Tuesday, June 22, 2010

Colombia: Rags-to-Riches Success, With a Booming Bull Market That Leads World for 10-Yr. Returns


Both the Wall Street Journal and Investor's Business Daily had editorials today about the presidential election in Colombia, which should also receive some attention for its record-setting, booming stock market rally.  Colombia's MSCI Index topped 900 for the first time last Friday, and registered gains yesterday and today, closing at an all-time record high today of 909.25 (see chart above, data here).  The bull market in Colombia is especially impressive when you consider that its market stagnated for the entire decade between 1994-2004, reached a low of 42 in December 2000, before it skyrocketed to almost 600 by early 2006, and then went over 800 last year and over 900 this year. 

On a year-to-date basis, Colombia's market has increased 15%, which is the world's highest stock market return since January.  Colombia's one-year return of 47.5% isn't too bad either, although Mexico, Indonesia, Peru and Turkey have done slightly better.  But when it comes to the average annual stock market return over the last ten years, no country in the world comes close to Colombia's return of 34.55%; not China (6.75%), not Turkey (2.66%), not Russia (13.24%), and not Brazil (14%).  In fact, the only country that even comes remotely close is neighboring Peru with a 23.6% average annual return since June 2000. 

The WSJ and IBD focus mostly on Juan Manuel Santos' landslide victory on Sunday's (note that most other countries vote on weekends,  and that weekday voting in the U.S. is unique), but point out some important economic lessons about free markets and free trade:

IBD:  "Santos is probably most dangerous for Venezuela's Hugo Chavez, because Colombia's rags-to-riches success story is so dramatic — showing that any beat-up nation can drag itself out of misery through markets — and because Venezuela and Colombia are such close neighbors. Word gets out about how well things are going in Colombia and it spreads fast in Venezuela. Santos need never fire a shot at Venezuela to slay Chavez's revolution because the power of the markets will do it for him.

Santos is also planning something that is likely to give Chavez — and for that matter, President Obama, something to think about — a forging of a more assertive Pacific alliance with free-market Chile and Peru, as well as the nations of the Pacific Rim. Given Obama's dithering on free trade — and the fact that Canada on Tuesday, has just finalized its pact, and it's obvious Colombia is going to prosper with or without its friends or enemies."

WSJ - "This triumph in Colombia also ought to echo in Washington, where Democrats in Congress and the White House continue to deny a vote on the U.S.-Colombia free trade agreement. One liberal Democratic excuse has been concerns about Mr. Uribe's (current president) security policies, but Colombia's people have now spoken.    Like Mr. Uribe, Mr. Santos wants the free trade deal to force his country to face the discipline of global competition and turn Colombia into the next Chile or Taiwan. Such progress would further reduce the FARC's appeal, and it is certainly in the U.S. national interest. This one shouldn't even be controversial.

See CD post here on Colombia, where I pose the question: 
 
With incredible export opportunities awaiting U.S. manufacturers in booming, emerging markets like Colombia (see chart above), with the huge potential to create much-needed jobs for America’s workers, and with universal support from almost every sector of the economy, what could possibly be holding up the Free Trade Agreements with Panama, Colombia and Korea?

26 Comments:

At 6/23/2010 6:26 AM, Blogger Paul said...

"what could possibly be holding up the Free Trade Agreements with Panama, Colombia and Korea?"

Easy, the union thugs who spent over $60 million getting Obama elected, and $400 million on the Democrats in '08.

 
At 6/23/2010 7:36 AM, Blogger juandos said...

"the union thugs who spent over $60 million getting Obama elected"...

Cha! Ching!

Sot on Paul!

From the AFL-CIO: "Its all Bush's fault"!

 
At 6/23/2010 8:43 AM, Blogger Paul said...

Juandos,

Along with their historic protectionism, The AFL-CIO has gone all in with the "social justice" crowd. Here's the guy the unions(specifically the Steelworkers) use to bludgeon Colombia. He goes there on "fact finding missions" and never manages to find anything positive. His reports are fed up to Pelosi and Reid as evidence against the treaty. Notice anything in the photo that might hint of bias?

Bottom line: no chance for a Colombian FTA under the Obama regime, especially now that Santos was elected to keep kicking the FARC's ass.

 
At 6/23/2010 9:04 AM, Blogger juandos said...

Thanks for that 'heads up' link Paul...

Imagine that! Kovalik has picture of a homicidal swine on his office wall...

 
At 6/23/2010 9:23 AM, Blogger Paul said...

Juandos,

Here's more.

Look at the comment.

 
At 6/23/2010 10:02 AM, Anonymous Anonymous said...

