Exhibit 5
RECENT DEVELOPMENTS IN THE REPUBLIC AS OF SEPTEMBER 21, 2015
This document provides information that supplements the information about Colombia contained in Colombia’s Annual Report on Form 18-K for its fiscal year ended December 31, 2014 (“2014 Annual Report”), filed with the SEC on September 9, 2015 and as the 2014 Annual Report may be further amended from time to time. To the extent the information in this document is inconsistent with the information contained in the 2014 Annual Report, as amended to date, the information in this section replaces such information. Capitalized terms not defined in this document have the meanings ascribed to them in the 2014 Annual Report, as amended to date.
Republic of Colombia
Government and Political Parties
In the presidential elections that took place in 2014, Juan Manuel Santos was reelected as president of Colombia. The next presidential election is scheduled for May 2018.
Internal Security
The level of criminal activity has generally shown a decreasing trend since the Uribe administration took office in August 2002. In particular, violence by guerilla organizations has generally decreased. Incidents of homicide increased from 15,459 in 2010 to 16,127 in 2011 and to 16,440 in 2012, but decreased in 2013 to 15,419 and to 13,258 in 2014. Incidents of kidnapping increased from 282 in 2010 and to 305 in 2011, but remained constant in 2012. Incidents of kidnapping decreased from 299 in 2013 to 288 in 2014. Incidents of terrorism increased from 472 in 2010 to 571 in 2011, and to 894 in 2012. Incidents of terrorism decreased from 890 in 2013 to 764 in 2014. For the first seven months of 2015, according to preliminary data, homicides decreased by 5.3%, incidents of kidnapping decreased by 43.9% and incidents of terrorism decreased by 28.3%, compared to the same period in 2014.
Over the past two decades, Colombia has implemented various measures to address the violence associated with the guerilla movements, including bilateral negotiations, enactment of legislation to protect the victims of armed conflicts, increased investment and economic development in conflict areas and the introduction of social, political and economic reforms designed to improve living conditions, increase access to the political process and equalize the distribution of income.
On September 4, 2012, President Santos announced a “General Agreement for the Termination of Conflict” between the Government and the FARC. The agreement establishes a procedure that aims to end the armed conflict. The proposed peace process includes an agenda with five concrete points: (i) rural development; (ii) guarantees for political opposition and public participation; (iii) the end of armed conflict; (iv) combating drug trafficking; and (v) the rights of the victims. The agreement does not contemplate the cession of land or cessation of military operations. Negotiations started in the first half of October 2012 in Oslo, Norway and have continued in Havana, Cuba.
On May 26, 2013, the Government and the FARC achieved an agreement on the first negotiation point concerning rural development. The main points of the agreement covered the following topics: access and land use, unproductive lands, registry of title to property, protection of agricultural frontier areas and reserves, development programs with a territorial approach, infrastructure and land improvement, social development, encouragement of agricultural production, economic cooperation, and food and nutrition policies.
An agreement on political participation, the next point in the negotiation agenda, was reached on November 6, 2013. The agreement includes: rights and guarantees for political opposition, including access to media, in particular for new political movements that appear once the final agreement is reached; democratic mechanisms for public participation, including direct participation; and measures to promote further participation, in equal conditions and with security guarantees, of all sectors of the society in national, regional and local politics, including the most vulnerable population.
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On May 16, 2014, the Government and the FARC announced an agreement concerning the problem of drug trafficking. The agreement aims to: work with the people concerned; transform the affected farmlands; open new opportunities for communities and territories; guarantee the rights of rural farmers; clear the areas affected by land mines and unexploded ordnance; promote a comprehensive strategy to ensure full respect of the rule of law in the territories concerned; implement a program for eradicating illicit crops; strengthen institutional capabilities for the detection, control and reporting of illicit financial transactions; and promote new plans against money laundering.
On June 7, 2014, the Government and the FARC announced an agreement to take responsibility for the victims of the internal conflict, one of the most important points in the peace negotiations between the Government and the FARC. The agreement outlined ten basic principles: recognition of victims; acknowledgment of responsibility; recognition of the rights of the victims; victim participation; the discovery of the truth of what happened during the conflict; reparation for victims; guarantees of protection and security; guarantee of non-repetition; principle of reconciliation; and focus on human rights. Finalization of this agreement, however, is conditioned on a general agreement upon the full negotiating agenda and no assurance can be given that such agreement will be reached or that if it is reached, that the agreement will not be materially modified.
On December 20, 2014, the FARC initiated a ceasefire and President Santos expressed the hope that this unilateral and undefined ceasefire could lead to a bilateral and permanent treaty.
On January 5, 2015, President Santos emphasized that the continuing peace negotiation is one of the principal objectives of the Government in 2015. At a meeting with the negotiating team in 2014, he emphasized the benefits to Colombia following the unilateral ceasefire by the FARC and invited the ELN to take the same initiative. The Government negotiating team returned to Havana with the aim of concluding a peace agreement as soon as possible.
On February 20, 2015, United States Secretary of State John Kerry announced that Bernie Aronson was appointed to support the Colombian peace process. The United States is not a direct participant in the negotiation table.
On March 7, 2015, as provided for in the de-escalation framework and seeking to build trust with, and to improve the security conditions of, the inhabitants of at risk zones in which land mines, improvised explosive devices, unexploded ordinance and other explosive remnants of war are present, the Government and the FARC agreed to request that the Norwegian People’s Aid organization lead and coordinate a clean-up and decontamination project in order to disarm and dispose of such explosive devices.
On July 12, 2015 delegations from the Government and the FARC announced that in order to provide confidence in the peace process, engender trust among the delegations, speed up agreement as to remaining items in the general agreement agenda and create the conditions for a general ceasefire of bilateral hostilities and disarmament, they decided to negotiate terms under which a general ceasefire of bilateral hostilities and disarmament would occur. Such ceasefire would require monitoring and verification of compliance with the ceasefire. To this effect, they have requested that a delegate from the Secretary General of the United Nations and a delegate of the Union of South American Nations follow the negotiations so as to aid in creating such a system. In the meantime, the FARC as a gesture of de-escalation, agreed to maintain unilateral suspension of all offensive actions. The Government, starting July 20, 2015, de-escalated its own military actions.
Other Domestic Initiatives
On November 22, 2013, a law on infrastructure was passed. The main purpose of the law is to establish a regulatory framework and provide tools for improving the country’s transportation infrastructure. It seeks to make the approval and execution process for transportation infrastructure more efficient and expeditious through structures that will support and facilitate the development of a modern transport network for the country.
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On December 23, 2014, President Santos signed Law 1739 of 2014. The law seeks to maintain the growth of the Colombian economy through infrastructure development and social programs and strike a balance between taxes on wealth and income without adversely affecting the middle class or small and medium size companies. The key provisions of the tax law include: (i) a temporary wealth tax on those with net assets above Ps. 1 billion effective as of January 1, 2015; (ii) a permanent increase on the CREE from 8% to 9%, starting in 2015; (iii) a temporary income tax surcharge of the CREE for a company’s earnings above Ps.800 million, which surcharge will be 5% for 2015, 6% for 2016, 8% for 2017 and 9% for 2018; (iv) postponing the elimination of the tax on financial transactions, the Gravamen a los Movimientos Financieros –GMF, to 2019, at which point it will gradually be reduced by 1 point each year until its elimination in 2022; (v) a tax deduction for investments in innovation; (vi) extending a subsidy in energy services (gas and electric) for the poor; and (vii) creating a Tax Expert Commission, Comisión de Expertos para la Equidad y la Competitividad Tributaria, which will propose reforms to make the Colombian tax system more equitable and efficient. The tax reform took effect on January 1, 2015.
On June 9, 2015, Law 1753 was approved by Congress and through which the Government has implemented the National Development Plan (“PDN”) for the period 2014 to 2018. The three main pillars of the PDN are (i) peace, reflecting the Government’s political will to commit to sustainable peace; (ii) equity, in order to focus on human development with opportunities for all; and (iii) education, which the plan considers as the most powerful instrument for social equality and economic growth. Additionally, there are five cross strategies that are meant to implement the three pillars: (i) competitiveness and strategic infrastructure; (ii) social mobility; (iii) transformation of the countryside (which includes initiatives on land access and distribution and improving the socio-economic condition of those living in rural areas); (iv) security, justice and democracy for peace building; and (v) good governance. Additionally, there is an evolving strategy, green growth, which includes as objectives the growth of sustainable development, lowering of carbon emissions, protecting the environment and planning for natural disasters and the effects of climate change.
