Petro Urges Investors to Keep Cash in Colombia as Peso Dives

(Bloomberg) -- Colombian President Gustavo Petro said higher US interest rate are sucking money out of South America, and called on investors to keep their funds in the country even as the peso weakened to a record low.

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“Don’t send money overseas en masse, because in Colombia there are opportunities,” Petro said Wednesday during a speech in Uraba, a banana-producing region near the border with Panama.

Petro’s plea, just two months into his government, comes as Colombian assets dropped amid investor concerns over the agenda of the first leftist president in the history of the Andean nation. The Colombian peso led emerging market losses on Wednesday, weakening 1.6% to a record low of 4,840 per dollar. Local peso bonds due 2031 also dropped, sending the yield up 25 basis points to 14.36%.

In his speech, the president said the capital now flowing out of Colombia had originally been generated by oil and coal exports. He also said the high interest rates in the US as well as a global economic crisis are a threat to the country.

“It takes capital out of South America and sends it there, leaving us empty,” Petro said.

Amid the market volatility, Petro’s approval rating fell to 46% this month, from 56% in August, according to an Invamer poll published by El Espectador newspaper.

Investor Nerves

Wednesday’s drop in the peso took place despite an attempt by Finance Minister Jose Antonio Ocampo to calm investors the previous evening.

Read More: Colombia Plans to Trim 2023 Bond Sales as Borrowing Costs Rocket

“We’re going to have responsible macroeconomic policy. We’re going to comply with the fiscal rule. There won’t be any exchange controls,” Ocampo told reporters in Bogota on Tuesday night. “We expect this commitment to macroeconomic stability to be recognized by the markets.”

The peso has weakened 19% since Petro won the presidential election in June, the biggest drop among major emerging markets after the Argentine peso.

Petro’s proposal to end new oil exploration, and a suggestion earlier this month that he would consider curbs on “hot money” flows have triggered alarms among some investors.

--With assistance from Maria Elena Vizcaino.

(Adds poll in 6th paragraph.)

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