Commentary
In our last call on Colombia and Peru in October 2021[https://www.complexcountries.com/treasury-fx-in-colombia-peru], there were concerns about political uncertainty. Since then, the president of Peru has been impeached and a left wing former guerrilla elected president of Colombia has been beset by scandals. So how has this impacted the companies operating in the countries?
In short, not a great deal. Currency volatility continues to be a challenge and reduced foreign investment has hampered growth. But in terms of politics the markets are relatively sanguine as the respective governments stumble along without enough power to make radical changes and the long run potential remains.
From a Latin American perspective both countries are relatively easy to operate in for treasury, with local teams coping well with the challenges.
Colombia:
- Most companies repatriate cash via dividends and intercompany loans. The process involves a lot of admin, but it works.
- Funding is relatively easy but also entails a lot of bureaucracy and it is essential to get communications with DIAN (the tax & customs agency) accurate.
- Some companies avoid the transaction tax (‘cuatro por mil’) by parking cash in fiduciary accounts for 24 hours. It saves money but, again a lot of form filing.
- The currency volatility also caused one participant to have their local credit dramatically reduced
- Citi is the
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