Colombian Update The Weekender - Political Drift....& other news

THE WEEKENDER

Thumbing through digital press this weekend I was struck by The Economist’s pieces on Jair Bolsonaro, not so much the background on him, people already know that he has some extremist views when it comes to social inclusion, but I found some parallels with what happened here in Colombia during the springtime Presidential elections. The article points out that it is easier to point out what Brazilians voted against in the first round the what thy voted for - very true of Colombia in June, the fear of Gustavo Petro and his PT Dilma/Lula rhetoric was a much more important factor than having the least idea what Ivan Duque was proposing - in fact many would agree that we are still waiting to see what a Duque Presidency represents, Congress is yet to see any heavyweight legislation put forward - a tax reform is coming but on one side the expansion of the tax base seems to have been set aside whilst FinMin Carrasquilla suggested a few days ago that extending VAT is going to be a political fight. In both cases investors will be happier with the right wing candidate, prepared it appears to overlook the faults, especially in the case of Bolsonaro however in Colombia my personal feel is that we are in a different phase of the long term political cycle than much of the region.

SHIFTING SANDS In the first round in a large field Bolsonaro accumulated a hefty 46% of the vote whereas in Colombia in a reduced field the right between Duque and Vargas Lleras only totalled the same 46% and the middle-left 50% - most neutral political observers believe if Sergio Fajardo had accumulated 300,000 more votes in Round 1 and replaced Petro in the runoff we would currently be discussing the policy decisions of a different President. Ordinarily in Colombia the elections are followed by a period of navel gazing by the vanquished, their guns fall silent as they contemplate their futures - this time as part of the sea-change in Colombia that has not happened. Firstly just a couple of weeks after Duque took office we had the corruption referendum which put the President in political sandwich The head of the Senate and his own mentor Senator Uribe both from the party which put him in power both opposed the vote and whilst it didn’t pass the threshold of votes whereby the seven proposals would automatically be brought before Congress the fact that 11.6 million people voted 99% in favour of the proposals meant Duque had to act and he has had to bring some of the matters to Congress himself - where many of his own party are opposing the measures still. Secondly last week we had the education rally whereby both private and public sectors, students and professors arm in arm protested the lack of Government funding for the public sector - as opposed to other such rallies in the past there was a strong turnout despite the rain and it didn’t descend into the mindless vandalism that undermines such events. Gustavo Petro reappeared, Sergio Fajardo (an ex Professor himself) appeared on the social network banging the drum and the Government promptly pledged another US$161mn to the 2019 budget for education - it is large drop but in a huge bucket however it is welcome.

AGAINST THE CLOCK The larger point is that the left and centre-left and clearly already targeting the municipal elections set to take place in just over a year and beyond that the 2022 Presidential elections. There is the new found confidence that 9.3 million votes from the Presidential first round in May brought and it is clear already that they will dog any moves made by Duque or indeed any of his team over the next four years. Time, demographics and the GINI coefficient are all against Duque and VP Ramirez, who is surely looking to slingshot herself into being the first female resident of the Nariño Palace, and to repeat again my thesis that it is hard to see what Duque can physically do as President to prevent a centre-left victory in 2022, once the tax reform is published he is already going to be swimming against the popularity tide.

IN BRIEF In construction we had a couple data points to end the week :

• Construction Licences continue to jump around, after a good reading in July which had everyone talking about the recovery of a key leading indicator August saw a drop of 11.7% to 1,836,066 in the broader 302 municipalities and 10.3% in the reading for 88 districts with very little good news as the key housing sector fell 1.1% and 11.6% respectively in the two areas. Both numbers are well down YTD and we still await a consistent run of good data in order to declare a true recovery.

• In terms of Construction Costs there was a September increase in both Housing and Heavy sectors of 0.08% & 0.09% respectively but with inflation at over 3% for the same month it is clear there isn't any great demand pressure a this point in the system. YTD though in both areas we do see higher increases than in 2017 however as of yet those differences are marginal.

HEALTH SECTOR You may have noticed no blog this past Friday as I was under the knife once again and whilst I am no fan of needles or any other facet of such procedures if it has to be done there is no better private health service on the planet to put yourself into the hands of - a big shout out to one of Colombia's hidden gems. Coincidental ahead of a large international health convention in Cali next month the IDB released a survey of Latam and Caribbean countries which suggested that whilst Colombia has the best coverage (around 93%) when asked the local populace were the least content with 70% complaining. In the developed world 68% view their health service as very good whilst in Latam/Caribbean it is 41% - in Colombia it is just 30%. I took the opportunity to ask my surgeon about this who confirmed to me that whilst I got to the front of the line with my plan those in the public sector were not far behind and got the same treatment. The issue with the survey is likely that Colombians using the system don’t appreciate how poor other countries comparative service is and when looking at the private service feel they are getting a raw deal. The point he did raise was corruption in the public sector which appears to be eating away just as much in the health sector as well as the rest of society - since my arrival here there have been numerous high profile cases such as Saludcoop and Cafesalud (the list is extensive) - no corruption is acceptable but when you are stealing from the health system of the most needy the perpetrators should face a lifetime in a deep, deep black hole. The other minor issue which I always come back to and which dovetails into FinMin Carrasquilla's tax reform is that if you aren't paying taxes it gives you very little leverage when it comes to complaining - just one more reason why the tax base should be radically increased.