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Colombia Stable But Meh
As before, Colombia's external position is "ok, but not exciting". Current account deficits have stabilized and the basic BOP is in balance, but adjustment momentum has faded without leaving Colombia much wiggle room.
And domestic retrenchment is over. The big downturns in durable auto sales, retail spending and cement usage all occurred in 2023, and demand has been gradually rebounding over the past year. This is good for underlying growth and earnings, but also threatens the external position going forward.
The peso has calmed down this year after the sharp regional 2024 sell-off. However, with Colombian nominal and real rates lower than in Mexico or Brazil, we prefer to have exposure to MXN and BRL rather than COP. Nor do we see Colombia as an equity growth story at this juncture, as we fear the economy doesn't have much leeway for a renewed domestic boom. Finally, sovereign dollar bonds are fairly priced in our view.
Colombia Stable But Meh (PDF)
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