Last week ended with the Central Bank raising rates, as expected, by 1% to 12% – but it wasn’t as simple as that. There was split vote with one vote for 1.25% and another for just 0.25% – the majority though went for 1%. The committee overall remains surprised by the stubbornness of inflation but also sees the end of the tightening cycle. Other issues discussed were the perception that food inflation will drop in 2023 and that the committee has no desire to intervene in the forex market. The only question remaining is whether 12% will be the terminal rate – some think 12.5% will be that number but the December inflation reading on January 5 will give better clues.

Colombia and Venezuela, ahead of the full border opening on January 1 have jointly applied for 16 bilateral projects to CAF, the InterAmerican Development Bank – amongst other sectors, agriculture and petrochemicals are included. Yet more steps towards the rebuilding of what once was a prosperous economic relationship.

The week ahead will feature a number of economic releases.

Today we have the Economic Activity reading for October which is expected to rise to 5.2% having dropped to 4.2% last month – if that happens it would be going in the opposite direction of most recent data.

On Tuesday we have the Central Bank minutes but that is likely to bring very few surprises. On the other hand, what will the import data for October bring? The export data was a disappointment and if domestic demand has continued along its recent past then look for another bumper and unwelcome Trade Deficit. Look for total imports of US$5.9bn and a Deficit of US$1.29b.

Finally on Friday from Fedesarrollo we have the Retail and Industrial Confidence data for November – it’s hard to see past more slippage in the numbers.

In terms of the markets, equities will continue to follow the rest of the world but the Peso has enjoyed a very good couple of weeks of out-performance – some of this is undoubtedly due to underperformance in the weeks after Gustavo Petro came to power, which is now being adjusted for.

Finally for today, the minimum wage may have been settled with an increase of 16% but the government hasn’t finished yet. Ordinarily, this would trigger the same 16% increase or over 200 products nationally but President Petro is looking to break this vicious circle and limits many increases to 12%, including transport, rents and energy. This will require a mountain of paperwork but would represent a very successful start to 2023 if they can move those increases down to inflation – around 12.5%.

Please find link to LinkedIn video below :

https://www.linkedin.com/posts/rupert-stebbings-927b6316a_what-jumps-out-the-week-ahead-whilst-floods-activity-7010535194852007936-DR69?utm_source=share&utm_medium=member_desktop

That is about it for today – remember these are just themes that jump out at me – please refer to your local analyst, economist, salesperson or soothsayer for more details.

My regards to all,

Roops

Murillo initially opposed left-wing President Elect Petro, running as the vice-presidential candidate under former Medellín Mayor Sergio Fajardo, a moderate-left centrist.

According to Colombia’s foreign relations ministry, Murillo is a mining engineer by education, with a MS in Engineering Science. Murillo is credited with creating Colombia’s public policy framework for climate change mitigation and was instrumental in implementing the country’s carbon tax and carbon markets. Murillo also had a hand in Colombia’s tax on disposable plastic shopping bags.

55 years old, Murillo was born in the small rainforest town of Andagoya, Chocó. Due to his high scores on Colombia’s ICFES high school exams (somewhat similar to the SAT or ACT in the US), he was invited to apply for, and received a scholarship to study mining engineering at Moscow State University in Russia.

Murillo returned to Colombia in 1991 and worked in environmental governance of the mining sector in Chocó. He then accepted a role with the Antanus Mockus mayoral administration in Bogotá with the predecessor agency to the city’s Secretary of The Environment.

In 1997, Murillo was elected as governor of Chocó on a platform of environmental protection, rural rights, and clean government. During an era when much of Colombia was still extremely dangerous, this earned him powerful enemies, who conspired to remove him from office. Soon thereafter, he was kidnapped.

Murillo sought, and received political asylum in 2000, where he worked to raise awareness of the plight of socially excluded Afrocolombians like himself. Many people who have not traveled to Colombia remain to this day unaware of Colombia’s large black population, or its racially mixed majority.

In the United States, like many immigrants he had a humble start, counting on the generosity of friends and working the jobs available while he polished English skills and forged connections.

Soon however, he found himself back in his policy element, busy in leadership roles across the spectrum of policy and advocacy organizations. Murillo served in Washington as senior international policy advisor for the Lutheran World Relief International Cooperation Agency, Vice President of Operations for the Phelps Stokes foundation. He consulted for USAID, the United Nations Development Program, and the United Nations Food and Agriculture Organization. During this period, he organized over 150 bilateral delegations between the US and Colombia, and was called on to testify in the US Congressional Subcommittee on the Western Hemisphere of the Committee on International Affairs.

Murillo was elected governor of Chocó for a second time, but the area remained dangerous and he was unable to complete his term.

