Colombia Country Risk Report

Published 29 April 2015 | Quarterly

  • 52 pages
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  • Includes 3 free updated quarterly reports
 
$1,195.00
Colombia Country Risk Report

Core Views:

  • With the oil sector set for slower growth as global crude prices plunge, this will prompt larger net exports deficits and weigh on gross fixed capital formation, such that we anticipate slower growth over the next decade than in the last.

  • Hydrocarbon sector weakness will also weigh on Colombia's balance of payment position. Indeed, faltering oil prices and production will temper investment into Colombia and cool export growth. Meanwhile, slower oil production growth combined with increasing pressure to spend on social programmes and infrastructure development will feed through to fiscal slippage in the years ahead. While the country is well positioned to withstand the storm, with low external debt and a sizeable stock of foreign reserves, the potential for deterioration in the country's macroeconomic buffers will temper investor perception of Colombia's sovereign creditworthiness.

  • We expect the government and Fuerzas Armadas Revolucionarias de Colombia will reach a peace accord in the coming quarters. However, given the splintered nature of the left-wing insurgent group, such a deal will only slowly improve the security environment.

Major Forecast Changes:

We have tempered our optimism on Colombia's growth outlook. Our increasingly cautious view toward the country's oil sector will feed through to the economy in a number of ways:

  • We have modestly revised down our 2015 average peso forecast, from COP2,585/USD to COP2,560/USD. While this represents a modest upward adjustment to our forecasts, reflecting the impact of the peso's larger-than-expected H115 rally, this still implies sizeable depreciation in the latter half of 2015.

  • We have revised down our fiscal forecasts, and now expect shortfalls of 3.1% of GDP in 2015 and 3.6% of GDP in 2016. We have long highlighted that weak oil prices and falling production would weigh on revenues, but now also see the government as less likely to pullback sharply on spending in the current low growth...

Table of Contents

Executive Summary
5
Core Views
5
Major Forecast Changes:
5
Key Risks To Outlook:
5
Chapter 1: Political Outlook
7
SWOT Analysis
7
BMI Political Risk Index
7
Domestic Politics
8
Appointment Of US Envoy To Bolster Peace Negotiations
8
TABLE: POLITICAL OVERVIEW
8
Long-Term Politics
9
Many Structural Challenges Ahead
9
Chapter 2: Economic Outlook
11
SWOT Analysis
11
BMI Economic Risk Index
11
Economic Activity
12
Oil Sector Weakness Will Prompt Further Economic Deterioration
12
table: GDP Contribution To Growth
12
table: BMI And Bloomberg Consensus Forecasts* WTI And Brent, Front Month - USD/bbl
13
Monetary Policy
14
Elevated Inflation Will Keep Monetary Policy On Hold
14
table: Monetary Policy
14
Fiscal Policy
15
Expenditure Cuts Insufficient To Prevent Fiscal Slippage
15
table: Fiscal Policy
15
Balance Of Payments
17
Oil Price Plunge Will Undermine Balance Of Payments Position
17
table: Current Account
17
table: BMI Currency Forecast
18
Exchange Rate Policy
19
COP: Depreciation To Continue
19
table: Exchange Rate
19
Chapter 3: 10-Year Forecast
21
The Colombian Economy To 2024
21
Structurally Weaker Growth Following Oil Bust
21
table: Long-Term Macroeconomic Forecasts
21
Chapter 4: Operational Risk
25
SWOT Analysis
25
Operational Risk Index
25
Operational Risk
26
table: Operational Risk
26
Legal Environment
27
table: Latin America - Legal Risk
28
Costs Of Labour
30
table: Latin America - Labour Costs Risk
31
table: Regulations Governing Flexibility Of Workforce
32
Chapter 5: Key Sectors
35
Retail
35
table: Retail Sector Spending, % Of Total
36
table: Retail Sector Spending, % of GDP
37
Shipping
38
table: Major Ports Data
40
Other Key Sectors
43
Table: Oil & Gas Secto r Key Indic ato rs
43
Table: Telecoms Sector Key Indicators
43
Table: Pharma Sector Key Indicators
44
Table: Defence & Securit y Secto r Key Indic ato rs
44
Table: Autos Sector Key Indicators
44
Table: Foo d & Drink Secto r Key Indic ato rs
45
Table: Infrastructure Sector Key Indicators
45
Table: Freight Key Indicators
45
Chapter 6: BMI Global Macro Outlook
47
Global Outlook
47
Softening Growth Picture
47
Table: Global Assumptions
47
Table: Developed States, Real GDP GrowtH, %
48
Table: BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, %
48
Table: Emerging Markets, Real GDP Growth, %
49

