Colombia, Venezuela and Exports: Biggest Loser Edition

A Bloomberg article today touches on how the diplomatic dispute with Venezuela is affecting Colombia’s economy, as it has resulted in plummeting trade with their second most important trading partner. Maladjusted wrote awhile back about how a Mockus presidency could be good for business if it means a reopening of trade between Venezuela and Colombia. Well, it doesn’t look like Mockus has a snowball’s chance in hell to actually win this thing, but as updated numbers are out from Colombia’s DANE, it’s worth taking a look to see how continued diplomatic problems (almost assured with Santos) will continue to weigh on the economy. Already, as Bloomberg points out, Colombia has the second lowest growth forecast in the region, and the collapse in trade is at least part of the problem. So, lets run some numbers through Maladjusted Charts and see what we can find out, has Colombia found new markets for these goods? What sectors are the worst hit?

First off, lets get the basics down, just how much has trade with Venezuela collapsed, and who has picked up the slack?



Before the drop off from Venezuela, the US was still Colombia’s largest trading partner, but was followed by Venezuela (all alone in second place), Ecuador and of all places, Switzerland. But through the first 5 months of this year, the US has remained its dominant position, while China has catapulted from obscurity to accounting for nearly 8% of total exports, about double that of Venezuela or Ecuador, as the chart below shows.



So from the above, it does seem that Colombia has fared pretty well finding alternative markets for their exports to Venezuela, indeed total exports increased over the same period last year. Unfortunately for some, looking at the breakdown of goods reveals a slightly different picture. Some 23% of exports with Venezuela during the period of Jan.-April 2009 were animals and animal products, a sector that accounted for around 5% of Colombia’s total exports. This year, however, Venezuela has stopped buying these products, and the sector has taken an extreme hit, making up less than 1% of total exports so far this year. The chart below shows how while exports to the US have skyrocketed, none of it has come from animals and animal products.



So what has accounted for the rapid rise in exports to the US? Well, simply, oil. Colombia has increased their oil production this year, and coupled with a rise in prices from last year, exports of combustibles accounts for nearly the entire rise in total exports, with most of the surplus going to the US.



Another sector that seems to have taken a hit from the Venezuela dispute is textiles. Overall, despite being a smaller component of total exports, textiles accounted for the second largest drop from last year to this year after animals and animal products. Exports to Venezuela of textiles dropped by $125 million, while overall exports of textiles fell by $105 million. As the chart below clearly shows Colombia has been unable to replace the Venezuela market for textiles.



In the end, what this means is summed up nicely in a quote from the Bloomberg article referenced earlier, “Colombia is selling more oil to the U.S.,” said Sandy [an economist with Credit Suisse Group AG]. “For the industrial sector and food producers, more sales to the U.S. don’t do anything.”

So while total exports have increased over 2009, it’s really not saying much as 2009 was clearly not the best year. And although trade has increased greatly with China and with the US, there have been sectoral shifts more so than straight replacement. I would say that the increased trade with China is definitely a good thing for Colombia, since before the recent increase Colombia exported less to China as a percent of total exports than just about every other country in South America. On the other hand, increasing dependence on the US may not be the most desirable outcome here. I’m sure the US will be happy to buy up Colombian oil…especially over Venezuelan oil, but look at Mexico…do you really want to be that tied to the US economy? Not to say that being tied to Venezuela’s economy right now sounds very good either, but looking at the next few years up north is not very promising. The UCLA Anderson Forecast was just released and projects growth for the next three years below the 3% long-term nominal growth rate. And yes, unemployment is expected to still be over 8.5% by 2013. Not exactly a booming export market.

But more importantly, and certainly more importantly for those most affected in Colombia by the trade fall off, are the sectoral shifts that will occur over the medium term if exports to Venezuela don’t return, or if new markets for those products can’t be found. While the overall export picture doesn’t seem dire, the industries that have been most affected, animal farmers and textile producers have been severely hit. Farmers, while they account for a smaller percent of GDP, make up nearly 20% of the workforce and have been the worst hit by the dispute with Venezuela.

Well, I’m sure this is WAY more than you ever wanted to know about trade between Venezuela and Colombia, I think it may be more than I wanted to know, but there ya have it. Next time maybe we can see if Venezuela has found new markets to import all that food that they no longer get from Colombia….then again, it’s probably just rotting in a container somewhere anyhow…

Best Breakdown of the First Round in Colombia

Want the most detailed, complete breakdown of the first round available? Check out the coverage at FiveThirtyEight. Geographical breakdown? Check. Vote by poverty level? Check. Exactly how bad were the polling companies? Check. Does Mockus have a chance? Check (and the answer is pretty clearly no).

