Colombia changes debt denomination to pesos

Big news out of Reuters.

Colombia is going to change a big chunk of its foreign debt to peso-denominated, presumedly to bank off of the peso's strength. Frankly, I'm a little suprised they haven't already done this. With the peso's consistent strength for the last 5 years (about 10% gain per year) they could have really taken advantage of this. Not to mention the fact that denominating your debt in your own currency helps to avoid external shocks ala asian financial crisis.

This, combined with a FTA with Colombia (supposedly "very, very close to closing negotiations" according to both governments, should keep the economy on track to regain investment grade status.

Anyone read anything about how the government plans on making the conversion? Options, buy-back, ...?

By jh816 on May 6, 2008, 20:25 in Friendly Talkzone.

Wastelandlive says on May 6, 2008, 22:09:

I'm rusty on this stuff, but I think that "converting" the debt - vice paying it off with cash reserves - means borrowing pesos - by selling debt to Colombians - converting them to dollars, using them to pay off dollar denominated debt.

The problem with this, of course, is that it increases the demand for pesos. A strong currency is one man's blessing, another man's curse: as the peso goes up, exports go down. Unemployment goes up. Domestic demand goes down.

It's an interesting balancing act.

FTA "very, very close to closing negotiations" (in quotes, and according to both governments!)?!!!

I'm surprised to read that. The read here from Washington is fat chance. Perhaps after the election? Where are you reading that?

Wasteland

miamimike says on May 6, 2008, 22:26:

This, combined with a FTA with Colombia (supposedly "very, very close to closing negotiations" according to both governments, should keep the economy on track to regain investment grade status.
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IMO, this FTA agreement will not be passed at the earliest, until maybe the 2nd half of 2009. I doubt anything will pop before the Election here in the states and then if the Opposite Party(Dems) win, for sure this Col FTA will be on the back burner,,,

Do you have a Link to that statement about the "very close to closing Negotiations?" I'd like to read that one,,,

Our enemies are innovative and resourceful, and so are we. They never stop thinking about new ways to harm our country and our people, and neither do we." GW Bush

Rubito says on May 6, 2008, 22:42:

I don't think it will EVER pass.

---Violence is the price of freedom.---

jh816 says on May 7, 2008, 02:34:

sorry, late night typing.

The FTA I was talking about was the talks with Canada. Info is from Reuters.