Colombia Business Sector Liquidity Improves Thanks to Gradual Reopenings
ANDI — Colombia’s biggest industrial-commercial trade association — announced July 8 that its most recent survey of 200 major companies shows that business liquidity is starting to improve thanks to the gradual reopening of various economic sectors during the current Covid-19 crisis.
During the height of the national quarantine and business shutdowns in April, surveyed companies had (on average) only 11 days of cash-on-hand to cover salaries, benefits, suppliers, taxes, overhead and outstanding loans, ANDI noted.
But thanks to subsequent, government-authorized exemptions to quarantines – paired with strict biosafety protocols – cash-on-hand doubled to 23 days in May and tripled to 35 days in June, the survey found.
“Government measures and the resumption of activities and operations have given companies oxygen,” said ANDI president Bruce MacMaster. “However, this liquidity survey shows that companies face a difficult situation. There are companies in big problems that require great support and even rescue plans,” he added.
The big improvements in liquidity seen in the latest survey “can be explained by several factors: a greater number of productive activities in operation, the reactivation of production chains and not only in isolated sectors, the rationalization of costs within companies, aid provided by the financial sector (grace periods, extensions, among others), national government measures such as the day without VAT [sales tax] and aid such as the payroll and ‘prima’ [mid-year worker bonus] subsidy, among others,” according to ANDI.
“As we have noted in previous versions of the survey, the situation in the business sector is not homogeneous. On the one hand, we find companies with a situation of marked illiquidity. This is the case of 20.6% of the companies surveyed, where cash-on-hand only covers between one and eight days to operate.
“Then there are another 10.8% of companies with between nine and 15 days [liquidity] and 26.3% between 16 and 30 days. Thus, 57.7% have cash to operate for a month or less.”
The survey also found that operating income declined for 72.8% of companies in May 2020 versus May 2019, while 20.4% of companies saw a year-on-year increase and 6.8% reported no change, according to ANDI.