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Colombian economy 47

Colombia President Ivan Duque announced July 31 on his state visit to China that Chinese President Xi Jinping signed protocol deals that eventually will boost exports of Colombian bananas, avocados, coffee, meats and shellfish to China.

Initial deals enable export of 4 million boxes of bananas (mainly produced in Antioquia) and 960 tons of Haas avocados to China this year, according to the announcement.

Further initial agreements “open up the possibility for us to have greater exports of Colombian coffee,” according to President Duque.

In addition, the Chinese government announced that it will grant 100 full academic scholarships so that more young Colombians can study in the best Chinese universities.

On another front, a new communications deal will enable exporters “to use the electronic commerce platforms of the People's Republic of China to offer Colombian products,” according to the announcement.

As for the possibility of expanding Chinese tourism to Colombia, President Duque said he talked to President Xi about a project that eventually would open a direct flight between China and Colombia.

“Chinese tourism in Colombia barely represents 0.5% of our visitors,” according to President Duque. “Last year [2018], we had only about 15,000 Chinese visitors to the country, and that figure can be multiplied,” he added.


Wall Street bond rater Fitch on November 14 issued a “stable” outlook for Colombian sovereign debt and simultaneously upgraded its GDP forecast to 3.3% growth in 2019 and 3.5% in 2020.

“Ivan Duque’s 2018 presidential election victory is expected to lead to continuity in the government’s monetary and fiscal policies, including abiding by its fiscal rule,” according to Fitch. “The new president also has pledged to enhance the business climate in Colombia.

“Growth prospects are consolidating towards Colombia’s medium-term growth potential of 3.5% after three years of underperformance (with average growth of 2.1% in 2016-2018). Higher exports, supportive consumption and higher investment are expected to underpin higher growth."

On the other hand, “infrastructure projects related to the 4G [fourth-generation highways] rollout have witnessed several bottlenecks that have slowed their progress, representing downside risks to the growth outlook,” Fitch added.

Meanwhile, a proposed tax reform in Congress “is key to achieving the [government revenue] target as well as meeting spending pressures such as from the immigration crisis stemming from Venezuela, although higher expected oil revenues from Ecopetrol dividends will help,” according to Fitch.

However, “if the tax reform does not pass or is heavily watered-down, [then] we think the government would revise the 2019 budget passed by the Congress in October 2018 with significant cuts in budgeted capital expenditure,” Fitch concluded.

DANE: 3Q 2018 Rebound

On a related front, Colombia’s national economic statistics agency -- Departamento Administrativo Nacional de Estadística (DANE) – on November 15 released its latest study on national economic indicators.

For the third quarter (3Q) of 2018, Colombia’s GDP (“PIB” in Spanish initials) grew at a 2.7% rate, up sharply from the 1.7% rate in 3Q 2017, DANE found.

Sectors showing relatively strong GDP growth (4.5%) in 3Q 2018 were public administration, defense, social security, voluntary pensions, health services and education, according to DANE.

Wholesale and retail commerce, vehicle repair, transport and warehousing, and hotel-and-restaurant services grew at a 2.6% rate, according to DANE. Industrial manufacturers meanwhile saw a 2.9% GDP growth in the latest quarter, the agency added.

In the mining sector, metals extraction grew by 14.3%, while oil-and-gas extraction rose 1.3%. However, carbon and lignite extraction declined by 4.1%, according to the agency.


A new report from the United Nations Economic Commission for Latin America and the Caribbean (CEPAL) finds that foreign direct investment (FDI) in Colombia grew by a relatively modest 0.5% year-on-year in 2017, whereas FDI in Latin America actually fell 3.6% region-wide.

According to the report (see: https://www.cepal.org/es/comunicados/inversion-extranjera-directa-america-latina-caribe-cae-tercer-ano-consecutivo-2017-llega), “FDI inflows into Colombia reached US$13.924 billion in 2017, up 0.5% on 2016 levels and close to those recorded between 2011 and 2014.

