Sunrise Over El Dorado : Alianza : Dec 5th

DAILY THOUGHT : Flying down to Bogota yesterday I found myself reading a report into the value of aviation to the Colombian economy and of how lower taxes and investment airport infrastructure could add billions to the GDP numbers and create 100,000s of jobs. How ironic that returning in the evening I was delayed by almost an hour because the lights on one of the runways had gone out. This is a separate concession from the terminal, itself flooded recently, and you just sit their thinking "One job, you had one job" - as we all battle to put up Christmas lights and try and find the loose bulb we understand it isn't easy but at the same time we aren't being paid millions of dollars to do it.

MARKETS

What the good lord (or Donald Trump) giveth etc - whilst the COLCAP was saved by a closing auction which added 0.56% in the last few minutes it still closed down 0.42% @1399.71pts. Total volume on the day was USD58mn with the most traded stocks being ECOPETROL (USD 14mn), PFGRUPOSURA (USD 13mn) and EXITO (USD 9mn). In terms of movement we saw upside for PROMIGAS (+3.8%) , ISA (+3.38%) and GRUPOARGOS (+2.22%) whilst taking the day off were ECOPETROL (-3.95%) ,CELSIA (-1.84%) and ETB(-1.75% As you might expect the Peso went the way of the rest of the products as it dropped 1.39% to close at 3176 having at one point touched 3186 - volume on the day was a spritely USD1.35bn, traders keeping an eye on external events as well as the Government activity in the forex market.

The bond market surprised everyone by being virtually unchanged having managed to decouple itself from events in other markets - for the record the 2024 closed at 6.29% and the 2032 at 7.35%.

TAX REFORM

Only a few developments yesterday as the tax reform gets swilled around Congress like mouthwash, everyone anxious to see what gets spat out but as of yet no major changes, at least fiscally, there have been items that have made headlines but not big ticket items. Most of the reform has now been approved to take forward and today at 8am the members of the house will be back at work sifting through the last few items - time is short and the country houses are calling but we look set to get the remnants of the reform passed into law well before Father Christmas drops down the chimney.

INFLATION

It is that day of the month once again - this afternoon inflation data will be released for November and we are expecting things to stay well under control with a 0.2% (consensus 0.19%) reading leading us to a 12m number of 3.35% (consensus 3.33%). We expect the most important weighting of Food to continue to have a drag effect whilst the other heavyweight of Housing will be up but not impacting. Few if any expect much different and likewise for the balance of 2018 will we see anything remarkable happening which means rates will exit 2018 at 4.25%. Moving into 2019 we think inflation will begin to accelerate once more due to the trickle down of expansionary measure into the economy as well as an as of yet unclear impact from the tax reform. Another important factor in the CPI basket going into 2019 will be the minimum wage settlement and as of yet we only have the initial posturing but expect to see headlines and noise - FinMin Carrasquilla's comments, if he has any, will be interesting considering the public stance he took years ago stating the minimum wage was way too high.