What Jumps Out: El Niño Debate Continues to Highlight the Failings with Colombia’s Energy Supply

This week, the energy sector has been front and centre. Everyone has an opinion on whether we are heading into an El Niño-inspired crisis, be it operationally or financially, when it comes to electricity supply.

Four points of order on the matter:

1. Is it not incredible that, with El Niño having been originally forecast for September, that the matter is only up for serious debate in October?

2. Prepare yourself for another Colombian blame game. The private sector and government, which need to work together to ensure energy security, will firstly prioritize making sure that the public know ‘it’s not on them!’

3. In a country with so much — hydroelectric power, a once plentiful gas production, rising oil output, enormous coal supplies, enough sun for as many solar panels as you wish to install and howling winds on both coastlines — there has been an epic failure to develop a failsafe energy system.

4. Any producer, transmitter or end supplier who claims to be struggling financially, needs to have a long look at themselves. Energy prices are skyrocketing are there must be plenty of profit to go around.

Despite the rain this week, the environment minister announced an immediate $410 million USD relief fund to combat the effects of El Niño. Hopefully, the courts, where half of Colombia’s national budget appears to get wasted, won’t block this measure, like they did with the proposal from Gustavo Petro a few months ago.

In other news, the International Finance Corporation (IFC) raised its 2023 and 2024 GDP estimates for Colombia. They have been moved up from 1.0% and 1.9% to 1.4% and 2.0%, respectively. For context Fedesarrollo, in September, estimated 1.2% and 2.0%. In this last report Fedesarrollo also moved 2023 inflation estimate up from 9.2% to 9.43%. The IFC’s inflation projection is much, much higher at 11.4%, suggesting no further declines in 2023.

Consumer confidence for September according to Fedesarrollo rose 0.9% to -17.9%. There were no significant changes in the underlying sectors.

A report from OECD noted that Colombian unemployment (9.5%) is still very high versus the group average of 4.8%. Nonetheless, the focus here should be on how far that number has come down over the past year and the million extra jobs that have been created.

September saw $1 billion USD in TES bond sales/outflows, the largest number of 2023. Analysts (including Alianza Valores SCB) view this as profit taking. Due to the strong/bouncing Colombian peso, that profit has been cut to around 12.5%, but that was, according to Bloomberg, still a huge return next to other EM countries.

Finally, Medellin pantomime villain Jaime Gilinski was grabbing headlines as he helped bail out Metrobank in his adopted UK homeland — a busy man.

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