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1. ABRIL2009 IMPACTODELACRISISFINANCIERAGLOBALSOBREAMERICALATINA Luis Oganes Jefe de Investigación Económica para América Latina STRICTLYPRIVATEANDCONFIDENTIAL

2. América Latina no es inmune a la recesión global 1 Posibilidad de políticas contra-cíclicas es la gran novedad 11 Crisis cambiará estrategias de fondos de pensiones 18 Impacto de la crisis sobre Colombia es manejable 22 IMPACTODELACRISISFINANCIERAGLOBALSOBREAMERICALATINA 1

3. Los países desarrollados están en recesión; la recuperación será muy gradual dados los problemas estructurales que deberán superar G-3: Quarterly GDP growth forecasts Source: J.P. Morgan 2009 Real GDP growth outlook: global growth outlook being revised down Revised forecasts (as of April 09) 2009 forecast (as of end-August 08) AMÉRICALATINANOESINMUNEALARECESIÓNGLOBAL Source: J.P. Morgan 2

4. Luego de resistir la desaceleración global durante los primeros tres trimestres de 2008, América Latina entró en recesión en el cuarto Latin America: real GDP growth forecasts (%q/q, saar except where noted) AMÉRICALATINANOESINMUNEALARECESIÓNGLOBAL Source: National statistics offices and J.P. Morgan 3

5. La contracción de América Latina en 4T08 fue tan profunda como en EEUU; no hubo el “desacople” esperado en la región GDP growth (%oya) AMÉRICALATINANOESINMUNEALARECESIÓNGLOBAL Source: J.P. Morgan 4

6. La producción industrial en América Latina se desplomó en el 4T08 en línea con el ajuste de inventarios global; aún no toca piso Latin America IP by country (%oya) Latin America IP* (%oya) AMÉRICALATINANOESINMUNEALARECESIÓNGLOBAL *The manufacturing component of GDP serves as a proxy for Peru IP. Source: J.P. Morgan *Excludes Argentina, Ecuador and Venezuela; the manufacturing component of GDP served as a proxy for Peru IP. Source: J.P. Morgan 5

7. El consumo y la inversión seguirán a la caída de la producción durante 2009, pero las exportaciones netas dejarán de restarle al crecimiento Subpar GDP growth in 2009 despite envisioned recovery in export volume growth Domestic demand receding with expected stagnation of investments; Retrenching imports to wipe out net export drag GDP growth % %-point contribution to oya real GDP growth AMÉRICALATINANOESINMUNEALARECESIÓNGLOBAL Source: J.P. Morgan 6

8. La caída de precios de commodities ha sido severa, pero los precios están estabilizándose en niveles superiores a los vistos en 2005… Latin America: Commodity price indices of select countries (Average 2005 = 100) AMÉRICALATINANOESINMUNEALARECESIÓNGLOBAL Source: J.P. Morgan 7

9. …lo cual es una buena noticia dada la alta dependencia de América Latina a exportaciones de commodities Latin America: % of each country’s exports Source: Official sources and J.P. Morgan 1 Brazil imports more oil than it sells abroad AMÉRICALATINANOESINMUNEALARECESIÓNGLOBAL 8

10. Aún así, el déficit de cuenta corriente crecerá y no podrá ser financiado por los flujos de IED en varios países de la región External accounts (US$ billion) 1. Forecast is based on the series reported by the CB of Venezuela which we believe overstates Venezuela's oil exports due to PDVSA data distortions. Source: J.P. Morgan AMÉRICALATINANOESINMUNEALARECESIÓNGLOBAL 9

11. Dificultad para refinanciar deuda externa del sector privado es otra fuente de vulnerabilidad para la balanza de pagos en varios países Latin America: Private external debt stocks1 Latin America: Private external debt maturities in 20091 AMÉRICALATINANOESINMUNEALARECESIÓNGLOBAL 1. Includes private corporates and banks, latest available 2. Includes trade financing lines Source: J.P. Morgan 1. Includes private corporates and banks 2. Includes trade financing lines Source: J.P. Morgan 10

12. Posibilidad de políticas contra-cíclicas es la gran novedad América Latina no es inmune a la recesión global 1 11 Crisis cambiará estrategias de fondos de pensiones 18 Impacto de la crisis sobre Colombia es manejable 22 IMPACTODELACRISISFINANCIERAGLOBALSOBREAMERICALATINA 11

13. La novedad esta vez son las condiciones iniciales de América Latina: (1) reservas en nivel récord alto y deuda externa en récord bajo… Foreign reserves and external debt to GDP POSIBILIDADDEPOLÍTICASCONTRA-CÍCLICASESLAGRANNOVEDAD Source: J.P. Morgan 12

14. …(2) los shocks externos golpearon a América Latina cuando las cuentas fiscales estaban más sólidas que durante crisis previas… Overall fiscal balance (% of GDP) POSIBILIDADDEPOLÍTICASCONTRA-CÍCLICASESLAGRANNOVEDAD Source: J.P. Morgan 13