"The first thing we do, let's kill all the lawyers". - William Shakespeare, King Henry VI

 
At 6/23/2010 10:57 AM, Anonymous Benny The Man said...

When you have cocaine sales to bolster the ecnomy, thngs can really take off. Go Colombia!
Opium is now underwriting the Afghanie economy. I guess it is a workable model for country development.
Sound basis for U.S. alliances--let's make friends with exporters of cocaine and opium.
Free trade, baby.

 
At 6/23/2010 11:52 AM, Blogger Paul said...

Benji,

You must work really hard to excel at your level of idiocy. Colombia's narcotics problem preceded the dramatic turnaround in the country's economy, so that's not it. Uribe's economic reforms and relentless pursuit of terrorists made the difference. Security and prosperity are mutually reinforcing.

"Free trade, baby."

The True Economic Conservative shows his bonafides again. But what would Milton say?

 
At 6/23/2010 12:37 PM, Anonymous Benny The Man said...

Paul-

I am not sure what MF's take on our alliance with cocaine and opium exporting thug-states would be. MOst probably, he would agree with free tarde, and legalized, unregulated adult use of cocain and opium in the United States, aned also pot-smoking too. In fac, we could have opium den-brothel-casinos, is Friedman had his way.


I know when I see videos of US Marines risking life and limb to protect opium fields of warlords "on our side" I am disgusted.

When we take down secular thug states and replace them with Shiite thug states, I am repulsed.

When we resurrect monarchies, using American blood and US taxpayer money, I am appalled.

But, hey $3 trillion is not enough for Iraqistan--there is more work to do. I am sure those opium farmers will be happy to give up extremely lucrative opium crops to grow vegetables, on very thin and unreliable margins, if we just build some more schools for them.

 
At 6/23/2010 12:50 PM, Blogger Paul said...

Benji,

So you want to leave a safe-haven for the savages who murdered 3000 of your fellow Americans on 9/11.

That's got nothing to do with Colombia and its democratically elected pro-USA goverment. Anymore non-sequiturs to add, or have you fulfilled today's quota?

 
At 6/23/2010 1:08 PM, Anonymous Benny The Man said...

Paul-

Liberals never want to consider that money spent on social welfare programs is largely wasted. Conservatives never want to consider that money spent on defense and USDA programs is largely wasted.

3,000 Americans?

Terrible. Of course, we lose 30,000 Americans every year in auto accidents, and 18,000 a year to gunshots.

If terrorists want to set off bombs in the USA, they do not need Afghanistan.

The federal government usally spends about $10 to achieve a 25 cent result. The US foreign policy guys may do even less with $10.

But hey! Let's shoot some up heroin and support Karzi! Snort up for Colombia!

 
At 6/23/2010 1:31 PM, Blogger Paul said...

Benji,

Your first injection of stupidity into this thread: "When you have cocaine sales to bolster the ecnomy, thngs can really take off. Go Colombia!"

You've been trying to turn this into a discussion on Afghanistan and Iraq since you were shown to be talking out your ass, as usual.

 
At 6/23/2010 1:54 PM, Blogger Benjamin said...

If one is fluent talking out of his ass, is that referred to as "flatulency"?

 
At 6/23/2010 4:33 PM, Blogger Ron H. said...

Attorney Dan Kovalik's Downtown office includes a poster-size picture of Argentine-born Cuban revolutionary Che Guevara.
Click photo for larger image.


Thanks for the link, Paul, I think a poster of a mass murder on one's office wall is a nice touch, don't you? I'm considering Pol Pot myself.

Kovalik might want to rethink his choice of despotic criminals, unless he wants to be associated with failure. He has picked a real bumbler. Does he realize that every revolution Che was involved in failed except the Cuban one, and he wasn't instrumental in that one. Every other endeavor ended only in the death of hundreds or thousands of people, with nothing gained.

The only thing he ever did right was to successfully stop several bullets in mid flight.

 
At 6/23/2010 4:46 PM, Blogger Ron H. said...

"MOst probably, he would agree with free tarde, and legalized, unregulated adult use of cocain and opium in the United States, aned also pot-smoking too."

"Free To Choose" as MF would say. You understand that these crops are only lucrative businesses for "thug states" because they are illegal in the US, don't you?

"In fac, we could have opium den-brothel-casinos, is Friedman had his way."

One stop shopping! You may be on to something here.

"When we resurrect monarchies, using American blood and US taxpayer money, I am appalled."

Do you mean like in Iran in the 1950s, Benji? Not much blood, but lots of money.

 
At 6/23/2010 5:01 PM, Blogger sethstorm said...

