Colombia's Inflation Dynamics: A Strategic Playbook for Commodity and Currency Investors

Colombia's inflation story over the past two years has been a rollercoaster, but the ride is finally leveling out. From a peak of 11.74% in 2023 to a more manageable 4.9% in July 2025, the country's central bank has done the heavy lifting to bring prices in check. But what does this mean for investors eyeing Colombia's natural resources and local-currency bonds? Let's break it down.

The Commodity Conundrum: Gold, Oil, and the Inflation Paradox

Colombia's economy is a textbook case of a resource-dependent model. Coal, oil, and gold account for nearly 50% of its exports, and these sectors have historically danced to the tune of global inflation. In 2023, when inflation spiked, commodity prices surged—gold hit record highs, and oil prices rebounded from pandemic lows. But here's the twist: moderate inflation isn't the enemy.

As inflation cooled in 2024 and 2025, so did the volatility in these markets. For example, gold prices stabilized as central banks worldwide shifted focus from inflation to growth. Oil, meanwhile, faced headwinds from lower global demand and U.S. tariff hikes, dragging down Colombia's export revenues. But here's the kicker: moderate inflation creates a window for diversification.

Colombia's government has been pushing to reduce reliance on hydrocarbons, and the data shows progress. Non-traditional exports—agriculture, food, and manufacturing—now account for 47.4% of total exports, up from 42.9% in 2023. This shift is critical. Investors who bet on Colombia's coffee, cut flowers, or emerging tech sectors could reap rewards as the country rebalances its economy.

The Currency Conundrum: Peso Volatility and the Central Bank's Tightrope

The Colombian peso has been a wild card. In 2023, it depreciated sharply against the dollar, driven by high inflation and political uncertainty under President Gustavo Petro. But as inflation eased, the peso stabilized—though not without hiccups.

The central bank's 375-basis-point rate cut since late 2023 has been a double-edged sword. On one hand, it's helped tame inflation and boost consumer spending. On the other, it's kept the peso vulnerable to external shocks. For currency investors, this means hedging is key. A weaker peso makes Colombian exports cheaper, but it also raises import costs and debt servicing for local companies.

Local-Currency Bonds: A Tale of Two Markets

Colombian TES bonds (government-issued local-currency debt) have been a mixed bag. Foreign investors have been net sellers in 2024 and 2025, spooked by fiscal risks and global macroeconomic uncertainty. But local pension funds have been voracious buyers, pushing TES yields to record lows.

The disconnect here is telling. Domestic investors trust the central bank's inflation-fighting resolve, while foreigners remain skeptical. For bond investors, this creates an opportunity: buying TES at a discount if you believe in the central bank's ability to hit its 3% inflation target by 2026. But don't ignore the risks—Colombia's fiscal deficit and political gridlock could still derail progress.

What's the Takeaway for Investors?

1. Commodities: Diversify your bets. While gold and oil remain relevant, Colombia's pivot to non-traditional exports offers long-term upside. Look for undervalued sectors like agriculture or renewable energy.
2. Currency: Hedge your peso exposure. If you're investing in Colombian equities or commodities, use forward contracts or dollar-hedged ETFs to mitigate exchange rate risks.
3. Bonds: Consider TES for income, but only if you're comfortable with short-term volatility. The key is to align your investment horizon with the central bank's inflation timeline.

Colombia's inflation story isn't over, but the narrative is shifting from crisis to cautious optimism. For investors willing to navigate the complexities of a resource-rich but politically fragile market, the rewards could be substantial. Just remember: in this game, patience and diversification are your best allies.