Andean Group - 8 February 2005

The consensus among economists is that the peso will actually weaken this year by about 5.5% against the dollar. In 2004, it appreciated by about 14% in real terms. The 5.5% depreciation would take the currency down to 2,544 at the end of 2005. The worry about the strength of the peso, and the danger of Colombian exports being priced out of the US, their biggest market, is prompting the government to consider measures to boost the dollar. The latest is a requirement that every foreign exchange transfer of over US$200 should be reported.

OUTLOOK

Inflation: The rate for January was 0.82%. This was the third-lowest rate for any January, when wages are usually increased, for the past 35 years. Food prices increased by 1.45% and transport and telecommunications prices rose by 1.28%. The target for this year is an inflation rate of between 4% and 5%. In 2004 the rate was 5.5%.
Unemployment: The unemployment rate at the end of 2004 was 12.1%. This is equivalent to 2.44m people. The government pointed out that the number was 110,000 below the rate at the end of 2003. On the other hand, the employment rate fell from 54.8% to 52.4% over the year.
Farc finances: The ministry of finance reckons that the Fuerzas Armadas Revolucionarias de Colombia had revenues of US$77m in 2003. The ministry reckons that the guerrilla group spent US$35.6m.
The Venezuelan trade embargo: The Venezuelan trade embargo caused problems for border departments, notably Arauca. The department had been buying 6MW a day from the Venezuelan gird to supply power to the capital. This supply was interrupted at the end of January, though it was restored before Presidents Uribe and Chávez of Venezuela were due to meet.