Local Colombian Elections Are Upon Us — Along with Hopes for a More Democratic Venezuela

We now have just a few days to run until the regional elections. For those of you who live anywhere except Colombia, be eternally grateful; an unmitigated list of trivial candidates who offer nothing in terms of enlightenment — in fact nothing of much.

Photo: Colombian President Juan Manuel Santos shakes hands with US Secretary of State John Kerry during the peace agreement signing in 2016 as Venezuelan President Nicolás Maduro looks on. (Credit: Office of the President of Colombia, Efraín Herrera – SIG)

In the meantime, the weekend press offered as little economically as ever, but there was interest in the elections in both Argentina and Venezuela.

For the latter, Colombia has a vested interest in the potential of having a future democratic neighbor, a country where President Gustavo Petro has been a protagonist. Though cross-border trade has picked up, it remains at modest levels. But the economic upside of an open Venezuela is close to limitless.

Last week, we saw Washington lift sanctions on Caracas for six months and this could impact Colombia. If the Middle East situation continues and the United States seeks a new long-term oil supply, Venezuela has it. Their production may have collapsed to ~820k bpd (compared to Colombia’s 781k bpd in August), but underneath the ground there are centuries of supply.

The downside for Colombia is that any oil investor will prefer, given the right political conditions, to plough their money into Venezuela. However, the upside: if those political conditions have been met, we will have a much more prosperous commercial partner as a neighbor going forward.

Nonetheless, as Colombia transitions to the reality of cleaner energy, companies such as Ecopetrol have a role to play as noted last week with their latest natural gas find, in conjunction with Shell, off the Caribbean Coast.

In other news …

Last week ended with the National Administrative Department of Statistics (DANE) publishing the import data for August, which dropped 27.5% year-over-year. Exports have dropped a more modest 10.1%, but there was still a monthly trade deficit of over U$1 billion USD. While there was a silver lining in that the August 2022 deficit was over $2 billion USD, Colombia as a country cannot afford such hefty deficits.

Elsewhere on the import/export front, there is a political storm as Israel has threatened to freeze security exports to Colombia due to Petro’s likening of the Gaza situation to Nazi Germany — and this may also impact exports to Israel. (This isn’t the forum to discuss it and there are suggestions that the situation is blowing over, but beware of it.)

In macro terms this will be a very quiet week as far as the DANE is concerned with no frontline data due to be published.

Away from politics this week, we can expect further procrastination over the reform process and energy supply once El Niño arrives. But little else. Markets will be driven by external events aside from Grupo Éxito where we await details of tender offer from Grupo Calleja.

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