Sunrise Over El Dorado : Alianza : January 15th 2019

DAILY THOUGHT : Juan Guaido is the latest opposition politician to be thrust into the spotlight in Colombia with the suggestion that the National Assembly can run the country instead of Nicolas Maduro. The issue here is that a year ago it was Leopoldo Lopez and his glamorous wife Lilian Tintori grabbing the headlines and before that Henrique Capriles driving the opposition but they never appear to coordinate. Put simply if they can't organize themselves properly in the face of a man who so galvanizes hatred amongst their various parties how can they hope to run a country in the case of any eventually change of power - anything would be an improvement but the chaos would likely continue in the short-term at least.

The streak isn't yet threatening Joe DiMaggio's 56 games but the COLCAP has now risen for 9 straight days even though for most of yesterday we looked set to close in the red. Prior to the closing auction which represented 20% of the days volume the market was down 0.02% but the auction took us up to close 0.35% into positive territory at 1393.20pts on a total volume of USD50mn of which a huge cross (USD22mn) in Grupo Sura was a significant proportion. In terms of movement the best performers were CLH (+11.73%) ,CNEC (+1.79%) and MINEROS (+1.75%) and to the downside were ISA (-1.25%) , EXITO (-1.22%) and ETB (-1.18%). * Weekly Strategy : Whilst we have edged into our 1380-1420 short term target range we would advise sticking by the 1420 goal unless we suddenly dip below 1380 -whilst we have passed over the 50 day SMAVG we have fresh air up to the 100 day SMAVG * The Peso was again close to unchanged yesterday closing at 3139.6 (+0.01%) once again on decent volume of healthy volume of USD 1,096 MM * Weekly Strategy : We are neutral amidst a currency market that has moved into a trading zone. If we do continue to move higher towards 3120 we see a final target of 3000 however if we weaken towards 3170 then the next stop could be 3300, a very tough currency to read at this juncture *

A relatively quiet day on the bond market with few notable changes along the curve. At the short end the 2020 closed at 5.0% (-1.4bps) and at the longer end the 2024 and 2032 gained slightly to close at 6.125% and 7.13% respectively. *We have decided that with the benchmark 2024 having come down from 6.40% to 6.10% it is better to take profits a these levels even though we may continue towards 6% or even lower. We would be watchful around these lower levels for any signs of weakness and jump into such a movement towards*

We wrote yesterday on the subject of tourism and those visiting Cartagena from overseas always come away gushing about what they find, the old city full of its ancient architecture and alive with life, boutiques and fine restaurants - billions of dollars have poured into the city over the past decade however it gives a false image of the situation - take a taxi 2km in any direction from the old clock tower and you will likely come face to face with poverty, and a lot of it. CEPAL have published their latest report on poverty and whilst Colombia has done good work to lower numbers between 2002 & 2016 (it takes that long to consolidate the regional data) the poverty and extreme poverty levels from 53.8% & 23.8% to 30.9% & 12% respectively there is still more to do. These don't jive exactly with the Government's own data at the DANE which gives us 28% & 8.5% respectively under local methodology however the direction is clear as the same agency reports 2002 numbers of 49.7% & 17.7%. Good work has been done. There is much more to do however if Colombia is to get down to the levels of the rest of the Andean region or even Brazil - there are worse cases of course and remarkably whilst most countries have gapped downwards according to CEPAL Mexico's extreme poverty has actually increased from 10.4%-11.7% over that period, even the overall poverty has only dropped from 46.4%-43.7% - people then wonder how AMLO manages to get elected as president ? Honduras in included as a comparative number due to the fact it is the only country in the Americas where the GINI co-efficient is higher than that of Colombia - again locally there has been improvement, at the beginning of the decade Colombia stood at 56 but by the end of 2017 that number was 50.8, however as we look back to 2002 it was at 57.2 which reflects a severe lack of progress between 2002-2010. We await the publication of the 2017 data in order to judge where we are currently, of course one of the fears is that the easier work has been done, the low hanging fruit so to speak has been picked, so harder work may be ahead.