Abstract
BMI sees little chance of Colombia avoiding a recession in 2009 as the twin
engines of growth in recent
years – private consumption and fixed
investment – feel the brunt of collapsing consumer confidence, the
global downturn and ongoing risk aversion. We are, therefore, forecasting that
Colombia will experience
an economic contraction of 1.5% this year, the
country’s first contraction since 1999, which compares to
growth of
3.4% in 2008 and 7.6% in 2007.
According to the country’s national
statistics office, retail sales grew by just 0.5% in 2008, down from
growth of 11% in 2007, with growth well into negative territory in the latter
stages of the year. This is
clearly an ominous signal for the
country’s retailers, and BMI is expecting total mass grocery retail
sales
to stagnate in 2009. Any increase in sales is likely to be driven by
new store openings, rather than by a
significant increase in like-for-like
sales.
Indeed, in the last quarter, the country’s two largest
retailers have both announced plans to rein in
expansion over the course
of this year. Almacenes Exito, which is a subsidiary of France-based
Casino,
has stated it will invest COP190bn (US$81.5mn) in 2009, down from
COP500bn (US$214.7mn) in 2008.
Meanwhile, the Colombian unit of Carrefour
has revealed it will invest EUR100mn (US$129.3mn) in
2009, compared with
EUR200mn (US$248.7mn) in 2008. However, strong growth is still expected in
food consumption in Colombia over the next five years. By 2013, total food
consumption is expected to
rise by 47.8% (nominal growth rate in local
currency terms), stemming from a projected 36.5% increase
in per-capita
spending and an 8.3% increase in the size of the population. Using BMI
forecasts for the
COP/US$ exchange rate, this translates into total food
consumption growth of 107.9% in US dollar terms
as the Colombian peso is
forecast to strengthen considerably against the US dollar over the next
five
years. This growth will be driven by increased demand for value-added
and premium products for the
most part.
Colombia is the world’s
third-largest coffee producer. At the end of March, the National Federation
of
Coffee Growers reported that Colombian coffee shortages will start to
ease by August, with volumes
normalising by September as the mid-year crop
from southern and northern regions is delivered.
Production was down 9%
y-o-y in 2008, as a result of poor weather and high input prices associated
with
the global commodities bubble. The federation said its 2009 first
half crop would be around 4.5mn bags,
down 1.5mn bags from a year earlier,
but said strong recent flowering indicated a normal second half of
the
year. Production for 2009 is seen at more than 11mn 60-kilogram bags. Colombia
is a major supplier
of some of the best Arabica coffee in the world and
hopes to increase production to 17mn bags by 2014,
which, given the
current economic climate, seems an overly ambitious target, particularly as
the highdemand
speciality coffee sector, which is hoped will drive growth,
is likely to be the worst affected in
terms of consumer demand.
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