 1872 the present system of valuing the peso at 100 centavos was first adopted. The Colombian peso is currently issued in banknote denominations of 1,000 (see above) 2,000, 5,000, 10,000, 20,000 and 50,000.
After several recent years of appreciation the Colombian peso suffered a significant fall in September 2008 following the global credit crisis, forcing the Central Bank of Colombia (CBC) to take special action. The central bank in early October removed rules that had previously forced 40% of some overseas trade borrowing in Colombia to be held for six months by the CBC, one day after similar restrictions on fixed income assets were lifted. The CBC feared a further flight of foreign capital would depreciate the Colobian peso even more.
The Colombian economy's close trade ties to neighboring Venezuela, whose economy is heavily exposed to the crude oil market, has also exerted downward pressure on the Colombian peso over the past half-year. Venezuelan growth halted in 2008 following the credit crisis after years of rapid expansion, sending its demand for exports from Colombia plummeting. Colombia sends around 17% of all its exports to Venezuela, with which it shares a long and mountainous border, and the latter relies on oil for 90% of its total exports.
The Colombian peso in 2009 has so far continued its steady decline of 2008 - when it lost around 30% of its value - and shed a further 12% of its value over the first quarter of 2009, following a quarter of slight contraction in the Colombian economy. The Colombian peso is also being battered by bad market news in the U.S., it largest ally. The peso's weakness looks set to continue through 2009 as Colombia's badly-hit economy continues to struggle, a prominent economist said recently. Declines in Colombia's export markets, especially regional ones, have left Colombia and its currency relatively worse off than fellow latin American markets, Prof. Nourel Roubini told Bloomberg on April 8, 2009.
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- Colombia's Central Bank Lifts Controls on Foreign Borrowing. Bloomberg.
- Colombian Peso Sinks Under Weight of Venezuela Crash. Bloomberg.
- Colombia Peso Falls Most in Five Months; Chilean Currency Drops. Bloomberg.
- Colombia Economy Faces ‘Difficult’ 2009, Roubini Says. Bloomberg.