Colombia achieves fiscal balance in 2005

President Uribe announced that Colombia reached a fiscal balance in 2005 – making it the best performance in that country’s public sector in at least 15 years and the first time since 1994 that Colombia reported a balanced budget. The Colombian government has been gradually reducing its fiscal deficit, which in 1999 stood at 5.5% of GDP.

Standard & Poor's recently raised its outlook on Colombia's foreign and domestic debt to "positive" from "stable," which caused yields on the Colombian bonds to fall to record lows.

IMF says economic outlook “very favorable”

During a routine visit to Colombia, the International Monetary Fund (IMF) issued the following statement on March 9 in Bogota:

"The economic performance in 2005 surpassed expectations, as real GDP rose by an estimated 5 percent – contributing to strong declines in unemployment and poverty – the external sector strengthened and inflation remained well under control. Fiscal policy was significantly stronger than expected, reducing gross public debt to about 48 percent of GDP.

"The outlook for 2006 remains very favorable. Real GDP is expected to rise by 4½ percent, while inflation during the year is likely to fall to the lower end of the target range of 4 to 5 percent. The external current account deficit is projected to amount to 1.6 percent of GDP, reflecting the ongoing strength of world commodity prices, especially for oil, as well as strong growth in non-traditional exports. Net capital inflows are expected to remain strong, resulting in part sustained foreign direct investment.”

Trade Surplus Jumps 26% to $1.39 Billion

Colombia's trade surplus expanded 26% to $1.39 billion in 2005, due to higher exports of commodities and vehicles, according to the Statistics Department (DANE). DANE also reported that Colombia’s trade surplus in December was $50.9 million, compared with a $17.7 million deficit in the same month of 2004.

Colombian exports of cars rose 58% last year, in part due to an increase demand from neighboring Venezuela. Exports of commodities such as oil, coal, coffee and nickel rose 35% in 2005. Overall, exports expanded by 27%, to $21.19 billion last year. Strong exports have spurred the country’s economic expansion and largely contributed to the expanding GDP. In addition, imports rose 27% to $19.8 billion in 2005, according to DANE.

Retail Sales Up 10%

Colombian retail sales, excluding fuel, rose 9.3% in 2005 and 10% in December compared with the previous year, according to (DANE). Sales of furniture led the charge with a 44% increase, while vehicles and motorcycles followed, both with a 29% increase in sales.

Employment in the retail sector rose 4.1% last year from 2004, and registered a 5.8% increase in December 2005 over the previous year. Analysts believe falling unemployment and renewed domestic confidence are the two main factors responsible for the increase in retail sales.

Growth of Industrial Production and Productivity

Colombia's industrial production, excluding coffee processing, rose 2.23% in 2005, compared to the previous year. The production of manufactured goods led the growth – including a 29% increase in cement production compared to 2004. Of 48 industrial sub-sectors, 31 registered growth last year. Productivity also grew 2% in 2005.

Colombia to Invest $350 million for Port Infrastructure

Colombia will invest $350 million over the next 15 years to improve the infrastructure and service in ports on the Pacific coast of Valle del Cauca. The investment will largely benefit Buenaventura, Colombia’s main Pacific port, which is owned by Maritrans Ltda. It will also include development of deep-water ports in Bahia Malaga and Agua Dulce. In addition, funds will be used to improve the road between Buga and Buenaventura.

Three quarters of the funds in Buenaventura are expected to help improvements in education, health, transport, public services and highways, with the remainder to be invested in improving the competitiveness of the port. The Inter-American Development Bank and Andean Development Corporation (CAF), and national, departmental and municipal government budgets are expected to fund the plan.

Starbucks to Open in Colombia

Starbucks, the world’s largest coffee retailer, is entering Colombia and planning to open its first store in Bogota. Though an exact location and opening date have not been determined, the north side of the city and Bogota’s El Dorado airport are under consideration. The company is likely to enter Colombia alone, and not as it commonly does in alliance with local investors, to compete directly with the Juan Valdez, Tostión, Kaldivia, and Oma coffee chains.

25 New Hotels Planned for 2006

Colombia’s hotel sector will experience significant growth in 2006. The country will add 25 new hotels in 2006, in addition to 20 that began construction last year. Of the 25 hotels planned to open during 2006, nine will likely be built in Bogota. The remaining 16 will likely be built in Barranquilla, Cartagena and Medellín.

The hotel sector accounts for approximately 150,000 people in Colombia. Once open, the new hotels will add 3,200 jobs to the market. The additional hotels will add 4,500 rooms to 55,000 currently in operation.

Colombia Begins Privatizing National Gas Transport Company

The Colombian government began to transfer control of the country's largest natural gas transportation operator, Ecogas, to the private sector on March 7, auctioning shares of the company to social groups. The government plans to raise a minimum of $332 million from the sale of shares in a new company, Transportadora de Gas del Interior SA, or TGI.
Ecogas employees and former workers, as well as Colombian pension and mutual funds, labor unions and cooperative associations have first option to the shares until May 8, when the remaining shares in TGI will then be offered to a strategic investor, through an auction to be held on July 26. Ecogas operates a network of 3,644 kilometers of natural gas pipelines in the country.