The Colombia Country Risk Report helps businesses with market assessment, strategic planning and decision making to promote growth and profitability in Colombia. It is an essential tool for CEOs, Chairmen, Finance Directors/CFOs, Managing Directors, Marketing/Sales Directors with commercial interests in this emerging market.

An influential new analysis of Colombia's economic, political and financial prospects through end-2019, just published by award-winning forecasters, BMI  Research.

Key Uses

  • Forecast the pace and stability of Colombia's economic and industry growth through end-2019.
  • Identify and evaluate adverse political and economic trends, to facilitate risk mitigation.
  • Assess the critical shortcomings of the operating environment that pose hidden barriers and costs to corporate profitability.
  • Contextualise Colombia's country risks against regional peers using BMI's country comparative Risk Index system.
  • Evaluate external threats to doing business in Colombia, including currency volatility, the commodity price boom and protectionist policies.

The Colombia Country Risk Report by BMI  Research includes four major sections: Economic Outlook, Political Outlook, Operational Risk and Key Sector Outlook.

Economic Outlook:

How will the Colombia' economic policy-making and performance impact on corporate profitability over 2015-2019?

BMI provides our fully independent 5-year forecasts for Colombia through end-2019 for more than 50 economic and key industry indicators. We evaluate growth, and also forecast the impact of economic management.

Economic Outlook Contents

The Colombia Country Risk Report features BMI's forecasts with supporting analysis for 2015 through to end-2019, set against government views and BMI's evaluation of global and regional prospects.

Key Areas Covered:

Data:

  • Full 10-year forecasts with data - for key macroeconomic variables including GDP (real growth and per capita), population, inflation, current account balance and the exchange rate.
  • BMI's comprehensive Risk Index system - rates each country worldwide for economic and political risk, and rates the business environment, within a global and regional context.

Written Analysis:

  • Economic Activity - real GDP growth, employment, inflation, consumption (retail sales and confidence).
  • Balance of Payments - trade and investment, current and capital account.
  • Monetary Policy - interest rate trends (bank lending and deposit rates) and inflation (producer price and consumer price).
  • Exchange Rate Policy - currency controls, foreign investment flows, exchange rates and foreign exchange reserves.
  • Fiscal Policy - macroeconomic strategy and policies, government finance and tax reforms.
  • Foreign Direct Investment - approvals, inflows and climate.
  • External Debt - debt profile (short and long-term plus public and private sector obligations).
  • Global Assumptions - forecasts for each year to end-2019 covering: major commodities, growth in key regions, inflation, and interest and exchange rates, in the United States, Japan, China and the eurozone.

Key Benefits

  • Rely upon BMI's 100% independent forecast scenarios for Colombia and underlying assumptions - we take no advertising and are privately-owned.
  • Exploit the benefits of BMI's comprehensive and reliable macroeconomic database on Colombia, sourced and fully maintained by BMI from an extensive network of private sector, government and multilateral contacts.
  • Gain key insights into the current and future direction of government economic policy, which could significantly affect your company's business prospects, from BMI's team of analysts and economists.

Political Outlook:

What are the political risks to doing business in Colombia over the next 5-years?

