What Jumps Out: Guessing Game

Colombia was this week a little different from most other countries. It was waiting around to see what the libertarians of Washington would offer up next. Of course, they’re only offering more economic chaos, which benefits no one, including the US. Fortunately for Donald Trump, most of his core supporters don’t have the smarts to understand the long-term damage.

Colombia is a tough call in terms of impact. Many of its exports to the US are inelastic in terms of demand, but it is a good moment to look around for new markets. According to the press, Colombia is in the 10% bracket, and US negotiators will arrive in May to thrash out the details. The political skirmish with the US from last weekend already appears to have blown over, which suggests there may have been a lot of exaggeration involved.

Forex traders are suffering, as are those with international trade. The Peso jumped above $4400, then fell back – where it will be next work is a guesstimate at best. There was good news from Departamento Administrativo Nacional de Estadística – DANE Colombia on the inflation front for March with a 0.52% reading, which translated into 5.09% on a 12m basis. Consensus expectation from Fedesarrollo was 5.17%. This surely now gives Banco de la República – Colombia the space to lower rates in a couple of weeks.

One area where Colombia is caught in a trap is on gas. Local production has struggled, and whilst recent offshore discoveries will help the situation moving forward, there is work to do. The 2024 gas reserves data was published and has dropped to just 6 years, and there is a shortfall to be covered. Initially, the plan was to look for cheap imports from Venezuela; however, Trump’s hostility towards Caracas and the threat of sanctions for those trading with Nicolás Maduro have complicated the situation. To contextualize the situation in 2012, reserves were above 13 years; however, those at the ANH are hoping that we have now reached the bottom, and that increases due to discoveries will change the trend.

Moody’s was again discussing the fiscal rule, and despite some easing, feels that it won’t be achieved in 2025 due to a shortfall in government revenues. Again, we come back to the global chaos, which has seen oil prices collapse to $60. Gas-guzzling Americans will be ecstatic as the driving season approaches, but it is no help to Colombia.

Have a great day.

Roops.

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Natural gas well. Photo credit: Ken Doerr.