The Business Year - Colombia 2016

11 128 183 COLOMBIA

A peace deal with the FARC, Colombia is committed to An improving image abroad 2016
signed in August, ends years a game-changing overhaul means Colombia’s already
of conflict and opens up many of its entire transportation lucrative tourism sector is set
opportunities for the future. matrix. to grow further.

£60







COLOMBIA

2016

In association with: 6 Year in review • Colombia 28 Why Colombia? • Forum

ANDI 11 DIPLOMACY 30 Living la vida • Focus: Bogotá

11 Peace in our time? • Review 32 Free trade zones • Vox populi 26
14 President Juan Manuel Santos
• Inside perspective 34 Guillermo Botero Nieto, President 57 ENERGY
16 Peace at last • Focus: Peace of Fenalco • Interview & MINING
agreement
18 Enrique Peña Nieto, President of 35 Making waves • Focus: Pacific 57 Powering away • Review: Energy
Mexico • Guest speaker trade
19 Juan Orlando Hernández 58 Enrique Sistiva Vargas, General
Alvarado, President of the Republic 35 Rodrigo J. Sarasti G., President, Manager, Proquimsa • Column
of Honduras • Guest speaker Sarasti & CIA • Column
20 From Plan Colombia to 60 Rubén Darío Lizarralde, President
Peace Colombia • Focus: Paz 36 Security • Forum of Campetrol • Interview
21 Barack Obama, President of the
United States • Guest speaker 38 Consultancy • B2B 61 Mauricio De La Mora Rodríguez,
Former President of National
22 ECONOMY 39 FINANCE Hydrocarbons Agency (ANH)
• Interview
22 Weathering the storm • Review 39 Sector of interest • Review:
26 Bruce Mac Master, President of Banking 62 Manuel Fermin, Director of
the National Business Association of Confervio Agregados • Interview
Colombia (ANDI) • Interview 42 Mauricio Cárdenas, Minister of
27 Regional investments • B2B Finance and Public Credit 63 Upstream activities • Vox populi
• Interview
39 64 Refined tastes • Focus: Refinery
43 Francisco Solano Mendoza,
President of Banco Agrario de 66 Reyes Reinoso, President of
Colombia • Interview Reficar • Interview

44 Investment banks • B2B 67 Guillermo J. Gamez, CEO of CTAC
• Interview
45 Fortune favors the brave
• Focus: Bank expansion abroad 68 William Ariza F., CEO & General
Manager of Galqui-Tececor
46 Bonus in the offing? • Review: • Interview
Capital markets
69 Gas, naturally • Forum
47 Jorge Ivan Abreo, President,
AdCap • Interview 70 Federico Echavarria, Country
Manager of AES Chivor • Interview
48 Juan Pablo Córdoba, President of
the Colombian Stock Exchange 71 Cleaning Colombia • Focus:
• Interview Renewables

49 Brokerages • B2B 72 Tunnel on • Review: Mining

50 Trust in this • Focus: Fiduciary 73 Bryan Jabba, General Manager,
trusts Austin Ingenieros Colombia • Column

51 Fiduciary trusts • B2B 74 Oliver Hoelzer, General Manager
of Liebherr Colombia • Interview
52 All to play for • Review:
Insurance 75 Geo techniques • B2B

52 Manuel Arévalo, Country
Manager, Coface • Column

55 Héctor Martinez, CEO of Willis
Colombia • Interview

56 Juan Pablo Lozano, President of
Afiancol • Interview

4 THEBUSINESSYEAR COLOMBIA 2016

76 INDUSTRY 97 TELECOMS & IT 128 134

76 Cool, calm, and collected 97 Rising star • Review 128 146 Rodrigo Estay, Country
• Review Manager, Cushman & Wakefield
78 Victor Hugo Rey, General 98 Alberto Samuel Yohai, President, INFRASTRUCTURE • Column
Manager, Casalimpia • Column Colombian Chamber of Information & CONSTRUCTION
80 Eduardo Jaramillo Cuervo, Technology and Telecommunications 147 Elsa Noguera, Minister of
President & CEO of General Electric • Column 128 For whom the road tolls Housing, City, and Territory
(GE) • Interview • Review: Infrastructure • Interview
81 Daniella Souza, President 101 David Luna Sánchez, Minister of
Colombia & LATAM Andean Region ICT • Interview 130 Carlos Jacks, CEO, Cemex 148 Fernando Marín
of Dow Chemical • Interview Latam Holdings • Column Valencia, President of Grama
82 José Luis Mora, General Manager 102 Xiong Yihui, President of Huawei Construcciones • Interview
of Litoplas • Interview Colombia • Interview 132 Juan Martin Caicedo
83 Diana Pabón Morales, General Ferrer, Executive President 149 Regional construction • B2B
Manager of Quimica Cosmos 104 Andrés Ríos, General Manager of the Colombian Chamber of
• Interview of Siscoax • Interview Infrastructure (CCI) • Interview 150 Up in the sky • Focus:
84 Local chemical companies Skyscrapers
• Forum 105 Colombia calling • Focus: 133 Pedro José Collado Gómez,
85 Electrical components • B2B Business process outsourcing (BPO) President of FCC Colombia 151 Cranes • Vox populi
86 Send it elsewhere • Focus: • Interview
Exporters 105 Fernando Rodriguez Sierra, 152 Construction companies
87 Clothing manufacturing • B2B General Manager, Unisono • Column 134 Eleuberto Antonio Martorelli, • Forum
88 Vehicles • Vox populi President of Odebrecht Colombia
90 Consumer goods • B2B 106 Erick H. Cepeda, General • Interview 154 Felipe Otoya Domínguez,
91 Glass makers • Vox populi Manager of SoftwareONE • Interview President of Forsa • Interview
92 Col. Juan Manuel Padilla Cepeda, 135 Luciano Gómez, General
General Manager of Indumil 107 Adriana Lucia Falla, General Manager of Latco • Interview 155 Miguel F. Rangel Galvis,
• Interview Manager of SoftManagement S.A. General Manager of Knauf
93 Spread the load • Focus: The • Interview 136 Infrastructure companies • Interview
regions • Forum
94 Germán Forero, President of 108 Oswaldo Medrano, General 156 Architecture • Vox populi
Gerfor • Interview Manager of Ikonosoft • Interview 138 Luis Eduardo Barrios López,
95 Home appliances • B2B General Manager of A Construir
96 Colombian SMEs • Forum 109 IT retailers • B2B • Interview

103 110 Software • Forum 139 Fabio A. Méndez Pinilla,
President of MPI Asfaltos
112 IT infrastructure • B2B • Interview

114 Ricardo Ávila, Editor-in-Chief of 140 Motoring toward development
Portafolio • Interview • Focus: 4G generation

115 TRANSPORT 142 José Joaquín Ortiz García, CEO
of JOYCO • Interview
115 From here to there • Review
143 Geo technics • B2B
116 Rafael Robledo Montagut,
General Manager, Romarco S.A. 144 Build it bigger • Review:
• Column Construction

