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This paper tests for purchasing power parity (PPP) between Colombia and its main trading partners using the Johansen framework of multivariate cointegration. The tests shows that PPP does not hold in the strong sense, but a clear purchasing power relationship is, nevertheless, shown to exist. The model is, furthermore, shown to have significant forecasting power. It outperforms a random walk in out-of-sample forecasting on the 12 and 24-month horizon but not on the 3 and 6-month horizon. * The opinions expressed here are those of the authors and not necessarily of the Banco de la República, the Colombian Central Bank, nor of its Board of Directors. I express my thanks to Luis Eduardo Arango, Javie