So Santos wants to sell off his country and make it a worse off Third World hellhole? That isnt an improvement to make Colombia's government just a slightly better hellhole than Venezuela.

As for the jobs awaiting US workers, we tried that. We got less jobs to stay in the US and more hellholes doing that work. But then the folks who want the treaty passed just want something to use against US workers, not give them work.

 
At 6/23/2010 5:23 PM, Anonymous Benny The Man said...

Ron H:

Ugh. Foreign policy...boy, the right-wing flatulencies smell up the room every time.

Vietnam, Iraq, Afghanistan...do occupations at a cost of trillions ever pay off for the US taxpayer?

Remember, the federal government pays $10 to get 25 cents of results...unless it is foreign affairs, where the ratio sinks to 10 cents of results for every $10 spent.

Iran? That was even before even my time. I suppose the Shah, as a secularist, was better than what followed....but then, by that measure, Saddam was better than what followed...but why should be our decision? The lunatics after the Shah established a Shiite state...a Shiite state was established in Iraq after Saddam...

Would it not be better to have stayed the hell out in the first place?

 
At 6/23/2010 5:38 PM, Blogger Paul said...

"So Santos wants to sell off his country and make it a worse off Third World hellhole?"

He wants foreign investment and US goods and services at reduced prices. I doubt the "third world hellhole" option is on his mind.


"But then the folks who want the treaty passed just want something to use against US workers, not give them work."

The folks who want the treaty defeated just want free shit handed to them because they're too lazy to compete like the rest of us.

A la sethstorm.

 
At 6/23/2010 5:40 PM, Blogger Paul said...

Resist the urge to debate Benji's mindless isolationism. The same hopeychangey fantasy world thinking led him to the genius decision of voting for Barack Obama.

 
At 6/23/2010 5:58 PM, Blogger Ron H. said...

Remember, the federal government pays $10 to get 25 cents of results...unless it is foreign affairs, where the ratio sinks to 10 cents of results for every $10 spent.

I believe you are describing the famous "multiplier" Keynesians are so fond of bragging about

Isn't that "stimulus" at work? The idea is to cause economic activity, right? It doesn't have to be PRODUCTIVE activity, does it?

Those silly business people in the real world will be fooled by the government spending into thinking the economy is really recovering, so they will start hiring and producing lots of stuff in response.

 
At 6/23/2010 5:58 PM, Blogger Paul said...

Ron H,

Yep, and this turd has even testified before Congress opposing the FTA. Rep Dan Burton had the photo w/ Che enlarged and asked him, in effect, if he was still a fan of revolutionary terrorists.

And there's another steelworker "organizer" who poses as a union leader forced to flee Colombia after the paramilitaries threatened his life. He's all over the internet associating with pro-Chavez and FARC groups/individuals.
You can see him here advocating the overthrow of capitalism at a Minneapolis union hall conference on the wonders of Venezuela's revolution.

 
At 6/23/2010 6:02 PM, Blogger sethstorm said...


He wants foreign investment and US goods and services at reduced prices. I doubt the "third world hellhole" option is on his mind.

But that's what they will get.


The folks who want the treaty defeated just want free shit handed to them because they're too lazy to compete like the rest of us.

That's the same tired canard you keep on saying. They are neither lazy nor less competitive. You just want a politically favorable group in work, and the rest living hand-to-mouth.

 
At 6/23/2010 6:07 PM, Blogger Ron H. said...

Paul, I realize there's no chance of serious debate with Benji or Sethstorm, but sometimes it's fun to just stir things a little to see what bubbles to the surface. I had a little time on my hands this afternoon, so...

 
At 6/23/2010 6:10 PM, Blogger Paul said...

"But that's what they will get"

What they will get is access to Canadian and European markets while the USA loses out.

"You just want a politically favorable group in work, and the rest living hand-to-mouth."

The protectionism you advocate is the very definition of political favortism. Free trade opens the playing field. Nobody forces you to buy Colombian flowers, coffee, or even cocaine.

 
At 6/23/2010 6:12 PM, Blogger Paul said...

Ron H,

Heh, I meant that more as a "note to self."

 
At 6/24/2010 8:14 AM, Blogger juandos said...

"Look at the comment"...

Well Paul cluelessness is yet another 'tard' trait one can depend on...

Obviously Kovalik has it in spades...

"The True Economic Conservative shows his bonafides again. But what would Milton say?"...

Well that's an interesting question and I'm sure that pseudo benny would be a case in point of why our public education system is a failure...

THE ROLE OF GOVERNMENT IN EDUCATION

by Milton Friedman

 

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