Colombian news summary

Thursday October 14

- The international rating agency, Fitch Ratings, revised Colombia´s outlook from stable to positive. This decision reflects the optimistic expectations the agency has according to the countries´ macroeconomic performance. Some of the key aspects taken into consideration were the expected increase in oil and mining production, moderate inflation, macroeconomic stability and a flawless debt service. Nevertheless, a couple of areas which would be in need of improvement are the structure in public finances and fiscal solvency ratios.

- The Colombian Government announced on Thursday that a $1.4 billion-dividend payment it was to receive from oil-company Ecopetrol, will be deposited in accounts abroad. This decision aims at curbing the inflow of dollars that has been appreciating the Colombian Peso recently. The peso has gained 6.78% during the past six months. In reaction to the announcement, the peso depreciated on Thursday approximately 0.54% and Friday’s representative market rate will be at $1,801.20 (COP/USD). Finally, the Igbc (Colombia´s Stock Market General Index) decreased 1.17%, the same as the Colcap and COL20 which fell 0.96% and 2.07%, respectively.

Friday, October 15

- Government took to Congress on Friday a bill that eliminates a 20% surcharge to energy consumption of industrial users, and a 30% deduction on income tax for those companies that reinvested their profits in real productive fixed assets. It also modifies the tax regime on financial transactions, and strengthens the power of the national taxes and customs office, Dian.

The first measure is aimed at improving the competitiveness of enterprises, now faced with the strong pressure of the Colombian Peso´s revaluation. If the law is approved, the surcharge will decrease 10% in 2011 and 10% in 2012.

The second part of this ruling, eliminating the 30% deduction, would increase National´s Government income by approximately COP$4 Bn ($2.200 Bn), but most important, it would make Colombian tax regime simpler and more efficient. In the past eight years, government placed a number of tax exemptions on activities such as tourism and cocoa, that favor elusion and distort incentives for investment.

On the Tax on Financial Movements, the bill cuts the possibility of elusion that exists when payments are channeled through trust companies and stock brokers. If the law is enacted, money transferred to third parties other than the initial investor will be subject to a 4 per-thousand tax, like all other payments made thorough financial institutions. Government expects that this could raise tax collection by COP400.000 million ($220 million).

- On Friday the closing rate for the public debt notes (TES) due July 2020 decreased 2 bps in relationship to Thursday´s session (7.09%). Furthermore, Fabricato, one of Colombia´s most representative textile companies reported an income increase during the third quarter of 2010 of 3.0%, in comparison to the same period on 2009 (COP$165.820 million).