A strong decline in Colombia real imports likely to diminish deterioration of trade balance

In Colombia, the very strong real currency depreciation of 20.4% in the past 12 months and the slowdown in activity have started affect Colombia's trade balance.

So far, with the very strong deterioration in the terms of trade, given the decline in the oil price, the exchange rate has been the main variable to adjust, with no major changes on the fiscal and monetary policy fronts. 

In this environment, imports declined 10.2% y/y in the first five months of the year, and the trend deepened in Q2 with a decline of 18% in April and May. 

"A decline of imports of 16% is expected for this year", says Barclays. 

However, there has not been a reaction from the export side, which is not a surprise considering that almost two-thirds of Colombia's exports are commodities that are not sensitive to the exchange rate. Even manufacturing exports have declined about 7%, driven partly by the decline of exports to Venezuela, Mexico and Ecuador, which have fallen 39.4%, 22.9% and 11.0%, respectively