“Reinvested earnings increased significantly for the year, especially in the fourth quarter, reflecting the increase in the price of oil, as well as the overall improvement of the economy in the second half of the year.”

Transport and telecommunications sectors were the biggest FDI recipients in 2017, at US$3.136 billion, “matching investment flows to the oil sector (US$3.135 billion), traditionally the largest recipient of FDI in Colombia,” according to the report.

Following the crash in global oil prices starting in 2014, “between 2011 and 2014, the oil sector [in Colombia] recieved over US$5 billion annually, but these [FDI] inflows halved in 2015 and 2016,” the CEPAL report noted.

In contrast, Colombia's oil-and-gas FDI rise seen in 2017 and in the first months of 2018 “reflects the pick-up in investment resulting from the increase in [oil] prices,” according to the report.

Colombia’s mining sector also benefited from a global rebound in prices for basic materials, as 2017 mining FDI rose to US$953 million. “FDI in the manufacturing sector also increased, almost reaching its highest level in the past 10 years, at US$2.523 billion,” the report added.

Following a trend of recent years, Spain was the biggest single source of FDI to Colombia, at US$2.616 billion, with the United States a close second, at US$2.121 billion.

“Mexico was the third largest investor [to Colombia] in 2017 with FDI totaling US$1.717 billion, including an investment by Grupo Salinas, which injected an additional US$100 million into its fiber-optic infrastructure subsidiary, Azteca Comunicaciones Colombia,” according to the report.

“Investments from Spain and Mexico increased owing to the recapitalization of the [telecom] subsidiaries of Telefónica and Claro, after a Colombian court ordered the companies to pay the Colombian government US$500 million and US$1 billion [respectively] in compensation for contractual infringements in the framework of the concessions awarded to them in 1994,” the report added.

In contrast to the positive signs for Colombia, 2017 FDI actually declined 9.7% year-on-year in Brazil and 8.8% in Mexico, while Chile saw FDI plunge 48% and Peru dipped 1.4%.

Commenting on the CEPAL report, Maria Lorena Gutierrez, Colombia’s Minister of Trade, Industry and Tourism, stated: “Colombia is a stable country. We have instruments that attract investors such as investment agreements, free zones and double-taxation [avoidance] agreements.

“But the prospects are even better. The peace agreement [between the government and the FARC terrorist group] and the entry of Colombia into the Organization for Economic Cooperation and Development are aspects that make the country even more attractive,” she added.


The Organization for Economic Cooperation and Development (OECD) – the group of the 37 biggest free-market democracies in the world – announced May 25 that Colombia has now completed all main steps to join the group.

Formalization of affiliation will take place May 30 in Paris, when President Juan Manuel Santos and OECD Secretary-General Angel Gurria sign the official “access agreement” papers during the reunion of the OECD Council of Ministers, according to the organization.

The recent, successful conclusion of talks between OECD and the Colombian government on intellectual property rights had been the main sticking point holding-up Colombia’s final approval.

“It’s great news for our country. OECD is the most important organization that promotes the best public policies in the world,” as well as providing a “stimulus to investment,” President Santos said.

As an OECD member, “we have immense possibilities to advance in health, education, the fight against corruption and protection of the environment,” Santos added.

During the seven-years-long accession process, Colombia underwent “in-depth evaluations, carried out by 23 OECD committees, and Colombia has undertaken major reforms to align its legislation, policies and practices with OECD standards on issues including labor, the judicial system, corporate governance of public enterprises, the fight against bribery and the field of trade, and has introduced new policies at the national level on industrial chemicals and waste management,” OECD added.


Colombia’s national statistics agency (Departamento Administrativo Nacional de Estadistica, DANE) announced May 15 that first quarter (1Q) gross domestic product (“PIB” in Spanish initials) grew by 2.2%, a big improvement over the 1.7% PIB growth in 1Q 2017.

The finance/insurance sector topped every other sector at 6.1% PIB growth, followed by 5.9% growth in public administration/defense; 5.6% growth in professional, technical and scientific activities; entertainment/recreation at 4%; wholesale/retail commerce at 3.9%; communications/information sector at 3.1%; and real-estate activity at 2.9% (see chart, above).

