August 3, 2022

Colombia’s industrial and manufacturing production contracts – 8.5% in July

Colombian manufacturers were among the first to resume operations by presidential decree as the country remained in quarantine and in a key sector for the gradual reopening of the economy.

Despite the incentives to reopen assembly plants at a standstill with the coronavirus pandemic, the country’s statistical entity DANE released figures that show a significant contraction in industrial production for July of – 8.5% instead of ‘a forecast of – 5.1%. Among the sectors most affected is automotive construction with a sharp drop of 49%, followed by textiles and clothing with 29%. The only departments that have managed to maintain positive numbers are Boyacá at 10% and Caldas at 13%.

As the manufacturing sector faces its worst monthly declines on record, 86% of Colombian business leaders remain pessimistic that August will see an improvement in numbers as only 14% of traders and retailers have saw their sales increase. Among their concerns are the excessive restrictions that were implemented during quarantine that continue to restrict access to consumers.

“The index tells us that there can be no reactivation until the restrictions in Bogotá, Santander and other cities are removed,” said Jaime Cabal, president of the National Federation of Trade and Commerce. (Fenalco). The Cabal attributes much of the decline to lost income, schools and universities closed during most of the summer months, and the high cost of credit. Bogotá was the worst performing city, with industrial production contracting deeply into negative territory with -15%.

While the country showed “sparks of renewal” – according to Fenalco – with the slow reopening of authorized businesses in June, 65% of traders saw their incomes drop despite a No Tax Day which boosted sales in electronics. Bogotá mayor Claudia López sharply criticized the government’s decision to host a Día Sin Iva on June 19, calling it “COVID Friday”.

However, for the national retailers represented by Fenalco, the removal of the 19% VAT on consumer goods “has been very positive, stimulating consumption and positively impacting businesses,” Cabal says. Cosmetics and other beauty products is an economic sector that has fallen behind in recouping lost revenue, recording a 30% drop in sales as makeup became less necessary with the mandatory use of face masks.

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