This week the Colombian central bank will sit down for the first time in 2024 with urgent business at hand.
Off the record, I am sure most of them would admit to having kept rates at 13.25% for far too long — and there is also a strong argument that they went too high to start with. They made a start in December by cutting to 13.0% but they now need to shift through the gears. Anything less than a move to 12.75% would be total incompetence, and 12.50% would see the seven of them on the road to redemption. Anyone calling for no change, in my view, can only be meddling in politics.
The most recent real sector data from the National Administrative Department of Statistics (DANE) for November was poor, and since then yet more clues have appeared (as if even needed). Imports fell by 13% (and for the 13th month in a row) to $5.17 billion, as domestic demand drops out, and there was also the final new home sales number for 2023 that was down 50% year-over-year to 138,151 units.
In the face of all this, rocket science is not required from the central bank.
Not far from the Banco de la República decision will be El Niño, which has arrived in brutal fashion. In the same country where 40 people recently died in a monsoon-provoked landslide, the land is drying out rapidly with historical record temperatures in many regions.
The local weather people (IDEAM Colombia) are anticipating scorching temperatures until April before they normalize. President Gustavo Petro is taking no chances and declared a national disaster, which will give the government extra powers for the next 12 months. On a slightly more optimistic note, ACOLGEN are predicting there is enough energy to see Colombia through the crisis.
In other news, the new tax reform was in the press over the weekend. The Ministry of Finance head Ricardo Bonilla reiterated that thsi was only to reduce the corporate tax burden — and, ironically, ex-finance minister José Manuel Restrepo was questioning whether this is the right time for such a move. Here we have a government, which the opposition states is anti-private sector, lowering taxes — and an opposition that is pro-the-same-sector doubting the timing. Colombian chameleon politics 101.
Finally, a little shout out to The Economist who wrote a piece about the Gustavo Petro, his son Nicolas, and vote-buying at the election. They need a small lesson in Colombian politics. Almost every elected official — including every president — on my watch has been accused of vote-rigging and association with criminal organizations. It is almost a rite of passage.