What Jumps Out: Be Careful What You Wish For

We just finished week with no standout economic headlines in Colombia — but we nonetheless saw plenty of interesting developments.

To start, in a report this week, Davivienda Corredores reiterated the local experts view that El Niño will disappear in April as we move towards a normalized climate pattern. By August, however, we can expect La Niña to arrive.

Unfortunately, despite the hardship that El Niño brings, it is is the biblical rains of La Niña that traditionally brings greater suffering. There is the human cost of landslides, which in turn block roads and highways to make the time to market both more lengthy and more expensive. This leads to higher inflation. So out of the fire, onto the floor for a few months — and then into the frying pan. Keep an eye on this, and hopefully the authorities are wrong.

Fedesarrollo gave its latest look at the market and expectations for 2024. They are looking for GDP growth of 1.4% (up from their projected 1.3% in January) and a year-end CPI of 5.4%. They are looking for overnight interest rates to close 2024 at 8% (currently 12.85% so much work to do) and the Colombian peso to remain stable, ending the year at 4,071 to $1 USD. That GDP number is slightly higher than the 1.3% the International Monetary Fund estimated a few days ago.

For those still looking at Colombian equities, energy is preferred sector, with ISA Interconexión Eléctrica and Grupo Energía de Bogotá being two of the top three picks.

Fedesarrollo also reported the latest retail confidence (14.5%) and manufacturing confidence (0.2%) figures for January. There was small decline in the former, but a healthy increase in the latter (up from -4.3% in December). In the same report, fourth quarter 2023 exporters reported a marked increase in expectations going forward.

The government, while feeling out their budget plans for 2024, have also given more powers to President Gustavo Petro in terms of some disbursement. Colombian Finance Minister Ricardo Bonilla also announced that they were also looking hard at infrastructure projects that aren’t advancing and renegotiating their terms. Such a movie would free up resources currently earmarked for other priorities. It’s complicated and lacking transparency, but be aware of it.

In the same vein, Petro has again implored his own team to travel in economy and to hold virtual meetings where possible in order to save money.

In politics, the labor and pension reforms will be back on the congressional menu next week. I’m not sure what they have all been doing for the month since holidays ended. Not a lot, most probably.

Finally, the Supreme Court again failed to elect a new Attorney General. They will try again in a couple of weeks. The different political parties, all of whom have skeletons in the cupboard, are desperate to have their man or woman in charge.

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