The latest strength in the U.S. Dollar has essentially been unstoppable with the dollar hitting an 11-year high of 2,692 pesos per USD during the day on Monday according the El Colombiano newspaper based in Medellín, Colombia.
However, on the xe.com currency website, the Colombian peso traded in a range between 2,625 and 2,688 pesos on Monday, closing at 2,677 pesos. The following graphic from xe.com demonstrates the exchange rate for the Colombian peso hasn’t been this high in the past 10 years.
The strong dollar is starting to have some impact on inflation in Colombia with imported items becoming more expensive in terms of pesos resulting in inflation hitting a 12-month high last month. Colombia is a major importer of grains, which total about 7 million tons per year. So an impact of the higher exchange rate has already started to be seen in some food products in the country that are priced in pesos.
The dollar has been strong against the Colombian peso due to the weakness in the price of crude oil (Colombia is a big oil exporter) and the recent strength in the U.S. dollar. The Colombian peso looks to be the most vulnerable currency in South America when it comes to weak oil prices. At the same time as the Colombian peso was hitting an 11-year high versus the U.S. dollar, the price of oil on Monday was hitting a six-year low for U.S. oil.
Some analysts have projected that the dollar could reach an exchange rate as high as 3,000 Colombian pesos to the USD in the third quarter, which would be an increase of about 12% from Monday’s exchange rate close. In a recent report, Credit Suisse said it expects the Colombian exchange rate to end the year at 2,700 Colombian pesos per USD. However, it is well known that exchange rates are very difficult to predict.
The Bottom Line
The improved exchange rate is making for a significant real estate buying opportunity in Medellín and other cities in Colombia when buying property with U.S. dollars. Real estate is priced in Colombian pesos in the country, so if you are buying with U.S. dollars, you will be saving over 30% compared to a year ago with the new exchange rate (or saving over 40% from just nine months ago).
The bottom line is that if you have U.S. dollars, the current exchange rate for the Colombian peso is now the best it has been in about 11 years. So this makes Colombian real estate perhaps the cheapest in the Americas.
The average cost of real estate in the four most popular neighborhoods in Medellín for foreigners based on our recent survey was 2.503 million pesos per square meter, which is now only $935 per square meter at the exchange rate of 2,677 pesos.
The improved exchange rate also makes the cost of living in Colombia much lower if you receive an income in USD, such as someone retired from the U.S. receiving monthly Social Security benefits.