Inflation in Colombia

A short history of inflation in Colombia

The Coffee Boom (1975 to 1977)

Colombian inflation peaked at 40.4% in the year to June 1977, and the cause was an unusual one: too much good fortune at once. A frost destroyed much of Brazil's coffee crop in 1975, the world coffee price roughly quadrupled, and Colombia, then heavily dependent on coffee exports, took in far more foreign currency than its economy could absorb. Converting it into pesos expanded the money supply, and prices followed.

Gradualism and Independence (1991 onwards)

Colombia is more notable for what did not happen. Alone among the larger Latin American economies it avoided both hyperinflation and default in the 1980s, holding inflation in the twenties for two decades rather than letting it accelerate. The 1991 constitution made the Banco de la Republica independent and gave it price stability as its mandate, and an explicit inflation target followed in 1999.

Post-Covid Inflation (2021 to 2023)

In Colombia, prices rose fastest in March 2023, at 13.3%. The causes of the post-Covid inflation were global in nature, beginning with the lockdowns: factories and ports closed and the shipping between them fell out of sequence, so goods took longer to make and longer to arrive. Governments had spent heavily supporting household incomes through those closures, so when restrictions lifted there was money waiting to be spent and not enough on the shelves to spend it on. Then in February 2022 Russia invaded Ukraine, disrupting two of the world's largest suppliers of wheat, fertiliser, oil and gas at once, and the cost of everything grown, heated or transported rose with them.

Because the causes were shared, so was the timing: most countries peaked within a few months of one another in late 2022. The major inflation events covers this episode and the others in more detail.