Colombia Business Forecast Q1 2007

Content

• Executive Summary
  • Focus On 2007
• Chapter 1: Political Outlook
  • SWOT Analysis
  • BMI Political Risk Ratings
  • Political Risk Analysis
  • Scandal Threatens Reform Outlook
  • Colombia's political landscape has been rocked by the emergence of a scandal in which senior politicians have been
  • linked to the right-wing paramilitary group Autodefensas Unidas de Colombia (AUC) We are worried about the
  • potentially damaging repercussions not only for the controversial 'Justice and Peace' bill, but also on the
  • credibility of Uribe's mandate
  • Foreign Policy
  • Signed, Sealed But Not Delivered
  • The enactment of a free-trade agreement (FTA) with the US will likely boost bilateral
  • commerce and open up new opportunities for investment in Colombia This will be no easy feat, however, given
  • strong objections from the US Democratic party
• Chapter 2: Economic Outlook
  • SWOT Analysis
  • BMI Economic Risk Ratings
  • Economic Activity
  • In Danger Of Burn-Out?
  • Economic expansion in 2006 came in above expectations on the back of a boom in domestic demand Growth should
  • cool off in 2007, as the effects of the central bank's tightening cycle feed into the economy However, our end-2007
  • forecast of 44% would still represent a healthy rate of expansion
  • Table: Economic Activity
  • Balance Of Payments
  • Hanging In The Balance
  • We anticipate that the current account deficit will widen in 2007, as import penetration outpaces export growth,
  • but this will be offset by a gradual strengthening of the capital and financial accounts
  • Table: Balance of Payments
  • Fiscal Policy
  • Reform Holds Key To Fiscal Outlook
  • We believe that the consolidated public sector deficit will widen further over the coming years, as fiscal expenditure
  • growth outpaces the expansion of government revenues The extent to which the deficit widens is likely to be contingent
  • upon the government's success in implementing its tax reform proposals, which aim to rein in the fiscal bottom line
  • Table: Fiscal Policy
  • Monetary Policy
  • A Tight Call
  • Despite a series of interest rate hikes in H206, we believe that the Banco Central de la Republica (BanRep)'s
  • aggressive tightening cycle is not quite finished Given its commitment to its long-term 20-40% inflation target,
  • we remain relatively hawkish and anticipate at least one more upward move in the policy rate in Q107
  • Table: Monetary Policy
  • Exchange Rate Policy
  • Currency Stability Anticipated
  • Given Colombia's solid macroeconomic fundamentals and relative political calm, we expect the peso to remain
  • reasonably stable in 2007 That said, a weaker external position could cause the unit to fall off slightly in 2007
• Chapter 3: Special Report
  • BMI Sovereign Risk Ratings
  • What And Where Are The Risks?
  • Table: BMI Sovereign RIsk Ratings
  • Table: Latin america Sovereign Ratings - Evolution of Willingness to Pay
  • Latin America
  • Seeing Off The Challenges
  • Table: Latin america Sovereign Ratings - Evolution of Ability to Pay
  • Improving Debt Dynamics Throughout The Region
  • BMI Sovereign Ratings Index Methodology
• Chapter 4: Business Environment
  • SWOT Analysis
  • BMI Business Environment Risk Ratings
  • Legal Framework
  • Overview
  • Labour Force
  • Size
  • Table: Demographic Indicators (2005)
  • Foreign Investment Policy
  • Overview
  • Table: Colombia, Annual FDI Inflows
  • Table: Latin America, Annual FDI Inflows
  • Foreign Trade Regime
  • Overview
  • Table: Top Export Destinations
  • Tax Regime
  • Overview
• Chapter 5: Key Sectors
  • Autos
  • Industry Forecast Scenario
  • Table: Colombia Autos Sector - Historical Data & Forecasts (CBUs Unless Otherwise Stated)
  • Pharmaceuticals
  • Market Summary
  • Table: Drug Market Indicators