119 Natalia Abello Vives, Former
Minister of Transport • Interview

120 Juan Camilo Samacá, President
of Almaviva • Interview

121 Major General Pedro Ignacio
Lozano, President of Satena
• Interview

122 Along for the ride • Focus:
Railway

123 Miguel Centanaro, President of
Cenconsas and Ferropetrol
• Interview

124 Ports • Forum

125 Road transport • Vox populi

126 Port services • B2B

127 Down by the river • Focus:
Magdalena river

THEBUSINESSYEAR 5

Editor-in-Chief 158 169 HEALTH 187
Leland Rice & EDUCATION
158 183 TOURISM
Regional Director 169 Bill of health • Review: Health
Carla Alberti de la Rosa AGRICULTURE 183 It’s not magic • Review
170 Rodolfo efrain Scarpetta 184 Pablo Umaña, General Manager,
Country Editors 158 Blooming marvelous Solórzano, General Manager, Cinemark • Column
Adrián Espallargas, Iñaki López • Review Bionexo • Column 186 Alfred Kling, General Manager,
Alfred Kling Joyas • Column
Country Managers 160 Hernando Fonseca, General 172 Medical tourism • B2B 187 Sandra Howard Taylor, Vice
Cristina Villegas, Eva Garcia Manager, Inversiones Peniel Minister of Tourism • Interview
• Column 173 Open wide • Focus: Health 188 Jean-Claude Bessudo,
Project Assistant tourism President of Aviatur • Interview
Angie Serrato 161 Aurelio Iragorri Valencia, 189 City promotion • B2B
Minister of Agriculture 173 Luis Fernando Gil T., CEO, 190 Meet me in the park • Focus:
Chief Executive Officer • Interview Gilmedica • Column Tayrona national natural park
Ayşe Hazır Valentin
162 Alberto Zuñiga, General 174 Pharma • Vox populi 192 EXECUTIVE
Chief Operating Officer Director of BASF Colombia • GUIDE
Laila Bastati Interview 175 Hospitals • Forum
192 Good at business • Review:
Senior Editor 163 Gustavo Edmundo Vergara, 176 Gold star for you • Review: Doing business
Peter Howson General Manager of Gelco Education 194 Legal trends
• Interview and outlook • Review: Legal
Associate Editor 177 Diego Mauricio Mazo Cuervo, 197 Mauricio Zagarra, Managing
Terry Whitlam 164 Sowing Colombia • Focus: Dean, CEIPA Business School • Partner of Norton Rose Fulbright
Colombia Siembra Column Colombia • Interview
Sub-Editors 198 When in Colombia...
Jared Kimball, Emily Casswell, 165 Seeds • Vox populi 178 Gina Parody, Minister of
Kevin Mataraci, Shireen Nisha Education • Interview 190
166 Full plates • B2B
Editorial Assistant 179 The power of the pen • Focus:
Aleksandra Fabia Tugal 168 Morning Joe • Focus: Coffee Pact for education

Assistant Web Editor 168 Juan Pablo Isaza, General 180 Universities • Forum
Belemir Ece Çolak Manager, Café Devoción • Column

Contributors 183
Jason J. Nash, Mark Szawlowski,
Aidan McMahon, Trevor Earnshaw MANY OF THE INTERVIEWS PUBLISHED HERE HAVE BEEN ABRIDGED.
THE ORIGINAL, FULL-LENGTH INTERVIEWS CAN BE READ AT
Transcribers THEBUSINESSYEAR.COM
Attila Pelit,Claire Livesay,
Deanne de Vries, Gillian Dochery,
Heather Conover, Jason Shaw,
Nikolai Davis, Susan Barrett,
Ruben Martinez,
Pronto Publishing Services

Acting Art Director
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Publisher
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6 THEBUSINESSYEAR COLOMBIA 2016

Colombia has a spring in its step. The signing, in August 2016, of a peace
deal with the FARC sent the strongest message yet that the country is
open for business.

Year in Review

PEACE TALKS WITH THE FARC, a left- eration (4G) program, launched in 2014, fore- GDP PER CAPITA
sees investment of $50 billion in transport in-
wing guerrilla movement in conflict with the frastructure development, half of which will go $6,056
Colombian government since the 1960s, have to the road network—80% of the country’s cur-
been followed closely in recent months, no rent internal transport is currently road based. INFLATION
less so than by a large international invest- The plan will slash journey times around the
ment community that has long eyed the po- country and facilitate the quicker transport of 5.01%
tential the country holds. The signing, then, in goods between industrial zones and ports.
August 2016 of a peace deal following exten- CURRENT ACCOUNT
sive talks in Cuba is likely to be a watershed The 4G project is especially timely as lasting
moment for the Colombian economy, not to peace with the FARC, which is set to be put to -6.48% of GDP
mention society. a popular referendum in the coming months,
opens up formerly inaccessible regions of the SOURCE: WORLD BANK (2015)
The talks took place amid a global downturn country to investment and development. In-
in commodities prices, which have impacted deed, many of the territories occupied by the GDP GROWTH (%)
Colombia’s state revenues, as well as currency FARC and other groups are rich in natural re-
depreciation, to which many EMs have been sources, offering a lifeline to local communi- SOURCE: WORLD BANK
subjected in recent quarters. GDP came in at ties in these relatively undeveloped areas. 6.6
$292.08 billion in 2015, up 3.1%, slower than
the growth of 4.6% witnessed in 2014. The One sector that will receive a boost as weap- 4.9
World Bank predicts growth of 2.7% for 2016, ons are laid down is hydrocarbons, with Co- 4.4
before a period of recovery begins in 2017. The lombia’s current proven reserves of 2 billion
regional average GDP growth figure for 2015 barrels of oil set to run out in six years. In 4.0
was -0.94%. Another key indicator put unem- June, the head of the oil industry’s union said
ployment at a record low of 8.9% following la- Colombia will need about $7 billion in invest- 3.1
bor and wage reforms. In inflation terms, the ment annually over the next 10 years to boost
figure hit 5.01%, beyond the 2-4% target range oil exploration and production, a process that 2011 2012 2013 2014 2015
of the country’s central bank as slowdown in should be eased with risk of rebel attacks on
China, the US, and Europe hurt exports de- infrastructure diminished and transport in-
spite the peso-dollar exchange rate reaching frastructure improving. Mining is also set for
as high as COP3,052 as of end-1Q2016. In a heyday and enjoys popular support around
terms of the impact of oil prices, as well as oth- Colombia as an employer of around 1 million
er commodities in distress, the government set people. Colombia is the largest producer of
its target deficit for the central budget at 3.6% coal in Latin America and fifth in the world,
of GDP in 2016, having managed a narrower and is also one of the largest Andean producers
deficit of just 1.6% of GDP between 2013 and of gold. Gold could also be entering a “golden”
2015. Declining state revenues from previous- era, as measures to end illegal mining (80% of
ly reliable sources of cash such as oil and coal all gold mining in the country is carried out il-
have also led to a CAD of 6%, triggering alarm legally), driven mostly by leftwing rebels, take
bells. Other effects that plummeting oil prices hold and open up the sector to investment.
have had on the economy include a Standard President Santos has even offered for illegal
& Poor’s revision to its outlook on Colombia mines to apply for licenses and carry out im-
during 2016, giving the country a long-term pact studies.
foreign currency rating of BBB, but rating its
local currency sovereign debt BBB+. Standard Positive developments in the political sphere
& Poor’s maintained its A-2 rating for short- have also attracted the attention of another sort
term Colombian-issued local and foreign cur- of observer: the tourist. The tourism sector al-
rency debt, a reflection of the demonstrated ready contributes over $17 billion to GDP and
ability of Colombian monetary policy to mit- is expected to reach $17.5 billion, or 6% of GDP,
igate economic challenges using such tools as in 2016. Now, looking to put its reputation for
its floating exchange rate. violence behind it, Colombia’s limit is the sky.
Medium term, the government hopes to grow
Yet despite fiscal concerns, the government the sector by 15% over the next decade, and
has begun to invest heavily in infrastructure in present the culture, landscapes, architecture,
recent years, based mainly on the PPP Law of cuisine, and biodiversity that make the country
January 2012. The much-lauded Fourth Gen- a unique place to visit as well as do business. ✖

THEBUSINESSYEAR 7

SAN ANDRÉS, JEPÍRACH ATL ANTIC OCEAN
PROVIDENCIA AND VENEZUELA
SANTA CATALINA Carnival season
in Colombia is a
ISLANDS sight to behold,

BARRANQUILLA drawing millions to
take part in its many
PANAMA CARTAGENA
eclectic variations
Following its on the extravagent
independence from
the Spanish empire in celebration.
1819, Colombia was
united with present-

day Panama until
1903.

Colombia is BARRANCABERMEJA CAÑO
MEDELLÍN SAN LIMÓN
the only South
CARLOS
American country
with both Pacific

and Atlantic
coastlines.

CHIVOR

BOGOTÁ ALBERTO CUPIAGUA
LLERAS CUSIANA

PACIFIC BUENAVENTURA COLOMBIA Colombia is
OCEAN CALI one of only 17
megadiverse
countries in

the world.

TUMACO RUBIALES

Despite its
much publicized
socioeconomic
woes, Colombia is
consistantly ranked
as the happiest
country in the

world.

