Colombia Weekly

Colombia Weekly

Rodrigo Fuenmayor, William Pereira, Economics/FX/Interest Rate Teams - FX / Rates
Colombia Weekly | 04 Dec 2012 12:21 |

Summary

Strengthening labour market. The unemployment rate (urban areas) declined to 10.2% in October from 10.7% in the month before. This was better than the consensus expectation of 10.5%. The national unemployment rate was 8.9%. The strengthening of the labour market and continued availability of credit, albeit at a reduced pace, bode well for domestic consumption and demand.

Peace talks adjourned for a week. The first round of direct negotiations between the government and the illegal and armed group FARC (Revolutionary Armed Forces of Colombia) concluded in Havana. Talks are to resume in a week.

The government representative gave no indications that talks had advanced substantially nor did he take any questions. This will undoubtedly be a long and arduous process and any hope of a quick resolution is unfounded, in our view. The negotiations are currently focused on the difficult issue of rural development. Other challenging issues, such as ending the war, the narco trade, disarming and the post-conflict future of the guerrillas, and compensation for war victims will be negotiated later. President Juan Manuel Santos has set a nine-month horizon for an agreement. Even that may prove optimistic.

Business confidence fell in October. Fedesarrollo’s Industrial Confidence Index (CCI) declined to -2.6% in October from a flat reading (+0.1%) in September. The weakness was largely due to a sizable 16.6pp drop in the CCI’s three-month-ahead production expectations component.

Consumer confidence improved in October. Fedesarrollo’s Consumer Confidence Index (CCI) rose to 22.8% in October from 16.9% in September. However, the CCI in October was still 2.9pp below its level from a year earlier. October data will likely reflect continued improvement in retail sales.