Overall, the local markets have once again been set adrift on the global seas, subject to every breath of wind out of the US, or Russia or even Number 11 Downing Street…waking every morning to find its fate more or less sealed even before the opening bell.
Finance Minister Ocampo was in Washington this week chatting to the IMF and World Bank, traveling with several other local officials. Topics on the agenda included tax reform which is seen as a weapon to close the current account deficit, expected by Ocampo to close 2022 at 5.6%, as well as sustainability and the intention to slowly green Colombia’s energy production.
Whilst in Washington, the IMF raised Colombia’s 2022 GDP estimate to 7.6% – from 6.3% in July. As per other overseas entities, this is by far the highest amongst the front-line countries.
Ocampo remained in the headlines all week with another speech once again nudging the Central Bank on interest rates – his theory being that a supply driven inflation problem will not be cured by exorbitant rates. The problem is that the local swaps traders are anticipating borrowing rates of 11.5% or even higher.
Rupert’s opinions & analysis as an independent expert contributor are his own and not necessarily those of Finance Colombia or the BVC.
Central Bank Head Villar for his part stated that the weak Peso may force rates higher as inflation continues to be imported – he also became the latest authority figure to rule out capital controls.
Going back to the IMF, this week they also warned Latam countries against lowering rates too quickly before inflation was truly beaten.
At the beginning of the week there was disappointing, if somewhat predictable news on the consumer confidence front. Fedesarrollo reported a September number of -11.5% versus August -2.4% and a consensus estimate of -3.2%. IT’s easy to be smart after the event but given the current economic uncertainty and forthcoming tax reform, it is hardly a shock.
Over the weekend both GEB and EPM signed up to the national pact to lower energy prices and by Wednesday the ministry was reporting that no less than 80 companies in the sector had signed up and that via number or renegotiations of bilateral agreements, end users could expect to save $1.5 billion COP ($330 million USD) in 2023.
Later today we have the real sector data for August – there will be YoY gains still, but at a more modest rhythm.
Please find below the video report from LinkedIn:
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,