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Economy & Finance 13

Written by May 04 2020 0

The Medellin Mayor’s Office revealed May 4 that to date, 64,366 companies have registered under the pioneering “Medellin Me Cuida” economic restart program for manufacturing and construction sectors here.

According to the Mayor, of those 64,366 companies, 54,810 have presented evidence of compliance with new biosafety protocols to prevent the spread of Coronavirus. So far, 33,702 companies have been certified in compliance, while another 8,915 are pending approval.

As a result of the “Medellin Me Cuida” registration and biosafety compliance programs, 785,260 employees are now authorized to venture out to and from work in the Medellin metro area (Valle de Aburra), including 528,695 inside Medellin itself, according to the Mayor.

“The Municipal administration will follow up on the biosafety protocols that were approved for the companies,” the Mayor added.

Authorization notices were sent by email to authorized companies, including text messages to those accredited to work.

“In Medellín we are pioneers [in company/worker registrations] because we not only require biosafety protocol from construction or manufacturing companies, but also from those that were already exempt in previous [Coronavirus quarantine-exemption] decrees,” added Medellin’s general secretary Esteban Restrepo Taborda.

“The municipalities of the metropolitan area were in charge of approving the companies domiciled in each locality, then linking the required information on the [Medellin Me Cuida] platforms and thus allowing the movement of workers anywhere in the region,” according to the Mayor’s Office.

To qualify for quarantine exemption, employers must enforce biosafety protocols such as the mandatory use of a face mask, minimum distancing of employees and the provision of elements for worker care such as glycerinated alcohol plus policies for self-care and isolation (such as telecommuting for office workers).

“The Mayor’s Office of Medellín, together with the authorities, will continue to adopt control and surveillance mechanisms to comply with protocols to preserve the life of citizens and also reactivate the economy for the well-being of all,” the Mayor added.

Written by April 24 2020 0

The Medellin Chamber of Commerce for Antioquia (CCMA) just revealed a new study indicating that the Coronavirus quarantine costs the local economy here at least COP$170 billion (US$42 million) every day -- and 95% of businesses have seen sales drop anywhere from 80% 100% during the crisis.

As a result, Antioquia regional gross domestic product (“PIB” in Spanish initials) likely will come in at a net-negative 1.5% to 2% this year -- barring some dramatic reversal, according to CCMA.

To get an idea of this impact, Antioquia’s GDP in December 2019 alone was COP$134 trillion (US$33 billion), according to CCMA.

“Of the 3 million employed persons in Antioquia department, close to 1 million work in activities at high risk of Covid-19, and losses of between 112,000 and 131,000 jobs are projected, which implies an increase in the unemployment rate close to 15%,” according to the trade group.

Because of quarantine rules to date, “55% of the companies in Antioquia are not currently operating. These represent 41.2% of formal jobs,” according to CCMA.

The controlled reopening of construction and manufacturing sectors on April 27 will help industry and employment -- but won’t solve all the current problems, the group added.

What’s more, 88% of companies only have enough cash-on-hand to survive a maximum of one to two months, CCMA’s survey found.

Meanwhile, ANDI – Colombia’s biggest national industrial/commercial trade association – on April 23 released findings of its second survey on cash liquidity among 238 member companies.

“Compared to the results of the previous survey, it can be seen that the liquidity situation of companies today with updated information as of April is more critical to the extent that the vast majority of companies have not received income and have had to continue to cover their expenses,” according to ANDI.

“In effect, with updated information, companies only have 11 days to operate if they allocate the entire cash flow of the company to fulfill all their obligations -- that is, the entire payroll including social security, suppliers, financial sector, contracts and Dian [taxes].

“In the case of manufacturing companies, they have 12 days to operate” if cash-on-hand were disbursed to cover all outstanding expenses, ANDI found.

“In the manufacturing industry, there is an average of 42 days in cash to cover the salary of employees, 31 days to meet the full payroll including social security payments, 15 days to pay suppliers, 38 days to cover fixed expenses associated with contracts and loans acquired with the financial sector, 43 days for the payment of withholding tax and 42 days for the payment of VAT [value-added tax] withholding.

“However, the situation is much more complex for a large number of companies: 38.7% of the companies surveyed only have sufficient cash to cover between one and eight days if they meet all their obligations of payroll, suppliers, fixed expenses, financial sector and Dian, while 17.1% only have between nine and 15 days left, while 27. 6% have between 16 and 30 days. Thus, 83.4% have cash to operate for a month or less.”