Explaining the decline in the construction sector, the sharpest drop was in residential/nonresidential building (down 9.2%), followed by an 8.2% drop in civil engineering and a 6.4% drop in highway/railroad construction, according to DANE.

The dip in the mining sector was blamed mainly on a 17.5% drop in metals mining. However, the oil-and-gas sector saw a slight (0.8%) increase in 1Q 2018 PIB.

The decline in industrial manufacturing was blamed mainly on a 4.6% drop in textile manufacturing and a 4.2% drop in finished metals production.

Over-all, Colombia’s economic output had a value of COP$210 trillion (US$73 billion) in 1Q 2018, up from COP$207.8 trillion (US$72 billion) in 1Q 2017 (as measured in constant 2015 Colombian pesos), according to DANE.


The International Monetary Fund (IMF) on April 30 announced that it foresees 2.7% growth in Colombia’s gross domestic product (GDP) this year.

In its latest annual “executive board” report (see: http://www.imf.org/en/News/Articles/2018/04/30/pr18154-imf-executive-board-concludes-2018-article-iv-consultation-with-colombia?cid=em-COM-123-36986), IMF found that during the 2017 calendar year, “adequate policy management brought Colombia near completion of its adjustment to large external shocks while further advancing inclusive growth.”

However, “economic growth moderated as private investment and consumption weakened in line with lower national income. Some delays in the infrastructure [development] agenda also contributed to the decline in private investment.”

On the other hand, “fiscal consolidation continued, guided by the fiscal rule and contributed to the narrowing of the current account deficit which was also buttressed by some recovery in oil and non-oil exports,” IMF found.

“Despite the growth moderation, social indicators improved with both poverty and income inequality decreasing in 2017.

“The current-account deficit declined to 3.4% of GDP and continued to be financed by FDI [foreign direct investment] to a large extent. Portfolio inflows moderated somewhat but remained ample with further increases in foreign participation in the local government debt market,” the organization added.

“Colombia’s outlook is favorable as continued efforts to advance the structural reforms will foster economic diversification and productivity growth. Economic growth is expected to rebound strongly in 2018 and further over the medium-term, led by strengthening investment and exports.

“The combined impact of the structural tax reform, a brighter outlook for oil prices and the authorities’ 4G [fourth-generation highway construction] infrastructure agenda will underpin investment while reducing Colombia’s relatively large infrastructure gap.

“Continued efforts to reduce trade barriers and some recovery in global growth will help sustain strong export growth. The implementation of the peace agreement will promote regional development and reduce inequality,” IMF’s report added.

On the other hand, “the economy remains vulnerable to uncertainties from a sudden tightening of global financial conditions and escalation of trade or geopolitical tensions.”

In addition, “placing public debt on a declining path is an appropriate fiscal target which would also leave room to fine-tune the consolidation pace as guided by the fiscal rule.

“IMF directors encouraged [Colombian] authorities to focus on improving tax administration, as associated revenue gains will create space for public investment. They highlighted the need for a comprehensive pension reform to increase coverage and progressivity.

“The current monetary policy stance should be conducive to a recovery in activity and reducing the [discount] rate further in line with inflation expectations could be warranted if the recovery faltered.

“Directors agreed that the flexible exchange rate regime has served Colombia well and should remain the first line of defense against global shocks as well as help accumulate adequate buffers.

“Directors noted that the banking system has been resilient amid the economic slowdown, reflecting partly effective financial supervision and ample capital and liquidity.

“They welcomed recent regulatory measures to homogenize banks’ loan restructuring practices and to bring regulation closer to Basel III standards, including through the implementation of the conglomerates law,” the IMF report concluded.


Medellin-based national electric-power grid operator and power-trading center XM announced April 17 that power demand in Colombia is up 3% year-on-year through first-quarter (1Q) 2018, compared to a 1.8% net year-on-year decline in 1Q 2017.

