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1/21/09

Colombia's economy and a seriously scary chart

At first glance, the chart below of Colombia's manufacturing industry growth doesn't look too bad, does it? What we see is from 2003 to November 2008 the line zigs and zags a bit, but generally moves in the right direction.

Click to enlarge

Well, as Lester Burnham's Post-It said in American Beauty, 'LOOK CLOSER', because the numbers for November released yesterday by Colombia's official stats people DANE totally but totally and horribly suck.

Traditionally, Colombia's best performing month is November, true for all indexed results on the chart. In 2003 (and to get wonky on you) November topped the year with 132.17, in 2004 November topped with 151.08, in 2005 November topped with 154.83, in 2006 November topped with 187.54, in 2007 November topped with 201.61. BUT, 2008 November has seen a significant slump to an indexed 188.50. As Reuters reports here (Spanish language), the Year-over-Year drop is 13.3%.... yowzers. This is serious caca, people. Colombia isn't just slipping into recession, it's diving in head-first. Retail sales were also reported down 2.95% in the YoY figures yesterday. Extremely smelly.

To round off the bad news, the last snippet of the Reuters report also mentions how local bizpeople are moaning that interest rates are still too high and restrictive to operations. This is a bellweather to how Colombia's currency is about to perform against the dollar (i.e look out below). In fact, it's pretty indicative of how all local currencies are about to get reamed versus the greenback in the months to come. I was asked a couple of days ago by a Peruvian friend whether it would be better holding Nuevos Soles or US Dollars going forward. It took me about a millisecond to answer "dollars". As a final, wider thought, maybe the rabid goldbugs who constantly predict the imminent demise of the US dollar should remind themselves occasionally about wider world issues. Mind you, it's doubtful they even own passports.