Colombian Update July 13 : Whats New (s) : FinMin, Taxes, CenBank, Retail Sales, Industry, Energy.

TRAVELS & FOOTBALL

So England are coming home but with no trophy, nothing new there, last saw us win the World Cup sat on my parents lap so by this time more than used to the disappointment. Of course being in Quebec there is likely to be some vociferous support for France but I will be with the underdogs, I visited Croatia a few months after the war finished and what they have achieved since 1995 is close to miraculous given the size of the country. On a separate note Quebec City is an amazing place, some on this list will have been here before but if you haven’t it is incredibly recommended. In terms of the adopted homeland there have been some bit and pieces occurring over the past few days...... TAXES Tax collection data for the first semester gave us only very modest growth of 0.34% versus the 7% anticipated by the Finance Ministry, this of course down to the economy still growing below its potential as well as downward adjustments in corporation taxes related to the December 2016 tax reform. Most private contributions rose however in the commercial sector there were concerns over international commerce in particular. The hope of course is that the post election environment will see the economy and investment expand thereby boosting taxes during the second semester. The overall tax system needs an enormous reform, it is both unjust and unwieldy - nowhere enough people pay taxes, too many avoid paying what they should pay and there are areas such as land taxes that need to be looked at. All of this should help lower the burden on the corporations but this will of course take time - it is a tricky animal politically but at the lower end of the economic spectrum people need to get accustomed to paying taxes, even if it is a Peso and at the top end the land barons need to be taxed in the same way other members of the chamber of commerce are i.e. contributions based on what you ‘should’ be earning - this would encourage agricultural development in rural areas where 81% of the land is owned by 1% of the population (Oxfam)

FINANCE MINISTER Those changes in the tax system would be the responsibility of one man more than any other, the new Finance Minister and that will be Alberto Carrasquilla as announced this week - he is highly qualified unquestionably having served under Alvaro Uribe during his first term, investors should be content with this appointment given his profile and experience. Mr Carrasquilla though is anything but a champion of the left where he viewed with deep suspicion due to reforms carried out between 2003-2007 as well as comments with regards to the minimum wage stating that it is too high. This is in fact an unseen debate within Colombia, it has a relatively generous minimums versus Latam and unfortunately it has been counter productive in some areas with those same employees having priced themselves out of work, a fine example are the domestic housemaids - once seen as a standard element of the household many people now see them as a luxury due to increased salaries as well as the list of benefits that come with the jobs. ENERGY Perhaps the biggest surprise of the week was the CREG’s decision in conjunction with FinMin Cardenas to study and adjustment or even elimination of the 25% market share limit on companies involved in the commercialization of energy, whilst this may or may not have something to do with the clearing up of the Electrocaribe mess it would still be a serious policy change given how stringent the authorities have been over recent years. In reality as long as the CREG remains vigilant and with the final word this appears a logical move, the key in the end is that the country has effective supply at a reasonable price to both supplier and consumer be it Industrial or Residential. Sticking with energy we saw June consumption rise 3.9% YoY, moving the number above where the authorities expected it to be. We saw the industrial demand (+4.8%) outstrip the increase in the residential (+3.5%). All this a reflection of the economic recovery which is well underway and as ever Colombia remains a global example of clean energy with 85% of the monthly supply coming from the hydro sector. CENTRAL BANK The Central Bank minutes were published and with due respect to all of those involved on the committee doing great work there was nothing of excitement, we already know that inflation concerns have now taken over as the priority from economic growth which is already underway. They are of course data dependent but in a relaxing state of affairs there will be little to do over the coming months except monitor those statistics - as stated previously they have done good work and can relax a while although it is hard to imagine the team there sat around playing XBox whilst awaiting the latest inflation numbers.

REAL SECTOR Only a brief comment on Retail Sales (+5.9%) & Industrial Production (+2.9%), which both rose in May in a non calendar effect month, as I am not travelling with my files - my 11 year old sons laptop has lots of stuff but most of it is related to video games. In terms of Retail Sales the increase ex vehicles was 5.6% and there was a leap in electronics (+25.6%) ahead of the World Cup, after all nothing better than watching your team exit the competition at the hands of England in HDTV - all joking side this is a big number but is no more than a manifestation of what we have seen in terms of confidence over recent months. Overall all but two of the categories measured rose and whilst it is true there may have been a pre World Cup effect I think that would be somewhat misguided as there has been a healthy pick up in activity over recent months. Switching to Industrial Production we saw sales rise 4% in the sector as 30 of the 39 activities measured increase. To the upside we saw the diverse sectors of Metals (14.8%) & Meat (10%) faring well but arguably the biggest story was the 2.2% decline in Refining & Coking - those are areas that have driven the recovery in Industrial Production and if the overall number can remain positive whilst Refining is off colour that could be a very good sign.

That is my lot for this week, I am heading off to Montreal this morning along the banks of the beautiful St Lawrence river which has served as a umbilical cord in the development of Eastern Canada for many a century, less so these days with the emergence of Toronto however you can feel the history along both shores.