BRAZIL

ECUADOR

CITY PORT AIRPORT HYDRO PERU
POWER
SOURCES: WORLD BANK, WORLD
WIND OIL GAS REFINERY ENERGY, WORLD FACTBOOK
FIELD FIELD

200 KM

8 THEBUSINESSYEAR COLOMBIA 2016

TIMELINE

THE BUSINESS YEAR IN COLOMBIA

SEP 2015 OCT 2015

President Santos and leaders of the Local elections are held in which former Bogotá mayor, Enrique Peñalosa, is re-elected
FARC rebel group set a six-month after 14 years, defeating Colombia's left-wing candidates. The most controversial
deadline for signing a final peace policy of Enrique Peñalosa’s campaign platform is the alteration of the Bogotá
agreement. President Santos flies subway project in favor of creating an above ground metro. Other main cities in
to Havana and shakes hands with the Colombia such as Barranquilla, Cartagena, Cali, and Medellín also elect new majors
leader of FARC, Timochenko, after the and parties, signaling the public’s support for a change in local policy.
government and the leaders of the
guerrilla army agree upon a system JAN 2016
of transitional justice, which prior
to the milestone meeting had been The Colombian government sells 57.61% of the shares held in the electric
one of the most difficult points in the company Isagen, which it privatized in 2013 to help raise funds for investments
negotiations. The historic picture of in its ongoing highway projects, to Canadian investment fund Brookfield Asset
President Santos, Timochenko, and Management. The Canadian company pays $2 billion during an auction, while the
Raúl Castro, whose country plays government announces its intent to use these funds to further finance its ambitious
host to the peace talks, is published road infrastructure plans. The sale of the partly parastatal company takes place amid
on the front page of media outlets protests from political and social groups opposing the sale of public assets.
across the world.

Sep
Oct
Nov
Dec
Jan
Feb

FEB 2016 FEB 2016

In a meeting with President Santos, A Colombia court bans mining in moorlands, also known as “paramos.” The court's
US president Barack Obama pledges decision stands to void around 350 mining licenses. The paramos are a unique
more than $450 million in aid to landscape found mainly at an altitude of 3,000-5,000m. The conservation of these
help Colombia peace plan. The lands marks a particularly important development in the effort to guarantee the water
proposed financial aid package will supply for Colombian cities, including the capital.
also support de-mining, humanitarian,
and counter-narcotics projects.
The two presidents commemorate
the 50-year anniversary of Plan
Colombia, a US initiative to aid the
Colombian military in its ongoing war
on drugs that has been paramount
in guaranteeing the stability of the
Colombian state.

Year in Review THEBUSINESSYEAR 9

From diplomatic achievements to economic restructuring, developments in
Colombia filled news headlines around the world.

MAR 2016 APR 2016

Chicago Bridge & Iron is sued by Ecopetrol for $2 billion due to cost overruns at its Colombia legalizes gay marriage, the
Reficar facility in Colombia. According to the parastatal oil company, poor management fourth country in South America
by CBI is responsible for the major cost overruns in the refurbishments made to the to do so. Under previous rulings,
refinery located in the north of Colombia. After the final completion of the plant's same-sex couples could formalize
expansion, the total cost of the project came out to over $8.01 billion, representing their unions before notaries and
an overrun of $4.02 billion. judges, but particular interpretations
of rights granted by this status had
remained a legal gray area and
appeals had been launched against
it. Colombia’s Constitutional Court
goes on to officially ratify the new
legislature legalizing same-sex
marriage.

Mar
Apr
May
Jun
Jul
Aug

JUN 2016 JUL 2016 AUG 2016

Colombia and FARC rebels sign a Health officials in Bogotá declare an Border patrols allow more than
historic ceasefire, one of the most end to the Zika epidemic in Colombia. 100,000 Venezuelans to cross
difficult topics to agree upon for Deputy Health Minister Fernando into Colombia to purchase food
government representatives and FARC Ruiz Gómez states in a public address and medicine. The decision to
leaders. Scores of people take to the that although nearly 100,000 cases reopen the border comes a year
streets of Bogotá in celebration of of the Zika virus had been reported after Venezuela closed passage
the agreement. The signing of the in Colombia, cases of new infections across the border one year ago.
ceasefire paves the way for a final are decreasing to just 600 per week. The massive influx of Venezuelans
peace accord to be signed in the Colombia’s curbing of the spread of searching for basic supplies further
next month, which will put an end to the virus, linked to the birth defect highlights Colombia’s central role in
the more than 50-year conflict. microcephaly, makes it the first maintaining regional solidarity during
country in South America to turn a time of steep economic crisis in
the tide in the fight against the neighboring Venezuela.
epidemic.



14 20 THEBUSINESSYEAR 11

President Juan Manuel Santos on International partnerships have 21
the new progressive changes that helped Colombia to consolidate
Congress has enacted to propel control and move the state Barack Obama, President of the
Colombia to the future. towards unity and functionality. United States, on shared values
and how they have shaped the
Diplomacy countries' relationship.

REVIEW

C The US has long supported Colombia in the war on drugs, but a new

phase of its relationship is about to come forward, one of peace and not

war through the initiative Paz Colombia.

PEACE IN
OUR TIME?

olombia has under- Colombia has opened much
gone a huge trans- of its economy to foreign in-
formation in the vestors and companies. The
country has signed FTAs with
last few decades. Its many of the world’s largest
economies and is a founding
international reputation has member of the Pacific Alli-
ance. It is also a member of
grown more positive as crime numerous economic orga-
nizations, both regional and
rates have dropped, and tour- global.

ists have begun to flock to the PEACE PROCESS

country. Areas that were once On June 23, 2016, President
Juan Manuel Santos and the
“no-go” zones for foreigners leader of FARC, Rodrigo Lon-
doño Echeverri, signed a his-
have now become havens for toric cease-fire that laid the
groundwork for a full peace
backpackers and business treaty. After 52 years of fight-
ing and four years of negoti-
tourists alike. This turnaround ations, the two managed to
come to an agreement. In real-
is due to a number of factors, ity, the two forces had actually
stopped fighting over a year
including a more open econ- before, when FARC declared
a unilateral cease-fire and
omy that has allowed a series the government called a halt
on all offensive operations
of FTAs and economic treaties against the group. However,
the cease-fire has now been
to be signed. In 2016, a major enshrined in a formal declara-
tion by both sides. What must
breakthrough was made in the be done now is plan out how
to demobilize FARC’s 6,800
peace process with the Revo-

lutionary Armed Forces of Co-

lombia, or FARC as it is more

commonly known. An end to

the war appears to be in sight Image: PresidenciaRD

after lengthy talks in Cuba. The decade-long conflict between FARC
and the government may be coming to
The US has long supported a close as peace talks make a major
breakthrough with an official ceasefire
the government of Colombia declaration by both sides. The next step is
a public referendum on the deal.
in its war against the rebels

and drug cartels and, through

Paz Colombia, the country

has sought the demobiliza-

tion of rebel forces, which are

believed to be behind much

of the country’s drug trade.

