The Peso hit and stayed above 5,000, many have asked if that is a fair level. The market always dictates but it does feel more of a self-fulfilled prophecy as opposed to a rational level.

As expected, President Petro declared a Climate Disaster Emergency as the ongoing La Niña threatens to continue into 2023. The amount of funds to be appropriated have yet to be announced but with 2,500 reported ‘events’, 453,000 people affected, 203 deaths and 37 missing, every Peso is welcome after the worst “winter” in 40 years.

Rupert’s opinions & analysis as an independent expert contributor are his own and not necessarily those of Finance Colombia or the BVC.

Petro met with Maduro of Venezuela this week. It is a delicate situation with many Colombians, but the border is now open and more airlines are asking to operate the routes. The first month saw a modest $2.5 million USD in trade – but from small acorns……….

Export data for September disappointed once again with exports totaling $4.778 billion USD – up on the $4.582bn of the previous month but missing the consensus of $4.97bn. The number was up 26% YoY (FOB) but only 7.7% in tonnage terms. Coal was the main driver in both FOB (76% of total increase) & Tonnage (+14.1%) but oil whilst rising on a FOB basis, dropped 7.5% in Tonnage terms, precisely when the country needs to be cashing in on favorable prices.

PMI for October came in at 50 – there are no consensus estimates on this but that isn’t a great reading. Even in 2020 the number was at 51.7 – even as the country was still struggling with Covid.

Perhaps the macro highlight was the unemployment data for September. Both the Urban (10.45%) and Total (10.70%) numbers continue to trend downwards. Also, YoY those two categories have added 1.02mn and 10.7mn new jobs respectively over the past 12 months.

CPI data is due tomorrow (Saturday) with the expectation that we will be above 12% for the first time since April 1999.

Related to this I was finally relieved to see some debate in the press as to why the Central Bank only makes rate decisions at 8 of their 12 meetings – to me an utter nonsense of a concept. In November there will be no decision even if inflation goes to 14%? There is a mechanism whereby they could move rates in an emergency, but why back yourself into that corner?

Please find below the video on LinkedIn:

https://www.linkedin.com/posts/rupert-stebbings-927b6316a_what-jumps-out-self-fulfilling-prophecy-activity-6994247241225936896-EZgS?utm_source=share&utm_medium=member_desktop

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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

The new tax bill places export duties on coal by up to 10% and petroleum by up to 15% depending on commodity prices and raise taxes on Colombians earning more than $2,000 per month (10 million pesos, precisely). The law also removes the tax deductibility of petroleum royalties paid to the government by both coal miners and petroleum producers.

With petroleum and coal being Colombia’s most economically important exports, the shock drove the peso, already down 25% the past year, to a historically low $5,070 COP to the USD. Finance Minister José Ocampo complained that the markets were “overreacting,” while defending the package saying: “This is the most progressive reform in history! There are obviously some sectors which will pay more taxes, but all have high earnings.”

Dividends will be taxed at 15% and the wealth tax will be 0.5% on assets exceeding 3 billion pesos, 1% on assets over 5 billion pesos, and 1.5% on assets over 10 billion pesos.

A new 5% tax is imposed on digital streaming services such as Netflix and HBO Max with at least 300,000 subscribers in Colombia. This is not restricted to video, but also applies to audio streaming and web portals.

The Senate bill must go through a reconciliation process with the house bill before the president signs the final version.

The Petro administration sought to impose a 20% tax on churches, but that measure did not pass congress in the heavily Catholic country. Colombia already has a Value Added Tax (VAT, or IVA in Spanish) Taxes were also rejected on bread, sandwiches, crackers, honey, milk and yogurt, but will be placed on the following foods:

• Other dairy products besides milk and yogurt
• Sausages, meat, offal, insect-based food (ants are a famous snack with some Colombians)
• Prepared or preserved meats
• Confectionery items
• Chocolate, basic and prepared
• Baking and pastry mixes
• Cereal
• Pastries and bakery products
• Jams, marmalades, and jellies
• Ice cream

Above photo: Colombia’s taxation chief Luís Carlos Reyes (left) & Finance Minister José Ocampo in congressional chambers (photo: Twitter account of President Gustavo Petro)