Written by April 18 2020 0

The east-of-Medellin “Oriente” region -- second only to Cundinamarca in Colombia’s gigantic cut-flower export industry – aims for a sales rebound for the upcoming May 10 annual “Mother’s Day” demand surge typically seen in North America, Europe and parts of Asia.

As noted in an April 14 bulletin from Asocolflores (the national flower-producers’ trade association), the Colombian government granted flower producers and exporters some limited exemptions from the national Coronavirus quarantine.

However, these partial exemptions also include extra-strict health protocols for workers at production and shipping sites, as well tougher restrictions on the number of workers allowed on company buses typically used for transport.

“President Iván Duque extended mandatory preventive isolation until April 27 due to Covid-19, but maintained the exceptions that allow the floriculture sector to operate,” noted Asocolflores president Augusto Solano.

“Our farms continue to work under strict health and hygiene measures, which implies higher operating costs because, for example, company buses are traveling with half the number of people they normally transport,” Solano said.

Meanwhile, latest figures on the evolution of the Coronavirus crisis indicate that Colombia is not only doing better than many other nations, but also beating its earlier, more pessimistic projections. Because of this, “the government hopes to begin a gradual and careful opening of the rest of the economy” in the coming months, Asocolflores noted.

In the meantime, “Colombian flower growers already have production and logistics in place to meet demand from different countries, which for the most part continues to be the United States, Japan and now some European countries,” according to the trade group.

Beyond preparing for the annual export surge for Mother’s Day, Colombia’s flower producers are also helping to address the Coronavirus crisis in Antioquia and elsewhere in Colombia, according to the group.

Among those efforts: donation of four Intensive Care Units (ICU) for Cundinamarca and Antioquia; donations to subsidize the purchase of an ambulance for Rionegro, Antioquia; delivery of Coronavirus detection tests for the small tropical-flower-growers’ region; and distribution of food packages for poor families.

In addition, “Asocolflores also delivered 120,000 stems of flowers to nine hospitals in Bogotá, Medellin and small towns in Cundinamarca to celebrate International Health Day on April 7,” according to the trade group.

Written by April 14 2020 0

Colombia’s national industrial-commercial trade association ANDI on April 14 released results of a national member survey showing that Colombia’s business sector is close to hitting a critical wall on cash liquidity – because of the Coronavirus quarantine crisis.

The survey of 172 companies that collectively generated COP$56.8 trillion (US$14.7 billion) in operating income last year shows that “the liquidity situation of companies today is more critical to the extent that they have not received income and continue to cover their expenses,” according to ANDI.

“We have affirmed that the great problem at the moment is liquidity -- that of individuals, that of the state [governments] and that of companies -- the latter of which are the vehicles that generate employment and therefore income for millions of families,” added ANDI president Bruce MacMaster.

If companies simply were to resort to using 100% of cash-on-hand just to cover employee expenses -- excluding all other costs, and not using bank overdrafts -- then they would have just 53 days to cover the salary of employees or 42 days to meet the full payroll including social security payments, the survey shows.

If companies used all cash-on-hand instead just to pay outstanding bills to their suppliers, then they would have just 35 days to cover fixed expenses such as leasing of offices, premises, warehouses, machinery, insurance, maintenance, public services, security and others, the survey shows.

If companies instead used all current cash just to pay outstanding loans, then they would have just 33 days left.

If instead they used cash just to pay taxes to the national DIAN tax agency, then they would have 45 days to pay withholding tax and 53 days to pay value-added tax (VAT).

“In the manufacturing industry, the availability of cash resources is less,” according to ANDI. “There is an average of 42 days in cash to cover the salary of employees, 37 days to meet full payroll including social security payments, 22 days to pay providers, 37 days to cover the fixed expenses associated with contracts, 21 days for loans acquired with the financial sector, 41 days for the payment of withholding tax and 37 days for the payment of VAT withholding.

“However, the situation is much more complex for a large number of companies: 59.9% of the companies surveyed have cash flow of one-month-or-less to pay their employees' payroll including social security, while 70.8% only have enough cash to pay suppliers and 69.2% only have enough to pay their fixed expenses associated with contracts," the survey found.

