Colombian Update May 31 : Whats New (s) : Fajardo, Concrete, Mortgages.

THE ONLY DECISION

Sergio Fajardo has now publically stated that he will vote 'En Blanco' on June 17th and effectively stay out of the run-off, the right decision on every level - it was well anticipated within the campaign and what I have been hearing across the breakfast table for some time, it also effectively guarantees that Ivan Duque will be the new President come August, whilst the Polo Party members of the alliance will head off to vote for Petro I fully expect the Green members to follow their leaders lead and either stay in bed or vote roughly the same way. Ahead of the election I predicted that come the second round that the 'Greens' would split three ways in Round 2, 50% neutral, 35% Duque and 15% with Petro and I stick with that position - it is a broad church of a party with the poor, rich, academics and uneducated - accordingly I see some doing their own thing. Either way Duque will be in power come August and we will have to see where we go from there. Big business is likely to be happy as are the markets but his manifesto is as populist as Petro's in many respects and what he will actually be able to achieve is open to debate, a simple example is taxes. He proposes to cut taxes for corporations and individuals without really saying how - stamping down on evasion is the main idea but that has been tried and failed for years, many would say he represents a party full of offenders and is therefore conflicted however regardless of which party they come from it is a never ending game of hide and seek which will be hard to win. He has also proposed processes akin to Blockchain - that may look good on National Geographic documentaries but we are talking about Colombia a country where its hard enough to get people to bank on line let alone learn the details of a system such as Blockchain. This of course isn't his only proposal and there will be plenty more issues - we were never going to turn into Venezuela but those who were 'smart' enough to listen to the scare mongering can now bring their cash back from whichever country they hid it in and buy into the post election rally which should already be underway but where little is occurring. As for Dr Fajardo well he now has a national profile like never before and is a man coming out of the campaign with his image greatly enhanced - all the opinion polls (as I have mentioned to so many clients) have pointed to him as the person that voters have the least beef with and that has been borne out. He has said no to 2022 but literally no politician who hasn't been selected for the Mars Orbit program can state that with confidence and he is going to be a player for the foreseeable future - after all as we all know it is much easier to sit in opposition and criticize than actually run a emerging market country which is restrained financially.

BUILDING BLOCKS Yesterday we had a couple of interesting snippets from the construction sector both of which are encouraging. Firstly the concrete sector looks to be getting on track, in April we saw Production of 1,031,600 which represented a YoY increase of 5.6% and Dispatches rose an even healthier 13.9% to 1,025,200 - YTD the news hasn't been so encouraging with -1.1% & -0.9% declines respectively however this is a sea-change versus what we have seen over recent times. As we know and as per most sectors there is a seasonal element so when we look at the positive April data and take a quick glance back in time we see that only April 2015 was higher historically in Production and April 2016 in Dispatches. Again when we look at the YTD data this has though been one of the worst years we have seen over recent times however election concerns have to have played a part - it never helps when Petro says he will cancel the 4G projects and take another look at the Bogota Metro. One factor that arguably makes the April number even better is the weather - it has been diabolical for those sitting at home doing little but even worse for those trying to break ground on new projects - the in-numerous landslides can also only have made deliveries more complicated. Also very briefly in the sector we saw the Q1 mortgage data formally released by the DANE - we already had a preview of this via the banking data from the SUPER but nonetheless more than welcome. We find the total portfolio at COP57.9Ben (USDA 20.6Ben) an increase of 9.4% You and perhaps more encouragingly 3.1% Qom - the increase was driven equally by the private sector as well as those mortgages that are subsidized by the Government. In terms of the total number of mortgages that stood at 1,116,897 which is an increase of 4.1% and again that was evenly distributed across the two primary sectors. Anecdotally I am currently looking at apartments and demand is high even though prices are shifting, the amount of new projects on offer in the Medellin Valley is as high as ever - sat on my desk is one of the local property magazines and the current number between apartments, houses, hotels (here you can buy rooms), shopping centres and offices stands at 383 - that is staggering especially given the enormous growth already experienced in the area.