Colombian Government Eliminated Capital Controls For Equities

One year and three months after establishing capital controls in an effort to curb the appreciation of the peso, the Colombian government announced that, beginning September 1, restrictions for foreign portfolio investment in equities will be eliminated. The restriction consisted in a mandatory non-interest-bearing 40% deposit (increased to 50% in April 2008) for foreign portfolio […]

Ecopetrol and the ‘Oil Wealth Effect’

The biggest IPO ever in Colombia took place last year, when Ecopetrol, the state-owned oil company, issued 10% of its shares, for US$2.5 billion. This amount was absorbed entirely by local investors, and close to 482.000 Colombians are now new shareholders of Ecopetrol. Since November 27th, when Ecopetrol stocks were first traded in the Colombian […]

Capital Controls in Colombia: Costly and Ineffective

Capital controls have been largely criticized in the literature, both for their ineffectiveness and for creating market distortions. Some governments in the 1990’s commonly used them, as an instrument to control short-term investment flows, in order to reduce the vulnerability of the economy, and to prevent financial crisis. More recently, countries like Colombia have imposed […]