- Chile: Ministry of Finance—issuance plan considers USD 20 bn, of which USD 6 bn will be in foreign currency
- Colombia: November’s imports rose 56.3%; monthly trade deficit widened to highest level in at least 14 years
- Peru: Lima labour market improved significantly at the end of 2021
CHILE: MINISTRY OF FINANCE—ISSUANCE PLAN CONSIDERS USD 20 BN, OF WHICH USD 6 BN WILL BE IN FOREIGN CURRENCY
Earlier today, Tuesday January 18, Chile’s Ministry of Finance (MoF) announced its 2022 issuance plan, which considers issuing Treasury bonds for a total of USD 20 bn during 2022, within the debt limit authorized by the 2022 Budget Law. The 2022 debt issuance plan considers the issuance in local and foreign currencies. According to the MoF, local currency issuances are planned in the order of USD 14 bn, and foreign currency issuances are estimated at USD 6 bn. The local currency financing plan considers the issuance of short-term notes for approximately USD 3 bn, and the remaining USD 11 bn in medium to long-term bonds. Also, the plan considers issuances of peso “social” bonds for a total of USD 4 bn allocated through a book-building process. Finally, the plan considers that USD 2 bn of the total issuances in foreign currency will be transferred to the Economic and Social Stabilization Fund.
—Anibal Alarcón
COLOMBIA: NOVEMBER’S IMPORTS ROSE 56.3%; MONTHLY TRADE DEFICIT WIDENED TO HIGHEST LEVEL IN AT LEAST 14 YEARS
November’s imports data, released by statistical agency (DANE), on Monday, January 17, came in at USD 6.55 bn (CIF terms), expanding 56.3% y/y (chart 1) and reaching their highest level since October 2014. Compared with November 2019, imports increased by 37.58%, showing the effect of a robust economic recovery but also the effect of higher international prices. That said, the monthly trade deficit stood at USD 2.01 bn (chart 2), the highest since DANE’s records started (2007). Colombia’s YTD trade deficit stood at USD 14.3 bn for January–November, which skew to the upside our expectation of a current account deficit of 5.2% of GDP in 2021.
Monthly raw material imports and consumption-related imports are at their historical highs, at USD 3.25 bn and USD 1.48 bn, respectively. On the other side, capital goods imports stood at USD 1.82 bn, the highest level since mid-2014. Manufacturing imports grew by 50.8% y/y accounting for the strongest positive contribution to annual imports growth, while agriculture-related imports increased by 35.3% y/y and mining-related imports grew by 190.2% y/y.
From the perspective of imports by use, the three major segments showed strong increases compared with November 2020 (chart 3):
- Consumption-goods imports increased by +43.1% y/y and stood at USD 1.48 bn (YTD USD 12.1 bn, +13% y/y). Durable-goods imports (+44.4% y/y) and non-durable goods imports (+42.0% y/y) are broadly equally contributing to the increase in consumption imports. Vehicles imports (+54.8% y/y), pharma products (+41.1% y/y) and foodstuff (+42.9% y/y) are leading the gains. Non-durable goods reached a new historical high, while durable goods imports are close to the 2014 average. We attribute the previous dynamic to higher prices in those goods, combined with large government purchases of COVID-19 vaccines.
- Raw-materials imports grew by 93.9% y/y, due to larger purchases of foreign goods for the industrial sector (+80.3% y/y), especially those related to chemical products (+88.2%y/y) and mining products (+105.2% y/y). Raw materials imports, in dollar terms, are now in the historical high, and they continued showing the effect of higher prices as well as the ongoing economic recovery.
- Capital-goods imports were up by 23% y/y (USD 1.82 bn), led by higher purchases of investment-related goods in the industry (12.6% y/y) and transport equipment (+24.5% y/y). Capital-goods imports already surpassed pre-pandemic averages (2019: USD 1.37 bn) and are closer to 2014 averages (USD 1.81 bn).
Imports in 2021 are pointing to a positive demand effect due to the economic recovery, but also the effect of higher international prices. However, Colombia is showing an asymmetrical response to international high prices conditions, mainly because imports in volumes are reacting to the economic rebound and, despite higher prices, the demand remains strong. While on the exports side, even with a positive environment for commodities prices, production remains below pre-pandemic levels. That said, in November we are facing the widest external deficit in at least 14 years. We expect part of this financing to be reflected in improved FDI, however another part of this deficit is also explained by extraordinary government purchases of COVID-19 vaccines, and it would decrease somewhat in 2022. Either way, Colombia would continue with a high current account deficit, however in 2022, notably after the general election, we expect FDI to finance the greatest share of this deficit.