In 2014, President Juan Manuel Santos appointed Murillo as director of the “Todos Somos Pazcifico” program, playing on the words Peace (Paz) and Pacific, as Chocó’s geography runs along Colombia’s Pacific coast. In this role, he managed the solicitation and approval process for a $400 million USD World Bank and InterAmerican Development Bank loan dedicated to potable water, sewer, sanitation and renewable energy for Chocó.

Santos promoted Murillo in 2016 to Minister of The Environment and Sustainable Development, where he represented Colombia in negotiations on The Paris Agreement on Climate Change and the Minamata Convention for control of mercury poisoning.

According to Colombia’s foreign ministry, Murillo was a professor at Colombia’s Externado University, Santo Tomas University and the Technological University of Chocó. Since 2019 he has been a researcher at the Center for Latin American and Latino Studies (CLALS), at American University, in Washington, DC.

From 2020 until this appointment, he was a Martin Luther King Scholar at MIT (Massachusetts Institute of Technology) attached to the Environmental Solutions Initiative where he focused his work on natural climate solutions and their impact on environmental protection, the fight against poverty, and social inclusion of Afrocolombian communities in the Western Hemisphere. He is the first Colombian and one of the few Latin Americans who has been part of MIT’s Martin Luther King Program.

Ayenda has an interesting model that collaborates with the many small, independent hotel operators in Colombia and other regional countries, and applies a consistent brand and standards while allowing the operators to retain their ownership. Independent operators obtain the benefits of belonging to a chain, such as marketing and reservations, while travelers receive quality and service consistency guarantees.

According to Ayenda’s website, it currently  operates in Colombia, Peru and México with almost 300 properties.

“I would like to congratulate Colombia for the development of this biosafety certification—the first in the region. I would also like to express the World Tourism Organization’s support for this important initiative that will provide confidence to travelers and consumers in the reactivation phase of tourism”, stated Zurab Pololikashvili, UNWTO Secretary General.

The biosafety certification (Check-in certificado, COVID-19 bioseguro) was created by the Ministry of Trade, Industry, and Tourism, with the support of ProColombia and ICONTEC, the Colombian Institute of Technical Standards and Certification. Its main objectives are to generate trust among travelers and consumers, minimize the risk of infection, and encourage the best development of tourism in Colombia.

“Obtaining this endorsement is voluntary and may be used by tourism related services providers, tourist areas, and tourist attractions in order to certify compliance with biosafety protocols once the sector is reactivated”, explained José Manuel Restrepo, the Minister of Trade, Industry, and Tourism.

Vice Minister of Tourism Julián Guerrero added that “with this certification entrepreneurs from the industry are invited to identify their business brands with the seal, as well, to follow all the biosafety measures. This with the ultimate aim of tourists being able to check-in with confidence in a hotel, restaurant, bar or any touristic place. The idea is to make them feel that they are entering a protected space”.

Colombia is also joining efforts with the Inter-American Development Bank (IADB), in working towards a comprehensive implementation of the biosafety protocols in the tourism industry.

The certification will be valid for 2 years, and the Ministry of Trade, Industry, and Tourism will keep a registry of the tourism service providers, attractions, and destinations that are granted the seal.

Telework is in many cases, a win-win for employers and employees. It allows the employer to reduce real estate space, and the considerable expenses of running corporate-campus kitchens and cantinas, climate control, bathroom space, even coffee and beverage expense is reduced or eliminated. The employee escapes a daily commute, may be closer to a loved one needing attention (or his or her furry pet companions), and flexibility in choice of living arrangements: for example a choice of residence not convenient for a daily commute to the office. As companies and individuals become more conscious of issues like work-life balance or carbon emissions, telework allows companies and employees to adopt and comply with social commitments along these lines.

This new curated report features counsel and insight from business thought luminaries such as:

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The new ANH President has a master of science and doctorate in engineering from MIT, and an MBA from IMD (Lausanne). He is an honorary lecturer of the Center for Energy, Oil and Mining Studies at the University of Dundee (Scotland) where he held the title of deputy director.

Zamora returns to the agency after having been its first director general between 2003 and 2011. He has been senior advisor to Accenture and Schlumberger Business Consulting, senior consultant to the Boston Consulting Group, and consultant to the IDB (Interamerican Development Bank), the World Bank, International Monetary Fund and International Finance Corporation. Previously, he worked at Mobil de Colombia, the Institute of Nuclear Affairs, Carbocol and the Corporación Invertir en Colombia (now ProColombia).

For Uber, we had detected this potential in 2013, and as we began our rapid global expansion to eventually over 60 nations, we chose Bogotá to be our first step into South America. Our services were quickly embraced by their tech-savvy citizens, and the flexible earnings potential of driving with Uber were welcomed quickly by drivers who appreciated a new way to earn a living. A living that, according to a 2019 profile by the Inter-American Development Bank, represented on-average nearly three times Colombia’s minimum hourly wage.

