Colombia Business Forecast Report Q3 2009

Publication Date	July 2009
Publisher	Business Monitor
Product Type	Report
Pages	61
ISBN Number	1745-0519
Product Code	BMI02143

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Summary

We now believe President ??lvaro Uribe will run for his third consecutive term in 2010, which, while raising longer-term constitutional concerns, is good news for economic and security policy continuity.

This in turn should help Colombia outperform many of its regional peers in our economic and political ratings over the duration of our forecast period. That said, we are becoming increasingly concerned about Colombia's longer-term economic growth potential, with the lack of export diversification and growing pressures on the consumer threatening to hamper strong levels of growth once global conditions improve.

On the political front, despite the serious political and legal opposition to Uribe's re-election bid, the Colombian electorate still appears overwhelmingly in favour of the incumbent staying in power beyond next year's presidential elections. However, we question whether a Uribe-backed candidate could not continue with these popular policies, which would likely have the benefits of policy continuity while preventing the longer-term damage to the country's political institutions that a re-election bid is likely to cause.

A major economic concern of ours in the months ahead is the economic situation of Colombia's Andean neighbour and second largest export market, Venezuela. On top of collapsing private consumption in Venezuela and a potential devaluation in the bolivar fuerte, Colombian exporters are facing the additional threat of having their products removed from Venezuela's list of 'essential goods'. This would mean these goods must be purchased via the much less competitive parallel rate, further hampering both Colombia's export sector and domestic economic activity.

On the business environment front, barring the recent spike in violence from the left-wing Fuerzas Armadas Revolucionarias (which marked its 45th anniversary by kidnapping a local councillor and killing a policeman and two security guards in the south-western town of Garz??n) Colombia's security outlook continues to improve. We do see short term risks to this view, particularly as deteriorating domestic conditions point to the potential for an uptick in social unrest. That said, with Uribe now looking likely to retain the presidency in next May's general election on a ticket of maintaining his hardline stance towards the FARC, in our view this is clearly a positive for the country's business environment outlook over the medium term.

Content

Executive Summary
Uribe until 2014
Chapter 1: Political Outlook
- SWOT Analysis
- Bmi Political Risk Ratings
- Domestic Politics
- Uribe until 2014
- despite The Serious Political and Legal Opposition to President ??lvaro Uribe's Re-Election Bid, The Colombian Electorate Still Appears Overwhelmingly in Favour of The Incumbent Running for A Third Consecutive Term in Office in 2010.
Chapter 2: Economic Outlook
- SWOT Analysis
- Bmi Economic Risk Ratings
- Economic Activity
- Consumer to Suffer beyond 2010
- While We Believe The Short-Term Challenges Facing The Colombian Consumer Are Severe, We Are Becoming Increasingly Concerned about The Potential for Private Consumption Gorwth beyond The Current Downturn.
- Fiscal Policy
- Spending Pressure Builds, but Uribe Holding out
- despite Pronouncements of Counter-Cyclical Expenditure Plans in 2009, We Do Not Believe The Colombian Government Has Either The Room or Desire for A Substantial Increase in Public Spending This Year.
- Balance of Payments
- Venezuelan Parallel Rate Concerns for Exporters
- on Top of Collapsing Private Consumption in Venezuela and A Potential Devaluation in The Bolivar Fuerte, Colombian Exporters Are Facing The Additional Threat of Having Their Products Removed from Venezuela's List of 'Essential Goods'.
Monetary Policy
BanRep to Tread More Cautiously
Colombian headline inflation fell within the central bank's 4.50-5.50% target range in May, with further downside
potential in the months ahead.
Regional Outlook
Banking Sector: Lessons Learnt, but Risks Remain
Historically the Achilles' heel of the regional economy, Latin America's banking sector has been much better placed
this time around to ward off global financial headwinds.
Chapter 3: 10-Year Forecast
- The Colombian Economy to 2018
- below-Trend Growth Going Forward
- Business-Friendly Policies and A Steadily Improving Security Situation Will Help Colombia Maintain Sustainable Levels of Economic Growth over The Period 2010-18, Although We Doubt Real Gdp Growth Will Hit The Lofty 4-7% Levels Seen in Recent Years.
Chapter 4: Special Report
- The Outlook for Global Banking
- Business Environment Rating Outlook
Chapter 5: Business Environment
- SWOT Analysis
- Bmi Business Environment Risk Ratings
- Business Environment Outlook
- Institutions
- Infrastructure
- Market Orientation
- Operational Risk
Chapter 6: Key Sectors
- Consumer Electronics
- Executive Summary
- The Devaluation of The Local Currency against The US Dollar, and Deteriorating Business Sentiment, Contributed to A Marked Slowdown in Spending on Some Categories of Consumer Electronics Products in The Second Half of The Year.
- Retail
- Executive Summary
- Generally Positive Trends in Underlying Economic Growth, A Young and Increasingly Urban Population, The Rise in Disposable Income and Greater Numbers of Working Women Are Key Factors behind The Forecast Growth in
- Colombia's Retail Sales.
Chapter 7: BMI Global Assumptions
- Global Assumptions
List of Tables
- Table: Political Overview
- Table: Economic Ac Tivity
- Table: Fiscal Policy
- Table: Balance of Payments
- Table: Monetary Policy
- Table: Colombia Long-Term Macroeconomic Forecasts
- Table: Loa N-to-Deposit Ratios, Selected States
- Table: Loa N Growth (% Chg Y-O-Y), Selected States
- Table: Commercial Banking Business Environment Ratings, Selected States
- Table: Bmi Business and Operational Risk Ratings
- Table: Bmi Legal Framework Ratings
- Table: Labour Force Quality
- Table: Latin America Annual Fdi Inflows
- Table: Bmi Trade Ratings
- Table: Top Export Dest Inations
- Table: Consumer Electronics Overview, 2006-2013
- Table: Key Retail Indicators, 2006-2013
- Table: Global Assumptions
- Table: Global & Regional Real Gdp Growth
- Table: Commodities