Sunrise Over El Dorado : Alianza : December 10th 2018

DAILY THOUGHT : There won't be a national holiday and the VP even managed to announce his demise 24 hours before the event but last week saw the passing of Belisario Betancur who was President between 1982-86. Born in 1923 this is a man from a different era born into a humble family in a village some 30km from Medellin - he was one of 22 children of which only 5 survived due to the levels of infant mortality. He was the second born, the first son born in his family was give the name Belisario but it passed to him as his older brother didn't survive. I saw him on a panel a few years ago, already in his 90's, a shadow of his former self no doubt but the audience nonetheless listened intently.

MARKETS

A quiet day on the COLCAP with total volume of USD25mn with the index dropping 0.54% closing @ 1382.45pts, of that volume some 20% was in the auction which added a few basis points at the close, volume was led as it invariably is by ECOPETROL (USD 7mn). In terms of movement there was a better day for PFAVAL (+1.95%) whilst to the downside PROMIGAS (-9.09%) ,PFCEMARGOS (-2.68%) and BCOLO (-2.61%) all struggled. We are now heading into an era when traditionally stock prices increase - there are tax benefits for individuals in seeing out the years in stocks as opposed to cash whilst funds will also be looking for a good finish to 2018 however such is the strength of the winds from overseas buffeting the local markets that one wonders if it will be possible this time around. The Peso had a better day managing to pull back from the 3200 barrier and close at 3147 which represented an improvement of 1.23%, volume was solid at USD1.19bn Separately the Government completed the balance of USD38mn to complete their monthly accumulation of USD400mn of reserves.

The bond market had another decent day with the 2024 benchmark moving 5bps lower to close at 6.25% whilst the pretender to the benchmark crown the 2032 also fell, this time by 4.7bps to 7.27%.

TAX REFORM

So this is to be the week when the reform, or whats left of it, is voted on in Congress and the press over the weekend has been full of comments ranging from those that think it could/should be pulled and replaced by a structural reform for 2020 (the argument is that the country can get by in 2019) to those still looking to make changes. Arguably the most contentious area is that of fizzy drinks and alcohol - all this falls under the many times mentioned NIMBY (Not In My Back Yard) school of tax reform whereby we all see the need just as long as we are not affected. Let's see what the week brings.

CORRUPTION

In the absence of any heavyweight macro or micro news (I think the ongoing situations at Aval, Corficol, Cemex & Avianca have been well covered recently) I wanted to touch on the subject of corruption which appeared in several different guises in the press. El Tiempo voted for their person of the year, not yet on a par with Time magazine but nonetheless a talking point when it is published - this time around the esteemed newspaper nominated the 11.67mn persons who turned out on August 26th to vote NO to corruption in Colombia, they may have failed to breach the 12.14mn threshold for the 7 questions which would have triggered automatic reform but nonetheless they were millions closer than anyone ever expected and it has kept the subject firmly on the front page. President Duque campaigned (as did all the candidates in reality) on a no corruption platform and friends and foes alike have urged him to fight against Colombian graft as hard as Santos fought for the peace process and he appears to be listening in at least some respects and his lack of progress thus far as President is perhaps testament to that fact. At the beginning of any new administration there is enormous horse-trading in Congress as the smaller parties needed to push through legislation demand influential positions for themselves (known as marmalade locally) and the minions who helped to get them elected - or re-elected as is more likely the case. Duque has it appears had no truck with that behaviour and the net result is that he can't cobble together the votes he needs to get legislation passed. It is a complicated situation and seriously calls into question how governable the country will be over the next four years however whether it is 11 million voters or 1 President the steps taken so far are in the right direction.