Inflation 2.023 and Other Economic Results in Colombia.

Inflation 2.023

It was recently reported by the official source that inflation closed the year 2.023 at 9.28% annually, which is lower than estimated by analysts and think tanks and is also lower by almost 4 points than the inflation of the year 2.022 of 13.12%.

The item that grew the most was transportation with 15.42% due to the planned and controlled growth in the price of gasoline, which affects high and medium incomes due to vehicles and not low or vulnerable incomes.

It is also notable that food prices only grew by 5%, a level below the inflation record and that it is affecting to a lesser extent the low income and the vulnerable who mainly depend on this behavior due to their income levels. Thus, with the above, the inflation of high incomes was 9.8%, higher than that of low incomes of 8.2%.

With this record of inflation lower than expected, economic agents and analysts as well as the official sector will have to recalculate estimates for the end of 2.024. A space can also be opened to begin the dismantling of the diesel price subsidy in some month of the first semester without affecting too much the inflation of low incomes that could occur due to pressures on the increase in the price of public transportation.

Another effect is also to transmit security to accelerate the reduction of the interest rate by the Central Bank with a reduction of 50 points in one of the next meetings of the first semester. Likewise, when this happens there would also be a reduction of 100 or 150 points in the other bank interest rates sooner than in three months for CDTs and sooner than within a year for loans. The latter stimulates private investment, which is already encouraged in this year 2.024 by the reduction in inflation.

The inflation of 9.28% for the year 2.023 makes the increase in the minimum wage decreed at 12.07% higher than that inflation caused by 2.79 points and the expected inflation for 2.024 (which now with this result lower than expected of 9.28%) can be around 6%, which implies that the increase in the minimum wage is almost 6% above. This is what is called a real increase of 2.79 points with respect to the caused inflation and a real increase of 6 in relation to the expected inflation.

Salaries higher than the minimum wage increase the inflation caused by 9.28% for this year 2.024, which means they will receive a real increase this year of 3.28 points measured by the difference with the expected inflation. Salaries below the minimum that the majority of workers are and who are in the informal sector do not receive this increase.

Colombian Exports

1. Statistics

For the month of November 2.023, according to the official source of information, exports accumulated a total of 45.097.4 million FOB dollars in the year with a negative variation of -13.7% compared to the previous year in 2022.

Green coffee exports are US 2.527 million, which is only 5.6% of the total. Flowers are 4.2% and bananas 1.8% and the total agricultural and food products of US 9.168.3 represent 20% of the total.

But those from oil reach US14,151 million, which represent 31%, and those from coal, US 8.350 million, 18.5%. Those of gold US 3.093 million are 7% and for the total of fuels and mining products for US 26.642 million they are 59%.

The industrial ones reach a total of 9,285.7 million or 21% of the total.

2. Industrialization

For Colombia to be a globally competitive country, it must export industrial products at a percentage of about 50% of the total and thus, together with agricultural products at 20%, put fuel and mining exports at 30%.

What the country must do is a reindustrialization where industrial production and exports are increased above that of fuels. For this action, it must have the commitment of the private sector where there is reintegration into international value chains and also investments in technological renewal to reduce costs and have competitive prices.

It should be noted that those fuels that Colombia exports worldwide within 30 or 50 years will gradually stop being produced to make way for clean energy, an activity that the country must also undertake in that period.

The banks

1.Statistics

According to the entity in charge of financial supervision, as of october, indicators such as the value of assets, liabilities, equity and profits of the banks will be presented below.

By assets, the largest are the following: Bancolombia $244 billion, Davivienda $142 b, Bogotá $115 b and BBVA $104 b. These banks represent 64% of total assets. Likewise, within assets in the loan portfolio, the largest are Bancolombia $165 b, Davivienda $99 b, Bogotá $76 b and BBVA $69 b and represent 66% of the total. In housing loans, Davivienda $30 b, Bancolombia $21 b and BBVA $14 b stand out.

Regarding liabilities, the main banks are Bancolombia $207 b, Davivienda $129 b, Bogotá $100 b and BBVA $97 b. Within CDT liabilities, Bancolombia $62 b, Davivienda $45 b, BBVA $36 b and Bogotá $32 b stand out.

On the equity side, the main ones are Bancolombia $37 b, Bogotá $15 b, Davivienda $13 b and BBVA $7 b and they represent 70% of the total.

In profits and losses, the banks that stand out in profits are Bancolombia $5 b, Bogotá $1 b, BBVA $0.7 b and Citibank $0.7 b. With losses are mainly Davivienda -$0.5 b, Popular -$0.3 b and Scotiabank -$0.3 b. Bancolombia represents 78% of the banks' total profits.

According to experts and analysts, the year 2.023 was one of negative pressure for banks since there were recessionary effects with an economic growth of around 1% in GDP, which is low compared to the previous year of 7.3%. This led to lower growth in the loan portfolio and higher records of past due loans. However, they expect that with the decreases in the central bank's interest rate that already began in December 2.023, in the current year 2.024 the banks' losses will be reversed towards profits along with GDP records that will be close to 2% now. Furthermore, the base of comparison is the year 2.023 where there was lower growth.

2. CDT Interests

As of january 4, the interest on CDTs in the banks with the largest assets are as follows: in Bancolombia 11.83% for 90 days, 12.1% for 180 days and 11.97% for 360 days. In Davivienda 11.52% for 90 days, 11.48% for 180 days and 11.37% for 360 days. In Bogotá 12.41% at 90 days, 12.24% at 180 days and 11.55% at 360 days.

In banks with the lowest assets in the system, Banco Pichincha 13.77% at 90 days, 14.54% at 180 days and 14.34% at 360 days. In Bancien 13.45% at 90 days, 14.05% at 180 days and 14.15% at 360 days. In Falabella 13.76% in 90 days, 14.28% in 180 days and 13.43% in 360 days.

In the weighted average of the banks, the rate is 11.99% for 90 days, 12.05% for 180 days and 11.83% for 360 days.

Large banks pay lower interest than small banks because they represent lower financial risks.

3. Profits of the Total Financial System

As mentioned before, banks had profits of $6.4 billion in the accumulated amount up to the month of october, which is lower than the profits of trust funds and pension funds with $29.7 billion and $23.2 billion respectively. The former mainly include the trusts with profits of $13 billion and the latter the moderate fund with $8.3 billion and the programmed retirement fund with $6 billion.

4. Pension Fund Resources

A Individual Savings

The resources of the pension funds have a balance as of October of $373 billion, of which the moderate is $219b, the scheduled withdrawal $43b, the conservative $35b, and the highest risk $77b. At the same time, as mentioned before, the moderate and the scheduled withdrawal obtained the greatest gains.

As of october, the pensioners of this individual savings regime reached 314.817 individuals.

For their part, the resources of the voluntary pension funds (porvenir, protection, dafuturo) have a balance of $25 b. This fund is relatively smaller compared to the others.

B Average Premium

The fund's resources reach $12.1 billion, where Colpensiones owns $9.8 b.

The pensioners of this regime reach 1.6 million people, most of them from Colpensiones.

It is observed that the resources of individual savings are much greater than those of the average premium, but the resources of the average premium are complemented with the resources of the General Budget of the Nation for the purposes of paying their pensioners.

The pensioners of this average premium scheme are 5 times the pensioners of the individual savings scheme because that scheme has been in operation for more years than the individual savings scheme, which is 30 years old.