The surge in Colombian tourism revenues and overseas remittances has kept the external balance in surplus and the peso stable over the past two years, making for attractive carry and equity returns. Now, however, the end of domestic demand retrenchment and the renewed upturn in retail and durable spending is eroding the external position and, together with low global oil prices, adding to potential volatility.

We don't see Colombia as a meaningful underperformer going forward, but in our view the scope for outsized gains in local assets is also limited.