The relentless devaluation of the Colombia peso slashed U.S dollar earnings for the retail division of New York-based Citibank, forcing the banking giant to announce that it is selling its consumer banking operations in Argentina, Brazil and Colombia.
In a statement released last week, Citibank justified the South American sell-off as a result of sluggish returns and a downturn in three of the biggest economies in South America. Citibank said it would continue to service corporate clients in the three countries.
China’s slowing economy and instability in the oil market exacerbated the decision to close the umbrella on South American retail banking, despite the fact that Citibank has been operating in the region for more than a century.
The corporation which opened its first branch in Argentina in 1914, began sizing back on consumer banking in 11 other Latin America nations in 2014. In October 2015, Citibank Colombia began a series of senior staff layoffs confirming rumours on the street that the New York-based bank was downsizing its Colombia operations.
Citbank is one of 25 banks which operate in the country and has 174,000 personal banking clients and some 700,000 affiliated to the credit cards.
Adding fuel to a lack of confidence in the economy fire, Chilean retail conglomerate, Ripley, announced Thursday that it would shut down all of its operations in Colombia within the next 90 days. The corporation claimed it regretted the decision, yet a “change in the macroeconomic conditions” of the country forced the move.
The announcement by two corporations has cast a shadow on the viability of foreign-based companies to keep their Colombian operations afloat, as the Colombian peso continues to impact profit margins and foreign-made goods become more expensive with a currency which lost to the greenback 37 percent in 12 months.
To stall the peso breaking another record – $3,400 – the Banco de la República announced Monday that it is ready to auction $500 million USD in call options if the exchange rate reaches 7 percentage points above the moving average and a rare move for the entity.
The main bank also took the decision last Friday to raise its benchmark lending rate to 6.25 percent, the sixth consecutive monthly increase.
Fears of inflationary pressures and a slow-down in consumer spending has the retail sector concerned that this current lack of confidence could worsen and derail the economic growth forecast for 2016 of 2.7 percent.