Falling dollar price opens up opportunities for SMEs

The dollar in Colombia has fallen by $439 this year, meaning the peso has appreciated or strengthened by 9.87% against the greenback.

The Representative Market Rate (TRM or official dollar in Colombia) stands at $3,974.37, the same level as on July 17, 2024. In an environment of revaluation of the peso against the dollar, exporters are affected because they receive fewer pesos for the products they sell in that currency, while importers pay less for the products they bring into the country.

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Likewise, those with dollar-denominated debts, such as those with the government or individuals who obtained loans to study abroad or purchased goods abroad, can benefit.

However, the government could also be affected because, for example, exported oil, even if the price of a barrel is high, results in less revenue.

The thousands of families who receive remittances from abroad in dollars could also be affected by the prolonged drop in the currency's price.

The situation is also having an impact on micro, small, and medium-sized enterprises (MSMEs), according to Bancóldex, which believes these business units could adopt financial strategies that allow them to mitigate risks, take advantage of opportunities, and strengthen their competitive position.

He said that MSMEs that sell in dollars could be receiving fewer pesos for their products, and therefore it is advisable to review current contracts and consider renegotiating prices or including exchange rate adjustment clauses to protect profit margins.

See more: Pension reform: pension savings in the semi-contributory pillar will not be inheritable. Likewise, they can take advantage of the opportunity to import cheaper inputs, and for those that import machinery, technology, or raw materials, this may be a strategic time to make purchases, since the fall of the dollar reduces import costs . Furthermore, if an MSME depends heavily on the U.S. market, it is advisable to explore opportunities in countries with stronger or more stable currencies, which can reduce risks and expand commercial reach.

An important factor is that reducing import costs can improve liquidity. This additional margin can be used to invest in productivity, innovation, or business expansion.

He also noted that MSMEs can evaluate financial instruments such as swaps or forwards (foreign exchange hedges), which help mitigate risks associated with exchange rate fluctuations.

The bank stated that it has various financial instruments designed to provide MSMEs with the appropriate support to implement several of the aforementioned strategies. First, it has a digital currency hedging platform to reduce exchange rate risk due to fluctuations in the dollar price.

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Bancóldex's acting president, José Alberto Garzón, emphasized that "This situation could represent an opportunity for thousands of Colombian MSMEs. At Bancóldex, we invite you to make strategic decisions, invest in technology, renegotiate dollar-denominated liabilities, and stock up efficiently . Our mission is to support you with financial solutions and business development programs that will allow you to make the most of this moment."

International context

According to Paula Chaves, market analyst at asset broker HFM, this trend is part of an international context marked by the weakness of the dollar, which is trading near its lowest level in three and a half years , driven by expectations of a key U.S. employment report and positive trade signals.

Thus, the Colombian peso consolidated its position as the best-performing currency globally in July, boosted by the rebound in oil prices, the appeal of the carry trade (borrowing money in a currency with a low interest rate and investing in another currency with a higher interest rate), and a greater appetite for risk in the markets.

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Globally, the foreign exchange market has been reacting to better-than-expected U.S. employment data, reflecting a solid labor market and generating significant movements in risk assets.

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