All Eyes Are Watching Inflation Data this Week in Colombia

This week, all eyes are will be on January inflation print that will be published on Wednesday at 6 pm. December’s reading of 0.45% (and 9.28% year-over-year) was better than expected and allowed the Banco de la República last week, in their miserly way, to reduce rates 12.75%.

The hope is that we will see another decline for January. There will, however, be concerns. Firstly, there will be concern over the impact of the 12% minimum wage increase and the products indexed to that rise.

Second comes the impact that El Niño will have on energy demand and prices in the hottest regions of the country. On the coast, electricity prices are already 30% higher than a year ago.

Regardless of the inflation rate, it won’t impact Banco de la República as February is a non-decision meeting. Consider a nonsensically positive situation where inflation dropped to 7% in January. (I am exaggerating a point to make a point.) Rates will regardless remain at 12.75% until the end of March when the central bank has its next rate-decision meeting.

El Niño has taken a few days off with some most welcome rain and cooler weather. But worry not, you sun worshipers, as  IDEAM Colombia continues to point to an even hotter month in February. Thus far, despite the numerous forest fires, Colombia has been fortunate to avoid the tragic level of deaths seen recently in central Chile where fires continue to rage.

The other main macro number from National Administrative Department of Statistics (DANE) this week will exports for December. These numbers have been volatile — but generally lower during 2023. November saw a 9% decline due to a 19.5% decrease in commodity exports. It hard to see a more positive situation this time around, although bit by bit the comparable are getting easier.

In political news, María Corina Machado is making press once again. Amid global street protests there is word that the United States will ask Colombia to mediate with Venezuelan head of state Nicolas Maduro over the lifting of the ban on her running at the Venezuelan elections.

This is a key, key moment. It’s a massive ask given the threat that Machado is to Maduro’s presidency. But, if Colombian President Gustavo Petro could pull off a compromise of some sort, it would be a feather in his credibility cap.

In terms of the markets, COLCAP has started 2024 well (it is, after all, as cheap as hell), and the Colombian oeso remains stable at this 3,900 pesos to $1 USD level and we continue to watch of as the Gilinskis and GEA continue the swap of shares in Grupo Sura, Grupo Argos, and Nutresa.

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