Written by January 03 2020 0

Andi -- Colombia’s biggest and most influential industrial-commercial trade association, born in Medellin – on January 3 issued its latest annual economic outlook report, finding that Colombia continues to improve in several key economic competitiveness areas -- but still lags in others.

“Colombia ends 2019 with a fairly acceptable performance in the economic field,” stated Andi president Bruce MacMaster.

During 2019, Colombia’s manufacturing industry showed “moderate” growth year-on-year, although slightly lower compared to 2018's growth, the study found.

Between January and October 2019, Andi’s “Joint Industrial Opinion Survey” ("EOIC" in Spanish initials) reported an increase of 1.8% in industrial production (down from 2.9% in 2018); a 2.8% rise in total foreign plus domestic sales (down from 3.3% growth in 2019) and a 2.9% hike in sales for the national market (up from 2.6% in 2018), according to the trade group.

As for the general economic growth (“PIB” in Spanish initials), Colombia is outstripping nearly all of Latin America, rising above 3% for full-year 2019 – in contrast to 10 consecutive quarters in prior years that had growth rates below 2.5% and even in some quarters below 2%, Andi noted.

“However, 3% [annual PIB growth] rates are not enough. They are far from Colombia's long-term [historic] growth, which is between 4% to 4.5%, and [3% annual growth] will not allow us to respond to the great challenge that the country has today to generate quality jobs and meet great needs in social and competitiveness,” according to Andi.

“Household consumption, which had grown 3.6% [year-on-year] in 2018, at the end of the third quarter of 2019 grew 4.7%. Meanwhile, investment measured by gross formation of fixed capital went from 0.8% in 2018 to 4.6% in the same period of 2019.

“This behavior of investment [growth] is explained by the confidence that national investors and foreigners have in the country and also thanks to the incentive represented by the new Financing Law that corrects a lag that we had with respect to other countries by allowing VAT [value-added tax] deduction for the purchase of capital goods.

“With all of the above, Colombia remains one of the promising economies in the region and this is perceived by the risk rating agencies that keep the country in investment grade. In the same direction, foreign direct investment (FDI) flows to the country have been maintained this past year and recorded growth of over 20%, both in FDI towards the oil sector and oriented towards other sectors.”

Meanwhile, “2020 will bring great challenges. The recovery phase that began in the last two years should be consolidated and the country should look for growths greater than 4% and even 5%.

“For this [to happen], the recently enacted tax package [dubbed ‘Economic Growth Law’] constitutes a positive investment incentive. It is also important that both the public and private sectors closely monitor the commitments of the Growth Pacts, which would also contribute to a better environment to boost the economy. No less important is a strong export strategy that allows us to penetrate new markets and diversify the export basket.

“Another great challenge is in formalization. Colombia still has high levels of labor, product and business informality. The country has already made progress in making decisions to reduce informality such as the reduction of [company formalization] procedures, a simplified taxation system and electronic invoices.

“To this is added the CONPES [the national economic planning organization] initiative for business formalization, whose main purpose is the implementation of an action plan to improve the cost-benefit ratio of a company to be formal,” Andi added.

Competitiveness: Crucial for Growth

While Andi noted that the year 2019 was generally positive, “this level of economic growth is not enough for the country to transform and achieve greater development, a better level of employment and an increase in investment.

“That is achieved with a competitiveness strategy, where policies focus on Colombia being attractive both in the region and internationally in terms of infrastructure, human capital, institutions and business development, to mention a few issues,” Andi noted.

While some major competitiveness indicators found that Colombia showed “slight improvements in the year 2019, the position that the country occupies is still lagging behind,” according to Andi.

“The World Economic Forum [WEF or 'FEM' in Spanish initials] placed Colombia at position 57 among 141 countries in the Global Competitiveness Index 4.0, reflecting a three-position advance over the previous year, when it was in position 60.

“The top positions [in the WEF survey] are held by Singapore, the United States and Hong Kong. Asian countries such as [South] Korea and China remain in high positions in positions, at 13 and 28 respectively. India on the other hand fell 10 positions with respect to the prior year, placing itself in position 68.

“In Latin America, Colombia is in position four among the [WEF] countries analyzed, and continues to be better placed in the ranking than Costa Rica, Peru, Panama, Brazil, Argentina, Ecuador, Paraguay and Venezuela. However, although Chile, Mexico and Uruguay did not show improvements in the global index [in 2019], these countries continued to place themselves in higher positions in the indicator.

