Colombian Update What's New (s) : Protests, Real Sector, Oil, Imports....

PROTESTS

Whisper it very quietly but Colombia is in danger of tearing itself over the subject of education, which of course is the most worthy and noble of reasons however it highlighting the enormous political divide that remains across Colombia even 4 months after the elections. The public universities are on strike, there were more protests over the past 48 hours and October 23rd has been penciled in for another day of protest. President Duque offered up a fast USD330mn extra after the most recent protests but that is a drop in the bucket versus what the education system requires and deserves and that quick fire offer may have actually shown weakness and embolden the students and professors to seek more. The obvious question is where does the money come from, quite frankly against the current background of corruption and an over-gorged ruling elite the students don’t care and when politicians are discussing billions of dollars in projects for new navy bases and anti aircraft defences to fight god knows who it is hard not to have some sympathy Another matter which has slipped in under the radar is the attempt to extend the current periods for Mayors and Governors by two years and bringing them into line with the President - the justification for this is cost but underlying this are other darker forces. It almost beggars belied that without going to the electorate you simply change the rules and given the amount of current local officials being investigated for corruption or who have in fact already been convicted it is a nonsense. Encouragingly whilst it has passed the first couple of rounds of committees my sources tell me this will be sunk later in the year once the full weight of Congress gets to look at it.

MACRO In the meantime today we will focus on a raft of macro news that has been published this week and which on balance has been positive - the COLCAP and Peso have suffered of late due to a disorderly sell down of assets and external events respectively but despite that foreigners should in particular be taking notice at this point, stocks in dollar terms are appetizing.

RETAIL SALES & INDUSTRIAL PRODUCTION Both numbers were in solid shape in August with IP up 3.9% and RS rising 5.5%. In terms of Retail Sales 14/16 areas measured were in positive territory with the two heavyweights of vehicles and food rising 10.5% and 8.8% respectively - if we strip out that vehicle number we get to 4.8% which is still a very tidy reading. YTD the number stands at 5.4% (4.5% ex vehicles) which is a fair reflection of the economic recovery and even though there was a surprising dip in the Consumer Confidence number for September published by Fedesarrollo (it fell 5.4 to drop to -0.7 and into the red for the first time in ages) we seem set fair for a decent 2018 - looking forward the potential shadow on the horizon is clearly any tax reform announced by the Government. The gain in Industrial Production was driven unsurprisingly by refining which contributed almost half of the increase with chemicals and metallurgy the other main areas to push the number upwards. Overall we saw 25/39 areas measured in positive territory which suggests there is still some fragility and that is borne out by the 1.3% drop in the numbers of those working in the sector, the worst performing sector was clothing which dropped 8%. The tax reform should have impact on this data too although this time arguably it should be positive if the contributions from the corporate sector are lowered significantly.

IMPORTS Rose 9.3% in August to USD4.58bn which was driven by the manufacturing sector which rose 12.3% (chemicals +15%) and accounted for 79% of purchases - agriculture was up 6.7%, there is isn't a tremendous amount to pick out of the bones - it is a good solid number reflective of the economic recovery. This led to a trade deficit of USD764mn which is actually down on the equivalent number for 2017 which stood at USD809mn but given the jump in oil exports might have been expected by some to be lower however again this reflects on the internal demand recovering to counterbalance the increase in oil prices.

OIL Sticking with the black stuff production for September stood at 868.7k bpd which was a 1.9% increase YoY and the highest reading for 2018 - as we know this isn't where the country hoped to be at this point but a Lemony Snicket's situation means we are still recovering from the oil price shock of a few years ago. In terms of drill rigs there has also been an encouraging pick up in activity with September seeing 151/137 rigs in country being used - last month it stood at 130/148 and a year ago it was way down at 91/116 - more equipment is arriving and more of it is being used ! Our new President clearly has friends at the ACIPET (Oil Engineers) who suggested his arrival in power has provoked a pick up in the sector - I would like to balance that viewpoint and ask if they consider these improvements would have appeared if oil was at USD50 ?

REPUTATION That is about it - I was off a plane at 1am so energy levels declining but I would like to bookend this small offering with another mention of education. MERCO released their annual survey of the the companies with the best reputation in Colombia - at the top of the shop were Bancolombia, clearly dispatching the British Diva sat well with 51,825 people surveyed, my attention as drawn to position 10 where we find the National University - a public University, the first educational institution to make the list and a massive credit to them. Alongside the University of Antioquia another public university which is ranked as the number two in Colombia they do amazing work in an underfunded situation providing opportunities for those who otherwise would struggle to get anywhere during the all to brief time we have on this planet. Sadly all too often graduates of these two Universities are all to often looked over for their competition graduating from the local equivalents of the Ivy League or Oxbridge despite the comparative hunger of the public sector.