Six weeks ago, the Colombian peso was the worst-performing emerging-market currency of the year, weighed down by fiscal worries and election nerves. In June, it became the best-performing one — and by a wide margin. That kind of whiplash is exactly why a currency call deserves more scrutiny than a headline, so here's what's actually driving it.
What actually happened
The Colombian peso gained roughly 19% against the dollar over the trailing twelve months through mid-2026 — the strongest run of any emerging-market currency, ahead of the next-best performer (Hungary's forint) by a wide margin. Most of that move came fast: June alone delivered a 7.4% gain, the peso's best single month in about a decade, pushing USD/COP to its lowest level in roughly five years.
The proximate trigger was political. Abelardo de la Espriella, seen by markets as the more business-friendly candidate, won Colombia's presidential runoff on June 21 with just under 50% of the vote in one of the tightest races since 1994. Markets had already started pricing in his odds after a strong first-round showing, and the peso, along with Colombian equities, rallied on the read that a de la Espriella win meant a more market-friendly government taking office in August.
What's notable is that the June rally happened against the global backdrop, not because of it. The dollar index actually strengthened over the same month, and Brent crude fell sharply — both would normally weigh on a commodity-linked emerging-market currency. Bancolombia's own research desk described the peso's June move as driven by "idiosyncratic factors," not a weak-dollar tailwind. That matters for how durable the story is: this wasn't the peso getting carried by a global risk-on wave, it was Colombia-specific.
The carry trade, in plain terms
Underneath the election story sits a more structural one: Colombia's central bank (Banco de la República) raised its policy rate to 12% in June, resuming a tightening cycle aimed at persistent inflation. A 12% peso rate against a U.S. federal funds rate sitting in the mid-3% range is a real, meaningful yield gap — the kind that draws in money simply chasing return, independent of anyone's view on Colombian politics. That gap is what analysts mean when they call the current rate level "supportive of long peso positions": every month you hold pesos at that rate, you're being paid a lot more than you would be to hold dollars, before any currency movement at all.
The case against
The speed of the reversal is itself a warning sign, not just a headline. A currency that was the worst performer in its peer group in May and the best in June didn't get there on a gradual re-rating — it got there because several forces (high rates, an election result, strong remittances, firm oil prices) all lined up in the same direction at once. Analysts covering the move have been explicit that a rally assembled that quickly from several independent factors can come apart just as fast if even one of them reverses.
- The fiscal picture hasn't actually changed yet. Colombia ran a fiscal deficit of 6.4% of GDP the year before the election — a real structural weakness that a change in the presidency doesn't fix by itself. The market has priced in an expectation of fiscal consolidation from the incoming administration; it hasn't happened yet.
- The new government has to deliver, not just win. De la Espriella takes office August 7. Cabinet appointments and the administration's first concrete fiscal signals are what determine whether the rally's premise holds up, and markets that price in a policy shift early can be disappointed by the reality of governing.
- A strong peso squeezes the export side of the economy — coffee, flowers, and oil producers earn in dollars and convert to fewer pesos as the currency strengthens, a real drag on a meaningful part of Colombia's economy that can eventually feed back into growth and, indirectly, the currency itself.
- Rate cuts would remove the carry trade's engine. The 12% policy rate is doing real work in this story. If inflation cools enough for Banco de la República to start cutting, the yield gap that's drawing money in narrows, and with it, part of the case.
How people actually get exposure
For a retail investor, "buying COP" isn't usually a single transaction — it's a choice among a few practical routes:
- Holding pesos in a Colombian bank account. The simplest form of exposure, though idle cash doesn't capture the carry-trade yield. See our guide on opening a Colombian bank account as a foreigner.
- A peso-denominated CDT (Certificado de Depósito a Término) — a fixed-term deposit Colombian banks offer, the retail vehicle that actually captures something close to the policy-rate yield rather than just currency movement.
- Colombian government bonds (TES), generally more accessible to institutional or larger individual investors than a retail bank product.
- Indirect exposure through peso-denominated assets — a Colombian property, most obviously, which combines currency exposure with the separate investment case covered in our real estate pillar.
The honest summary
The bull case for the peso right now is real and data-backed: a genuine double-digit yield advantage, a political catalyst that already delivered, and a currency that just posted its best run against the dollar in a decade. The bear case is just as real: that entire move was assembled quickly from a handful of forces that can unwind as fast as they aligned, sitting on top of a fiscal deficit the new government hasn't actually fixed yet. Both of those things are true at the same time, which is precisely why this is a currency call and not a certainty — check the current rate and policy backdrop before acting on any of it, since both move fast.