15. … y (3) el sector público en varios países de la región son ahora acreedores externos netos y se benefician de una devaluación Brazil, Mexico, Peru and Venezuela: Net External Debt US$ billion POSIBILIDADDEPOLÍTICASCONTRA-CÍCLICASESLAGRANNOVEDAD Source: IBGE, Banxico, BCV and J.P. Morgan 14

16. Con la inflación bajo control, los bancos centrales están cortando tasas de interés agresivamente para ayudar al crecimiento 2009 Emerging Markets policy rate forecasts (%) 1. Government's indicative target in cases of no formal inflation targeting. Source: J.P. Morgan Latin America: CPI inflation – forecasts and targets (%oya, quarterly average, except where noted) POSIBILIDADDEPOLÍTICASCONTRA-CÍCLICASESLAGRANNOVEDAD 1. Forecast is for official inflation measure Source: J.P. Morgan 15

17. Aunque las cuentas fiscales de América Latina son más sólidas, no todos los países pueden aplicar políticas fiscales contra-cíclicas… Latin America: 2009 forecasts for fiscal balances (% of GDP) Source: J.P. Morgan POSIBILIDADDEPOLÍTICASCONTRA-CÍCLICASESLAGRANNOVEDAD 16

18. … debido a que la mejora en las cuentas fiscales en sí misma se debió a factores cíclicos (vinculada a commodities) Latin America: fiscal revenues linked to commodity exports (% of GDP) POSIBILIDADDEPOLÍTICASCONTRA-CÍCLICASESLAGRANNOVEDAD Source: J.P. Morgan 17

19. Crisis cambiará estrategias de fondos de pensiones América Latina no es inmune a la recesión global 1 Posibilidad de políticas contra-cíclicas es la gran novedad 11 18 Impacto de la crisis sobre Colombia es manejable 22 IMPACTODELACRISISFINANCIERAGLOBALSOBREAMERICALATINA 18

20. La crisis financiera afectó adversamente al valor de los portafolios de fondos de pensiones, pero la depreciación también ayudó CHILE COLOMBIA Sources: Superintendencia de Pensiones, J.P. Morgan Sources: Superintendencia Financiera de Pensiones, J.P. Morgan MEXICO PERU CRISISCAMBIARÁESTRATEGIASDEFONDOSDEPENSIONES Sources: Superintendencia de Banca, Seguros y AFP, J.P. Morgan Sources: Consar, J.P. Morgan 19

21. Los fondos de pensiones probablemente elevarán su posición neta en moneda extranjera como resultado de la crisis CHILE COLOMBIA Sources: Superintendencia de Pensiones, J.P. Morgan Sources: Superintendencia Financiera de Pensiones, J.P. Morgan MEXICO PERU CRISISCAMBIARÁESTRATEGIASDEFONDOSDEPENSIONES Sources: Superintendencia de Banca, Seguros y AFP, J.P. Morgan Current net FX exposure stands at 11.7% of AUM as of March 20th (JPM estimation) Sources: Consar, J.P. Morgan 20

22. Como inversionistas de largo plazo, es probable que los fondos de pensiones sigan agregándole duración a sus portafolios de renta fija CHILE COLOMBIA Sources: Superintendencia de Pensiones, J.P. Morgan Sources: Superintendencia Financiera de Pensiones, J.P. Morgan MEXICO PERU CRISISCAMBIARÁESTRATEGIASDEFONDOSDEPENSIONES Sources: Superintendencia de Banca, Seguros y AFP, J.P. Morgan Sources: Consar, J.P. Morgan 21

23. Impacto de la crisis sobre Colombia es manejable América Latina no es inmune a la recesión global 1 Posibilidad de políticas contra-cíclicas es la gran novedad 11 Crisis cambiará estrategias de fondos de pensiones 18 22 IMPACTODELACRISISFINANCIERAGLOBALSOBREAMERICALATINA 22

24. La economía colombiana se contraerá 0.5% en 2009, por lo cual BanRep seguirá cortando tasas agresivamente hasta llegar a 5.5% Colombia: industrial production and retail sales contracting • High frequency indicators continue to show a clear economic slowdown, with IP and retail sales contracting appreciably. The 4Q08 GDP contracted at a 4.0%q/q, saar pace, on the back of a 29%q/q, saar retreat in fixed investments. Certainly the drop in public works (mainly related to regional governments) accounted for part of this investment retreat and there should be an improvement going forward. However, even allowing for a gradual recovery starting in 2Q09, we revised down our full 2009 GDP growth forecast to -0.5% • Note that following the fall in 4Q08, there is a 0.4% negative carryover for 2009 GDP—meaning that no sequential growth from now on would result in -0.4% growth for the entire year. While partial recovery of regional governments public works should be a positive, we see further downside in private consumption and investments. On this backdrop we expect 1.2%q/q, saar GDP contraction in 1Q09, meaning that Colombia would already be in a technical recession • With limited room for fiscal stimulus and a clear economic retrenchment, monetary policy should be at the forefront of Colombia’s stimulus efforts • BanRep stepped up the easing pace to 100bp in February, cutting 300bp since last December, and we expect another 100bp in April followed by a final 50bp cut in May. This would bring the policy rate down to 5.5% by mid-year—below the 6.0% level reached in the 2005 easing. Our assessment is that BanRep will need to increase rates next year (as conditions normalize) but at this point would favor a stimulative policy in order to prevent a shaper economic contraction Colombia: Consumer lending decelerating in real terms IMPACTODELACRISISSOBRECOLOMBIAESMANEJABLE Source: J.P. Morgan 23

