COP/US$: Further Upside Ahead

The Colombian peso continues its bullish trend, smashing the COP1,800/US$ resistance to reach COP1,787/US$ on yesterday's announcement that the Venezuelan ban on Colombian agricultural goods has been lifted. We still maintain our positive outlook towards the peso over the medium-term based on the solid macro-picture of Colombia, with a US free trade agreement in the pipeline, strong exports forecast and 125 basis points of policy rate hikes expected by end 2011. In addition, Colombia remains an attractive investment environment and we expect to see significant capital inflows continue over the year, picking up when the delayed merging of Chilean, Peruvian and Colombian bourses is completed in May.

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