—Sergio Olarte & Jackeline Piraján
PERU: LIMA LABOUR MARKET IMPROVED SIGNIFICANTLY AT THE END OF 2021
Employment in Q4 2021 was up 12.7% y/y, according to data from the National Statistics Institute, INEI. This was still below pre-COVID-19 levels (chart 4), 2.1% lower than in Q4 2019, for example, but nonetheless better than expected. As a result of this robust jobs growth, unemployment plummeted to 7.8% (chart 5), a surprisingly strong decline from 9.1% in November. Thus was much lower than our forecast of 9.5%. Unemployment is now very close to the 6% to 7% rate in which it fluctuated prior to the COVID-19 lockdown. Note, however, with Peru going through a third COVID-19 wave currently at the start of 2022, and also given seasonal factors, we expect unemployment to rise in Q1 2022 back over 8%, then settling back down to between 7% to 8% in the second semester.
Employment improved among all age groups. However, jobs growth was lower at higher levels of education, with jobs actually falling 3.6%, among those with a college degree. In contrast, those with only grade school education saw a 41% increase in jobs. This ratifies the suspicion we’ve been harbouring for some time that new jobs are of a less quality and levels of expertise than jobs lost. In line with this, average monthly wages were 9.4% lower the pre-COVID-19 levels (Q4 2019).
Given the fourth quarter results, on average for the full-year unemployment was 10.7%, and jobs growth was 20.8%, albeit, of course, off the low lockdown year base.
—Guillermo Arbe
DISCLAIMER
This report has been prepared by Scotiabank Economics as a resource for the clients of Scotiabank. Opinions, estimates and projections contained herein are our own as of the date hereof and are subject to change without notice. The information and opinions contained herein have been compiled or arrived at from sources believed reliable but no representation or warranty, express or implied, is made as to their accuracy or completeness. Neither Scotiabank nor any of its officers, directors, partners, employees or affiliates accepts any liability whatsoever for any direct or consequential loss arising from any use of this report or its contents.
These reports are provided to you for informational purposes only. This report is not, and is not constructed as, an offer to sell or solicitation of any offer to buy any financial instrument, nor shall this report be construed as an opinion as to whether you should enter into any swap or trading strategy involving a swap or any other transaction. The information contained in this report is not intended to be, and does not constitute, a recommendation of a swap or trading strategy involving a swap within the meaning of U.S. Commodity Futures Trading Commission Regulation 23.434 and Appendix A thereto. This material is not intended to be individually tailored to your needs or characteristics and should not be viewed as a “call to action” or suggestion that you enter into a swap or trading strategy involving a swap or any other transaction. Scotiabank may engage in transactions in a manner inconsistent with the views discussed this report and may have positions, or be in the process of acquiring or disposing of positions, referred to in this report.
Scotiabank, its affiliates and any of their respective officers, directors and employees may from time to time take positions in currencies, act as managers, co-managers or underwriters of a public offering or act as principals or agents, deal in, own or act as market makers or advisors, brokers or commercial and/or investment bankers in relation to securities or related derivatives. As a result of these actions, Scotiabank may receive remuneration. All Scotiabank products and services are subject to the terms of applicable agreements and local regulations. Officers, directors and employees of Scotiabank and its affiliates may serve as directors of corporations.
Any securities discussed in this report may not be suitable for all investors. Scotiabank recommends that investors independently evaluate any issuer and security discussed in this report, and consult with any advisors they deem necessary prior to making any investment.
This report and all information, opinions and conclusions contained in it are protected by copyright. This information may not be reproduced without the prior express written consent of Scotiabank.
™ Trademark of The Bank of Nova Scotia. Used under license, where applicable.
Scotiabank, together with “Global Banking and Markets”, is a marketing name for the global corporate and investment banking and capital markets businesses of The Bank of Nova Scotia and certain of its affiliates in the countries where they operate, including; Scotiabank Europe plc; Scotiabank (Ireland) Designated Activity Company; Scotiabank Inverlat S.A., Institución de Banca Múltiple, Grupo Financiero Scotiabank Inverlat, Scotia Inverlat Casa de Bolsa, S.A. de C.V., Grupo Financiero Scotiabank Inverlat, Scotia Inverlat Derivados S.A. de C.V. – all members of the Scotiabank group and authorized users of the Scotiabank mark. The Bank of Nova Scotia is incorporated in Canada with limited liability and is authorised and regulated by the Office of the Superintendent of Financial Institutions Canada. The Bank of Nova Scotia is authorized by the UK Prudential Regulation Authority and is subject to regulation by the UK Financial Conduct Authority and limited regulation by the UK Prudential Regulation Authority. Details about the extent of The Bank of Nova Scotia's regulation by the UK Prudential Regulation Authority are available from us on request. Scotiabank Europe plc is authorized by the UK Prudential Regulation Authority and regulated by the UK Financial Conduct Authority and the UK Prudential Regulation Authority.
Scotiabank Inverlat, S.A., Scotia Inverlat Casa de Bolsa, S.A. de C.V, Grupo Financiero Scotiabank Inverlat, and Scotia Inverlat Derivados, S.A. de C.V., are each authorized and regulated by the Mexican financial authorities.
Not all products and services are offered in all jurisdictions. Services described are available in jurisdictions where permitted by law.