The popularity of the service grew widely across Colombia, and six years later we had expanded across the nation to 88,000 drivers serving two million regular riders. Because of the mass local adoption of the service, the rich local talent pool, and the optimistic economic outlook for the nation, Uber invested heavily. We opened our regional headquarters in Bogotá, and staffed it with over three hundred full time employees—most of whom are Colombian home-grown talent. In 2019, we selected Bogotá as the destination for our third Center of Excellence in Latin America, and we excitedly poised to directly invest USD $40 million and create 600 new direct jobs.

Justin Kintz is Über’s vice president for global public policy

However, by the end of 2019, it was evident we were lacking even the most basic institutional support from the Colombian government for making such a massive investment in the nation. Despite the fact that Uber Colombia was the first such service in South America, it still had been the last to be licensed and regulated by the national government. In the meantime, our industry had over 80 governments across Latin America proceed ahead sensible licensing, including cities like Rio de Janeiro, Mexico City, and La Paz, states like Mendoza and Jalisco, and entire nations like Brazil, Peru and Chile. (Relatedly, in this same time period, dozens of nations worldwide had established their own rideshare rules in short order.) Despite the Duque administration’s public push to move Colombia into an “Orange Economy” that embraces the digital sector, Uber’s investments instead were treated with ambivalence.

For many years, Uber has advocated for ridesharing regulations in Colombia that were designed to protect the public with safety standards and pricing transparency and to formalize the economy with driver licensing and taxation. Uber even advocated strongly for plans to provide hardship relief to the Colombian taxi industry in the event their drivers struggled in a period of changing consumer trends. To ensure we were practicing what we were preaching, Uber went so far as to self-regulate and collect and remit appropriate taxes despite lacking the governmental mandates, and despite the government not equally enforcing tax on our rideshare competitors or taxis. This was done at great cost to Uber in order to maintain our safety standards at a consistent global level, to create a good example for our entire industry, and to support Colombian communities. Notably, Uber’s services to-date have helped generate roughly 130 billion Colombian pesos (roughly USD $40 million) in revenue for the government.

The calls for regulation had been ignored. Recognizing the fragility of the investment environment, Uber announced in late 2019 that we would not be opening our Center of Excellence in Bogotá, and will be forced to find a different regional destination. This bad news was made much worse a few days before Christmas, when the Superintendency of Industry and Commerce ordered Uber Colombia to shut down, citing unfair competition with taxis. (Importantly, none of the other rideshare companies with nearly identical business models have received similar treatment.)

As Uber begins to close our ride services in Colombia (UberEATS continues food-delivery operations unaffected), we are aggrieved for the nearly ninety thousand drivers who lose this earning opportunity. We feel discouraged for the millions of users who rely on our services to remain mobile safely and conveniently. We are disappointed to see such a step backwards for a nation otherwise poised to move forward. The spirit of the people of Colombia is clearly ready to break out from behind the limits of protectionism and cronyism, and its political leaders have said the right things. This debate provides a real opportunity for those leaders to actually apply the promises they have made, otherwise, it may create a chilling effect on investment and innovation for many years to come. Colombia needs #UnaSolucionParaUberYa.

Editor’s note: Finance Colombia reached out to Colombia’s Superintendencia de Industria y Comercio to give them a chance to submit their position. As of press time, we received this statement: “Las decisiones de los trámites y los procesos adelantados por la Superintendencia de Industria y Comercio serán adoptadas dentro de los términos estipulados en las disposiciones legales que los regulen, atendiendo el debido proceso.” (The decisions of the formalities and processes put forward by the Superintendence of Industry & Commerce will be adopted within the terms stipulated in the legal dispositions that regulate it, attending due process.)

Photo courtesy of Über

This is a guest editorial and does not necessarily reflect the opinion or position of Finance Colombia. 

“I have appointed the prestigious economist Arturo José Galindo as co-director of the Banco de la República. Galindo has more than 25 years of experience in the design and implementation of economic policies and was an advisor to the Government of Colombia and Senior Economist of the @BancoRepublica,” Duque wrote in his account.

The president explained that the new co-director “holds a Ph.D. in Economics from the University of Illinois Urbana-Champaign. In the @el_BID (Interamerican Development Bank) he held the positions of Chief Economist for the Andean Region and Head of the Strategic Planning and Development Effectiveness divisions. ”

The new co-director has extensive experience in economic policy with a particular focus on macroeconomic issues, economics of the financial system and capital markets, and economic development.