As a teaser lets rip the image showing the polling companies margin of error:



Gross. Go check out the whole post, which is definitely worth a read. Here's to hoping they keep the international coverage going.

(side note: congrats to FiveThirtyEight for partnering up with the New York Times)

Market Reaction to First Round in Colombia

Just a quick look at the market reaction to Sunday's election. There was a lot of talk about how Mockus didn't scare investors, that may be true, but there is a lot of coverage today about how happy the markets are at Santos' big first round. As Marcelo Ballve pointed out, there was some risk surrounding the "unpredictability factor", and so Santos' big win appears to have taken that out of the equation.


First, Reuters:

The peso currency and benchmark TES bonds firmed on Monday, while the country's risk rating on JPMorgan's EMBI Plus index fell 8 points to 231 points.

"Now there is much more certainty about what might happen and what lies in store for the country. As well economic matters, the teams are well regarded. That generates stability and confidence recovers," said Alexander Cardenas, director of economic research at Colombian brokerage Acciones and Valores.

And, from Bloomberg:

The yield on Colombia’s benchmark 11 percent bonds due July 2020 fell three basis points, or 0.03 percentage point, to 8.04 percent at 11:02 a.m. New York time, according to Colombia’s stock exchange. The bond’s price rose 0.207 centavo to 120.003 centavos per peso.

…

“The market knows Santos,” said Bertrand Delgado, a senior Latin America economist at Roubini Global Economics, a research company in New York.

So Mockus may not have been bad, but the markets have spoke, and they clearly like Sunday's results. At least for now, it appears the country does too (I know polling in Colombia is notoriously bad, but seriously, you gotta wonder about this one, right?).

Mockus goes all po-mo

Ok, so we all knew Colombian presidential candidate Antanas Mockus has a background in math and philosophy, but who knew he'd turn out to be an avowed post-modernist too? Yes indeed, in a long interview in Spain's El Pais (spanish only), Mockus goes to great lengths to deconstruct the political dichotomy of "neoliberal" and "leftist," arguing that neither label suits him.

From the interview:

"Maybe I'm a bridge, maybe I'm someone heterodox with a vocation to pull together the fragments of various points of view. I have liquidated public entities, I have privatized, I have fired public officials and have been called a neoliberal. But I have raised taxes to an extent no neoliberal ever would, and I have defended public spending to promote equity. Labels are instructive but they can disguise many things. This might sound pretentious, but the new deserves a new name."

Might sound pretentious? Next thing we know he'll be quoting Derrida during his inauguration speech.

Ok, so it's not like he's the only post-partisan politician out there claiming to transcend ideological divisions. And there's certainly a nice ring to the notion that we should give up old ideological labels in order to simply govern pragmatically. But the belief that one has transcended ideology, to paraphrase the philosoher Slavoj Žižek, is the very imprint of ideological thinking.

Pseudo. Philosophical. Rant. Over.

News and Notes on the Colombia Election

Always a lot of coverage of the Colombian presidential election, and today is no exception, so here are just a few links to some interesting bits and pieces:

• Al Jazeera has a video report up where Teresa Bo looks at how the false positive scandal is hurting Santos' campaign. She speaks with family members of the victims, as well as presidential candidate Rafael Pardo and researchers who claim that the killings continue.
  
  
• La Silla Vacia looks at the internet campaign of Santos. The dirty tricks continue. They also note that yet another American is in on the campaign, Ravi Singh, who was the internet guru of the Obama campaign. Read the whole thing, they're really going all out. (via Colombia Reports)
  
  
• More beef between Polo and Mockus. Mockus had said that nominating Petro was "a clear departure from the FARC", a slap in the face to the rest of the party. For some good commentary on alliances between candidates, check out Otto's comment here.
  
  
• Want to know what regions support Santos? Semana has the answer. For full coverage of the elections, check out Votebien 2010.
  
  
• Finally, some more polling. Everything is pointing to the race tightening back up as we get closer and closer. Still doesn't seem like anyone has a chance in the first round, things should get real interesting in the second.

No Green Polos in Colombia

Back in early April (when Mockus was polling under 10%), maladjusted pointed out that a recent political alliance between two popular mayors might just shake up Colombia's presidential elections....well that certainly has happened, as Mockus and Santos seem to be just about neck and neck in every poll and Mockus is now the favorite in a possible second round. But another part of the equation was whether or not support from the left was forthcoming, and now we seem to have an answer. After Gustavo Petro of the left-leaning Polo Democratico hinted at a possible second round alliance, Mockus had the cold water ready:

Colombian Green Party presidential candidate Antanas Mockus ruled out any partnership with Polo Democratico leader Gustavo Petro on Monday, saying that the Green's only alliance would be with "the people."