Over the last 12 months through March 2018, Colombian power demand is up 2.5%, whereas power demand actually fell 1.5% over the comparable 2016-2017 period, XM found.

Meanwhile, power demand in Antioquia rose 3.7% year-on-year for the month of March 2018, versus a 3.2% net decline year-on-year in March 2017.

The power-demand figures indicate that Colombia generally and Antioquia specifically are starting to emerge from recessions that hit in 2016 and especially 2017, when a hike in value-added tax (VAT) slammed consumer spending and (consequently) industrial output.

For the month of March 2018, national power demand rose 4.4% year-on-year, compared to a 0.3% year-on-year contraction in March 2017, XM noted.

The relatively strong demand growth has exceeded prognostications by Colombia’s national energy-planning agency -- the “Unidad de Planeación Minero Energética" (UPME), XM noted.

Residential and small-business demand grew 4.4% in March 2018 versus March 2017, while combined industrial-commercial demand in March 2018 grew an even stronger 4.6% year-on-year, the agency noted. However, manufacturing demand in March grew by just 0.8% year-on-year, according to XM.

The greatest year-on-year demand growth in March 2018 was in Guaviare department (up 9.4% year-on-year), while the Tolima-Huila-Caqueta region saw demand jump 8.1%, and the Atlantic Coast region saw demand grow 6.8%, XM found.


Colombia’s national economic statistics agency (Departamento Administrativo Nacional de Estadistica, DANE) revealed February 5 that full-year 2017 exports jumped 19% year-on-year, to US$37.8 billion, up from US$31.7 billion in 2016 -- a year that saw exports drop 11.8% year-on-year.

By dollar value, petroleum and mining exports led the field, up 32.4% year-on-year, mainly from coal, petroleum coke and briquettes, DANE found.

Agricultural, food and beverage exports rose 7.2% -- mainly thanks to a rise in palm-oil export -- while manufacturing exports rose 2.4%, up from a 10% net decline in 2016, according to DANE.

By department, Antioquia once again led the nation in 2017, accounting for 18.1% of total national exports (excluding petroleum).

Exports in the broad “other” category in 2017 rose 15.7%, mainly from a rise in gold exports (dominated by Antioquia).

The USA once again led all nations in share of receipt of Colombia exports, at 29.7% of the total, followed by (in order) Panamá, China, Netherlands, México, Ecuador and Turkey, according to DANE.


The latest monthly survey of leading banks and financial firms by Colombia’s Banco de la Republica (the national bank) finds that the Colombian peso is likely to trade in a range of COP$2,800 to COP$3,200 per US$1 during 2018, with a foreseen average of COP$2,995/US$1 by year-end.

The monthly survey (see: http://www.banrep.gov.co/es/informe-estadisticas-monetarias-y-cambiarias) of 40 leading private banks, stock analysts, pension funds and international organizations also sees the COP/US dollar trading in roughly the same ranges through 2019 and 2020.

Severe cold weather in the northern hemisphere in recent weeks has boosted global energy demand, with the result that rising oil prices -- traded in US dollars -- habitually weaken relative values of the US dollar against other currencies, including the Colombian peso.

As a result, the Colombian peso has been trading below COP$2,900/US$1 in the last couple of weeks, down from more than COP$3,000/US$1 during several days in Decemeber 2017.

The same survey also found that full-year 2018 inflation is likely to come-in at around 3.47%, with full-year 2019 inflation seen at around 3.33%.

Gross domestic product (“PIB” in Spanish initials) is seen growing by 2.45% this year, according to the average forecast of the surveyed analysts.


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Medellin Herald is a locally produced, English-language news and advisory service uniquely focused upon a more-mature audience of visitors, investors, conference and trade-show attendees, property buyers, expats, retirees, volunteers and nature lovers.

U.S. native Roberto Peckham, who founded Medellin Herald in 2015, has been residing in metro Medellin since 2005 and has traveled regularly and extensively throughout Colombia since 1981.

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