In the Inter-American Development Bank (IDB) Galindo also served as manager in charge of the Department of Strategic Planning and Development Effectiveness and economist in the Department of Economic Research. During his time at this institution, he contributed to the development of policies, strategies, corporate processes and projects aimed at strengthening the work of the IDB in its support for the development of Latin America and the Caribbean.

In addition, he has been a professor at the universities of the Andes and Rosario, and has published several articles on macroeconomic and financial issues, in prestigious international academic journals.

Current protests and strikes over a myriad of grievances have partially paralyzed the country literally and figuratively. The current administration of President Ivan Duque enjoys only a 26% approval rating according to recent polls and thus lacks political capital to push through major reforms of any type, though they were able to move a modest but unpopular tax reform package through congress this month.

According to the report and Colombia Risk Analysis, the Colombian pension system urgently needs reform, as in its current form, it is insolvent over the long term. Added to this is the large sector of the population that works in the informal economy, thus does not qualify for traditional government backed or private pensions. In 2018, the public pension system cost almost 4% of GDP, so $12.2 billion pesos went to service pensions of only 2.1 million retirees—even though the country has an elderly population (ostensibly deserving pensions) exceeding 6.5 million.

President Duque is unlikely to manager pension reform during the remainder of his term in office.

Similar to the US, Colombia has a combination public-private pension arrangement with the public RPM functioning similar to the US Social Security System, and suffering from the same fatal flaw: current pensions are financed by current contributors rather than an actuarily sound  defined benefit plan.

The private portion allows employees during their working life to allocate contributions among various government approved funds and managers much like a 401k plan in the United States. The four fund managers are Porvenir, Protección, Old Mutual (Skandia), and Colfondos. Protección is owned by banking conglomerate Grupo Aval, and Porvenir is owned by Insurance giant Grupo Sura. Regulation creates a high barrier to entry for new managers, thus contributors are effectively limited to an oligopoly of 4 fund managers.

Almost half the Colombian workforce is employed in the informal sector and typically contribute nothing to the private or traditional public pension plan. They are covered by poverty subsidies Colombia Mayor (old-age Colombia) and the Periodic Economic Benefits Program run by the government. There are also special pension regimes for the military and other public sector employees.

There are several pension reform proposals being floated. Two domestic, by Colombian entities Asofondos and Fedesarrollo, plus alternate proposals by the Interamerican Development Bank and the OECD (Organization of Economic Cooperation & Development) of which Colombia is an aspirant.

For detailed coverage read the full report here, or contact Colombia Risk Analysis for in-depth analysis, context and projections on this and other political, economic and social developments affecting Colombia.

Existing and new investors joined the round, including BID LAB (The Interamerican Development Bank), XPT1 Fund, Generación Exponencial and Impulsum Ventures among others. The funding comes with additional loan facilities.

Sempli is a digital lender that began operations in 2017 with a mission to support the growth of Colombia’s underserved small business ecosystem. The company will use the funds to continue to grow its portfolio and enhance its technology and data analytics processes.

Since its inception, Sempli has raised over $24 million USD from equity rounds with the investors already mentioned and loan facilities from Triple Jump, AlphaMundi and Bancoldex.

Colombia is the third largest market in Latin America for small business lending. There are more than one million legally incorporated Colombian companies that have funding needs for growth and enhanced working capital.

Esteban Velasco and Felipe Llano, co founders of Sempli (pictured above), commented in a written statement: “Our purpose and dream is to transform and disrupt the banking industry, and become the number one digital option for small businesses in Colombia looking for a loan. We strongly believe that technology and data will drive our growth, and partnering with knowledgeable financial investors such as Oikocredit, Incofin CVSO and BID LAB gives us the confidence to build on our position as a solid balance sheet lender that will positively impact the growth of thousands of small businesses in our country”.

Sébastien Rigaud, responsible for Oikocredit’s investment, said: “We are impressed by Sempli´s growth and excellent results and look forward to continuing to support its successful team with this follow-on investment. Sempli is solving a real financing gap faced by thousands of Colombian SMEs. The company has set clear social impact objectives, has received the B-Corp certification, and is embracing the Smart Campaign’s Client Protection Principles promoting responsible financial inclusion. We’re very pleased that Sempli continues to be well aligned with Oikocredit’s focus on social impact”.

Felipe Vargas, responsible for Incofin CVSO’s investment, commented: “For Incofin CVSO, supporting tech innovation and disruptive business models is key to continue reducing the gap to access to financial services, particularly for productive loans in developing countries. Improving the access to credit for small entrepreneurs, the so called “missing middle”, has a significant potential in terms of social and economic impact, given the key role of these businesses in the creation of formal job opportunities and the economic dynamic of countries like Colombia. For all the above, investing in Sempli is meaningful milestone for Incofin-CVSO´s record as an impact investor”.