Latam Daily: Colombia Imports Increase in January; New Finance Minister 

• Colombia: Imports start the year in positive territory, reflecting a recovery in domestic demand; The Finance Ministry changes its head, markets will be vigilant of how much could change the willingness to maintain fiscal sustainability

COLOMBIA: IMPORTS START THE YEAR IN POSITIVE TERRITORY, REFLECTING A RECOVERY IN DOMESTIC DEMAND

On Wednesday, March 19^th, DANE published import data for January 2024. Imports reached US$5.37 billion CIF. Imports increased 8.47% compared to the same month in 2025, maintaining the positive trend for the seventh consecutive month (chart 1). In January, the three major groups of imported products had a positive balance; however, manufactured imports (+7.1% y/y) and fuel imports (+21.4% y/y) contributed the most, with 5.4 percentage points and 2.1 percentage points, respectively.

The growth in imports appears to reflect a better momentum in domestic demand and continues to show signs of a better outlook for the manufacturing sector. According to January’s economic activity data, commerce, transportation, and lodging were among the most prominent sectors during the month, with annual growth of 5.24%. In this regard, the dynamics of imports could be responding to the recovery in demand, showing a 24.7% y/y growth in the importing of durable goods (rebounding from the 15.5% y/y contraction one year ago), particularly vehicles (+33.9% y/y) and household appliances (22.7% y/y). Meanwhile, the manufacturing sector is reportedly entering a gradual recovery cycle, with raw material imports growing 12.5% ​​y/y in January, and capital goods imports growing 0.4% y/y, which contrasts with the 1.9% y/y growth in manufacturing production in January.

The trade balance stood at US$1.27 billion, widening the deficit by 18.0% compared to January 2024 (US$1.08 billion) (chart 2). In January, exports increased to a lesser extent (+4.3% y/y), reflecting good momentum in coffee exports and a recovery in oil exports but a sharp contraction in coal exports. The previous widening in the trade deficit is not supportive of having strong structural appreciation in the USDCOP, as the external accounts are signaling that the economy is consolidating the early stage of an expansionist cycle, which means there is a possibility of having a higher deficit in the future. Scotiabank Colpatria expects the exchange rate to adjust to a higher level in the year’s second half, around 4,300 pesos.

Key highlights from January:

• Consumer imports maintained a positive dynamic. In January, consumer imports grew 15.5% y/y, contributing 3.6 ppts to total import growth. Imports of non-durable goods grew 9.2% y/y, driven by imports of food, beverages, and textile products. Imports of durable consumer goods increased 24.7% y/y, reflecting a 33.9% y/y increase in vehicle imports.

• Imports of raw materials grew 12% y/y. Imports of intermediate goods and raw materials increased across all three subcomponents. Fuel imports grew 16.8% y/y, primarily due to increased oil imports. Imports of raw materials for industry grew 12.5% y/y, with mining and pharmaceutical products being the most notable. Imports of materials for the agricultural sector increased 0.9% y/y.

• Imports of capital goods fell -2.4% y/y. On the positive side, imports of capital goods for agriculture increased 21.6% y/y. Imports of construction and industrial materials increased slightly by 0.1% and 0.4% in annual terms, respectively. Meanwhile, on the negative side, imports of transportation equipment decreased -14.5% y/y (chart 3).

—Jackeline Piraján & Daniela Silva

THE FINANCE MINISTRY CHANGES ITS HEAD, MARKETS WILL BE VIGILANT OF HOW MUCH COULD CHANGE THE WILLINGNESS TO MAINTAIN FISCAL SUSTAINABILITY

On Tuesday night, Diego Guevara confirmed his resignation as Minister of Finance. Guevara has been very vocal about his willingness to maintain fiscal sustainability and recently announced a new spending cut of 0.7% of GDP. That probably was the main discrepancy with President Petro.

On Thursday morning, the government published the CV of Germán Ávila on the official presidential web page; that said, Ávila is expected to be named as the new Finance Minister—the fourth of Petro’s Presidency.

Timeline of Finance Ministers:

• Jose Antonio Ocampo: August 2022–May 2023.

• Ricardo Bonilla: May 2023 –December 2024. Currently under investigation for corruption.

• Diego Guevara: December 2024–March 18^th 2025. Despite Guevara’s few times leading the MoF, he worked since the beginning of the government as General Vice-minister.

Germán Ávila’s background is significantly linked to leftist parties (Polo Party and M-19 guerilla group), while in his public experience, the most relevant until now was being the president of the public financial holding (Grupo Bicentenario) since Nov 2024, however in their previous positions, his main experience is linked to the financial and housing-related fields. It will be important to see their first announcements regarding Guevara’s proposed spending cut, or if he will take a different approach.

More than the new name for leading the Ministry of Finance, what concerns the market is the motivations that led to Guevara’s resignation since it was evident that President Petro didn’t support the fiscal adjustment proposed by the former Minister.

According to Scotiabank Colpatria’s calculations, if the government doesn’t adjust its spending plan to its fiscal income reality, we have the risk of having a deficit of around 7.5% to 8% of GDP in 2025, which means higher financing needs (of around 3% of GDP) and moves away the possibility of having a fiscal adjustment, while the debt to GDP ratio could hit the 63% mark (current 60% of GPD in 2024, increasing from 53.8% of GDP in 2023). See our latest weekly report here.

Markets have penalized domestic assets significantly. The COLTES have widened by 35bps since Tuesday; the most significant movements are in the long end of the curve. Meanwhile, the exchange rate has depreciated by 3.0% and is currently hovering at 4,180 pesos.

What to expect?

It will be important to see their first announcements regarding Guevara’s proposed fiscal adjustment, or if he will take a different approach. Markets’ reaction has been adverse since the change in the MoF head could be associated with the intention of pursuing a more relaxed fiscal policy. We have to wait and see how Ávila reacts to recent market moves in which the FX and the FI markets have been significantly penalized. A positive aspect of Ávila is that he is close to the president, but undoubtedly, his main task will be to balance fiscal responsibility with the government’s request to continue with an ambitious social agenda.

Regarding monetary policy, we expect Ávila to continue leading the dovish tilt in the board. The key vote for the forthcoming BanRep meeting is in Olga Lucía Acosta’s hands. Board member Acosta recently said she is not concerned with the rebound in February’s inflation; however, we haven’t heard from her in the current week after all the changes in the MoF. For now, we stick to our call for rate stability at 9.50% in the March 2025 meeting, as we consider this the best way to act. However, if BanRep decides to deliver a cut, we think the FX market will suffer the most pain.

Germán Ávila’s profile:

• Economist–Universidad Nacional de Colombia.

• Ávila has more than 30 years of leading inclusive financial and social initiatives, especially in the housing-related field.

Experience:

• Founder and manager of Cooperativa Nacional de Ahorro y Crédito “CREAR COOPERATIVA”, currently Cooperativa CONFIAR. Focused on supporting savings and credit for social housing.

• Head of Federación Nacional de Vivienda Popular (FENAVIP). Focused on housing construction using popular organizations.

• President of Grupo Bicentenario (The public sector’s financial holding involving a group of 13 entities). This is his latest experience however he has been there for a short time (since Nov-2024).

—Jackeline Piraján, Valentina Guio & Daniela Silva