REDUCE YOUR FX RISK,
WHILE LOCKING IN BETTER USDMXN
EXCHANGE RATES IN THE FUTURE.

RISK
FORECAST
HISTORY
OPPORTUNITY

Reduce your FX risk, while
locking in better USD/MXN
rates in the future.

Pangea helps global organizations hedge, store, send, and receive foreign currency in one beautifully designed platform powered by AI.
MacBook mockup

Coffee, oil and interest rates, oh my!

Continued growth of the Colombian economy means that downside risk to businesses with Peso exposure remains but as Colombia’s inflation remains far from the 3% target, interest rates remain high making it possible to mitigate COP risk at a significant discount using FX forwards.

Risk

Pangea’s VaR estimates that this currency pair could experience up to 21% volatility in 2024*.
T
Fairly Likely
Not likely but possible
Highly Unlikely
Probability
Probability
~33%
~5%
~1%
Volatility
~7%
~14%
~21%
Exposure
$70,000
$140,000
$220,000
*VaR data representative of a 12 month recurring hedge on $1M cash flow.
Dashboard mockup

Forecast

The peso finished 2023 on a strong note, making a new high against the dollar in the final week of the year. Though COPUSD traded in a narrow range during the first two weeks of 2024, the uptrend from the October 2022 low remains intact.

The most recent reading on inflation was 9.28%, down from over 13% a year ago, but still substantially above the central bank’s 3% target level. Analysts expect a gradual reduction in interest rates in 2024 as inflation continues to fall, but Colombian rates will almost certainly continue to be significantly higher than those in the US.

According to the OECD, the Colombian economy will grow at a moderate rate of 1.4% in 2024 and 3% in 2025. High inflation and interest rates will weigh on domestic demand in 2024. Inflation is expected to return to the 2-4% range in 2025, and policy interest rates are projected to fall to 6% by the end of 2025. Colombia’s exports are dominated by oil, so global demand and oil prices will likely have a substantial impact on economic growth in 2024

On a technical basis the peso appears likely to gain another 5% before it hits the first important level of resistance at the 2022 high. If the peso were to weaken the first level of support is 5% lower than current levels. Unexpected events could push the peso to long-term resistance (+15%) or support (-11.5%) levels.
Dashboard mockup

History

Takeaways from last year,
and what could have been.

A historical look at a 2023 USD/COP hedge shows the results of hedging a strengthening Peso with forwards when interest rate differential is high.

Had a company used Pangea to hedge their USD/COP cash flows using forwards beginning in January, they would have received almost 19% more Pesos per dollar against the declining spot rate over the year. As seen in the corresponding image, this was a result of the positive interest rate differential of 7.83% percent (forward rates shown in green) and the strengthening Peso (shown in red).
Dashboard mockup