19 May 2026

Growth was not enough to calm the dollar

Colombia closed the latest week with an uncomfortable signal for the peso: growth exists, but it is not convincing. First-quarter GDP fell short of expectations, the momentum came mainly from the public sector, and the dollar moved back above COP 3,800. In that context, any doubt over fiscal discipline or BanRep's technical autonomy weighs more than usual.

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Analysis

Four signals that explain why the peso lost room to maneuver

Between May 15 and May 17, data and market readings appeared that do not fit a story of solid recovery. Instead, they point to an economy growing with state support, a more nervous currency market, and a monetary authority under close scrutiny.

GDP grew, but left doubts
Real activity
The figure was not disastrous, but it was insufficient DANE reported on May 15 that first-quarter 2026 GDP rose 2.2% year over year and 0.6% from the previous quarter, seasonally adjusted. It is not a recession, but it is also not the kind of expansion that can dispel local fragility.
The most delicate part was the composition The largest contribution came from public administration, health, and education, while construction, agriculture, and mining remained weak. When growth depends too heavily on government spending, the market starts asking how long that support can last with the fiscal front already under pressure.
March improved, but it does not change the picture
Economic pace
The ISE showed progress, not takeoff The Economic Monitoring Indicator stood at 128.91 in March, with annual growth of 3.98%. It is a useful figure to show that the economy is not paralyzed, but it is still not enough to speak of a forceful productive recovery.
The market already separates rebound from strength A monthly improvement or a positive quarter does little if private investment, agriculture, and construction do not follow. For the peso, that means less confidence that future growth will support tax revenue, employment, and demand for Colombian assets.
The dollar tested COP 3,800 again
Currency market
The reaction was immediate Valora Analitik reported on May 15 that the dollar in Colombia closed at COP 3,800.99, with intraday highs of COP 3,820. The move combined a stronger DXY, global oil tension, and a weak reading of local growth.
TES also sent a warning In the same session, yields such as the 2033 TES and 2050 TES rose sharply. When the dollar climbs and public debt weakens at the same time, the signal is clear: the market is demanding a higher premium to keep holding Colombian risk.
BanRep is no longer viewed on autopilot
Monetary credibility
The discussion is no longer only about rates An analysis published on May 17 by Valora Analitik, citing XP Investments, argued that BanRep's pause at 11.25% was read as a decision exposed to political pressure amid high inflation, unanchored expectations, and loose fiscal policy.
That raises the reputational cost If the market starts to suspect that the Bank's reaction is moving away from technical judgment, the punishment comes quickly: more volatility, expectations of a higher rate for longer, and less support for the peso, even before the next meeting in June.

The core problem is not that Colombia grew 2.2%. The problem is that this number arrived at a moment when the country needed something more convincing: a firmer signal from private investment, an improvement less dependent on public spending, and a fiscal narrative capable of lowering the level of suspicion in markets. None of that happened clearly.

That is why the dollar's rebound does not look accidental. When activity disappoints in quality, TES weaken, and the discussion over central-bank autonomy returns, demand for dollar hedges rises immediately. It does not take a collapse for the exchange rate to move. It is enough for confidence to stop improving.

The thesis for the peso today is uncomfortable but simple: as long as growth continues to look more administrative than productive, and as long as the fiscal and monetary correction does not gain full credibility, the market will continue to treat the COP 3,800 area not as an exaggeration, but as a perfectly defensible level.