Prompting a Petro response via twitter (god damn the tweeter), "Good bye Mockus, we'll go it alone."

Really, this was probably a bigger deal before Mockus took off in the polls, and he probably is confident that he can win without Polo's support, but recent polling shows that it wouldn't be insignificant. According to the most recent poll from Datexco, Petro is now in third place with 7.5% of the vote, moving ahead of conservative Noemi Sanin. Mockus is no lefty, and he's largely toed the line in terms of backing "democratic security" policies, so maybe the alliance with Petro was never destined to be. But if Mockus does win the election he's not going to find a lot of love in congress, where the Green Party is not well represented, and if your going to reach out to someone it best be Polo over PIN. Of course, regardless of political alliances, left-leaning voters will have to choose between Santos and Mockus in a potential second round...not exactly a hard choice for the left, even if your not a big Mockus fan.

In any case lets take a look in chart form at the most recent polling from Datexco, via the irreplaceable Colombia Reports:

Mockus good for business?

So maladjusted hasn't done any scientific study on this, but the guess is that most casual observers would think the Colombian business community will support Santos in the upcoming election. It's not like Mockus' rise in the polls is rattling the markets or anything like that, but business generally likes continuity (and right wingers), not newcomers who dress up in super hero costumes and dispatch mimes to ridicule traffic violators. That said, one thing businesses like even more are profits. Currently, exports to Venezuela have collapsed (due to some testy relations, we'll say) and while the US has graciously stepped in (see the graphs below), the fact remains that Venezuela is right next door and even though they are pushing an FTA with the US, does Colombia really want to be EVEN MORE dependent on the US (just look at Mexico).

According to Reuters, "Colombia says the trade conflict could trim around one percent off its economic growth this year." That ain't no joke, especially not when your coming off this past year. The article also mentions that Colombia has relatively few exports to China compared to the rest of the region. So maybe to the extent that China takes the place of Venezuela that could be a good thing, but it seems the US is picking up most of the slack.


So this is where Mockus' statements about Venezuela come into play. During the presidential debate the other night Mockus stressed the need to separate relations with Venezuela from those with the US. This would be a serious break from the Uribe years in Colombia, where it seemed like their privileged relationship with the US was always put before everything else. Given that Colombia's neighbors aren't too thrilled with Santos, it seems pretty clear that Mockus would be the candidate most likely to repair relations with Venezuela and Ecuador. And who stands to benefit the most from that? Colombian exporters...



So maybe I'm over estimating the effect this is having, and how important this is for Colombian businesses (in which case let me know). Regardless, from everything I've read Mockus' economic policies would not differ much from Santos, and in any case it would be hard to argue that better regional relations would be a BAD thing for business.

(all images courtesy of Colombia's DANE)

Quote(s) of the Day

First, from Miguel d'Escoto the former President of the UN General Assembly on the US' role in the region, via Democracy NOW!:

We need the United States as much as we need arsenic, and that is the fact. We don’t need it. We would need it, if they wanted to join the rest of humanity and together work for a better future for all of us, but they are not doing that. They are instilling, they have instilled, a culture of death, of greed, of selfishness. And this is killing the world.

Word. And secondly and more comical, from Colombia presidential candidate and former Defense Minister Juan Manual Santos, describing the differences between him and Antanas Mockus, via Colombia Reports:

"I am different from him in many ways. Firstly, I shaved off my beard. I believe in God. I believe in having an army."

My preference is for beards...and atheism and no army for that matter...

Bogotá Cambió

So who is this Antanas Mockus guy? I mean, we all know he's a presidential candidate in Colombia and is rapidly rising in the polls... but who is Mockus the man? Where does he come from and what makes him tick?

Well now you can find out. The man was hugely successful as two-time mayor of Bogotá, where he set off what is arguably the strangest, most post-modern, and all around awesome process of urban renewal ever. As just one example that doesn't even begin to scratch the surface, this guy fired 3200 officers of Bogotá's notoriously corrupt traffic police and... replaced them with traffic mimes! Yes, mimes whose job it was to enforce traffic laws. Could I make this shit up?

And you know what's the real kicker? His unorthodox approach to city politics, inspired by his background in philosophy, paid off. But don't believe me, watch the great documentary below. And when I say great, I mean balls to the wall awesome. Cuddle up with a blanket and some popcorn and enjoy.

Oh and did I mention that before running for major he was the president of the National University of Colombia and...umm... mooned an auditorium full of people? True story.

Here's part 1:



part 2, part 3, part4, part 5, part 6, part 7.