25. La reducción de la inflación será gradual, pero BanRep cumplirá su meta de 4.5-5.5% este año Colombia: Consumer prices (%oya) • Headline inflation continues to recede on the back of falling food prices. Food inflation reached only 0.11%m/m, sa in March down from 0.61% in February, taking the oya to 8.7% (from 9.5% in February and 13.2% in 2008) • Lower food inflation allowed headline inflation to fall from 7.7%oya in 2008 to 6.15%oya in March and reinforces BanRep’s confidence that 2009 CPI will fall to its target (5.0% +/- 0.5%) • Core inflation remains high though, with non-tradables (ex food and regulated) printing 0.43%m/m in March and 5.36%oya (note that it closed 2008 at 5.25% and 2007 at 5.19%). Tradables inflation, while still at low levels, has been drifting higher and reached 2.47%oya, the highest level since September 2006 • Since end-2008 inflation expectations have been drifting lower, on the back of falling commodity prices and a clear economic slowdown abroad and locally. The significant disinflation of food items lately reinforced this trend, and in April the median of the 12-months ahead inflation expectation decreased to 4.50%—the bottom of BanRep’s target for 2009 CPI. The minutes of BanRep’s March meeting recognized that core inflation remains relatively high, but the board believes that weaker-than-expected growth and economic slack will reinforce further disinflation going forward Colombia: Tradables & non-tradables inflation (ex food & regulated) %oya IMPACTODELACRISISSOBRECOLOMBIAESMANEJABLE Source: J.P. Morgan 24

26. Las brechas fiscal y externa de Colombia se incrementarán en 2009, pero ambas estarán financiadas • The government recognized lower growth and a wider fiscal deficit. After the release of the 4Q08 GDP drop last month the government reduced the official 2009 GDP forecast to the 0.5%-1.5% range (from 3.0% previously) and increased the forecast of the Central Government deficit to 3.7% of GDP (from 3.2%) and the non-financial public sector deficit forecast to 2.3% of GDP (from 1.8%) • The higher deficit resulted in an additional COP2.5 trillion in financing needs in 2009, which (as announced in late March) will be met with increased multilateral financing (US$740 million) and cash resources from the Treasury (COP0.9 trillion). Now, total financing from multilaterals is expected to reach US$2.65 billion in 2009 (from US$1.9 billion in the February revision plan) • The government successfully issued US$1.0 billion in the external market in an important step to pre-finance 2010 needs. Now total pre-financing has reached US$1.7 billion as the government had already announced US$0.7 billion from multilaterals to pre-finance 2010 • The government announced a precautionary one-year lending arrangement that would allow the country to draw US$10.4 billion from the IMF, but the line is considered “insurance” for global crises and there is no intention at this point to tap the credit line. Our assessment is that the government will continue to track external market conditions and will prefer to pre-finance 2010 needs in the market if there is a window of opportunity. The FCL certainly increases the room of maneuver Colombia: Central Government financing need (Uses and Sources) IMPACTODELACRISISSOBRECOLOMBIAESMANEJABLE Source: J.P. Morgan 25

27. El peso colombiano seguirá vulnerable a los precios de commodities, pero podría terminar el año por debajo del pronóstico de 2450-2550 • Following the sell off registered in 2H08 and early this year, the COP has been performing well since lat March. Better tone in the global market and slightly higher commodity prices are underpinning this benign performance. The sharp economic slowdown is also prompting significant import contraction, limiting the deterioration in the current account deficit. We still see the current account deficit widening to about 4.0% of GDP this year • FDI inflows have been the main source of financing for the CAD in the past years, having topped US$9 billion in both 2007 and 2008, of which more than half went to the oil sector. Now that commodity prices are falling and global growth is clearly slowing, we expect that investments in commodity related sectors will decrease, leading to lower FDI inflows (we see US$6 billion in 2009). Therefore, there could be a financing gap to the external accounts which may add pressure on the currency • The Central Bank should continue to use the mechanism to control FX volatility, under which the BanRep enters the market through Put or Call options (depending on the currency trend) every time the COP varies by more than 5% of its previous 20-day moving average. However, this should not have much influence on the COP, which will follow the general trend in Latin America FX and the tone in commodity markets in particular Colombia: Economic indicators IMPACTODELACRISISSOBRECOLOMBIAESMANEJABLE Source: J.P. Morgan 26