Along with the fall in violence,

12 THEBUSINESSYEAR COLOMBIA 2016

On June 23, 2016, President Santos signed, all weapons will be laid down at these
and the leader of FARC, Rodrigo camps and, within 180 days, the group will be
Londoño Echeverri, signed a historic fully demobilized. Few want to go back to the
ceasefire, which will lay the ground period of the 1980s and 1990s during the height
work for a full peace treaty. After of the violence when bombings and kidnap-
52 years of fighting and four years pings were the norm; however, the public also
of negotiations, the two managed to wants justice.
come to an agreement.
PAZ COLOMBIA
troops and 8,500 militia at 23 fixed positions
and integrate those people back into society. The US has long been a friend of Colombia,
The war against FARC was long and took a and for many years has backed the Colombian
heavy toll on the people of Colombia, and the government’s efforts to fight drugs and rebel
wounds from this conflict are still fresh. For groups. Part of this relationship has been Paz
some, the integration of FARC’s soldiers back Colombia, or Peace Colombia. In February
into society is a step too far. The government is 2016, President Santos and President Obama
planning a referendum on the peace deal to al- celebrated the 15th anniversary of the initia-
low the public to decide the way forward. Polls tive by allocating a further $450 million for the
carried out in August painted an uncertain pic- peace efforts. Paz Colombia is the next step of
ture, with many believing the deal is too lenient Plan Colombia, which in light of the recent de-
on FARC rebels. Álvaro Uribe and Andrés Pas- velopments in the peace negotiation changed
trana, two former presidents of Colombia, are its name and strategy. Paz Colombia will focus
behind the “No” campaign for the upcoming on fulfilling the peace agreement and main-
vote. They believe a public rejection of the deal taining talks between the two groups.
would force everyone back to the negotiating
table to go over some of the more controver- VENEZUELA
sial points regarding transitional justice and
the political participation of FARC. The “No” As prosperity rises in Colombia, its neighbor is
campaign believes FARC is responsible for nu- unfortunately experiencing quite the opposite.
merous war crimes and the current deal would While Venezuela and Colombia do not have
let it off lightly. However, the chief government the coziest of relationships, in recent times
negotiator during the process, Humberto de things have thawed somewhat. Still, the situa-
la Calle, believes a no vote would be a huge tion in Venezuela, especially since the death of
mistake. He points out that voting no does not Hugo Chávez, has taken a turn for the worse,
guarantee a return to the negotiating table and confounded by low oil prices. This has led to
there would be little to win for Colombian so- hyper-inflation and a lack of even the most
ciety by rejecting the deal. The entire Santos basic of goods, causing Venezuelans on bor-
administration is behind the “Yes” campaign der towns to cross into Colombia to purchase
and knows that to solidify the vote, it must en- goods. In mid-2015, President Nicolás Maduro
sure that the public believes that the rebels will of Venezuela closed the border with Colombia,
not be let off for their crimes. Talks are still un- citing security concerns after three soldiers
der way in Havana to negotiate the final peace were killed in an attack allegedly by right-wing
process deal. In the meantime, government Colombian rebels. The border between the two
officials, FARC, and UN Security Council offi- nations has long been a trafficking route for or-
cials are carrying out technical visits to the 23 ganized crime, which was possibly the reason
fixed positions. Within a week of the deal being behind the attack. With the economic situation
in Venezuela deteriorating, in August 2016 the
two presidents came to an agreement to open
five pedestrian border crossings for 15 hours a
day. On the first day by 4pm, over 40,000 peo-
ple crossed the border to the small border town
of Cúcuta to buy food, medicine, and house-
hold goods, things that had become difficult to
find in Venezuela. The opening should provide
some relief to the Venezuelans close to the bor-
der until the situation improves. ✖



14 THEBUSINESSYEAR COLOMBIA 2016

INSIDE PERSPECTIVE

a BRAND
NEW DAY

President Juan Manuel Santos on the new
progressive changes that Congress has enacted
to propel Colombia to the future.

For over half a century we have not been a bians. In the last six legislatures, Congress and BIO
normal country. For over half a century we the government had to risk it all to shape an
have suffered the burden of an armed internal agenda that is changing for the better the lives Juan Manuel Santos
conflict that gave us the stigma of being a “dif- of our compatriots and for the victims, who fi- graduated from the Naval
ferent” country in the continent. While others nally have law and institutions that safeguard School of Cartagena in
overcame dictatorships and difficult periods of their rights, and to work to repair and return 1969 and continued in the
violence, we were still tangled in a confronta- the seized lands. For regions, which have im- Colombian Navy, obtaining
tion with the largest and oldest guerrilla group proved their management capacity and equal- a Bachelor’s degree and
in the hemisphere, as though the end of the ity of their income through reforms such as the graduating as a Naval Cadet.
Cold War had not happened on our soil. law of land management and for the strength After leaving the Navy, he
of our economy through an innovative legisla- attended the University of
We had to rid ourselves of this burden. We tion, such as constitutional reform and the laws Kansas, graduating in 1973
had to rid ourselves of this obstacle on the path that impose fiscal discipline, ensuring healthy with a bachelor’s degree in
of our development and social progress. We finances and resources to the most vulnerable economics and business
had to finally be part of the third millennium. Colombians. For employment, creating norms administration and went
Today, after more than three decades of at- such as Ley del Primer Empleo (the First Em- on to receive an MSc in
tempts by the different governments that have ployment Act), reducing payroll contributions, economic development
led the nation, we are achieving that walking and in this last parliamentary term, Ley del Em- from the London School of
hand-in-hand with congressmen and all Co- pleo Juvenil (the Youth Employment Law). Economics and another in
lombians. I do not only refer to the legislative law and diplomacy from
initiatives that have eased the development of As for the poor, to continue furthering pov- the Fletcher School of Law
the peace process and ensure the proper imple- erty reduction—as we have accomplished in and Diplomacy at Tufts
mentation of the agreements. recent years more than any other period in our University. He has worked
history—with initiatives such as the Ley de Vivi- as Chief Executive of the
Peace—as we well know—is much more than enda Social (the Social Housing Act) or a law Colombian Coffee Delegation
the end of the armed conflict with the guerril- that turned the program Más Familias en Ac- to the International Coffee
las. Peace also requires reforms to ensure great- ción (More Families in Action) into state policy. Organization and Sub-
er development, equality, and coexistence in As for our health, we passed laws that improved Director of his family-owned
our nation and together we have made these financing for hospitals, as well as a statutory law newspaper, El Tiempo. Under
reforms, not only since 2014, but since 2010, that enshrines health as a fundamental right President César Gaviria he
when many supported initiatives of enormous and even became the first social right in the acted as Minister of Foreign
significance. history of our Constitution. As for our children Trade. In 2006 he became
and our youth, education has been the sector Minister of Defense, before
History will examine the work of the Con- with the most resources allocated in the last being elected President in
gress in these two periods, and I do not doubt two budgets through programs such as Todos a June 2010.
that it will show that this Congress produced Aprender (Everyone to Learn), Ser Pilo Paga (It
the most progressive initiatives of its time and is Worth Being Smart), bilingualism, and Jorna-
that it worked more than any parliament be-
fore to further guarantee the rights of Colom-

Diplomacy THEBUSINESSYEAR 15

da Unica (The Single Day), as well as building Peace—as we well know—is much more than the end of the armed
more schools than ever before. conflict with the guerrillas. Peace also requires reforms to ensure
greater development, equality, and coexistence in our nation
I have to highlight and thank the law passed and together we have made these reforms, not only since 2014,
this year by Congress that turns the Estrategia but since 2010, when many supported initiatives of enormous
Integral por la Primera Infancia de Cero a Siem- significance. History will examine the work of the Congress in these
pre (Comprehensive Strategy for Early Child- two periods, and I do not doubt that it will show that this Congress
hood from Zero to Forever) into state policy. produced the most progressive initiatives of its time and that it
This is a crusade that we began at the start of worked more than any parliament before to further guarantee the
this government to guarantee that children un- rights of Colombians. In the last six legislatures, Congress and the
der the age of five and pregnant mothers will government had to risk it all to shape an agenda that is changing for
receive the proper attention, because we know the better the lives of our compatriots.
they are the best investment for the future.
With that law, Congress has sown the seeds of the police to protect the security and tranquil-
the biggest transformation in Colombia, which ity of citizens. We have also done something
is what happens from the first phases of life. I extremely important, which is to produce an
want to thank the congressmen for achieving advanced legislation that protects the rights
that milestone. of minorities, including the excluded, and re-
sponds to the realities and needs of today.
I also want to highlight and recognize—be-
fore the country—the commitment shown by There are new norms such as a law against
my wife Maria Clemencia to this special pro- discrimination, a law for people with disabili-
gram, who has been its prime mover. ties, a law for victims of sexual violence, a fem-
icide law, and a law governing the use and pro-
And for who else have Congress and the duction of marijuana for medical uses. There
government worked? We have worked for our are also laws that improved the working con-
land, with initiatives such as the Ley de Finan- ditions of workers and domestic workers, com-
ciamiento Rural (Rural Finance Act) and au- munity mothers, volunteers, firefighters—who
thorizing the creation of the Zonas de Interes de went from an annual investment of COP800
Desarrollo Rural, Economico y Social (Rural Ar- million to COP30 billion—and the Ley de Pro-
eas of Economic and Social Development Inter- teccion al Cesante.
est), known as Zidres, to promote investment
and productive projects in the most untapped All those new laws represent particular
areas of the country. We have also worked to achievements in ensuring social rights of Co-
strengthen the judiciary system, with new legal lombians, and I reaffirm the conviction that the
codes in administrative, general process, and agenda we have accomplished in the last six
penitentiary and the creation of the Statute of years is a historic leap for the country.
Arbitration; removing the economic incentive
of popular actions; Ley de Arancel Judicial (the All these mean that the major reforms that
Judicial Tariff Act), which expanded the sourc- transform Colombia, progressive and advanced
es for funding of the judiciary system, and, of reforms, are being done from republican and
course, the Reforma de Equilibrio de Poderes democratic institutions, and not from weap-
(the Balance of Power Reform). ons, not from a revolution, not from author-
itarianism. Be proud that you are part of this
Even with those parts of the reform that change that will lead to a new Colombia; a Co-
cannot be applied—for recent rulings of the lombia with much more equity, more progress,
Constitutional Court—we must highlight its more education, and, as we always dreamed, a
importance, beginning with the elimination of Colombia in peace. ✖
the figure of the reelection not only of the pres-
ident but of all the high dignitaries of the state. Extracted from a speech given by President Santos before
Colombia is henceforth moving toward a more Congress on July 20th, the Colombian Independence Day.
flexible and participatory democracy, which
also guarantees generational change.

