Colombia to re-open businesses in wholesale and industrial sectors
Colombia’s quarantine, scheduled to end today, was extended last week for the third time since March to May 25. Despite the extension, Colombian President Ivan Duque announced that many wholesale and industrial businesses will be able to reopen today in areas where COVID-19 cases have largely subsided.
As Colombia’s construction and manufacturing sectors were allowed to reopen in late April, today’s easing measures are expected to restore up to 70% of the country’s economic activity.
However, even with a partial recovery this summer, Latin America’s fourth-largest economy could contract up to 7% this year. In April, Duque approved $4 billion in welfare payments and credit guarantees for struggling businesses. However, the president will likely pursue another round of spending for retail and service businesses, which will have to remain closed until at least May 25 and likely require months to fully recover.
Government spending will not come without a price. Colombia’s external debt is at its highest level ever and will continue to grow as the government is forced to borrow to finance a widening budget deficit. The real value of this debt, which is mostly financed in US dollars, has spiked since February, when the peso depreciated against the dollar by approximately 20%. While Colombia is unlikely to default on this debt, the burden could sap away at the country’s economic growth long after the economy comes entirely back online.
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