Foreign Affairs and International Organizations
On August 22, 2015, President Nicolás Maduro of Venezuela declared a state of emergency in certain parts of the border with Colombia and closed those borders due to alleged violence and smuggling. Certain Colombian citizens who had been living in Venezuela in the areas affected by the state of emergency have been since deported. On August 23, 2015, Colombia reiterated its willingness to cooperate with Venezuela in order to deepen both countries’ commitment against smuggling. At Colombia’s request, the permanent council of the Organization of American States held an extraordinary meeting on August 31, 2015 to determine whether to convene a meeting to consider the humanitarian situation faced by Colombians as a result of the deportations by Venezuela in connection with the state of emergency. Of the 18 votes needed to convene such a meeting, a sufficient majority to convene such a meeting was not attained. Accordingly, no resolution was passed.
Economy
Gross domestic product
Real GDP grew by 4.0%, 6.6% and 4.0% in 2010, 2011 and 2012, respectively, and based on preliminary figures, grew by 4.9% in 2013 and 4.6% in 2014. According to preliminary figures, real GDP grew 2.8% during the first quarter of 2015 and 3.0% during the second quarter of 2015 over the same quarters of 2014.
According to preliminary figures, during the first quarter of 2015, the sectors that experienced the greatest real growth over the same quarter of 2014 were construction (4.5%), agriculture, livestock, fishing, forestry and hunting (3.5%) and mining (1.9%). According to preliminary figures, during the second quarter of 2015, the sectors that experienced the greatest real growth over the same quarter of 2014 were construction (6.7%), commerce, repairs, restaurants and hotels (4.4%) and financial institutions, real estate and business services (3.9%).
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Impact of Oil Prices
The mining sector (including oil) is a significant contributor to the Colombian economy and is a principal source of exports. The mining sector grew 5.5% in real terms in 2013, but contracted 0.2% in real terms in 2014. Oil and its derivatives accounted for 55.2% of total exports in 2013 and 53.1% of total exports in 2014. On June 13, 2015, the Government published its medium-term fiscal framework, which reflects the Government’s expectation that the fall in oil prices will result in a shortfall in oil revenues of approximately 1.4% of GDP as compared to 2014 and an increase in the Central Government fiscal deficit to 3.0% of GDP in 2015. The Government anticipates that the balance can be financed within the fiscal responsibility law through a higher cyclical deficit. See “Public Sector Finance—General” in the 2014 Annual Report for more information on the results of a review of the Government’s financial plan for 2015 and the impact of oil prices.
Principal Sectors of the Economy
Mining and Petroleum
Colombia holds substantial reserves of petroleum, natural gas, coal, minerals, precious metals and precious and semi-precious stones, including nickel, gold, silver, platinum and emeralds. It is among the world’s leading exporters of emeralds, gold and coal. According to statistics compiled by DANE, the mining sector as a whole (including the petroleum industry) accounted for approximately 7.3% of GDP in 2014, as compared to 7.7% in 2013. Mining sector production decreased in 2014, recording a contraction in real terms of 0.2%, as compared to real growth of 5.5% in 2013, mainly due to the decrease in the value of minerals and metals (8.4%) and in crude oil and natural gas (1.4%).
Services
In 2010, the Government aimed to quadruple the number of internet broadband connections from 2.2 million to 8.8 million by 2014 through the “Plan Vive Digital”, a program designed to reduce unemployment and poverty while increasing competitiveness. At the end of 2014, the number of internet broadband connections exceeded the target, reaching a total of 9,891,506 broadband subscribers, in comparison with 8,216,401 broadband subscribers recorded at the end of 2013. At the end of the first quarter of 2015, the number of internet broadband connections increased to 10,112,622 subscribers.
Role of the State in the Economy
In 2014, the most important state-owned non-financial companies included Ecopetrol S.A., Medellín’s urban transit system (the “Medellín Metro”), the energy generation company Isagen and the energy transmission company ISA.
The following table sets forth selected financial data for the principal non-financial state-owned enterprises.
Principal Non-Financial Public Sector Enterprises
| | | | | | | | | | | | | | | | |
| | | Total Assets on Dec. 31, 2014(1) | | | Total Liabilities on
Dec. 31, 2014(1) | | | Net Profits for
2014(2) | | | Total External Debt
Guaranteed by the
Republic on Dec. 31, 2014 | |
| | | (millions of U.S. dollars) | |
Ecopetrol S.A. | | $ | 59,425 | | | $ | 29,024 | | | $ | 3,755 | | | $ | 0 | |
ISA | | | 12,119 | | | | 6,707 | | | | 297 | | | | 0 | |
Isagen | | | 3,578 | | | | 1,802 | | | | 218 | | | | 219 | |
Medellín Metro | | | 1,623 | | | | 2,442 | | | | (99 | ) | | | 62 | |
| 1: | Audited. Converted into U.S. dollars at the rate of Ps. 2,392.46/$1.00, the representative market rate on December 31, 2014. |
| 2: | Converted into U.S. dollars at the rate of Ps. 2,000.03/$1.00, the average representative market rate for January-December 2014. |
Source: Directorate of Banking Investment – Ministry of Finance and Public Credit
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Ecopetrol S.A. earned net profits of approximately Ps. 7.8 trillion ($3.7 billion) in 2014. Total net profits decreased by 41% as compared to 2013. Ecopetrol S.A. contributes to public sector revenues through a combination of income taxes, royalties and dividends. Ecopetrol S.A.’s total direct contribution to governmental revenues was Ps. 26.2 trillion in 2014, as compared to Ps. 30.9 trillion in 2013. The principal sources of Ecopetrol S.A.’s contribution to public sector revenues during 2014 were approximately Ps. 8.2 trillion in royalties, Ps. 10.8 trillion in dividends paid with respect to profits earned in 2014, Ps. 6.5 trillion in income taxes and Ps. 0.5 trillion in indirect taxes
ISA’s net profits in 2014 totaled Ps. 593.1 billion as compared to Ps. 433.0 billion in 2013.
In 2014, Isagen registered net profits of Ps. 436 billion ($218 million) as compared to Ps. 434.0 billion ($232 million) in 2013. Net profit was 1% up compared to 2013, offset by interest paid on debt associated with the construction of the Sogamoso hydroelectric power plant.
Medellín Metro registered a net loss of Ps. 197.2 billion ($82.6 million) in 2014 as compared to a net loss of Ps. 193.1 billion ($103 million) in 2013.
Environment
The PDN approved in June 2015 now includes as one of the strategies of the Government, Crecimiento Verde (Green Growth), a program promoting research, technological development and innovation for strengthening national and regional competitiveness with products and activities that contribute to sustainable development and growth with a low carbon footprint.
Employment and Labor
The following table presents national monthly average rates of unemployment from January 2011 through July 2015, according to the methodology adopted by DANE:
National Monthly Unemployment Rates(1)
| | | | | | | | | | | | | | | | | | | | |
| | | 2011 | | | 2012 | | | 2013 | | | 2014 | | | 2015 | |
January | | | 13.6 | % | | | 12.5 | % | | | 12.1 | % | | | 11.1 | % | | | 10.8 | % |
February | | | 12.9 | | | | 11.9 | | | | 11.8 | | | | 10.7 | | | | 9.9 | |
March | | | 10.9 | | | | 10.4 | | | | 10.2 | | | | 9.7 | | | | 8.9 | |
April | | | 11.2 | | | | 10.9 | | | | 10.2 | | | | 9.0 | | | | 9.5 | |
May | | | 11.2 | | | | 10.7 | | | | 9.4 | | | | 8.8 | | | | 8.9 | |
June | | | 10.9 | | | | 10.0 | | | | 9.2 | | | | 9.2 | | | | 8.2 | |
July | | | 11.5 | | | | 10.9 | | | | 9.9 | | | | 9.3 | | | | 8.8 | |
August | | | 10.1 | | | | 9.7 | | | | 9.3 | | | | 8.9 | | | | n/a | |
September | | | 9.7 | | | | 9.9 | | | | 9.0 | | | | 8.4 | | | | n/a | |
October | | | 9.0 | | | | 8.9 | | | | 7.8 | | | | 7.9 | | | | n/a | |
November | | | 9.2 | | | | 9.2 | | | | 8.5 | | | | 7.7 | | | | n/a | |
December | | | 9.8 | | | | 9.6 | | | | 8.4 | | | | 8.7 | | | | n/a | |
| 1: | Unemployment rate is defined as the unemployed population divided by the labor force. |
n/a: Not available.
