The Dollar Price in Colombia Impacts The Economy But Favors Migrants

Aura Narvaez, a Colombian living in New York City for nearly ten years, still remembers the first time she sent money back to her son in Cali, the third biggest city in Colombia. It was a cold Sunday afternoon in February 2008. Narvaez had just started working at a beauty salon in Jamaica, Queens, and she had received her first paycheck that day. She had only arrived to the U.S. two weeks earlier, but she had already begun a ritual that she would follow for the next eight years: sending remittances home to Colombia.

“I could have never dreamed of doing something like this in Colombia,” she reflected.

Since then, Narvaez has been sending monthly remittances to help her son pay for his Computer Engineering studies. She said that the exchange rate between the dollar and the Colombian peso has never helped her more than it does now. In fact, about a month ago, the price of the dollar reached $3,406.87 pesos, which is the highest price in history and represents a 60 percent increase from the figures in 2014, according to data collected by the Bank of the Republic of Colombia.

Like Narvaez, thousands of expatriates who send remittances from the U.S. have benefitted from the very high price of the dollar.

“The climb of the dollar has been positive from every point of view,” said Victoria Pantoja, who got a loan in 2014 to pay for her daughter’s college graduation and has been paying a monthly fee since then. “When I got the loan I had to send $200 to cover the fee, now I send $110. It is almost half!”

Most migrants are either sending less money or sending the same amount they sent before the dollar went up, Juan Manuel Julio, main investigator at the Bank of the Republic of Colombia, said. The amount they send depends on how much they spend in the U.S., not on how much the dollar is worth in Colombia, he added.

Since Colombians abroad are not sending bigger amounts than they sent a couple of years ago, the overall revenue that the country receives from remittances has not increased substantially, Julio said. However, he explained that, because of the variations in the exchange rate, this revenue is now worth significantly more in pesos. For instance, while the average monthly revenue from remittances in 2006 was $300 million-708,000 million pesos at the time, the monthly average this year is $340 million-107 billion pesos now, he said.

Aura Narvaez started taking English classes at a language school in Jackson Heights back in November. She goes to class every Saturday from 8:30 to 12:30.  Even though she moved to New York City almost a decade ago, she has not been able to learn English because everybody speaks Spanish at the beauty salon where she works. “The few American customers that we get actually want to practice their Spanish when they come to the salon, it is so ironic,” she said.

The money that Colombia receives every year from remittances almost equals the profit made from the exporting of coffee, bananas and flowers – the country’s main exporting products after oil and coal – combined, according to data from the Bank of the Republic of Colombia.

Julio said that from 2008 to 2014, the revenue from remittances was not considered important for the country’s economy because Colombia was profiting from coal, oil and nickel exports. This year, however, remittances could have a much bigger impact, he added.

“We need more and more remittances to enter the country to help compensate for the fact that Colombia is not receiving as much money from exporting oil as it used to,” Julio explained.

Julio’s explanation references the exceptionally low price of oil, which has dropped from $95 in 2014 to $30.65 per barrel this year, according to Hydrocarbonscolombia.com, a news service about the oil market in Colombia. Since the South American country is among the top 20 exporters of oil in the world, the low price of the barrel is taking a tremendous toll on the national economy and has caused the overall cost of living to rise in the last couple of years, Julio added.

In spite of these negative consequences, the devaluation of the peso has favored businesses that promote foreign investment. Casa Propia, an organization that helps Colombians living abroad buy properties in the country, has been one of the main beneficiaries.

People interested in buying properties in Colombia are now paying about 70 percent less than what they had to pay in 2014, Casa Propia director of monetization  Monica Lizarazo said. As a result, many investors have started to either buy the properties upfront or buy two properties at once, she added.

The situation, Lizarazo said, is also favorable to those who are renting instead of buying. Since they pay their rent in dollars, they get higher debt capacity from banks than tenants who live in Colombia, she said.

“We have such a faster dynamic now,” Lizarazo said. “This year is definitely the year to invest.”

Lizarazo, Narvaez and Pantoja, as well as the other Colombians who are benefitting from the high price of the dollar, understand that the current situation is bringing some negative consequences to the country. However, they think that the current conditions also bring some good opportunities that should not be overlooked.