“The rise by three positions [in the global WEF survey] by Colombia is mainly explained by significant improvements in macroeconomic stability, health and labor market.

“On the other hand, we deteriorated in institutions and in TIC [advanced technology, information and communications] adoption.

"Among the indicators of institutions, the fall in protection of intellectual property and verifications and balances is highlighted. On the other hand, the fall in TIC adoption is mainly due to the fall in Internet users.

“In infrastructure, we improved by two positions. The indicators that stand out for their progress are efficiency in train services and electricity.

“Macroeconomic stability had an advance of 13 positions, reaching 43, where inflation was the determining indicator.

“In human capital, the country advanced nine positions for the improvement in health indicators, specifically for healthy life expectancy. For its part, the skills indicator showed no progress, and we remain in an unfavorable position (80).

“In markets [efficiencies], we fell two positions due to the decline in the product market and in the financial system. The fall in the product market was due to significant deterioration in the following indicators: scope of market dominance, competition in professional services, competition in network services and complexity of tariffs.

“For its part, trade tariffs had an advance of 14 positions. In the financial system, the indicator of delinquent bank loans (as a percent of the value of the loan portfolio) was the one with the greatest decline.

“The labor market, meanwhile, had a significant improvement of seven positions, explained by the good performance of flexibility in salary determination, confidence in professional management and the meritocracy-and-incentive indicator.

“In the innovation ecosystem, Colombia lost six positions in the ranking, reaching 66. The capacity for innovation is the biggest challenge, since it fell four positions.

“The indicators that lost positions [relative ranking declines] were that of interaction and diversity, diversity of the workforce, status of cluster development and patent applications. The behavior in the indicator of collaboration within the company that improved 30 positions stands out as positive,” according to Andi.

“The pillars in which Colombia performed less favorably were that of business growth, legal certainty and internationalization.

“In legal certainty, the country's environment is not friendly and shows that Colombia has a lot to advance in this area, since the constant change in the rules of the game is a great limitation for companies.

“Indicators such as transparency and contract compliance time show a weak performance in the country. In internationalization, the indicator that does not show good performance is that of the [transparency] environment, due to indicators such as time to import and foreign currency reserves.

“The competitive environment of the country, although it has improved, there are many challenges and a long way to go. In infrastructure, costs and environment, we occupy the least favorable positions, while in technology and education the indicators show a better position (49 and 50).

“In [business] formalization, the position occupied by Colombia was 52, due to the country's environment in this area. The indicators of transparency and burden of government regulation are those that place the country in a less favorable position,” Andi added.

“The digital transformation in Colombia is, together with innovation and entrepreneurship, the pillar in which the country is better located, ranking 51.

“Within this pillar, the country's performance in ‘GovTech’ stands out, due to the good performance in indicators such as the government online services index, electronic participation index and the importance of TIC for the government vision.

“In the areas of [TIC development] infrastructure, digital talent and environment, we still have a long way to move forward,” Andi concluded.

IMD Rankings

“Likewise, the IMD [the Swiss-based business-development education program often ranked top in the world] in its global competitiveness ranking published in May [2019] shows a good performance for Colombia, with an improvement of six positions, achieving position 52 among 63 countries,” according to the Andi analysis.

“Within this [IMD] indicator, most of the measurement factors had improvements, which include the labor market indicator ranking (+21), prices (+17), attitudes and values (+10), fiscal policy (+7) and technological infrastructure (+7). On the other hand, the indicators for foreign trade, foreign investment, public finances and health and environment, fell between three and five positions.

“For its part, the ‘Doing Business’ [research organization] in its report, ‘Ease of Doing Business,’ presented an unfavorable panorama for the country, with a deterioration in the general ranking of two positions, going from 65 to 67 among 190 countries,” Andi noted.

About Medellin Herald

Medellin Herald is a locally produced, English-language news and advisory service uniquely focused upon a more-mature audience of visitors, investors, conference and trade-show attendees, property buyers, expats, retirees, volunteers and nature lovers.

U.S. native Roberto Peckham, who founded Medellin Herald in 2015, has been residing in metro Medellin since 2005 and has traveled regularly and extensively throughout Colombia since 1981.

Medellin Herald welcomes your editorial contributions, comments and story-idea suggestions. Send us a message using the "contact" section.

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