Sunrise Over El Dorado : Alianza : January 9th 2019

DAILY THOUGHT : Given the benign data out of the construction sector in terms of costs and cement production it is perhaps no surprise to find that according to the new GPA agency 41% of all Civil Works are behind schedule - in total there are 94 ongoing projects of which 35 are struggling to keep up, these are spread across airports and roads. As airlines try to grow we find 5/12 projects delayed and whilst the 4G projects are getting special attention due to their importance there is also a portfolio of other road projects falling behind schedule. Each case will have its reasons however when viewed as a collective this is clearly not good enough in a country crying out for new and improved highways and airports, if the economy is to truly grow everyone needs to get on base asap. * An often repeated statistic but as pertinent as ever revolves around the Tunel de La Linea project, a tunnel project of 8.65km which began in 2004 and still continues - it is compared to the 50km channel tunnel which took 6 years to be completed and opened in 1994 *

MARKETS

Another tidy day for COLCAP as it rose once again with a rise of 0.85% to 1368.24 - total volume was a much healthier USD41mn and was dominated by ECOPETROL (USD 10mn), ICOLCAP (USD 6mn) and PFBCOLOM (USD 6mn) *Strategy update - due to the holidays we missed the low volume lows on the COLCAP however we feel the current rally has short-term legs up t0 1420 *

This time around the Peso was an out-performer versus its regional peer group putting on 1.35% to close at 3165, volume on the day was around average at USD951mn. The currency was helped by oil prices and also by a research report which identified the Peso as the potential top regional performer in 2019. Finally FinMin Carrasquilla in an interview stated that he felt that the Peso is trading close to parity. *Strategy - whilst we think the Peso could tumble post April for the time being there is a short-term possibility if the 3115 level is broken we could move to 3050 - of course oil is a major factor in this product*

A strong session for bonds as a mixture of US inflation and fixed income markets along with oil improved sentiment along the curve. The 2020 fell 6.5bps to 5.06% whilst at the longer end the benchmark 2024 dropped 5.3bps to 6.10% and the 2032 was down 8.9bps at 7.11%. * We also missed an entry point for the 2024 benchmark however we think there is still the possibility that the yield may fall to as low as 5.95% if the 6.10% level is broken*

CANACOL

The company reported another gas discovery at the Nelson field, the 7th at that location - the positive here is the continued accumulation of reserves and in this case it has the largest Net pay (266ft) yet found in this area although this won't add enormously to current reserve levels. The key here and as mentioned in the company's 2019 strategic plan is getting all this gas to market and that will depend on the completion of the gas pipelines project to move the product on from the processing facilities.

VEHICLE SALES

We touched on vehicle sales only last week but yesterday the federation from the sector was discussing the outlook for 2019 following on from the 30.2% spike in December which brought the 2018 total to 256,662, a 7.7% increase on 2017. Looking into 2019 'Andemos' are expecting another 7.5% increase to 276,000 which would be healthy however we are still way off the peak of a few years ago. As mentioned last week the used car market is now a reality in Colombia whereas a decade ago the lack of vehicles made that impossible and that was laid bare by the fact the same entity expects to see 900,000 transfer of vehicle ownership. Finally, and this segways into the piece on Mexican highways written last week, the federation expects to see 620,000 new motorcycles sold in 2019 - in several parts of the country they dominate the transport system and as per Mexico it is surely time that they paid tolls when travelling between cities.