Source: DANE.
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The following table presents national quarterly average rates of employment by gender for the periods indicated:
National Quarterly Employment Rates by Gender
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2011 | | | 2012 | | | 2013 | | | 2014 | | | 2015 | |
| | | Women | | | Men | | | Women | | | Men | | | Women | | | Men | | | Women | | | Men | | | Women | | | Men | |
First Quarter | | | 42.7 | % | | | 67.4 | % | | | 45.3 | % | | | 68.7 | % | | | 44.8 | % | | | 68.3 | % | | | 45.3 | % | | | 68.3 | % | | | 46.3 | % | | | 69.2 | % |
Second Quarter | | | 44.6 | | | | 68.1 | | | | 47.6 | | | | 69.3 | | | | 47.5 | | | | 68.7 | | | | 47.8 | | | | 69.2 | | | | 48.7 | % | | | 69.9 | % |
Third Quarter | | | 45.3 | | | | 68.6 | | | | 46.4 | | | | 69.2 | | | | 47.5 | | | | 69.2 | | | | 48.1 | | | | 69.5 | | | | n/a | | | | n/a | |
Fourth Quarter | | | 48.1 | | | | 71.7 | | | | 47.5 | | | | 70.8 | | | | 48.5 | | | | 71.2 | | | | 49.2 | | | | 71.6 | | | | n/a | | | | n/a | |
Source: DANE.
The following tables present the distribution of national employment by sector of the economy for the periods indicated:
National Quarterly Employment Rates by Sector
| | | | | | | | | | | | | | | | |
| | | 2011 | |
| | | First Quarter | | | Second Quarter | | | Third
Quarter | | | Fourth
Quarter | |
Agriculture, fishing, hunting and forestry | | | 18.6 | % | | | 17.6 | % | | | 17.6 | % | | | 18.8 | % |
Mining and quarrying | | | 1.0 | % | | | 1.4 | % | | | 1.6 | % | | | 0.8 | % |
Manufacturing | | | 12.5 | % | | | 13.4 | % | | | 12.7 | % | | | 13.5 | % |
Electricity, gas and water supply | | | 0.5 | % | | | 0.5 | % | | | 0.6 | % | | | 0.6 | % |
Construction | | | 5.6 | % | | | 5.4 | % | | | 5.9 | % | | | 5.9 | % |
Retail, hotels and restaurants | | | 26.6 | % | | | 26.6 | % | | | 26.1 | % | | | 26.3 | % |
Transport, storage and communications | | | 8.8 | % | | | 8.2 | % | | | 8.2 | % | | | 8.0 | % |
Financial intermediation | | | 1.2 | % | | | 1.2 | % | | | 1.2 | % | | | 1.1 | % |
Real estate, renting and business activities | | | 6.4 | % | | | 6.7 | % | | | 6.5 | % | | | 6.4 | % |
Community, social and personal services | | | 18.7 | % | | | 19.0 | % | | | 19.5 | % | | | 18.5 | % |
Total | | | 100.0 | % | | | 100.0 | % | | | 100.0 | % | | | 100.0 | % |
| | | | | | | | | | | | | | | | |
| | | 2012 | |
| | | First Quarter | | | Second Quarter | | | Third
Quarter | | | Fourth
Quarter | |
Agriculture, fishing, hunting and forestry | | | 17.9 | % | | | 16.9 | % | | | 17.2 | % | | | 18.0 | % |
Mining and quarrying | | | 0.9 | % | | | 1.3 | % | | | 1.4 | % | | | 0.9 | % |
Manufacturing | | | 13.0 | % | | | 13.2 | % | | | 12.3 | % | | | 12.9 | % |
Electricity, gas and water supply | | | 0.6 | % | | | 0.5 | % | | | 0.5 | % | | | 0.6 | % |
Construction | | | 6.2 | % | | | 5.9 | % | | | 5.8 | % | | | 6.1 | % |
Retail, hotels and restaurants | | | 26.6 | % | | | 26.9 | % | | | 26.6 | % | | | 26.9 | % |
Transport, storage and communications | | | 8.6 | % | | | 8.1 | % | | | 8.7 | % | | | 7.9 | % |
Financial intermediation | | | 1.4 | % | | | 1.2 | % | | | 1.2 | % | | | 1.2 | % |
Real estate, renting and business activities | | | 6.2 | % | | | 6.5 | % | | | 7.2 | % | | | 6.9 | % |
Community, social and personal services | | | 18.6 | % | | | 19.6 | % | | | 19.1 | % | | | 18.6 | % |
Total | | | 100.0 | % | | | 100.0 | % | | | 100.0 | % | | | 100.0 | % |
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| | | | | | | | | | | | | | | | |
| | | 2013 | |
| | | First Quarter | | | Second Quarter | | | Third
Quarter | | | Fourth
Quarter | |
Agriculture, fishing, hunting and forestry | | | 17.7 | % | | | 16.1 | % | | | 16.7 | % | | | 17.0 | % |
Mining and quarrying | | | 1.2 | % | | | 1.1 | % | | | 1.3 | % | | | 0.6 | % |
Manufacturing | | | 11.8 | % | | | 12.7 | % | | | 11.6 | % | | | 12.0 | % |
Electricity, gas and water supply | | | 0.5 | % | | | 0.5 | % | | | 0.5 | % | | | 0.5 | % |
Construction | | | 5.5 | % | | | 5.5 | % | | | 5.8 | % | | | 6.4 | % |
Retail, hotels and restaurants | | | 27.8 | % | | | 27.1 | % | | | 27.3 | % | | | 27.6 | % |
Transport, storage and communications | | | 8.6 | % | | | 8.6 | % | | | 8.0 | % | | | 7.9 | % |
Financial intermediation | | | 1.3 | % | | | 1.3 | % | | | 1.5 | % | | | 1.4 | % |
Real estate, renting and business activities | | | 7.2 | % | | | 7.1 | % | | | 7.1 | % | | | 6.9 | % |
Community, social and personal services | | | 18.4 | % | | | 20.1 | % | | | 20.0 | % | | | 19.6 | % |
Total | | | 100.0 | % | | | 100.0 | % | | | 100.0 | % | | | 100.0 | % |
| | | | | | | | | | | | | | | | |
| | | 2014 | |
| | | First Quarter | | | Second Quarter | | | Third
Quarter | | | Fourth
Quarter | |
Agriculture, fishing, hunting and forestry | | | 16.4 | % | | | 15.6 | % | | | 16.6 | % | | | 16.4 | % |
Mining and quarrying | | | 1.0 | % | | | 1.1 | % | | | 1.1 | % | | | 0.7 | % |
Manufacturing | | | 11.8 | % | | | 12.3 | % | | | 11.6 | % | | | 12.3 | % |
Electricity, gas and water supply | | | 0.6 | % | | | 0.6 | % | | | 0.5 | % | | | 0.6 | % |
Construction | | | 5.9 | % | | | 5.9 | % | | | 5.9 | % | | | 6.5 | % |
Retail, hotels and restaurants | | | 27.7 | % | | | 27.2 | % | | | 27.0 | % | | | 27.2 | % |
Transport, storage and communications | | | 8.6 | % | | | 8.3 | % | | | 8.1 | % | | | 8.3 | % |
Financial intermediation | | | 1.4 | % | | | 1.3 | % | | | 1.5 | % | | | 1.2 | % |
Real estate, renting and business activities | | | 6.9 | % | | | 7.2 | % | | | 7.6 | % | | | 7.4 | % |
Community, social and personal services | | | 19.7 | % | | | 20.6 | % | | | 20.1 | % | | | 19.3 | % |
Total | | | 100.0 | % | �� | | 100.0 | % | | | 100.0 | % | | | 100.0 | % |
| | | | | | | | | | | | | | | | |
| | | 2015 | |
| | | First Quarter | | | Second Quarter | | | Third
Quarter | | | Fourth
Quarter | |
Agriculture, fishing, hunting and forestry | | | 16.3 | % | | | 15.4 | % | | | n/a | | | | n/a | |
Mining and quarrying | | | 0.8 | % | | | 1.0 | % | | | n/a | | | | n/a | |
Manufacturing | | | 12.2 | % | | | 12.2 | % | | | n/a | | | | n/a | |
Electricity, gas and water supply | | | 0.6 | % | | | 0.5 | % | | | n/a | | | | n/a | |
Construction | | | 6.4 | % | | | 6.1 | % | | | n/a | | | | n/a | |
Retail, hotels and restaurants | | | 27.4 | % | | | 27.1 | % | | | n/a | | | | n/a | |
Transport, storage and communications | | | 8.5 | % | | | 8.4 | % | | | n/a | | | | n/a | |
Financial intermediation | | | 1.4 | % | | | 1.3 | % | | | n/a | | | | n/a | |
Real estate, renting and business activities | | | 7.4 | % | | | 7.7 | % | | | n/a | | | | n/a | |
Community, social and personal services | | | 19.0 | % | | | 20.2 | % | | | n/a | | | | n/a | |
Total | | | 100.0 | % | | | 100.0 | % | | | n/a | | | | n/a | |
Source: DANE. Calculations: Ministry of Finance.