I would also like to highlight the new Police
Code approved by Congress that updates a
regulation that is more than 40 years old, and
which gives greater and more effective tools to

16 THEBUSINESSYEAR COLOMBIA 2016

FOCUS PEACE AGREEMENT

The armed conflict between the Colombian government and several rebel
groups that has spanned more than five decades and claimed the lives of
thousands is moving toward a peaceful conclusion.

PEACE AT LAST

COLOMBIA is on the brink of putting an end of the main sources of funding for the guerril-
la group. Farmers will be discouraged from
to its longest running guerrilla conflict after harvesting materials used for illegal drug pro-
more than five decades of war against the left- duction through a national crop substitution
wing FARC rebels. This bloody conflict is now program that will be sponsored by the Colom-
one step closer to its end after President Santos bian government. Reducing the drug trade and
and the FARC leader, Rodrigo Londoño Eche- implementing national policies to boost land
verri (referred to as “Timochenko”), signed an productivity are paramount to ensuring the suc-
historic bilateral ceasefire on June 23 in Havana. cessful development of rural areas.
That agreement laid the groundwork for a final
peace treaty, which was finalized in August. The government will facilitate the transition
Both sides agreed to the creation of temporary of FARC into a political movement after a final
transition zones for the nearly 7,000 rebels that referendum on the deal is signed. A system of
will include camps and protected areas not ac- transitional justice will also be created for the
cessible to civilians. victims of the conflict. This section was one of
the most delicate and harsh topics in the peace
Santos is set to be the Colombian president
who finally achieves successful peace negotia- After the accord is agreed upon, President Santos
tions with the FARC rebels, following three pre- has consistently insisted on the need to validate the
vious attempts to do so. Peace talks stalled in the document by the Colombian people via a referendum,
1990s and violence escalated until the 1998-2002 although this path has yet to be clarified.
term of President Andrés Pastrana, who restart-
ed conversations with FARC leadership. The process, as it establishes the creation of an in-
process ultimately failed, and Pastrana’s succes- tegral system comprised by judiciary mecha-
sor, Álvaro Uribe, headed a US military-backed nisms and extra-judicial authorities that will
offensive against the guerrillas. Colombia’s Na- be implemented to guarantee the rights of the
tional Army scored several important victories victims. An important factor will be the creation
against the rebels during the following decade, of a truth commission, a temporary extrajudi-
a period in which Santos served as Minister of cial organization that will work on clarifying and
Defense between 2006 and 2009. investigating the worst cases of war crimes and
crimes against humanity during the conflict.
In November 2012, the Santos administra- Another key element will be the formation of a
tion and a group of guerrilla leaders headed by Special Jurisdiction for Peace that will judge the
Timochenko began the current peace process, crimes.
which is now one giant step closer to coming to
a close after the announcement in late June. A President Santos has consistently insisted
key aspect of enforcing peace will be bridging on the need to validate the document by the
the huge economic gap between Colombia’s Colombian people via a referendum, which it
rural areas and the rest of Colombia, particu- was announced in late August would take place
larly in Llanos Orientales, the Western area of in early October. Peace with FARC will be an
the country where the FARC rebels traditional- historical milestone in finally achieving peace
ly garnered support from the locals, using it as in Colombia, where other guerrilla groups and
a stronghold. One of the points of the current criminal organizations still operate. The next
peace process, agreed upon in May 2013, ad- bump in the road for peacemaking will be
dresses the access and use of land for dispos- reaching an agreement with the National Liber-
sessed peasants and features the creation of a ation Army, the second largest guerrilla group in
fund to meet that objective. Furthermore, both the country. This talk will take place in Ecuador,
sides decided to implement national agriculture though the priority remains finalizing the cur-
plans to develop those areas and improve the rent process with FARC. ✖
current infrastructure.

The government and FARC leaders also
agreed to reduce the harvest of illicit drugs, one

Diplomacy THEBUSINESSYEAR 17

THE AUGUST 24 FARC PEACE DEAL MARKS THE END OF ONE ERA—
CHARACTERIZED BY CONFLICT AND STRUGGLE—AND THE BEGINNING OF
ANOTHER, ONE WHICH BOTH SIDES OF THE HISTORIC AGREEMENT HOPE

WILL LEAD TO A BETTER LIFE FOR A BETTER COLOMBIA.

1964 MAY 1998 JUNE

Leftist group Revolutionary Armed Forces of Colombia Andrés Pastrana Arango is elected president of
(Spanish acronym FARC) is created to oppose the Colombia. Pastrana presides over the creation of the
National Front political coalition formed in 1958 nearly USD1 billion Plan Colombia to combat the
following the end of Colombia’s 10-year civil war. illegal drug trade and rebel groups. He begins the
process of carrying out peace talks with FARC.
Throughout the following five decades, FARC and other
rebels engage in armed conflict with the Colombian 2002 MAY
state as well as right-wing paramilitary groups.
Álvaro Uribe wins the presidential election, promising
2002 FEBRUARY to take a stronger stance against rebel groups. Uribe’s
presidency ushers in a period of military offensives
Pastrana breaks off three years of peace talks with against FARC.
FARC following the hijacking of an aircraft blamed
on the group. He orders rebels out of the previously
demilitarized zone in the south of the country as the

government declares war on the area.

2010 AUGUST

Juan Manuel Santos becomes President of Colombia.
Santos responds to a FARC offer of peace talks by
demanding the group release all of its remaining
hostages.

2012 NOVEMBER

FARC declares a two-month ceasefire as new peace
talks with the Colombian government begin in Cuba.

2015 JANUARY

President Santos says the government is ready for
a bilateral ceasefire with FARC after welcoming a
December 2014 unilateral ceasefire proposed by the

rebel group.

2016 AUGUST 2016 JUNE

The Colombian government and FARC negotiators The government and FARC leaders agree on a bilateral
sign a final peace deal in Havana. The agreement ceasefire in Havana.

must pass a public vote in a referendum scheduled for SOURCE: TBY RESEARCH
October 2.

18 THEBUSINESSYEAR COLOMBIA 2016

GUEST SPEAKER

FORTIFYING
ties

TBY talks to Enrique Peña Nieto, President
of Mexico, on the role trade agreements will
play in strengthening bilateral trade as well as
specific sectors which will be at the forefront of

that growth.

