Because Colombia is a major exporter of petroleum and other fossil fuels, the Colombian Peso (COP) is denominated a commodity-backed currency. This means that the COP’s valuation in the Foreign Exchange market is dependent upon the price of energy commodities, particularly oil. Therefore, the value of the COP has been hit particularly hard in recent years as the price of one barrel of crude oil reached a low-point of less than US$30 in January 2016. Since 2016, the average value of the Colombian currency has been 3,000 COP to 1 USD, with a low-point of almost 3,500 COP for 1 USD during the early months of 2016. However, during the last 10 years, the COP experienced a prolonged period of strength between August 2009 and October 2014, during which the average value was less than 2,000 COP for 1 USD.
Coconut Production and Coconut Oil Trade
In recent months, after years of production cuts by the world’s major petroleum producers, particularly the OPEC and Russia, international oil prices have finally begun to rise gradually. Even though they are still far from the more than US$150 per barrel pricing in June 2008, as of December 2017 the closing price per barrel of crude oil was approximately US$60. If this trend continues, it is expected that it will trickle-down and strengthen the COP’s value during 2018. Such a trend will strengthen the assets of foreign investors already present within the target country and make it more expensive for other foreign investors seeking to enter these national markets. Thus, international investors should consider what the effect of rising commodity prices might be in emerging regions and take advantage of the current window of opportunity.
One way to take advantage of this opening is to invest in Colombia’s coconut market, which increased cultivation from a total of 12.500 hectares in 1985 to 16.886 hectares under cultivation in 2016. Likewise, coconut production in Colombia has gone from 27.000 metric tons in 1961 to 123.260 metric tons in 2016. One of the many products derived from coconut production is coconut oil, whose leading South American exporter is Colombia. Coconut oil and other increasingly popular wellness products are distilled or extracted from copra, which is the coconut flesh or meat after it has been dehydrated and crushed. Furthermore, coconuts are now being used to produce everyday goods such as sugar, flour, and even vinegar.
In 2016, Colombia exported a total of US$70.7 million worth of coconut oil, of which 62% or US$44.2 million was sold to the Netherlands. Simultaneously, over the last several years, the international price of coconut oil has decreased from US$961 per metric ton in March 2014 to US$665 per metric ton in December 2017. Meanwhile, the price of fresh organic green coconuts has risen steadily in recent years due mainly to a significant increase and momentum surrounding the demand for high-quality coconut water. Nevertheless, coconut suppliers in regions like Latin America and South Asia have not been able to increase output as quickly. Currently, one green coconut in the United States costs an average of US$3.00.