Vene-Colombia Spat Seen Hurting: Bear

Colombia will likely suffer from the evolving crisis with Venezuela, according to Bear Stearns. If the impasse continues, the peso will likely depreciate perhaps north of COP1,950/USD, the bank says. “17% of Colombian exports go to Venezuela, and no Plan B exists to make up for those foregone revenues. The fiscal accounts and the local economy could also suffer from the current crisis,” Bear says. “If the situation of trade with Venezuela erodes further, the hit to the economy could be north of 1%”. The current forecast Bear has for Colombia is 5.7% growth in 2008. The shop also worries about inflation in Venezuela, which will likely accelerate further as the conflict persists. “We think that the risk for Venezuelan asset prices in the near future remains biased to the downside, despite the apparently compelling valuations, and despite the continued existence of a sizable current account surplus,” Bear says, maintaining Venezuela credit at underperform.