President Santos visited Mexico What is the importance of the in the region, and the creation BIO
of the Venture Capital Fund,
in May 2015 and signed several Pacific Alliance in connecting which will have an initial in- HE Enrique Peña Nieto
vestment of $100 million and holds a bachelor’s degree
agreements. In which specific companies from these countries will start operating in 2017. in law from Universidad
Panamericana and a
areas did the two countries de- to the productive value chains? How has the FTA between Co- master’s degree in business
from Monterrey Institute
cide to collaborate and boost The Pacific Alliance is at the lombia and Mexico helped drive of Technology and Higher
same time both a valuable tool Education. Early in his
bilateral cooperation? in the ongoing project of inte- growth between the two coun- career he held a number of
gration and trade liberalization positions within the State
During the visit of President in Latin America and an open tries? of Mexico’s government,
Santos to Mexico, we did in and inclusive mechanism that The FTA signed in the 1990s including Sub-Secretary of
fact sign several agreements, provides a solid basis for coop- has promoted significant trade the Interior, Administrative
the most important of which eration between its members growth between Colombia Secretary, President of the
was the MoU for the Estab- and its observer countries. and Mexico. In 1994, we had Directive Council of Social
lishment of Strategic Relation- Through this mechanism, bilateral trade of about $427 Security, President of the
ship. Specifically, we signed companies in Colombia and million. We have seen this fig- Internal Council of Health,
academic and diplomatic Mexico, as well as Chile and ure grow by 1,300% to its cur- and Vice-President of the
cooperation agreements, as Peru, are closer to each other rent level of more than $5.7 National System for Integral
well as others in the fields of thanks to the facilitation and billion. Colombia is now the Family Development. In
production linkages, tourism, unification of trade rules. In second largest trading partner 2003 he won the election
higher education, and con- particular, the Pacific Alliance of Mexico in Latin America as a State Deputy in his
sumer protection. In addition, has a Working Group on SMEs, and the Caribbean. Among hometown of Atlacomulco.
we identified areas where we with the strategic objective of other products, we export cars, In 2005 he became
can continue to cooperate, inserting them into global val- computers, transportation ve- Governor of the State of
such as sanitary and phy- ue chains. To this end, three hicles, iron, steel, plastics, and Mexico. He was sworn in
tosanitary regulation to facil- major actions were promot- tractors into the Colombian as President of Mexico on
itate trade between Colombia ed, namely the development market. We must not forget December 1, 2012.
and Mexico. Other areas of of a collaborative study with that the signing of the FTA
cooperation include air trans- the OECD to identify oppor- was the original seed for one
port, culture, student mobili- tunities for SMEs in global of our greatest successes, as it
ty, migration, and science and production chains, the estab- allowed us to forge in the Pacif-
technology, particularly di- lishment of Network Business ic Alliance one of the most dy-
rected at the agricultural, en- Development Centers that will namic and innovative mecha-
vironmental, and healthcare start to work in 2016 in order nisms of cooperation in Latin
sectors. In the same vein, we to provide training and advice America and the Caribbean. ✖
reiterated our commitment to to SMEs and all entrepreneurs
the consolidation of the Pacif-
ic Alliance.

Diplomacy THEBUSINESSYEAR 19

GUEST SPEAKER

stronger
TOGETHER

TBY talks to Juan In March 2010, Honduras and ment will help progress toward results of the active relation-
Orlando Hernández ship, such as several legal
Alvarado, President Colombia signed an FTA. Since achieving better safety levels? instruments, to regulate co-
of the Republic of operation actions (security,
Honduras, on the then, how has trade between The MoU for the Establish- trade, investment, culture,
importance of the ment of the High Level Group education, and technology
culture of collaboration both countries changed? on Security and Justice (GAN- exchange), as well as common
and partnership SJ) will be used as the primary interest issues marking the in-
between the two The FTA between Honduras instrument for the coordina- ternational agenda. We have a
countries. and Colombia sets the rules tion and monitoring of ac- Bilateral Mechanism for Dia-
for a bilateral relationship tions of all legal instruments log and Political Consultations
BIO with clear and predictable in force between Honduras created by the MoU signed in
trade standards between the and Colombia on security Tegucigalpa on September
Juan Orlando Hernández two countries. Honduras’ ex- and justice, drugs, combat- 4, 2012. The Bilateral Mecha-
Alvarado is President of the perience has been positive. ing organized crime and hu- nism provides a mechanism
Republic of Honduras. He While we still have a trade man trafficking, and others. for consultation at the level of
completed his studies at deficit with Colombia, aspects The partnership between the ministers to address political,
the National Autonomous agreed to in the FTA have led two governments and coor- cooperation, economic, and
University of Honduras to an increase in imports for dination through GANSJ has trade issues, as well as the up-
(UNAH), and graduated Colombia from Honduras as allowed us to accurately hit dating of regulations, security
with a degree in law and a result of the placement of criminal gangs, especially issues, regional and multilat-
social sciences. He became new products in the Colom- drug cartels. Honduras used eral issues, and also a bi-na-
a lawyer and notary, and bian market, especially in the to be a country widely used tional mechanism at the level
later earned a master’s clothing segment. Without a as a bridge for the transit of of Vice Chancellors respon-
in public administration doubt, this trend has had a drugs from Colombia and sible for reviewing commit-
from the State University positive impact on the econ- other neighboring countries ments, who to date have met
of New York. He worked omy of Honduras through to Mexico and the US, and twice. The Joint Committee on
as a legal professional generating jobs and attracting this has been greatly reduced. Technical Cooperation, Sci-
and as a member of the investment toward product The US government itself ence, Culture, Education and
National Party of Honduras, placement in non-traditional has acknowledged that trac- Sports was created under the
participating in the electoral markets that have great po- es of drug flights have been Agreement on Technical and
process of 1997 and winning tential. It is worth mentioning reduced by over 70%, and all Scientific Cooperation signed
the first Liberal MP for that the framework of dia- of this is possible thanks to on March 4, 1980 and the
Lempira. Before leaving logue that the FTA generates the cooperation between our Cultural and Educational Co-
Congress to pursue his with Colombia also leads to governments and their agen- operation Agreement signed
presidential campaign, he regular assessment of its per- cies. The seizure of drugs is on August 12, 1961. The last
introduced a bill to create formance in order to strength- increasing every year and we meeting of the Joint Commit-
the Integral Government en it and improve bilateral hope to continue working on tee V was on April 4, 2013 in
Troop Special Response trade. To date, it defines an it, because it is beneficial to all Bogotá, where we defined the
Unit Security. agenda for further market ac- parties involved. Cooperation Program 2013-
cess for products that do not 2015. Besides trade, Colom-
now have preferential access. What is the present political and bia has increased investment
Our entrepreneurs should in Honduras. The Honduran
take advantage of the oppor- economic relationship with the banking and cement sectors
tunities offered by the market have benefited from the ar-
in Colombia, and we hope to government of Colombia? rival of new capital. We are
help them find new markets in excited about this and hope
the sister country. Honduras and Colombia es- that more Colombian com-
tablished diplomatic relations panies and investors can set-
In September 2015, Honduras in 1825. Since then, the bi- tle in the country. ✖
lateral relationship between
and Colombia signed a unilat- the two countries has been
marked by strong ties of co-
eral agreement to fight against operation and friendship. It
is important to mention the
terrorism and organized crime.

How do you expect this agree-

20 THEBUSINESSYEAR COLOMBIA 2016

FOCUS PAZ

FROM PLAN
COLOMBIA TO
PEACE COLOMBIA

International THIS YEAR MARKS the 15th anniversary of to inflict several overwhelming defeats to both
partnerships the paramilitaries and guerrilla insurgents that
have allowed Plan Colombia, an important assistance pro- financed their operations with illegal drug traf-
the Colombian gram sponsored by the US to combat drug car- ficking. Around 70 FARC leaders were killed in
government to tels and left-wing guerrilla groups in Colombia. the last 15 years, and cocaine cultivated land
consolidate control President Santos and President Obama met in shrunk by 60%.
and move the state February in Washington to commemorate the
towards unity and date and also announced the next chapter of The program also bolstered democratic in-
functionality. the program, which will be known as “Plan Paz stitutions in Colombia and the government
Colombia,” and will help to build a peaceful reformed several land laws, in addition to
Colombia during the post-conflict period. providing humanitarian aid to the victims. At
the beginning of Plan Colombia, approximate-
Colombia and the FARC signed a peace ly 70% of the assistance was to cover military
treaty in Havana in March that will end over costs and 30% was dedicated to humanitarian
50 years of conflict. The post-conflict period aid, but in the last years those expenses bal-
will be tough, as the current 4,000 FARC fight- anced and to date is about 50-50.
ers will have to rejoin society, nearly 3 million
displaced persons would like to return to their Peace Colombia will be the fourth chap-
regions of origin, and cocaine plantations will ter of Plan Colombia. The first chapter took
have to be replaced with legal alternatives to place between 2000 and 2006, when the army
name a few of the challenges ahead. targeted the interdiction of narcotics in Putu-
mayo department and reducing the presence
Several governments have signed up to sup- of guerrilla forces in Cundinamarca and Meta
port Colombia and, in that regard, the US will regions. The second stage developed between
be one of the main international partners that 2007 and 2009 and focused on returning the
will help the nation to attain stability and se- presence of the state to certain rural areas and
curity. “And just as the United States has been the demobilization of the paramilitaries. The
Colombia’s partner in a time of war, I indicat- third one was named Strategic Development
ed to President Santos we will be your partner for Colombia, which went from 2010 to 2015
in waging peace,” announced Obama as he and emphasized the eradication of drug traf-
rolled out the framework for the next chapter ficking and focused on humanitarian aid ad-
of the partnership. vancement.

