Colombian Update September 5th : What's New (S) : Politics, Exports, EPM, Pekerman.....

POLITICS

At street level there is continuing concern about the lack of direction of the new Government and whilst these are very, very early days for Duque and his team there is no getting away from the fact that people are looking for a little more meat on the bone, there have been a fair number of over reaching statements on corruption, taxes etc but the populous wants to see a little more definition. In terms of getting things done it is already clear that Duque will not be able to count on the same national alliance of parties in the Congress and Senate to drive policy forward that his predecessor could call upon - yesterday the influential Cambio Radical party of the vanquished Vargas Lleras were the latest to declare themselves as independent members of both houses joining the Liberal and 'U' Parties in that stance. At this point the Government can only could on the whip of the Centre Democratic, Conservative and two minor parties when it comes to votes - that means in the Congress approximately 33.7% of the members and 36.77% when it comes to the Senate. On top of the independents there are the parties from the centre and left who have declared themselves as formal opposition already and whilst they don't have much in terms of Congress muscle (8.43%) they will certainly be making themselves heard in the Senate where they mustered 18.62% of the seats. Whilst this is going to make for a lot of horse-trading over the next four year and arguably a compromise on progress it is perhaps a sign that Duque wasn't prepared behind closed doors to make promises (the famous Colombian pork barrel called marmalade) in terms of posts in the new administration and given the public clamour over corruption that certainly would be a good start.

EXPORTS At face value the export readings for July are healthy indeed with a total YoY increase of 16.2% to USD3.6bn which means YTD we have had an increase of 14.9% - clearly solid signs of a recovering economy, the 12 month number to July was also positive coming in at +14.3%. There were no surprises in terms of sectors with combustibles up 31.9% driven by oil which registered a 45.5% increase. Moving to other areas there was good news for manufacturing with a 3.9% increase driven by the 'modest' jump of 919% in nickel sales however agriculture lagged behind with a 8.9% decline due to lower prices with in the coffee sector. However without any desire to rain on the parade and whilst accepting that in the end the FOB Dollars become Pesos there are concerns to be found within the data if we take a brief look at tonnage. In July the country exported 13.8% less in metric tons across all products and YTD that number is down 2.6% - combustibles were actually down in July by 14.2% driven by a 17.7% decline in coal etc, YTD the numbers for that sector also read poorly with a 3.3% decline which is largely caused by 8.7% less oil being shipped. Conversely whilst agriculture suffered during July in both monetary and tonnage (-14,2%) terms it has YTD done relatively well with 4.1% increase - there are no particular areas of strength but welcome news in a sector that is so labour intensive. But put simply Colombia still needs to diversify - whichever metric you prefer combustibles YTD have accounted for 93.6% of the tonnage and 53,5% of the dollars arriving.

EPM On Monday the head of EPM Jorge Londoño announced that the Medellin City Council will decide on the various divestments that they need to undertake including the 10% stake in ISA over the coming weeks - in his own words the sooner the better because whilst the furore over the Hidroituango crisis, which at one point threatened to become a Hollywood style disaster movie, has now died down the problem has simply not gone away. On the operational level there are still few clues as to what has to be done as the waters have yet to recede sufficiently for a full diagnosis - anyone saying it will be two, or three or fours years is simply guessing at this point and that shortfall in cash flow has to be covered. The flip-side is the downstream impact and here we are not talking about the 107,000 citizens who were in left in danger but instead the knock on effect it will have on both Medellin and Antioquia who have had EPM as something of a cash cow for investments over recent years. Already word has reached me on my travels around the city of funding being withdrawn for various projects and needy areas but additionally El Tiempo on Monday reported that the planned relaunch of the Antioquia railroad which was to cost around USD2bn has now been suspended, in part to redesign some segments of the line but also crucially according to the Governor because the crisis at EPM means future cash flows from the entity cannot be used for the financing.

FAREWELL Yesterday the football coach who brought unprecedented success to the Colombian national team said no more after 6 years in charge of the team having recorded 42 victories during that time. I never him during that period but he comes over as a thoroughly likeable human being - perhaps he deserves more in life that to babysit footballers who as we know invariably act like 5 year olds. I wish him well.