Colombia Record Foreign Investment Flows Seen Short-Lived

Oscar Medina
·1 min read
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(Bloomberg) -- Colombia posted a record in foreign direct investment flows last year, led by the very industry that President Gustavo Petro has promised to phase out: oil and coal.

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The Andean nation received $17.4 billion in direct investment from abroad, of which 34% went to fossil fuels, according to data released from the central bank last week. The highest inflows into oil and minerals since 2014 can be explained in good part by higher taxes, according to Munir Jalil, the Andean chief economist at BTG Pactual.

That is unlikely to happen again this year, says Jalil, after the nation’s top court struck down a measure banning the commodity producers from deducting royalty payments from their corporate tax liability. The move is estimated to cut almost $800 million annually from government coffers.

Read more: Court Kills Colombian Royalty Tax Measure Worth $780 Million

With lower FDI flows expected this year and as the central bank continues to cut the key interest rate, Jalil forecasts the Colombian peso will end this year weaker at 4,080 per dollar from around 3,943 now.

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