What Jumps Out: Back At The Desk

After a few weeks on the road it is back to Colombia and as of yet I haven’t fully assimilated to my adopted home.

Apart from the six hours of time difference from the UK, there is the altitude which one always needs a day or so to get accustomed to, or at least I need to. But above all, having just landed from my birthplace, it is the attitude towards face masks, alcohol (medical version) and COVID which is the hardest adjustment.

After almost two weeks of face mask free life, allowing my ears some respite, it is back to a fully masked up existence and the wife spraying me with alcohol every time I touch a door handle. In the UK there are fully understandable exceptions like public transport but even then, it is voluntary – of course at Heathrow there were one or two Asian travelers dressed up like extras from Star Wars but in general a very liberal attitude.

There should be no issues in wearing a face mask in public spaces, it isn’t complicated to do – although many do appear to struggle to understand that it needs to be mouth and nose. Also that hanging it around the neck isn’t quite as effective – or while that you may in some cases need to remove it to speak on the telephone but that to browse the internet and WhatsApp you can in fact have the mask on. It is all so complicated for some.

All this against the backdrop by which yesterday (Tuesday) there were more deaths (170) in the UK than in Colombia (108). In terms of cases it’s hard to calculate or analyze the difference between the two countries. In the UK friends were testing themselves for free in the morning before work with lateral flow tests, one who suspected she may have COVID actually just had a bad hangover but better to be safe than sorry. Meantime in Colombia it is still a business running out of control – both costly and lengthy in many cases. There are stories of whole families becoming ill because one member with symptoms was reluctant to pay the $30 for a test – as for lateral flow tests, maybe for COVID-20.

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

In terms of the vaccination program obviously the UK is smashing it: Everywhere I went, High Street, university campus, public transport – it was there. In Colombia, fortunately for the government, there is a young population and a private sector that have stepped up to vaccinate their own workforces. Also, thus far we haven’t seen much sign of ‘hesitation’ or ‘reluctance’ – the PC way of saying ‘lack of responsibility’ – almost from the day the vaccines arrived people of all ages have sought them out – and if not available at their local site, have travelled to wherever in the neighborhood to find them, people have queued for hours where need be.

COVID is here for the long term, but the UK is a good example as to where Colombia can get to by year end – although if you were one of the 72,000 packed in to watch Manchester United at the weekend, maybe there are better places to be.

Another global guessing game has been Q2 GDP growth. Even my dog was fully aware that Q2 GDP would be higher in every country versus a year ago when the tumbleweed was rolling down the street but by quite how much she wasn’t prepared to say.

The consensus figure in Colombia was 18.5%, with some local analysts above 20%, however this was an impossible call especially in an economy where ~50% of the working population identifies as informal. The final number was 17.6% but it is only a number – this time last year we dropped 15.7% and that was only a number. What they actually mean is economic meltdown and robust recovery however for some time to come we won’t know how robust this will turn out, unemployment has remained stubbornly high, inflation is beginning to rear its head and then, it all has to be paid for.

President Duque was beaming yesterday but 17.6% was perhaps the least that could be expected, he was talking about a 2021 reading of 7% which would be healthy indeed but there is a lot of hard work still ahead, not least of which will be convincing people to return to work, attend a function, travel on a school bus – all without the safety net of a face mask.

Unsurprisingly the data was driven by a commercial sector that was closed twelve months ago. Commerce rose 40.3% YoY whilst Entertainment was up 83.8%. Industrial Manufacturing increased 32.5% and Construction 17.3% – of course all sectors were in the green, but these were the standout numbers.

Hopefully Q3 & Q4 will continue in the same vein – Q3 anecdotally seems more active than Q2 as the vaccine roll out drives Consumer Confidence which rose to -7.7% in July from -22.3% in June and which was well above the -17.7% anticipated. President Duque was correct to point out the fortitude of the Colombian people – the masses have been through a lot over recent decades and have a capacity to bounce-back that is beyond some of the more delicate developed countries.

Whilst watching from 10,000 kilometers away, two things have concerned me – the ever declining Peso (and not just because I was travelling) and the pulling of the LLP issuance.

The Peso is struggling badly, it is threatening to make 4000 the new 3000 which even 5 years ago was seen as a dramatically high level. Hopefully as the country gets back on its feet, the tax reform is eventually passed and extreme partisan politics gives way to a more moderate discussion, things will take care of themselves. The recent pullback in the oil price is clearly not helping but again once the Delta Variant has been washed through the system and we get to the billions of vaccines we need for herd immunity, that will also change. Tax Reform Version 1 was clearly an enormous, missed opportunity with the ratings agencies and that is going to take time to fix – the charm offensive required may well be left to whoever takes over as president in a year’s time. In the meantime, other countries have seen their capital markets flow even without the Holy Grail of Investment Grade.

One of those is Brazil where IPOs come off the shelf like toys during the holiday season, sometimes I feel I could list my aging car on a book build basis and funds all over the world would bid up the price.

Here in Colombia the market has been crying out for new blood, we have seen multiple names such as Tablemac delist, others including Éxito who are no longer part of the MSCI COLCAP and recently Avianca which has been put on the naughty step due to Chapter 11. At the Capital Market Mission gathering in 2019 investors were imploring for new names to invest in – new sectors even.

It was therefore bitterly disappointing to see Latam Logistic Property pull their ~$200mn issuance due to market conditions. It was as big as many of the Brazilian offerings and represented sectorial divergence – however apparently that isn’t enough.

Hopefully a not to be repeated situation where funds and individuals decided not to invest in a new name. Perhaps vaccine reluctance has become investor hesitancy?

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