
While Venezuela’s economy has been spiraling downward even before COVID-19 arrived, its neighbor Colombia had largely been free of recession since the Financial Crisis of 2008 and 2009.
The impacts of COVID-19 changed Colombia’s fortunes, with the International Monetary Fund (IMF) now predicting the nation’s gross domestic product (GDP) will shrink by 8.2 percent in 2020. The nation’s previous good economic standing, however, has allowed it to boost its access to a Flexible Credit Line (FCL) established with the IMF.
In late September, the IMF executive board approved a request from Colombia to increase its FCL by about $6.2 billion, to a total of $17.2 billion.
According to Hamid Faruqee, the FCL mission chief for Colombia, the nation’s government took many of the correct steps in dealing with both COVID-19 and the economic impacts that followed.
“The government reacted quickly to protect its people and its economy from the shutdown’s impact,” says Faruqee in an interview published online by the IMF. “The central bank cut interest rates and provided liquidity and credit. The fiscal rule was suspended for two years so the government has more room to support vulnerable households and businesses.”
The FCL, says Faruqee, is “a flexible instrument [that] will help address both actual and potential balance of payments needs. Combined with Colombia’s comfortable level of international reserves, it provides the added insurance against heightened external risks.”
Faruqee continues, “If the country uses them, these resources will help finance a budget deficit that has almost doubled since May. Tax revenue declined sharply because of the drop in economic activity, while spending increased to pay for health services and support vulnerable people and businesses. These funds will support the authorities’ spending plans on health (for example, more intensive care beds); support vulnerable households, unemployed and informal workers; help firms with payroll support; and meet the country’s financing needs.”
In the basic materials and recycling sectors, Colombia is generally in a second-tier in volume in South America along with Chile and Peru, but behind Brazil and Argentina. In copper, of course, Chile rises to the top.
According to Brussels-based Worldsteel, in the first eight months of 2020, Colombia produced about 710,000 metric tons of steel. That figure was well behind output in Brazil and Argentina, just slightly less than the 730,000 metric tons of output in Chile, and ahead of the less than 500,000 metric tons produced in Peru.
In the first five months of 2020, United States Census Bureau statistics posted to the United States Geological Survey (USGS) website do not show Colombia listed as importing any ferrous scrap from the United States in that timeframe. The U.S. exported 129 tons of aluminum scrap to Colombia in the first half of 2020, according to the USGS.
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