Inflation Hit a Seven-Year High in Colombia in 2015

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Inflation
Inflation

Inflation in Colombia in 2015 was 6.77%, which is the highest it has been in the country in seven years. In 2008, inflation was 7.67% in Colombia and in 2014 inflation was only 3.66% in the country.

Inflation in Colombia is now above the 2-4% target of the central bank in Colombia, which is why the central bank in Colombia has raised interest rates in Colombia.

Inflation in Colombia over past 11 years, source: DANE
Inflation in Colombia over past 11 years, source: DANE

Inflation in Colombia in tracked by DANE (Colombia’s government statistics agency) and a DANE presentation (in Spanish) about the 2015 numbers in Colombia is found here.

Impacts of Inflation

With inflation in Colombia, the costs of most things in Colombia are increasing in terms of pesos.

But keep in mind this is in terms of pesos in Colombia and doesn’t really impact foreigners with incomes in a stronger currency like the US dollar or Euro due to the Colombian peso being very weak lately.

Exchange rate past two years - minimizes impact of inflation, source: xe.com
Exchange rate past two years – minimizes impact of inflation, source: xe.com

Over the past two years, the exchange rate per USD has ranged from 1,842 to 3,351 peso, with rates above 3,000 pesos only being in the past few months.

The biggest inflation in 2015 in Colombia in terms of pesos was experienced in the food category, which was up 10.65% due to some crops being affected by El Niño as well as imported items becoming more expensive.

Some of biggest inflation is in food items
Some of biggest inflation is in food items

Several food items have seen prices increase dramatically in Colombia. For example, tomatoes were up 79.55%, onions up 60.92%, beans up 53.28%, yucca up 44.92%, carrots up 36.97% and sugar up 24.71%.

Annual inflation in 2015 in Colombia for other categories:

  • Other expenses up 6.9%
  • Housing up 5.38%
  • Healthcare up 5.3%
  • Education up 5.11%
  • Transportation up 4.87%
  • Communications up 4.7%
  • Entertainment up 4.52
  • Clothing up 2.99%

As an example for increased transportation costs, in Medellín the costs for bus and metro fares have increased in 2016. Starting January 1, the metro fares in Medellín using the Civica card increased by 130 pesos to 1,880 pesos per trip. Bus fares in Medellín also increased by about 5% in 2016.

With the inflation of 6.77% experienced in Colombia last year, the Colombian government also raised the minimum salary in Colombia by 7% in 2016 to 689,454 pesos per month.

Inflation by City in Colombia

While inflation across Colombia in 2015 was 6.77%, within the country it varied by city.

The highest inflation in Colombia last year was experienced in Manizales (up 7.97%) followed by Sincelejo (up 7.78%) and Barranquilla (up 7.65%).

The lowest inflation in Colombia in the 25 cities tracked by DANE was found in Cúcuta (up 5.58%) followed by Bucaramanga (up 6.02%) and Tunja (up 6.07%).

Inflation in the two biggest cities was close to the national average in 2015: in Bogotá inflation was 6.62% and in Medellín it was 6.82%.

Apartment Rental Impact

If you rent an apartment in Colombia landlords are permitted by law to raise rent by up to the inflation rate in Colombia seen in the prior year.

This is permitted only during lease renewal and can only be done once per year. For example, if a year rental contract was signed in September of last year, the landlord can’t increase rent before September this year during renewal.

However I haven’t experienced a rent increase in five years of renting in Medellín. It is fairly difficult for landlords to raise rent as there is quite a bit of competition with many vacant apartments and it is fairly inexpensive to move.

If a landlord notifies you that rent is being raised by the inflation rate, note that this is negotiable and you can threaten to move. The notification must also be in writing. But to avoid a rental increase you may actually have to move.

Keep in mind that if a landlord doesn’t contact a tenant by writing to change the terms, a lease in Colombia will renew automatically with the same terms as the previous lease.

Shopping at PriceSmart to save
Shopping at PriceSmart to save

Strategies for Avoiding Inflation Impacts

Besides negotiating with your landlord to limit a rent increase or moving to avoid a rent increase, it is also possible to change your shopping behaviors to avoid many of the impacts of inflation in Colombia.

For example, the highest inflation over the past two years in Colombia was in food items. But our grocery bills have decreased by about 38% in terms of pesos over the past two years.

Our grocery bills have decreased as we started shopping at PriceSmart that opened in December 2014, which has good prices for several items purchased in bulk.

We also started shopping at a nearby D1 Tienda for some staples and a local butcher shop, with both having much lower prices than Exito.

You can also chose to buy fewer imported items with prices that have tended to increase relatively rapidly in terms of pesos due to the exchange rate.

Instead of buying imported foods, toiletries, clothes, furniture, appliances and other items you can buy locally produced items. For example, we switched from an imported dog food to a locally produced dog food.

The Bottom Line

Inflation is increasing in Colombia in terms of pesos, which impacts Colombians earning pesos. But our cost of living in terms of Colombian pesos for a couple over the past two years has actually decreased by about 17%.

It is possible to adjust your shopping behaviors to avoid experiencing much inflation in terms of pesos in Colombia, just as you can do in other countries.

But even with inflation, with the greatly improved exchange rate, the cost of living in Colombia in terms of US dollars has dropped dramatically and we haven’t seen any impact of inflation in terms of US dollars.

Our cost of living over the past three months was less than $1,600 per month for a couple. This compares to a cost of living of around $3,000 per month back in 2014 and nearly $1,900 per month early last year.

Our standard of living hasn’t really changed other than not traveling as often on vacation but we also now live in a much bigger apartment.

But keep in mind that the Colombian peso may gain strength against the dollar at some point in the future when inflation in Colombia will become a bigger concern.

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4 COMMENTS

    • I respectfully disagree. I have heard countless times while shopping at PriceSmart Colombians in the store saying “tan barato” (so cheap).

      For example peanut butter at PriceSmart is about half the price by volume of what you can buy in Exito. Buying in bulk at PriceSmart can save money compared to buying the smaller packages at Exito or Jumbo. There are many products at PriceSmart that are priced much lower by volume than what I’ve seen in other stores.

      Plus PriceSmart has several imported products you can’t find elsewhere.

    • I went there this weekend to stock up, and while there are certainly expensive things there, there are tons of things that are significantly cheaper. One carton of almond milk at exito is 14,900 pesos; a 12 pack of the same carton is 68,900 at PriceSmart. Extra virgin olive oil is about 60% cheaper by volume than exito, cleaning supplies/paper goods like toiler paper are significantly cheaper; dry goods like pastas, rices, beans, spices are much much cheaper. As mentioned previously, liquor and nuts/nut butters are also very cheap. Imported items are also much less expensive than anywhere else. I don’t buy much imported goods, but things like cheese, hummus, and frozen goods are as cheap as you can find it.

      Your bill may be higher than at exito but you would be getting 3 or 4 times the amount of food. The only thing you have to be vigilant about is making sure that the expiration date is far enough away that you will use all of what you’re purchasing.