In recent years, Colombia has been a rare good news story in a troubled continent, as the country found a path towards prosperity against the odds. The Andean nation was Latin America’s fastest-growing economy before the pandemic hit, expanding its GDP 3.4% in 2019, and enjoys a good record of prudent economic policy, which has helped it overcome periodic bouts of political and social turbulence. Colombia enjoys a strong reputation among investors for conservative macroeconomic policies and steady growth, mostly avoiding the booms and busts that have bedeviled its neighbors.

Until the virus struck, Colombia was the fastest-growing main economy in Latin America for the second year running, according to Bloomberg. Its murder rate, once among the world’s highest, is set this year to reach the lowest level since the 1970s. However, since Covid-19 wreaked havoc on the nation, the economy is contracting sharply and Standard & Poor’s now projects an 8% drop in GDP in 2020, with a 5.5% recovery in 2021.

With businesses, including the national airline Avianca, going bankrupt, and widespread hunger as millions lost their jobs, the government of President Iván Duque is trying to pull off a difficult balancing act: provide enough stimulus to prevent even greater devastation, but without running up so much debt that the nation loses its investment grade credit rating. This cautious strategy has made Colombia an outlier in South America, with a stimulus package far smaller than that of peers such as Peru and Chile. This is largely a result of the fact that the country went into the crisis with a higher debt-to-GDP ratio than its peers Mexico, Peru and Chile, allowing it less fiscal room to prop up the economy, transfer cash to the needy and help struggling companies.

The collapse in exports in the second quarter of 2020 was among the most severe in the region, declining nearly 70% quarter-on-quarter due to the sharp drop in demand for oil, Colombia's largest export. The recovery in the third quarter was also not as smooth as in other regional economies, especially given a retightening of lockdowns in August in major cities as the usage of intensive care units surpassed thresholds that mandated shutting down certain parts of the country, including Bogotá. Lockdowns have since been relaxed nationwide beginning in September, and ratings agency Standard & Poor’s expects that a recovery will firm up into the fourth quarter of 2020. It is also projected that consumption will be slow to recover due to severe job destruction, which has pushed unemployment to 20%. This will inevitably impact the chemical and petrochemical industries in Colombia. However, the industry is making the adjustments necessary to persevere.

According to Pedro Manrique, VP of commercial and marketing at Ecopetrol, in 2019 the group had record financial results, even if in petrochemicals lower oil prices caused a slowdown. Last year was also very important for Ecopetrol to consolidate its trading business, which allowed the group to have a better position in front of Covid-19. “With the pandemic, we reduced capital investments to the minimum. From a commercial standpoint, we went out to capture all the opportunities created by the market’s contango situations for our trading business.”

Similarly, at Ecopetrol subsidiary Esenttia, president Juan Diego Mejía commented: “2019 was a very good year, with an EBITDA of around US$90 million. Although 2020 started very well, the months of April and May were difficult due to the coronavirus pandemic, and we were forced to reduce capacity to 85%.”

Things would pick up later on in the year, as Mejía described: “By June and July, we were already operating at our normal rate. During the pandemic, we have seen two conflicting forces: the initiatives by the government to maintain people’s safety, and the need to keep the economy going. In terms of industries, the ones that performed better were those related to health, hygiene, and food and household packaging. On the flip side, the automotive segment was hit in the main economies like Brazil and Mexico, and that affected us.”

In addition to its picturesque squares, cobblestone streets and colorful buildings, Cartagena is also known for its industrial potential and continues to build itself up as a hub. It lies in a strategic location for international trade and its closeness with ports like Panama, the east coast of the US, Gulf of Mexico and other Caribbean ports, makes its location attractive for commerce and investment. “Cartagena has a privileged logistics situation, with a number of ports and weekly routes to Latin America, the US and Europe ,” said Esenttia’s Juan Diego Mejía.

Juan David Urrego, managing director of the chemical business at Andercol, a part of Grupo Orbis, which recently consolidated its capacity after big investments in new facilities in Cartagena, shared his perspective on the advantages Cartagena’s location provides: “We source our raw materials from the Americas, Europe and Asia, and being located in Cartagena we have a logistics advantage both for import and export processes.”

As a result of the city’s dynamism, multinational chemical companies such as Mexichem, Tenaris, Dow Chemical, Cabot, Biofilm, Holcim, among others, have all established their plants and offices in the city. Cartagena will continue to attract global chemical and petrochemical companies regardless of Colombia’s challenging internal logistics due to the Andes mountains and underdeveloped roads.

Colombia has made enormous progress politically and economically over the past decade. However, there are deep reverberations from riots that began in Chile in October of 2019 that have been felt across Latin America and Colombia has not been immune. The devastation caused by the pandemic is only magnifying the social discontent that drove protests one year ago. Consequently, the months ahead threaten to bring socioeconomic and political turbulence, as protestors return to the streets. It will be a test of Iván Duque’s government to meet the demands of protestors while continuing to foster a dynamic business climate. But both are essential for Colombia to advance from middle income to a developed economy.

Image courtesy of Random Institute.