Poverty
In September 2011, DNP released a new methodology that changed the poverty line and the construction of the family aggregate income. The following table shows the percentage of the population with incomes below the poverty line for the years indicated following the new methodology.
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Poverty in Colombia(1)
(percentage of population below poverty line)
| | | | |
2010 | | | 37.2 | % |
2011 | | | 34.1 | % |
2012 | | | 32.7 | % |
2013 | | | 30.6 | % |
2014 | | | 28.5 | % |
| 1: | The poverty line is defined as the minimum level of income necessary to acquire an adequate amount of food and primary goods. Households whose annual income falls below that level are considered to be living in poverty. Households whose monthly income per-capita was lower than Ps. 211,807 for 2014, Ps. 206,091 for 2013, Ps. 202,083 for 2012, Ps. 194,696 for 2011, and Ps. 187,063 for 2010 were considered to be living in poverty. Households whose income per-capita was lower than Ps. 94,103 for 2014, Ps. 91,698 for 2013, Ps. 91,207 for 2012, Ps. 87,672 for 2011, and Ps.83,578 for 2010 were considered to be living in extreme poverty. |
Source: DANE.
Although Colombia does not have a welfare system, the Government modified the pension system in 1993 to serve social welfare needs. For further discussion of the pension system, see “Public Sector Finance—Public Sector Accounts—Expenditures” in the 2014 Annual Report. Also in 1993, legislation created a decentralized health care system which should, in the long term, provide subsidized care to the entire population.
Health Care Reform
On January 19, 2011, the President signed into law the Health Reform Law that allocates more resources to the health system (Ps.1.5 trillion per year). The Government will contribute Ps.1.0 trillion from the national budget, and other resources are expected to come from the Family Compensation Funds (a non-governmental agency that pays social security subsidies), municipalities and departments, among others. The law will also order periodic updates to the public health insurance plans in order to make them consistent with the epidemiological profile of the population, limiting and rationalizing the type of treatments and drugs that are included in the insurance plans.
On February 16, 2015, President Santos and Health Minister, Alejandro Gaviria, signed Law 1751, which establishes health as an autonomous fundamental right. Under the law, the provision of emergency services becomes mandatory, eliminating any requirement for authorization prior to treatment. The law also provides that administrative or economic reasons cannot interrupt a patient’s care. Additionally, it establishes a cap on medicine prices based on international reference prices.
Other Government Initiatives to Combat Poverty
Other initiatives the Government has undertaken to alleviate poverty in Colombia include a program called “De cero a siempre”, which seeks to promote and ensure children’s comprehensive development from conception until the age of six. Furthermore, the Government has continued to develop the “Families in Action” program, a monetary transfer program that seeks to reduce poverty and income inequality by encouraging poor families to make certain commitments in education and health. The Government has also implemented the “Women Savers in Action Program”, which seeks to promote the autonomy and empowerment of women, as well as the “Income Generation and Employability Program”, which aims to provide job training and encourage entrepreneurship.
On May 28, 2015, President Santos presented the program called “Plan de Impulso a la Productividad y el Empleo” (PIPE 2.0). This plan seeks to stimulate the economy and mitigate the impact of the economic slowdown. This initiative seeks to generate investment in cross-sectors such as infrastructure, education, public works, housing, industry and mining. It includes almost Ps. 17 trillion of investment and is expected to create 300,000 jobs.
8
Foreign Trade and Balance of Payments
Balance of payments
In June 2014, Banco de la República adopted the sixth edition of the IMF’s Balance of Payments Manual framework and incorporated resulting changes in balance of payments statistics from 2000 onward. The key changes from the fifth edition to the sixth edition of the IMF’s Balance of Payments Manual methodology include the reclassification of accounts within the balance of payments. On the current account side, a financial intermediation services account (FISIM) has been created and is included within the services account. The corresponding information was previously incorporated in the income line. On the capital account side, loans between affiliates (for nonfinancial sector companies), which had previously been incorporated within the loans account, are now included in the direct investment account. Furthermore, changes in the format for the presentation of information have been incorporated. Additionally, measurements of exports in the table “Balance of Payments” are different from the table “Exports (FOB) by Group of Products” and from the table “Trends in the Composition of Exports”, because these two latter tables do not incorporate special trade operations and commerce from the Free Trade Zones.
According to preliminary figures, Colombia’s current account registered a U.S. $19,580 million deficit in 2014, compared to a U.S. $12,367 million deficit in 2013. The increase in the current account deficit was mainly due to an increase in imports of goods and services accompanied by a decrease of exports of goods and services.
Income outflows were driven primarily by higher remittances of profits and dividends by foreign companies in Colombia to their head offices abroad. For 2014, the financial account registered a U.S. $19,640 million deficit, compared to a U.S. $11,845 million deficit for 2013. The increase in the deficit was mainly caused by a decrease in portfolio investment and other investment accounts.
According to preliminary figures, Colombia’s current account registered a deficit of U.S. $9,466 million for the first six months of 2015, compared to a deficit of U.S. $8,261 million for the same period in 2014. The financial account registered a deficit of U.S. $9,019 million for the first six months of 2015, compared to a U.S. $8,279 million deficit for the same period in 2014.
9
The following table presents preliminary balance of payments figures for the periods indicated based on the sixth edition of the IMF’s Balance of Payments Manual:
Balance of Payments (1)(2)(3)(4)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | For the Year ended December 31 | | | For the Six
Months ended
June 30th, | |
| Account | | 2010 | | | 2011 | | | 2012 | | | 2013 | | | 2014 | | | 2014 | | | 2015 | |
| | | (in Millions of U.S. Dollars) | |
Current Account | | | (8,663 | ) | | | (9,710 | ) | | | (11,306 | ) | | | (12,367 | ) | | | (19,580 | ) | | | (8,261 | ) | | | (9,466 | ) |
Credit (Exports) | | | 52,858 | | | | 72,233 | | | | 77,269 | | | | 76,227 | | | | 73,153 | | | | 36,468 | | | | 28,882 | |
Debit (Imports) | | | 61,520 | | | | 81,943 | | | | 88,574 | | | | 88,594 | | | | 92,734 | | | | 44,730 | | | | 38,348 | |
Goods and Services | | | (1,881 | ) | | | 955 | | | | (839 | ) | | | (2,745 | ) | | | (11,268 | ) | | | (3,558 | ) | | | (7,924 | ) |
Credit (Exports) | | | 45,875 | | | | 63,898 | | | | 68,034 | | | | 67,140 | | | | 63,846 | | | | 32,136 | | | | 23,922 | |
Debit (Imports) | | | 47,756 | | | | 62,943 | | | | 68,873 | | | | 69,885 | | | | 75,115 | | | | 35,694 | | | | 31,846 | |
