A small part of those attending the largest annual bankers’ convention, held last week in Cartagena de Indias, returned home with a moderately different appearance. The event, marked as always by a succession of conferences in rooms with full air conditioning and parties where economists, executives and politicians meet, has served to confirm that sectors of the financial world are beginning to detect slight signs of recovery. From the leader of the all-powerful Grupo Aval and heir to the magnate of the same name, Luis Carlos Sarmiento, to the host Jonathan Malagón, president of Asobancaria, they have highlighted some positive points.
His statements contrast, without a doubt, with the extensive manual of criticism of the state’s management of a convalescent economy during the last two years. Are these timid symptoms of recovery or is it a mirage? The facts suggest that caution is better business in the field of prophecies: “Economic activity has been surprising on the rise,” explains the director of economic research at Corficolombiana, César Pabón. Despite the weak 0.9% growth during the first quarter of the year, he remembers that expectations were around 0% and in some cases, even in a negative range.
In any case, few dare to put the word “recovery” on the table in capital letters and every time an analyst presents a positive fact in the conversation, he inevitably strives to clarify that this is not the time to throw things up either. By criticizing the first left-wing government in the recent history of Colombia, with which businessmen and bankers have clashed continuously, a layer of pessimism had permeated the debate: “The daily production of barrels of oil in April recovered until 790,000 a day, a figure that we have not seen since 2020,” says Pabón.
A basic positive fact that adds to the good performance in agriculture, with coffee growing and livestock chaining notable advances. The accumulated production of coffee bags grew by 12% between June 2023 and May 2024, according to data from the Federation of Coffee Growers. And livestock farming has also been one of the engines to temper the economic storm, with the rebound in pork production (8.1%) as one of the keys to understanding the quarterly outlook.
After more than a year in which the delays of the health crisis and other port and international problems left damage to the construction sector, civil works emerged as the big surprise by growing 7.5% in the first quarter. A positive variation that comes as a balm against the previous five quarters of consecutive contractions. In this way, oil production, good agricultural data and infrastructure are three signs that there is some improvement.
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A lonely tenth that also counts
Reactivation. That is the word most repeated in chorus by the economic analyzes of recent weeks. Reports that are accompanied by a decrease of a single tenth in unemployment until reaching 10.6% in its interannual reading for April. Another unexpected record: “It is not substantial, but it improved against all odds,” says Pabón. “Although it is not news to celebrate, it does show that at the local level there is better dynamism and this, of course, benefits household consumption.”
It is not easy for these records to completely reassure those responsible for monitoring the pulse of the Colombian economy, who are specifically concerned about low investment (-15% in the first quarter) or the budget deficit. “For a financial and economic sector there is nothing sillier than generating anguish and distrust,” says economist Sara Piñeros. From her home in Canada, she claims to be aware that the “economy is not going very well,” but in her opinion, political polarization has buried the possibility of understanding a much broader and more complex reality than what they suggest. ideological tantrums.
In the same way, César Pabón opens the angle and remembers that what happens in Colombia, although it is often ignored, is closely related to the situation in the United States, the largest trading partner. The push of the labor market and the growth of the great world power has led to a 25% increase in remittances arriving in Colombia when compared to the first part of 2023. “Remittances are a source of local spending, particularly in regions such as the Coffee Axis or the Cauca Valley.”
This would also explain the boost to household consumption, which represents 70% of the Gross Domestic Product and for months also had negative performance. It is supported by the vehicle sales figure in April, which rose by 11.3% after having outlined two years of negative streak. The good situation of tourism, furthermore, seems to be tied to news from the United States and the global north and between January and March the number of foreign visitors grew by 7.6% compared to the same period of the previous year.
Following this, the Minister of Finance, Ricardo Bonilla, announced last week a budget cut of 20 billion pesos, something like 5,000 million dollars or 4% of the total, to remedy a disturbing hole in public accounts. A decision celebrated almost in unison in the country. A huge snip that César Pabón interprets as a message of confidence: “The reduction in spending and the increase in the price of ACPM is good news for confidence and investment,” Pabón concludes. A panorama full of paradoxes and data that slowly begin to feed the hopes of a few.
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