The Colombian government will receive Back in the early 2000s, Colombia was on
over $450 million from the US to reinforce se- the brink of collapse. The economy was going
curity gains and extend the rule of law into ar- through a severe recession and nearly a third
eas denied for decades, although those funds of the territory was controlled by paramilitar-
have yet to be green-lighted by the US Con- ies while another third was in the hands of the
gress. Colombia and the US met again in April guerrillas. Both groups were largely financed
to finalize this agreement and ensure prog- by drug trafficking and Colombia was close to
ress in the post-conflict just as Plan Colombia being declared a failed state.
strengthened the state during the last decade
and a half of conflict. However, the situation has changed dra-
matically after the implementation of Plan
When Plan Colombia was agreed to in 1999, Colombia and today the country is on the
Colombia became one of the largest US mili- brink of peace. The United Self-Defense Forc-
tary aid recipients in the world and national es of Colombia (AUC in Spanish), a large para-
security forces significantly gained ground military organization, demobilized in 2006
against the FARC and the ELN, another guer- and FARC leaders eventually decided to sit at
rilla group. Signed during the Bush Adminis- the negotiating table. “Peace will help us con-
tration, the US backed the country with over solidate a new nation, a country that will be
$10 billion that made Colombia’s military safer, more prosperous, more just and equita-
power stronger. ble, better educated, and of course, happier,”
Santos stated in Washington. ✖
The army obtained state of the art military
equipment and training that became essential

Diplomacy THEBUSINESSYEAR 21

GUEST SPEAKER

TOGETHER
for the long

GAME

In the US, we are big fans of stitutions. Plan Colombia has Barack Obama, ment of Cuba for hosting the
Colombia. We love its culture been a tribute to the people President of the talks. We all know that it is
and we love its contributions. of Colombia and its efforts to United States, on easier to start wars than end
We love Shakira, Carlos Vives, overcome so many challeng- the history of shared them, but after half a centu-
and Sofia Vergara. We are es, and after 15 years, a tip- values and how ry of wrenching conflict, the
joined by many friends from ping point has been reached; they have come to time has come for peace. It is
Colombia, and we have a lot of the tide has turned. shape a very special time to make real the words
proud Colombian-Americans. of the young Colombian who
From Cartagena to the relationship. said, “The only thing I want to
The bonds between our campo, there is no denying see die over here in the west
two countries are not just at Colombia’s remarkable trans- BIO side of town is the sun at the
the level of government. They formation. Today’s Colombia end of the day.”
are people. They are cultures, is a country of artists, entre- President Barack Obama
friendships, and family. This preneurs, and dynamic cities. was born in Hawaii in 1961. Peace will be just the first
is one of the strongest part- In the “barrios” of Medellín, After working his way step. Any agreement will have
nerships in the hemisphere new businesses along with through college with the to be implemented, and just
and, increasingly, we are giant outdoor escalators up help of scholarships and as the US has been Colom-
global partners. It is a part- the hillsides are quite literally student loans, President bia’s partner in a time of war,
nership grounded in mutual lifting people out of poverty. Obama moved to Chicago I indicated to President San-
interests and mutual respect, Children who once hid in fear and worked with a group tos that we will be its partner
and Juan Manuel and I dis- now have the chance to pur- of churches to help rebuild in waging peace. Today, I am
cussed ways that we can con- sue their dreams. In short, a communities devastated by proud to announce a new
tinue to strengthen our ties country that was on the brink the closure of local steel framework for the next chap-
with more trade, more invest- of collapse is now on the brink plants. He went on to attend ter of our partnership. We are
ment in clean energy, and ev- of peace. I had the privilege of law school, and became going to call it Peace Colom-
er-deeper cooperation in the seeing some of this extraor- the first African-American bia—Paz Colombia.
region. Of course, much of dinary change myself when president of the Harvard
our work focused on how to I visited Cartagena. I still be- Law Review. He returned As Colombia transitions
seize this incredible moment lieve what I said then: in Co- to Chicago and taught to peace, the US will work
of promise in Colombia. We lombia today, there is hope. constitutional law at the hand-in-hand with the coun-
all remember a time, not long University of Chicago. In try. I am proposing that more
ago, when Colombia was torn Fully realizing that hope the Illinois State Senate, than $450 million be devoted
apart by terrible violence and requires a just and lasting he passed the first major to helping reinforce securi-
plagued by insurgency and peace, I admire the great ethics reform in 25 years ty gains, reintegrate former
civil war. And that is why the courage and resolve that and cut taxes for working combatants into society, and
US and Colombia forged what President Santos has shown families. He was elected the extend opportunity and the
became Plan Colombia, start- in pursuing negotiations to 44th President of the United rule of law into areas denied
ing with President Pastrana end the war. Santos is com- States in 2008. them for decades. We will
and transcending adminis- mitted to an agreement that continue to stand for human
trations in both of our coun- upholds Colombia’s national rights and justice for victims,
tries. We were proud to sup- and international legal ob- and we will keep working to
port Colombia and its people ligations, and the President protect our people, as well as
as it strengthened its security put victims at the center of the Colombian people, from
forces, reformed land laws, this process. I want to thank the ravages of the war on ille-
and bolstered democratic in- all of the parties for their ef- gal drugs and the violence of
forts, including the govern- drug traffickers. ✖

22 THEBUSINESSYEAR

26 28 35

Bruce Mac Master, President of The many opportunities available The development of new FTAs
the National Business Association in Colombia across sectors offer in the Pacific region has positive
of Colombia (ANDI), on tackling companies great potential. long-term implications for
obstacles to competitiveness. Colombia’s west coast.

Economy

REVIEW

A Colombia’s economy was hit hard by recent downturns around the
world, but years of effective planning have the country still moving in
a forward direction.

WEATHERING
THE STORM

ccording to economic output, have had
a severe impact on the coun-
the World Eco- try’s private sector as well as
on the state revenues used
nomic Forum’s to fund its public spending
budget.
2015-2016 Glob-
As a result of new labor and
al Competitiveness Report, wage reforms, unemploy-
ment in 2015 reached a re-
Colombia was ranked 61st cord low of 8.9%. Meanwhile,
GDP totaled $292.08 billion
in terms of the competitive- during 2015, maintaining
Colombia’s position as the
ness of its economy. This fourth-largest economy in
the region. However, GDP
marked the second consecu- growth dropped from 4.6% in
2014 to 3.1% in 2015, which
tive year in which Colombia still far outpaced the -0.94%
regional average growth rate
improved its position in the in 2015. According to the
World Bank, the strong ex-
report, moving up five places ternal macroeconomic head-
winds are likely to continue
from 2014-2015. The higher through 2016, putting the
year’s projected GDP growth
ranking in this year’s issue rates at just 2.7%, though
expectations are for Colom-
of the report reflects, among bia to enter a period of re-
covery starting in 2017. The
many other factors, the con- slowdown in key markets
such as China, the US, and
tinued enhancement of the the eurozone all contribut-
ed to declining demand for
country’s financial market Colombian exports despite
the ongoing depreciation of
development—for which the