Goods | | | 2,356 | | | | 6,137 | | | | 4,956 | | | | 3,180 | | | | (4,610 | ) | | | (521 | ) | | | (5,745 | ) |
Credit (Exports) | | | 40,762 | | | | 58,262 | | | | 61,604 | | | | 60,281 | | | | 57,000 | | | | 28,877 | | | | 20,566 | |
Debit (Imports) | | | 38,406 | | | | 52,126 | | | | 56,648 | | | | 57,101 | | | | 61,610 | | | | 29,398 | | | | 26,310 | |
Services | | | (4,237 | ) | | | (5,182 | ) | | | (5,795 | ) | | | (5,925 | ) | | | (6,659 | ) | | | (3,037 | ) | | | (2,179 | ) |
Credit (Exports) | | | 5,113 | | | | 5,636 | | | | 6,430 | | | | 6,859 | | | | 6,846 | | | | 3,259 | | | | 3,356 | |
Debit (Imports) | | | 9,350 | | | | 10,818 | | | | 12,225 | | | | 12,784 | | | | 13,505 | | | | 6,296 | | | | 5,535 | |
Primary Income | | | (11,229 | ) | | | (15,499 | ) | | | (15,046 | ) | | | (14,216 | ) | | | (12,670 | ) | | | (6,671 | ) | | | (3,857 | ) |
Credit (Exports) | | | 1,667 | | | | 2,765 | | | | 3,840 | | | | 3,613 | | | | 3,999 | | | | 1,833 | | | | 2,277 | |
Debit (Imports) | | | 12,897 | | | | 18,265 | | | | 18,886 | | | | 17,829 | | | | 16,669 | | | | 8,504 | | | | 6,134 | |
Secondary Income | | | 4,448 | | | | 4,834 | | | | 4,579 | | | | 4,594 | | | | 4,358 | | | | 1,967 | | | | 2,315 | |
Credit (Exports) | | | 5,315 | | | | 5,570 | | | | 5,394 | | | | 5,473 | | | | 5,308 | | | | 2,500 | | | | 2,683 | |
Debit (Imports) | | | 868 | | | | 735 | | | | 815 | | | | 880 | | | | 950 | | | | 532 | | | | 367 | |
Financial Account | | | (9,275 | ) | | | (8,925 | ) | | | (11,754 | ) | | | (11,845 | ) | | | (19,640 | ) | | | (8,279 | ) | | | (9,019 | ) |
Direct Investment | | | (947 | ) | | | (6,228 | ) | | | (15,646 | ) | | | (8,557 | ) | | | (12,252 | ) | | | (6,444 | ) | | | (5,454 | ) |
Net Acquisition of Financial Assets | | | 5,483 | | | | 8,420 | | | | (606 | ) | | | 7,652 | | | | 3,899 | | | | 2,371 | | | | 1,381 | |
Equity and Investment Fund Share | | | 6,893 | | | | 7,254 | | | | (557 | ) | | | 7,468 | | | | 2,935 | | | | 2,179 | | | | 1,826 | |
Debt Instruments | | | (1,410 | ) | | | 1,165 | | | | (49 | ) | | | 184 | | | | 964 | | | | 192 | | | | (445 | ) |
Net Incurrence of Liabilities | | | 6,430 | | | | 14,648 | | | | 15,039 | | | | 16,209 | | | | 16,151 | | | | 8,815 | | | | 6,834 | |
Equity and Investment Funds Share | | | 7,065 | | | | 12,776 | | | | 13,800 | | | | 13,840 | | | | 13,658 | | | | 8,011 | | | | 5,575 | |
Debt Instruments | | | (635 | ) | | | 1,872 | | | | 1,239 | | | | 2,368 | | | | 2,493 | | | | 804 | | | | 1,260 | |
Portfolio Investment | | | (973 | ) | | | (6,090 | ) | | | (5,690 | ) | | | (6,978 | ) | | | (11,654 | ) | | | (4,892 | ) | | | (3,411 | ) |
Net Acquisition of Financial Assets | | | 2,290 | | | | 2,111 | | | | 1,666 | | | | 4,096 | | | | 7,007 | | | | 5,342 | | | | 2,983 | |
Equity and Investment Fund Share | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | |
Debt Securities | | | 2,290 | | | | 2,111 | | | | 1,666 | | | | 4,096 | | | | 7,007 | | | | 5,342 | | | | 2,983 | |
Net Incurrence of Liabilities | | | 3,263 | | | | 8,202 | | | | 7,356 | | | | 11,073 | | | | 18,661 | | | | 10,233 | | | | 6,394 | |
Equity and Investment Fund Share | | | 1,318 | | | | 2,288 | | | | 3,180 | | | | 1,926 | | | | 3,833 | | | | 1,471 | | | | 903 | |
Debt Securities | | | 1,944 | | | | 5,914 | | | | 4,176 | | | | 9,147 | | | | 14,828 | | | | 8,763 | | | | 5,491 | |
10
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | For the Year ended December 31 | | | For the Six Months
ended June 30th, | |
| Account | | 2010 | | | 2011 | | | 2012 | | | 2013 | | | 2014 | | | 2014 | | | 2015 | |
| | | (in Millions of U.S. Dollars) | |
Financial Derivatives and Options to Purchase Shares by Employees | | | (354 | ) | | | (82 | ) | | | (714 | ) | | | (33 | ) | | | 268 | | | | (132 | ) | | | 382 | |
Net Acquisition of Financial Assets | | | (354 | ) | | | (202 | ) | | | (780 | ) | | | (156 | ) | | | (411 | ) | | | (287 | ) | | | (154 | ) |
Net Incurrence of Liabilities | | | — | | | | (120 | ) | | | (66 | ) | | | (124 | ) | | | (680 | ) | | | (156 | ) | | | (536 | ) |
Other Investments | | | (10,144 | ) | | | (267 | ) | | | 4,890 | | | | (3,225 | ) | | | (439 | ) | | | 1,397 | | | | (701 | ) |
Net Acquisition of Financial Assets | | | 210 | | | | 3,417 | | | | 2,656 | | | | 1,826 | | | | 1,820 | | | | 776 | | | | (445 | ) |
Net Incurrence of Liabilities | | | 10,354 | | | | 3,684 | | | | (2,234 | ) | | | 5,051 | | | | 2,258 | | | | (620 | ) | | | 256 | |
Reserve Assets | | | 3,142 | | | | 3,742 | | | | 5,406 | | | | 6,946 | | | | 4,437 | | | | 1,791 | | | | 164 | |
Net Errors and Omissions | | | (613 | ) | | | 785 | | | | (448 | ) | | | 522 | | | | (59 | ) | | | (18 | ) | | | 447 | |
Memorandum of the Financial Account Excluding Reserve Assets | | | (12,418 | ) | | | (12,668 | ) | | | (17,160 | ) | | | (18,792 | ) | | | (24,076 | ) | | | (10,071 | ) | | | (9,183 | ) |
| (1) | Data for 2015, 2014 and 2013 are preliminary and data for 2010, 2011 and 2012 are revised. |
| (2) | The calculation of the change in international reserves is made based on the 6th edition of the IMF Balance of Payments manual, following the recommendation not to include in this calculation changes due to exchange rate and price valuations. |
| (3) | Other financial corporations are institutional units that provide financial services, and which asset and liability are, in general, not available in open financial markets. |
| (4) | Non-financial corporations are corporations whose principal activity is the production of goods or non-financial market services. This category includes legally established companies, branches or non-resident corporations, quasi-corporations, hypothetical resident land owners units and resident non-profit institutions that are market producers of goods and nonfinancial services. |
Source: Banco de la República—Economic Studies.
Exports of goods (according to balance of payments figures) decreased by 5.4% in 2014 compared to 2013 due to a decrease in international commodity prices, mainly oil prices, partially offset by an increase in the volume of shipped raw materials such as coffee, flowers and bananas. Nontraditional exports, including emeralds, decreased by 6.7% from $17,089 million in 2013 to $15,945 million in 2014. Among industry exports, the largest decreases among the categories of specifically identified export products were registered by other industries (including jewelry, musical instruments, sporting goods and other products), which decreased by 25.8%, iron and steel industries, which decreased by 12.1%, and paper and its byproducts, which decreased by 11.0%. Exports of goods (according to DANE and Banco de la República) in 2014 totaled approximately $54,794 million, including oil and its derivatives (52.8% of total exports), coal (12.4% of total exports), coffee (4.5% of total exports), nickel (1.2% of total exports) and nontraditional exports (29.1% of total exports).
According to preliminary figures supplied by DANE and the Dirección de Impuestos y Aduanas Nacionales de Colombia (“DIAN”), exports of goods totaled $22,261 million during the first seven months of 2015, representing a 32.6% decrease as compared to the same period in 2014. This decrease was primarily caused by a 44.5% decrease in exports of oil and its derivatives, a 32.5% decrease in non-monetary gold and certain other sectors and a 6.2% decrease in the manufacturing sector.
11
Geographic Distribution of Trade
The following tables show the destination and origin, respectively, of Colombia’s exports and imports.
