Colombia economy setting NEW RECORDS-Full Speed Ahead

Monday, April 23, 2007

Colombia Economy: Full Speed Ahead

GDP and FDI continue growing at significant rates,
driven by high confidence in President Alvaro Uribe
and his policies.

As Colombian president Alvaro Uribe met a group of foreign investors today, foreign economists and investment banks continue to remain bullish on the outlook for Colombia's economy.

"It is difficult not to expect the first quarter of the year to show an aggregate expansion of more than 7 percent year over year," Bear Stearns said Friday, pointing to recent data showing solid growth in industry, retail, energy demand and cement production. "We continue to expect the rate of growth of the Colombian economy to reach 6.3 percent year over year in 2007."

That's higher than forecasts from JP Morgan (6.0 percent), local think tank Fedesarrollo (5.5 percent) and National Association of Financial Institutions (5.3 percent). Last year, Colombia's economy expanded by 6.8 percent - its best result in 29 years.


INVESTMENT BOOM: FDI in Colombia is setting new records. Today, President Alvaro Uribe (second from left) met with Jean-Charles Naouri and other executives of Casino Guichard-Perrachon, the convenience store operator in France. (Photo: Miguel Angel Solano/SNE).
Meanwhile, Credit Suisse predicts that foreign direct investment in Colombia will surpass last year's level of $6.3 billion. "We think that net FDI in 2007 will probably exceed the level that it reached last year, as there several public and private transactions that are expected to be completed in coming months," Credit Suisse analyst Carola Sandy said in commentary last week.


Uribe met Monday with a delegation that included Jean-Charles Naouri, CEO of Casino Guichard-Perrachon (the top convenience store operator in France) and Joel Ornstein, CEO of U.S.-based Euristates, Inc. (a subsidiary of French investment company Euris). Casino last year acquired local retail chain Carulla-Vivero last year for $110 million. It already owns a minority stake in Exito, the largest retailer in the country, and plans to gain full control.

Other major investments last year included Swiss-based Glencore's $656.4 million acquisition of 51 percent of the oil refinery in Cartagena and Luxemburg-based Millicom's acquisition of Colombia Movil for $479.9 million.

Last month, Brazilian steel company Votorantim acquired Colombian steelmaker AceriasPaz del Rio for $491 million. And the Brazilians may make even further investments as well.

"We believe that in full process of growth, is a country where the commercial rules and contracts are clear and respected", João Bosco Silva, managing director of Votorantim Metals, said in a statement in connection with the acquisition. "Thus, we will have the opportunity to evaluate growth alternatives also in other performance areas of VM (Nickel and Zinc), because we have a long term intention in Colombia."

Colombia is also expected to garner significant interest for the 20 percent of state oil company Ecopetrol that is scheduled for sale to private investors in August. The Colombian government is also planning to sell off electricity-sector assets such as Isagen and ISA, which will come in addition to several major private deals. "Therefore, in 2007, net dollar inflows into the country should remain sizable despite the expected worsening of the current account," Sandy says.


Meanwhile, the economy is going full speed ahead. Industrial production in February was 14.6 percent higher than the same month last year, while retail sales grew by 14.2 percent. The industrial production grow was even higher than originally forecast by Bear Stearns.

"Retail sales also grew strongly in February... leaving everything set for the first quarter to show an expansion of at least 13 percent year over year in sales," Bear Stearns says in its commentary. It expects Colombia's fast-growing reserves to reach $20 billion in the next few weeks.

The increased optimism in Colombia comes as President Alvaro Uribe is under fire for alleged ties to paramilitary groups. He has denied the ties and today received clear support from all of Colombia's major business organizations.

"We have an economy that is growing at historic high levels, resulting in ...reduced poverty," Luis Carlos Villegas, the head of the national business council (Consejo Gremial Nacional) said after meeting Uribe, along with other prominent business leaders. "Interest rates are at historic low levels, with unemployment falling, investment growing [and] exports doubling each year."

© Copyright Latin Business Chronicle

- H O M E -