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Recent Notes on Inflation and Exports in Colombia.

Inflation

According to the official source, inflation in october reached 5.41%, a result lower than the market's 5.7% expectation. This result was also lower than the 5.81% for september and is lower than the 10.48% figure for a year ago.



Food had low inflation, since it only registered 1.75%, which benefits the inhabitants with lower incomes due to their lower purchasing power. In fact, inflation for the poor was 5.01%, while inflation for the high income reached 5.68%. The latter were impacted by the costs of secondary education 13.3%, postgraduate studies(9.16% and fuel for vehicles 10.9%.

Although food benefited the poor more, they had an increase in rents of 7.96% and urban transport 8.38%.


As for the components by products of the variation of food of 1.75%, there are the fall and the increase of the following ones.

Those that fall are wheat -15.9%, corn -14.2%, tomato -46.8%, onion -22.1%, eggs -8.3%, oil -10.9% and arracacha -13.5%. Those that rise are oranges 23.5%, bananas 19.9%, potatoes 7.66%, vegetables and legumes 8.5%, panela 10.1%, gelatin 40.7% and chocolate 62.9%.


For the months of november and december, what is expected are again reductions in inflation and for the analysts, given the result of october is lower than expected, a lower inflation is possible at the end of the year between 5% and 5.3% and food will continue with low levels of inflation.


The monetary authority and the private sector together with the public sector must focus on reducing inflation to the 3% target earlier than at the end of next year and encourage greater growth in economic activity.


Exports

Colombian exports according to the official source for the period from january to september fell 1% compared to the same period last year. The most notable decreases were in fuels 1/ - 8.8% and iron and steel casting -18.7%, which were almost completely offset by increases in coffee 11.6%, plastic materials 10.6% and metals and manufactures 5.4% 2/


By destination country, the main one is the United States with 29% of total exports. It is followed far behind by Panama 9%, India 6% and China 5%. Others in Latin America Mexico 4%, Ecuador 3.8%, Peru 2.2% and Venezuela 2%. From the rest of the world, the Netherlands 2.6%, Belgium 1.3%, Germany 1.2% and Japan 1.1%.

The main export product to the United States is fuel 1/ with 41% of the total to that country, followed by flowers 13%, pearls and precious stones 11% 3/, coffee 8.8%, metals and manufactures 5.1% and food and beverages 4.8%.

 

To Panama, which is the second destination country, the main export product is oil with 92% of what goes to that country. To India and China, the third and fourth destination countries, oil is 75% and 66% of what is exported to those two countries. Pearls and precious stones also go to India 17% 3/ and iron and steel casting goes to China 12%.


In addition to the United States, coffee is also exported to Germany, Belgium and Japan and constitutes 37%, 43% and 33% of the total exported to those countries respectively. In contrast, coffee exports to India and China are low, only 0.05% and 6.6% of the total exports to these countries. Flowers are also exported to these places very little.

Flowers that go to the United States as the main destination also go to the Netherlands and Japan with 5% and 9% of the total exports to these countries.


Metals and their manufactures, in addition to the United States, also go to China, India and Ecuador with 7%, 4% and 4% of the total exports to each country respectively.

Chemical products are mainly exported to Venezuela, Peru and Ecuador with 23%, 32% and 23% of the exports to these countries. Food is destined for Venezuela, Peru and Ecuador with 24%, 12% and 13% of the total exports to these destinations.


It should be noted that textiles and clothing are only 1.4% of the country's total exports and are mostly directed to Ecuador, Peru, Mexico and Venezuela with very low percentages within the total exported to those countries.



The added value in the composition of Colombian exports is very low, too many raw products are exported without any transformation, and there is little or no insertion in the international trade chains of the products.

Additionally, the country must consider that oil and coal are polluting fuels that, according to international agreements, will be reduced over the course of the next 40 years and replaced by clean energy.


Industrial production, clean energy together with added value must be priority objectives for the export activity of the private sector and of the country's public policy.

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1/ Fuels include mainly oil but also coal.


2/ Fuel exports (oil and coal) represent 46% of the total. Coffee represents 7%, flowers 5%, and fruits 4%. Pearls and precious stones (including gold) 8%, chemical products 5%, plastic materials 3% and metals and their manufactures 3%.


3/ Includes Gold.

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