Merchandise Exports to Major Trading Partners
| | | | | | | | | | | | | | | | | | | | |
| | | 2010(1) | | | 2011(1) | | | 2012(1) | | | 2013(1) | | | 2014(1) | |
| | | (percentage of total exports) | |
United States | | | 42.2 | | | | 38.6 | | | | 36.3 | | | | 31.4 | | | | 25.7 | |
China | | | 4.4 | | | | 3.5 | | | | 5.6 | | | | 8.7 | | | | 10.5 | |
Panama | | | 2.4 | | | | 3.8 | | | | 4.8 | | | | 5.5 | | | | 6.6 | |
Spain | | | 1.4 | | | | 3.0 | | | | 4.9 | | | | 4.9 | | | | 6.0 | |
India | | | 1.3 | | | | 1.3 | | | | 2.3 | | | | 5.1 | | | | 5.0 | |
Netherlands | | | 4.2 | | | | 4.4 | | | | 4.2 | | | | 3.9 | | | | 3.9 | |
Venezuela | | | 3.6 | | | | 3.0 | | | | 4.3 | | | | 3.8 | | | | 3.6 | |
Ecuador | | | 4.6 | | | | 3.4 | | | | 3.2 | | | | 3.4 | | | | 3.4 | |
Brazil | | | 2.5 | | | | 2.3 | | | | 2.1 | | | | 2.7 | | | | 3.0 | |
Peru | | | 2.9 | | | | 2.3 | | | | 2.6 | | | | 2.2 | | | | 2.2 | |
United Kingdom | | | 1.7 | | | | 2.1 | | | | 1.9 | | | | 1.9 | | | | 2.0 | |
Chile | | | 2.7 | | | | 3.9 | | | | 3.6 | | | | 2.7 | | | | 1.8 | |
Switzerland | | | 2.2 | | | | 1.7 | | | | 1.2 | | | | 0.8 | | | | 0.9 | |
Others | | | 24.1 | | | | 26.7 | | | | 23.0 | | | | 23.2 | | | | 25.4 | |
Total | | | 100.0 | % | | | 100.0 | % | | | 100.0 | % | | | 100.0 | % | | | 100.0 | % |
Totals may differ due to rounding.
Sources: DANE.
Merchandise Imports by Major Trading Partners
| | | | | | | | | | | | | | | | | | | | |
| | | 2010(1) | | | 2011(1) | | | 2012(1) | | | 2013(1) | | | 2014(1) | |
| | | (percentage of total exports) | |
United States | | | 36.5 | | | | 35.6 | | | | 33.1 | | | | 34.7 | | | | 34.2 | |
China | | | 5.0 | | | | 5.5 | | | | 6.0 | | | | 6.0 | | | | 6.6 | |
Mexico | | | 5.5 | | | | 7.5 | | | | 8.0 | | | | 5.9 | | | | 5.5 | |
Panama | | | 4.0 | | | | 5.3 | | | | 5.8 | | | | 5.6 | | | | 4.9 | |
Switzerland | | | 3.4 | | | | 3.4 | | | | 3.7 | | | | 3.6 | | | | 3.6 | |
South Korea | | | 3.3 | | | | 3.3 | | | | 3.1 | | | | 3.3 | | | | 3.6 | |
Germany | | | 3.5 | | | | 3.4 | | | | 3.3 | | | | 3.5 | | | | 3.1 | |
Brazil | | | 3.8 | | | | 3.2 | | | | 3.1 | | | | 2.8 | | | | 3.0 | |
Chile | | | 2.3 | | | | 2.1 | | | | 2.4 | | | | 2.3 | | | | 2.3 | |
Japan | | | 3.4 | | | | 2.8 | | | | 2.6 | | | | 1.9 | | | | 2.1 | |
Spain | | | 1.5 | | | | 1.5 | | | | 1.9 | | | | 2.0 | | | | 1.9 | |
Uruguay | | | 1.9 | | | | 1.8 | | | | 1.5 | | | | 1.4 | | | | 1.9 | |
Ecuador | | | 1.7 | | | | 1.5 | | | | 1.6 | | | | 1.4 | | | | 1.5 | |
Others | | | 24.2 | | | | 23.0 | | | | 23.9 | | | | 25.6 | | | | 25.6 | |
Total | | | 100.0 | % | | | 100.0 | % | | | 100.0 | % | | | 100.0 | % | | | 100.0 | % |
Totals may differ due to rounding.
Sources: National Directorate of Customs and Taxes.
12
The major trading partners of Colombia classified by exports are the United States, China and the European Union.
Exports to the United States were $14.1 billion in 2014, as compared to $18.5 billion in 2013, and $6.04 billion for the period from January to July 2015. The 23.6% decrease in 2014 was mainly due to lower sales of refined petroleum products and mineral products, which decreased by 31.6% compared to 2013.
Exports to China were $5.6 billion in 2014, as compared to $5.1 billion in 2013. From January to July 2015, exports to China reached $1.3 billion. In 2014, exports to China increased 12.8% over the previous year, mainly due to a 167.1% increase in the export of wood, charcoal and wood products.
Exports to the European Union were $9.4 billion in 2014, as compared to $9.3 billion in 2013. From January to July 2015, exports to the European Union reached $3.7 billion. In 2014, exports to the European Union increased 1.3% over the previous year, mainly due to a 45.2% increase in exports of coffee, tea, mate and spices.
The major trading partners of Colombia classified by imports are the United States, Mexico and China.
Imports from the United States were $18.2 billion in 2014, as compared to $16.3 billion in 2013, and $9.5 billion for the period from January to July 2015. In 2014, imports from the United States increased by 11.4% compared to 2013, mainly as a result of a 33.2% increase in imports of oil, minerals, refined petroleum products and related products.
Imports from China were $11.8 billion in 2014, as compared to $10.4 billion in 2013, and from January to July 2015 imports totaled $5.7 billion. In 2014, imports from China increased by 13.8% compared to 2013, mainly as a result of a 16.2% increase in imports of equipment, electrical recording materials and image materials.
Imports from Mexico were $5.3 billion in 2014, as compared to $5.5 billion in 2013, and $2.3 billion for the period from January to July 2015. In 2014, imports from Mexico decreased by 4.1%.
Monetary System
Financial sector
As of June 30, 2015, Colombia’s financial sector had a total gross loan portfolio of Ps. 352.0 trillion compared to Ps. 303.0 trillion as of June 30, 2014. Past due loans totaled Ps. 10.9 trillion as of June 30, 2015, Ps. 9.4 trillion as of June 30, 2014, and Ps. 8.0 trillion as of June 30, 2013, representing an increase of 36% over the two-year period. Past due loans were 3.1% of total loans as of June 30, 2015, 3.1% of total loans as of June 30, 2014 and 3.0% as of June 30, 2013. Provisions as a percentage of past due loans remained constant at 144.8% as of June 30, 2014 and June 30, 2015.
The aggregate net technical capital (or solvency ratio) of Colombian banks increased from 15.0% of risk- weighted assets as of June 30, 2014 to 15.5% of risk-weighted assets as of June 30, 2015. The change in the solvency ratio is a product of an increase in risk-weighted assets from Ps. 320.2 trillion as of June 30, 2014 to Ps. 371.0 trillion as of June 30, 2015.
13
The following table shows the results of the financial sector as of, and for the twelve months ended June 30, 2015:
Selected Financial Sector Indicators
(in millions of pesos as of, and for the twelve months ended,
June 30, 2015)
| | | | | | | | | | | | | | | | |
| | | Assets | | | Liabilities | | | Net Worth | | | Earnings | |
Banks | | | Ps. 469,736,638 | | | | Ps. 406,519,487 | | | | Ps. 63,217,151 | | | | Ps. 5,099,223 | |
Non-Banking Financial Institutions (1) | | | 41,575,840 | | | | 32,635,739 | | | | 8,940,101 | | | | 610,682 | |
| | | | | | | | | | | | | | | | |
Total | | | Ps. 511,312,478 | | | | Ps. 439,155,226 | | | | Ps. 72,157,252 | | | | Ps. 5,709,905 | |
| | | | | | | | | | | | | | | | |
| (1) | Includes financial corporations, commercial financing companies and cooperatives. |
| (2) | Includes Financiera Eléctrica Nacional (“FEN”), Banco de Comercio Exterior de Colombia S.A. (“Bancoldex”), Financiera de Desarrollo Territorial (Territorial Development Financing Agency or “FINDETER”), Fondo para Financiamiento del Sector Agropecuario (Agricultural Sector Financing Fund or “FINAGRO”), Fondo Financiero de Proyectos de Desarrollo (Financial Fund for Development Projects or “FONADE”), Fondo Nacional del Ahorro (National Savings Fund or “FNA”), Fondo de Garantías de Instituciones Financieras (Financial Institutions Guarantee Fund or “FOGAFIN”), Fondo de Garantías de Entidades Cooperativas (Cooperative Institutions Guarantee Fund or “FOGACOOP”), Fondo Nacional de Garantías (National Fund of Guarantees or “FNG”) and Instituto Colombiano de Crédito Educativo y Estudios Técnicos en el Exterior (Colombian Institute of Educational Credit and Overseas Technical Studies, or “ICETEX”). |
Source: Financial Superintendency.
