Why Central Bank Independence Matters More Than Who Governs

Lessons from Colombia, Peru, and the United States for Investors

In Colombia, the president appointed three of the five board members of the Banco de la República. He had a majority. And even so, the Board of Directors did not lower interest rates at the pace he demanded.

In March 2026, they raised them.

That decision, taken against the explicit will of the government that appointed the majority of its members, is probably the most important signal an investor can receive about a country.

Two Presidents, One Same Pressure

Trump repeatedly pressured the Federal Reserve to lower interest rates. Petro has done the same with the Banco de la República. The argument in both cases is the same: high rates slow growth.

In both cases, central banks responded with technical judgment. The Fed kept rates high during 2023 and 2024 until inflation in the United States showed clear signs of convergence. The Banco de la República did the same: it gradually reduced rates when inflation was falling, and raised them when pressure returned.

That is where the political parallel ends. What follows is the economic signal that matters.

The Function That Sustains Everything Else

An independent central bank does not exist to please the government of the day. It exists to control inflation, protect purchasing power, and preserve market confidence.

The contrast with countries where that independence was lost is brutal. Argentina ended 2023 with inflation of 211%. When Alberto Fernández’s government instructed the Central Bank to print pesos to finance the fiscal deficit, the result was predictable: prices multiplied, the peso collapsed, and Argentinians lost more than 40% of their purchasing power in a single year.

Venezuela is the other extreme. When the central bank stopped functioning as an independent institution, hyperinflation reached levels that made the national currency irrelevant.

These are not theoretical scenarios. They are the direct consequence of eliminating the barrier between fiscal policy and monetary policy.

Colombia: The Test Under Pressure

What happened in Colombia during this government has few precedents.

Petro’s government had the opportunity to appoint three of the five board members of the Banco de la República. In addition to the regular appointments, one previous board member was disqualified, opening an additional seat.

Three out of five. Majority.

The president publicly demanded a more aggressive rate cut. The argument: the economy needed stimulus.

The board members, including those appointed by his own government, maintained the technical position.

The numbers explain why. Inflation in Colombia had fallen from 13.1% at the end of 2022 to 9.3% in 2023 and 5.2% in 2024. It was a significant decline, but still far from the 3% target. The Bank reduced the policy rate from 13.25% to 9.25%, a 400-basis-point cut in just over one year.

But in 2025 the decline stalled. Inflation closed the year at 5.1%, practically the same as 2024. The 23.6% increase in the minimum wage created new price pressures. Inflation expectations began to rise.

What did the Board of Directors do? Not only did they not lower rates. They raised them. In January 2026, 100 basis points to 10.25%. In March 2026, another 100 basis points to 11.25%.

Raising rates when the government asks you to lower them. Doing so when the president appointed the majority of your board members. That is not a symbolic gesture. It is institutional independence proven under the most direct pressure possible.

And we are not talking about just any central bank. Central Banking magazine, the world’s leading sector publication, ranked the Banco de la República research team 14th in the world and first in Latin America. In that ranking it stands alongside the Federal Reserve, the European Central Bank, the Bank of England, and the IMF.

According to RePEc, the largest bibliographic database in economics, it is the top institution in macroeconomic research in the entire region, among more than 4,100 institutions evaluated.

Within Colombia, it has also been recognized as the most trusted institution in the country for 13 consecutive years, according to the Cifras y Conceptos Opinion Panel, with a score of 75 out of 100.

It is not only independence. It is internationally recognized technical judgment. And that combination should give peace of mind to any investor looking at Colombia and wondering whether their money is in serious hands.

The economy responded. Despite high rates, Antioquia grew close to 3% in 2025. More than 30,000 new companies were created. Medellín attracted more than USD 400 million in foreign direct investment, a 270% increase compared to 2024. More than 11,200 jobs were created.

Investment does not seek low rates. It seeks clear rules and stability. A central bank that does what it has to do, even when unpopular, is the best signal an investor can receive.

Peru: Thirty Years and Eight Presidents

If Colombia shows how independence resists pressure from one government, Peru shows how it resists sustained political chaos.

Since 2016, Peru has had more than eight presidents. Impeachments, resignations, vacancies, an attempted coup. Dina Boluarte, the current president, is the fifth since 2020.

Seen from outside, that instability would seem incompatible with any form of growth. And yet Peru has been one of Latin America’s most stable economies for three decades.

The economy recorded average annual growth of 2.6% in the decade through 2023. It rebounded 3.3% in 2024 after a contraction. Inflation closed 2024 at 2.0%, one of the lowest in the region.

How is it possible?

Julio Velarde.

The president of the Central Reserve Bank of Peru has led it for more than twenty years. He began his fourth consecutive term in October 2021. He went through left-wing governments, right-wing governments, interim governments, impeached governments.

It did not matter who was in the Presidential Palace. Monetary policy remained technical, predictable, and oriented toward an inflation target between 1% and 3%.

While presidents came and went, the Peruvian sol remained stable. International reserves remained solid. Foreign direct investment reached USD 6.9 billion in 2024. And today, the BCRP interest rate stands at 4.25%, with inflation at 2.2%, within the target range.

Compare that with Argentina: 211% inflation in 2023, a central bank that for years was used to finance the fiscal deficit, and a currency that lost all credibility.

The difference is not geographic. It is institutional.

The Signal That Matters

When we evaluate a country for investment or to establish operations, negative signals are loud. Political polarization. Cabinet reshuffles. Controversial statements on social media. Broken promises. Populist presidents who generate uncertainty.

Those signals are real. But they are not what determines whether your investment will be protected in five or ten years.

The signal that determines that is how economic institutions behave under pressure.

In Colombia: inflation from 13.1% to 5.2% in two years. Rate hikes against the government’s will. A central bank internationally recognized as the most technically serious in Latin America. USD 400 million in foreign investment in Medellín alone in 2025.

In Peru: inflation at 2.0%. Interest rate at 4.25%. Sustained growth despite eight presidents in one decade.

In Argentina, the counterexample: 211% inflation when the central bank lost its independence.

The data does not lie. Central bank independence and technical judgment are the variables that separate countries where investment works from countries where it evaporates.

Presidents Pass

Populist presidents generate headlines, uncertainty, and noise. But when economic institutions are shielded, the noise remains just that: noise.

Colombia has a central bank that is not only independent by constitutional design, but proved that independence in practice, under the maximum pressure possible, and has the international technical recognition to support it.

Peru has thirty years of economic stability built on the same foundation.

Despite all the signals that may appear negative, this is the deeply positive signal that should define the confidence of those investing in these countries.

Because presidents pass. And the institutions that protect your investment remain there.