BMI's Colombia country Risk Index evaluates the short- and medium-term threats to political stability.

Political Outlook Contents

  • SWOT Analysis for the Colombia Market - Political Strengths, Weaknesses, Opportunities and Threats facing Colombia.
  • Political Stability and Risk Assessment - BMI's Risk Index assesses explicit short- and long-term risks to political stability; latest positioning and trends for Colombia's risk are compared with regional and global averages.
  • Current Administration and Policy-making BMI assesses the threats to the continuity of economic policy, and likely changes to the business operating environment.
  • Long-Term Political Outlook BMI examines the structural risks to the stability of Colombia’s political system and the dominant public policy issues likely to affect decision-makers, and outlines scenarios for how the state could evolve in the medium to long term.

Key Benefits

  • Benchmark Colombia's risk profile against its neighbours, the global and regional average, allowing easy comparison of risks between key business markets.
  • Identify, evaluate and anticipate political and security risks to the business environment, and to your company's current operations and future plans.
  • Gain valuable insights into government and policy-making, through BMI's specialist team of analysts and economists, and their network of private and public sector sources.

Operational Risk

What are the current operational risks and difficulties associated with doing business in Colombia?

The Operational Risk section gives an evaluation of current risks and difficulties associated with operating in the market. It also provides a brief overview of the regional Operational Risk Index which benchmarks Colombia against its neighbours.

Operational Risk Contents

The chapter provides a summary of the main threats in the country, within:

  • Labour Market Risk (Education; Availability of Labour; and Labour Costs)
  • Logistics Risk (Market Size and Utilities; Quality and Extent of the Transport Governance)
  • Trade and Investment Risk (Economic Openness; Government Intervention; and Legal Risks)
  • Crime and Security Risk (Crime; Terrorism; and Interstate Conflict risks).

The report also drills down in greater depth to address key issues in one of the following segments most critical to the market:

  • Transport network, economic openness, cost and availability of labour, crime risks, bureaucratic environment, market size and utilities, and interstate conflict.
  • Assess your company’s exposure to country specific operational and business risks, using BMI’s insight on the current dangers of operating in the market.
  • Evaluate Colombia’s risk profile against its regional peers, helping you understand the market’s strengths and weaknesses in relation to other countries.

Key Sector Outlook*

Which industry sectors in Colombia will grow fastest, and where are the major investment opportunities in the market?

BMI identifies investment opportunities in Colombia's high growth industries including automotives, defence & security, food & drink, freight transport, infrastructure, oil & gas, pharmaceuticals & healthcare and telecommunications & IT.

Key Areas Covered:

  • Market Overview - Size and value of each industry, including recent sector developments and major industry key performance indicators (KPIs) that have impacted company performance.
  • 5-year Industry Forecasts - Forecasts for each year over 2015-2019, using BMI's proprietary industry modelling technique, which incorporates key domestic and international indicators - including economic growth, interest rates, exchange rate outlook, commodity prices and demographic trends - to provide fully integrated forecasts across and within each industry.
  • Demand- and Supply-Side Data/Forecasts - BMI's industry data covers both the output of each industry and the domestic demand, offering clear analysis of anticipated import/export trends, as well as capacity growth within each industry.

Key Benefits

  • Target strategic opportunities in high growth industries, which are benefiting from global mega trends, and thus offer strong investment and growth opportunities.
  • Compare the growth path of different industries to identify which are best placed to benefit from domestic and international economic prospects, and which have historically suffered from volatile growth trends - a key indicator of future risks.

*Not all Country Reports contain the Key Sector Outlook chapter. Please enquire above for more information.

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Testimonials

The sections that I find most interesting and useful are the macroeconomic data and forecasts for the country, top export destinations and economic activity. The indicators/analysis of these areas helps us orient our thinking, our assumptions and, consequently, our decisions in the commercial area.

Country Manager, DHL Express