Interest rates and inflation
Consumer inflation (as measured by the change in the consumer price index, or “CPI”) for 2014 was 3.7% compared to 1.9% in 2013. The 12-month change in the CPI as of August 31, 2015 was 4.7%.
Producer price inflation (as measured by the change in the producer price index, or “PPI”) for 2014 was 6.3% compared to negative 0.5% for 2013.
In February 2015, DANE introduced a new methodology for calculating the producer price index (“PPI”) based on recommendations from the IMF, the OECD and Banco de la República. While the old methodology measured the average monthly change in prices of a basket of domestic supply of goods in the first stage of commercialization, including goods produced and sold by national companies and importers, the new methodology measures the average monthly change in prices of a basket of goods produced domestically. The new methodology has been applied to figures beginning in January 2015. As of August 31, 2015, the year-to-date PPI was 2.01%.
The average short-term composite reference rate (depósitos a término fijo, or “DTF”) decreased from 4.2% in 2013 to 4.1% in 2014. The average DTF for 2015 (as of September 7, 2015) was 4.45%.
14
The following table shows changes in the CPI and the PPI and average 90-day deposit rates for the periods indicated.
Inflation and Interest Rates
| | | | | | | | | | | | |
Period | | Consumer
Price Index
(CPI) | | | Producer
Price Index
(PPI)(1) | | | Short-Term
Reference Rate
(DTF)(2) | |
2010 | | | 3.2 | | | | 4.4 | | | | 3.7 | |
2011 | | | 3.7 | | | | 5.5 | | | | 4.2 | |
2012 | | | 2.4 | | | | (3.0 | ) | | | 5.4 | |
2013 | | | 1.9 | | | | (0.1 | ) | | | 5.1 | |
2014 | | | | | | | | | | | | |
January | | | 2.1 | | | | 1.00 | | | | 4.0 | |
February | | | 2.3 | | | | 1.90 | | | | 4.0 | |
March | | | 2.5 | | | | 2.58 | | | | 3.9 | |
April | | | 2.7 | | | | 3.18 | | | | 3.8 | |
May | | | 2.9 | | | | 3.26 | | | | 3.8 | |
June | | | 2.8 | | | | 1.99 | | | | 3.9 | |
July | | | 2.9 | | | | 1.96 | | | | 4.1 | |
August | | | 3.0 | | | | 2.45 | | | | 4.0 | |
September | | | 2.9 | | | | 2.63 | | | | 4.3 | |
October | | | 3.3 | | | | 4.20 | | | | 4.3 | |
November | | | 3.7 | | | | 3.73 | | | | 4.4 | |
December | | | 3.7 | | | | 6.02 | | | | 4.3 | |
2015 | | | | | | | | | | | | |
January | | | 3.8 | | | | (1.28 | ) | | | 4.5 | |
February | | | 4.4 | | | | (3.23 | ) | | | 4.5 | |
March | | | 4.6 | | | | 0.44 | | | | 4.4 | |
April | | | 4.6 | | | | (0.92 | ) | | | 4.5 | |
May | | | 4.4 | | | | (0.95 | ) | | | 4.4 | |
June | | | 4.4 | | | | 1.07 | | | | 4.4 | |
July | | | 4.5 | | | | 2.33 | | | | 4.5 | |
August | | | 4.7 | | | | 4.39 | | | | 4.5 | |
| 1: | Percentage change over the previous twelve months at the end of each month indicated, except for 2015 which registers percentage change from previous month. Figures for 2015 apply the new methodology announced by DANE as described above. |
| 2: | Average for each of the years 2010-2013 and, for each indicated month in 2014 and 2015, year-on-year of the DTF, as calculated by the Financial Superintendency. |
Sources: DANE and Banco de la República.
On August 1, 2014, due to continued weakness in global demand and lower oil and raw material prices, Banco de la República increased the discount rate by 25 basis points to 4.25%. On September 1, 2014, Banco de la República increased the discount rate to 4.5% to combat higher seasonal inflation in entertainment services (2.8%) and transportation (3.2%) in the last quarter of the year. Through August 2015, Banco de la República maintained the interest rate at 4.5% due to a smaller increase in inflation than had been projected, lower economic growth in the United States and the Euro Zone, the risk of a greater deterioration in the Chinese economy, including the recent Yuan devaluation, low oil prices, low international demand and a possible increase in the United States interest rates by the Federal Reserve.
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Foreign Exchange Rates and International Reserves
Exchange Rates
On September 21, 2015, the Representative Market Rate published by the Financial Superintendency for the payment of obligations denominated in U.S. dollars was Ps. 2,984.90=U.S.$1.00, as compared to Ps. 1,966.89=U.S.$1.00 on September 21, 2014. During the 12-month period ended September 21, 2015, the Representative Market Rate reached a high of Ps. 3,238.51=U.S.$1.00 on August 27, 2015 and a low of Ps. 1,966.89=U.S.$1.00 on September 21, 2014.
International reserves.
Banco de la República’s gross international reserves increased from $28,463.5 million at December 31, 2010 to $32,302.9 million at December 31, 2011. As of December 31, 2012, gross international reserves further increased by $5,171.2 million to $37,474.1 million and by December 31, 2013, gross international reserves were $43,639.3 million. As of December 31, 2014, gross international reserves increased by $3,688.8 million to $47,328.1 million. As of August 31, 2015, gross international reserves were U.S.$46,710.16 million compared to U.S.$46,712.15 million as of August 31, 2014, a 0.0043% decrease.
The increase in international reserves in 2010 was mainly due to intervention by Banco de la República in the foreign exchange market and the increase in special drawing rights (SDR) allocated by the IMF. In December 2011, Banco de la República decided to resume the accumulation of international reserves mainly due to three factors: low interest rates in the developed economies, a decision to have a more conservative risk profile of the central bank’s portfolio and the depreciation of the euro against the dollar by 3% in 2011. During 2012 and 2013, Banco de la República continued accumulating international reserves mainly due to the adoption of a conservative risk profile in light of the global financial crisis. In July 2014, Banco de la República decided to increase the daily amount of dollar purchases and continued accumulating international reserves, in an amount totaling $2.0 billion between July and September 2014, buying at least $30 million daily. During October 2014, Banco de la República resumed accumulating international reserves through average daily purchases of $10.0 million in competitive auctions. In November 2014, Banco de la República purchased $ 165.0 million in the foreign exchange market through the auction mechanism of direct purchase. From January 2014 to December 2014, Banco de la República accumulated $4.1 billion. As of February 2015, Banco de la República decided not to continue increasing international reserves. Year-to-date, Banco de la República has not made purchases of foreign exchange.
As established by Decree 4712 of 2008 and in accordance with the technical criteria established by Resolution No. 262 of February 11, 2011, which governs the administration of excess liquidity, the General Directorate of Public Credit and the National Treasury is allowed to perform any transaction that Colombia may require in the foreign exchange market, including the purchase of foreign exchange in such amounts and at such times as it may determine from time to time and derivatives operations that consist of swaps and forward contracts over foreign exchange. As of August 2015, the General Directorate of Public Credit and National Treasury had no current position in swaps and forward contracts over foreign exchange.
On May 22, 2012, the Government issued Decree 1076 of 2012, which established a system to administer the “Fondo de Ahorro y Estabilización del Sistema General de Regalías,” or Savings and Stabilization Fund. Based on Legislative Act No. 05 of 2011, up to 30% of the income from the General System of Royalties will be disbursed to the Savings and Stabilization Fund. The General Directorate of Public Credit and National Treasury is responsible for transferring such royalties to the Savings and Stabilization Fund, which is managed by Banco de la República. For this purpose, the General Directorate of Public Credit and National Treasury, at its sole discretion, may buy dollars in the secondary market. Royalties are derived from natural resources, such as oil, coal and other mining activities. As of August 28, 2015, royalties reached an aggregate amount of Ps. 32.4 trillion since inception and, as of June 30, 2015, transfers in dollars into the Savings and Stabilization Fund since inception were $2.8 billion.
