Colombian Peso Climbs to Highest Since July on Tax Cut

(Bloomberg) Colombia’s peso, the world’s third- best-performing currency this year, rose to its highest since July on speculation more money will flow into the country after lawmakers passed a bill to cut taxes on foreign bond profits.

The peso appreciated almost 0.1 percent to 1,768.50 per dollar at 10:47 a.m. in Bogota, the strongest level on a closing basis since July 4. It rallied to this year’s high of 1,755 per dollar on May 7.

Colombia’s currency has gained 9.5 percent this year, the best performance in the world after the Polish zloty and Hungarian forint. The peso strengthened as army victories over guerrillas opened up swaths of countryside to overseas investment in mining and oil and bolstered consumer confidence. The new tax rate on bonds may provide an additional incentive.

“The tax cut will probably attract more foreigners into the local market, which means more foreign currency coming into Colombia,” Taimyra Batz, an analyst at Bogota-based brokerage firm Ultrabursatiles SA, said in a telephone interview.

Congress approved last week reducing the levy on bond profits to 14 percent from 33 percent for most foreign investors. For those from countries considered tax havens, the rate will drop to 25 percent. The changes are part of a wider tax initiative approved by lawmakers that lowered payroll contributions while increasing taxes on revenue.

The Finance Ministry will present its 2013 financing plan today at 4 p.m. in Bogota, including the amount of bonds the government plans to sell in local and overseas markets.

The yield on the government’s 10 percent peso-denominated securities due in July 2024 was unchanged at 5.70 percent, according to the central bank.

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