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Public Sector Finance
General
In 2014, the Central Government deficit was 2.4% of GDP compared to a deficit of 2.3% of GDP in 2013. The Central Government deficit for 2014 was Ps. 18,356 billion, an increase of 10.3% from the Ps. 16,645 billion deficit registered in 2013. Central Government revenues increased by 5.1%, from Ps. 119,744 billion in 2013 to Ps. 125,904 billion in 2014, while Central Government expenditures increased by 7.5%, from Ps. 134,965 billion in 2013 to Ps. 145,132 billion in 2014. The increase in expenditures was primarily due to increases in operating and interest expenditures.
The Government currently projects a Central Government deficit in 2015 of 3.0% of GDP. However, no assurance can be given concerning actual results for the 2015 period and beyond.
The 2015 budget is based on the following principal budget assumptions:
Principal 2015 Budget Assumptions
| | | | |
| | | 2015 Budget
Assumptions
as of June 2015(1) | |
Gross Domestic Product | | | | |
Nominal GDP (billions of pesos) | | | 806.87 | |
Real GDP Growth | | | 3.6 | % |
Inflation(2) | | | | |
Domestic Inflation (consumer price index) | | | 4.0 | % |
External Inflation(3) | | | 0.5 | % |
Real Devaluation at end of period | | | 20.6 | % |
Export Prices | | | | |
Coffee (ex-dock) ($/lb.) (4) | | | 1.8 | |
Oil ($/barrel) (5) | | | 48.0 | |
Coal ($/ton) (6) | | | 61.6 | |
Gold ($/Troy oz.) (4) | | | 1,200.0 | |
| 1: | Figures correspond to statistics released by the General Directorate of Macroeconomic Policy in June 2015 in connection with the release of the Medium Term Fiscal Plan 2015. |
| 3: | “External Inflation” is based on projected inflation in the United States as published in the IMF, World Economic Outlook Database, April 2015. |
| 4: | Budget assumptions based on Banco de la República data. |
| 5: | Based on inputs provided by the Mining and Energy Technical Group established by the Fiscal Rule and oil futures market. Projections include an average price of Brent oil of $60 per barrel. |
| 6: | Based on projections by the General Directorate of Macroeconomic Policy. |
Sources: General Directorate of Macroeconomic Policy, Ministry of Finance.
The figures set forth in this “—Public Sector Finance” section represent the Government’s forecast as of June 15, 2015 of the 2015 Colombian economy. While the Government believes that these assumptions and targets were reasonable when made, some are beyond the control or significant influence of the Government, and actual outcomes will depend on future events. Accordingly, no assurance can be given that economic results will not differ materially from the figures set forth above.
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Privatization of Isagen
On July 30, 2013, the Government announced its intention to sell its remaining interest in Isagen (57.7% of the total shares of Isagen). On August 12, 2014, the Government decided to extend the privatization of Isagen up to a year because several bidders requested additional time to review the decision to acquire a controlling interest in Isagen and the extra time would allow for the completion of the Sogamoso hydroelectric project.
On May 14, 2015, the State Council ordered a temporary suspension of the sale of Isagen. The suspension was ordered to avoid further damage to the public interest. The Government postponed the auction to private investors scheduled for May 19, 2015. On September 10, 2015, the State Council decided to lift the suspension measure taken on May 14, 2015 and allow the Government to proceed with the sale.
Flexible credit line with the IMF
On June 24, 2013, the IMF’s Executive Board approved a two-year SDR 3.87 billion successor arrangement under the Flexible Credit Line, which at June 24, 2013 was equivalent to approximately $5.84 billion. On June 17, 2015, the IMF’s executive board approved a two-year SDR 3.87 billion successor arrangement under the IMF’s Flexible Credit Line, which at June 17, 2015 was equivalent to approximately $5.45 billion. To date, Colombia has not drawn on the Flexible Credit Line. The Government intends to treat the credit line as precautionary and does not plan to draw on the facility.
Public Sector Debt
Colombia’s ratio of total net non-financial public sector debt to GDP was 35.6% in 2010, decreased to 34.1% in 2011 and increased to 32.6% in 2012 and to 34.6% in 2013. For the year ended December 31, 2014, the ratio of total net non-financial public sector debt to GDP increased to 38.3%, mainly due to the increase in debt of the Central Government.
Public sector internal debt
As of August 31, 2015, the Central Government’s total direct internal funded debt (with an original maturity of more than one year) was Ps. 212.5 trillion, compared to Ps. 204.2 trillion as of August 31, 2014. The following table shows the direct internal funded debt of the Central Government as of August 31, 2015 by type:
Central Government: Internal Public Funded Debt—Direct Funded Debt
| | | | |
| | | At August 31, 2015
(in millions of dollars) | |
Treasury Bonds | | | Ps. 200,008,148 | |
Pension Bonds | | | 10,669,966 | |
Tĺtulos de Reducción de Deuda (TRD) | | | 451,352 | |
Peace Bonds | | | 8,308 | |
Constant Value Bonds | | | 1,127,098 | |
Banco Agrario | | | — | |
Others(1) | | | 280,266 | |
Security Bonds | | | 125 | |
Total | | | Ps. 212,545,263 | |
| | | | |
Total may differ due to rounding.
| (1) | Includes other assumed debt. |
Source: Deputy Directorate of Risk—Ministry of Finance.
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Total direct internal floating debt (i.e., short-term debt with an original maturity of one year or less) of the Central Government was Ps. 44.9 billion as of August 31, 2015.
Public sector external debt
The following tables show the total external funded debt of the public sector (with an original maturity of more than one year) by type and by creditor:
Public Sector External Funded Debt by Type (1)
| | | | | | | | |
| | | As of
July 31,
2014 | | | As of
July 31,
2015 | |
| | | (in millions of U.S. dollars) | |
Central Government | | U.S. $ | 37,137 | | | U.S. $ | 39,054 | |
Public Entities(2) | | | | | | | | |
Guaranteed | | | 1,818 | | | | 1,653 | |
Non-Guaranteed | | | 16,333 | | | | 21,870 | |
| | | | | | | | |
Total External Funded Debt | | U.S. $ | 55,289 | | | U.S. $ | 62,576 | |
| | | | | | | | |
| (1) | Provisional; subject to revision. Includes debt with an original maturity of more than one year. Debt in currencies other than U.S. dollars has been converted into U.S. dollars using exchange rates as of July 31, 2014 and July 31, 2015, respectively. |
| (2) | Includes Banco de la República, public agencies and entities, departments and municipal governments and state-owned financial entities. |
Source: Debt Database—Ministry of Finance.
Public Sector External Funded Debt by Creditor(1)
| | | | | | | | |
| | | As of July 31, 2014 | | | As of July 31, 2015 | |
| | | (in millions of U.S. dollars) | |
Multilaterals | | U.S. $ | 15,739 | | | U.S. $ | 16,211 | |
IDB | | | 7,015 | | | | 7,127 | |
World Bank | | | 7,536 | | | | 8,031 | |
Others | | | 1,188 | | | | 1,053 | |
Commercial Banks | | | 2,795 | | | | 5,249 | |
Export Credit Institutions | | | 2,736 | | | | 2,671 | |
Bonds | | | 32,625 | | | | 36,494 | |
Foreign Governments | | | 714 | | | | 1,281 | |
Suppliers | | | 3 | | | | 2 | |
| | | | | | | | |
Total | | U.S. $ | 54,613 | | | U.S. $ | 78,119 | |
| | | | | | | | |
Total may differ due to rounding.
| (1) | Provisional, subject to revision. Debt with an original maturity of more than one year. Debt in currencies other than U.S. dollars has been converted into U.S. dollars using exchange rates as of July 31, 2014 and July 31, 2015, respectively. |
Source: Debt Registry Office Ministry of Finance.
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As of May 31, 2015, floating (i.e., short-term debt with an original maturity of one year or less) public sector external debt totaled U.S. $513 million.
On January 28, 2014, Colombia issued U.S. $2,000,000,000 aggregate principal amount of its 5.625% Global Bonds due 2044.
On October 28, 2014, Colombia issued U.S. $500,000,000 aggregate principal amount of its 4.000% Global Bonds due 2024 and U.S. $500,000,000 aggregate principal amount of its 5.625% Global Bonds due 2044 in a reopening of each such series.
On January 28, 2015, Colombia issued U.S. $1,500,000,000 aggregate principal amount of its 5.000% Global Bonds due 2045. On March 26, 2015, Colombia issued U.S. $1,000,000,000 aggregate principal amount of its 5.000% Global Bonds due 2045 in a reopening of such series.
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