country was ranked 25th—

through prudent financial

measures taken by the gov-

ernment. This improved

ranking of Colombia’s eco- Image: Willis Colombia

nomic competitiveness A slowdown in many of Colombia’s
primary export demand markets and the
comes at a time when vola- effects of plummeting commodity prices
on the country’s income are testing the
tility in various components strength and resilience of one of Latin
America’s fastest-growing economies.
of the global macroeconomic

environment have had sig-

nificant, immediate impacts

on the country’s economic

performance. Declining pric-

es of global commodities,

which have long been a key

strategic pillar of Colombia’s

Economy THEBUSINESSYEAR 23

the peso pushing its exchange rate with the leaders of both government and private-sec- Despite remaining
US dollar all the way up to COP3.052 per dol- tor enterprises. Despite the current setbacks, one of Latin America’s
lar as of end-1Q2016. Together with fluctua- projections for the general government deficit fastest-growing
tions in the prices of food and other essential remain at 3% of GDP for 2016, with 2017-2018 economies, Colombia’s
consumer goods, the slide of the peso drove projections averaging around 2.3%. The con- GDP growth dropped
inflation well beyond the 2-4% range target- cern over the spike in the public deficit does from 4.6% in 2014 to
ed by the country’s central bank, the Bank of warrant concern, given that Colombia had 3.1% in 2015, which
the Republic, to 5.01% during 2015, while av- previously maintained an average deficit of still far outpaced
erage annual inflation in the Latin American just 1.6% of GDP between 2013 and 2015. the -0.94% regional
and Caribbean region in 2015 was only 2.92%. average growth rate
These troubles continued in 2016, with infla- Listing the dramatic ripple effects that during 2015.
tion reaching 7.6% in the first quarter of the plummeting oil prices have had on its econ-
year. In keeping with Colombia’s successful omy, Standard & Poor’s revised its outlook
track record of managing inflation through on Colombia during 2016, giving the country
effective monetary policy, the interest rate a long-term foreign currency rating of BBB,
hikes put into effect in September 2015 were but rating its local currency sovereign debt
expected to help curb the issue, with projec- BBB+. Standard & Poor’s maintained its A-2
tions for consumer inflation to return to the rating for short-term Colombian-issued local
desired range by 2017. and foreign currency debt, a reflection of the
demonstrated capability of Colombian mon-
The government expanded its target defi- etary policy to mitigate economic challenges
cit level for the central budget to 3.6% of GDP using such tools as its floating exchange rate.
for 2016. By February 2016, however, declin- The risk associated with owning Colombian
ing state revenues from previously reliable bonds, as measured by the rates of five-year
revenue-generating activities such as oil and credit default swaps, was one of worst among
coal exports and the extraction of other natu- promising emerging-market economies,
ral resources had contributed in large part to though this movement was also paralleled by
Colombia’s current account deficit rising past many countries around the world with simi-
6% of GDP, leading to concern among some larly structured economies whose reliance

24 THEBUSINESSYEAR COLOMBIA 2016

on commodities leaves them vulnerable to GDP (CURRENT $ BILLION)
shocks in the market. Thanks to apt manage-
ment of revenues during times of high com- SOURCE: WORLD BANK
modity prices, Colombia is relatively well po-
sitioned to weather the current uncertainty, 369.66 380.19 378.42
having utilized these accumulated funds to
further development initiatives in its capital 335.42
markets while ameliorating the country’s debt
profile. At 19.4% of GDP, Colombia’s gross na- 292.08
tional savings help to provide somewhat of a
buffer against the relentless havoc wrought on 2011 2012 2013 2014 2015
local industry by declining commodity prices
and falling foreign demand. as the costs of terrorism, the Global Compet-
itiveness Report ranked Colombia 132nd and
The high cost of securing capital financing 136th, respectively. Many of the territories
for the Colombian government represents occupied by FARC and other rebel groups are
a serious obstacle to its current ambition of rich in natural resources that could generate
using nationwide infrastructure projects to much-needed income for many of the coun-
improve the quality of life for the country’s try’s most undeveloped regions.
population and stimulate growth in currently
underdeveloped regions. The 4G program, as Though rebel violence has persisted in the
the series of 47 large-scale road infrastructure 21st century, the improvements seen in terms
improvement projects is commonly referred of internal security have corresponded with
to, will cover 8,000km of roads while expand- subsequent increases in the levels of both
ing ports and railways as well. With an esti- domestic investment and FDI. While invest-
mated requirement of $10.7 billion to finance ment as a percentage of GDP was just 14% in
the projects, the Colombian government has 2000, that number has grown to a current lev-
been forced to look beyond pricey global debt el of nearly 30% of GDP. Total FDI flows into
markets for alternative sources of capital. At Colombia reached $12.108 billion in 2015,
the start of 2016, the government of Colombia accounting for nearly 4.8% of the $253.528
sold a 57.8% majority share in Medellín-based billion in foreign capital that entered Latin
power generator Isagen SA to Canadian in- American and the Caribbean during 2015. At
vestment fund Brookfield Asset Management 4.15% in 2015, net FDI as a percentage of GDP
for a reported total of around $2.8 billion. The was also higher in Colombia than the 3.96%
funds raised by the privatization and subse- regional average. Though Colombia’s vast
quent sale of shares in Isagen will go directly wealth of natural resources and its popula-
toward helping finance the 4G program, turn- tion of 48.23 million, which earned its domes-
ing a transfer of ownership to foreign private tic market size a ranking of 31 in the Global
investors that was seen by some as detrimen- Competitiveness Report, are reasons enough
tal to the country’s long-term prosperity into for profit-seeking capital to find its way into
a crucial source of immediately employable the market, one of the biggest factors in the
capital. country’s recent success in attracting outside
investments are its many investor-friendly
Along with contractions in the commodity policies. The Global Competitiveness Report
markets that largely drive Colombia’s econ- ranked Colombia 10th for the strength of its
omy and the subsequent effects on worsen- investor protection, while it placed Colom-
ing the depreciation of the peso, one of the bia in the top spot in terms of efficacy of le-
main stories of 2015-2016 was the progress gal rights in the financial market. With the
made by President Juan Manuel Santos and historical agreement tentatively reached with
his administration in negotiating a peace ac- the FARC rebels in June 2016, Colombia may
cord between the state and the country’s larg- have found just the stimulus for new econom-
est leftist guerrilla group, the Revolutionary ic growth that the current changes facing the
Armed Forces of Colombia, referred to more country make so necessary. ✖
commonly by its Spanish acronym, FARC.
While an end to the decades-long armed con-
flict between the Colombian government and
FARC rebels will have its greatest effect on im-
proving safety throughout the country, there
is no doubt that a successful long-term peace
between the two sides could have wide-reach-
ing economic benefits as well. In terms of the
business costs of crime and violence, as well



26 THEBUSINESSYEAR COLOMBIA 2016

INTERVIEW

going Association
GLOBAL of industry,
businesses, and
TBY talks to Bruce Mac Master, President entrepreneurs
of the National Business Association of
Colombia (ANDI), on tackling obstacles to Proposed that
competitiveness in the economy, participating Colombia be the
in the global value chain, and the impact of the global leader
currency devaluation. in food and
agriculture
What is ANDI’s contribution to that economies can no lon- and we are just returning to
ger only focus on increasing that range. Colombia has a BIO
the Colombian economy? exports and that global mar- free and open market, which
kets are shifting toward value allows the exchange rate to Bruce Mac Master is an
Not only is ANDI an industrial chains. float and respond to supply economist from Los Andes
association, it is also a business and demand. Recovering that University with over 20 years
association of entrepreneurs. How important is it to link Co- exchange is definitely a huge of experience in investment
ANDI contributes to 50% of lombian companies to global opportunity. It gives us 40% banking and issues relating
the GDP in approximately value chains? competitiveness in terms of to social responsibility. In
30 different sectors in com- Without an awareness of international pricing. We have 2010, he was appointed
merce, while it also represents global value chains, compre- learned many things; for ex- Vice Minister of Finance by
many other businesses such as hensive success is not possi- ample, over the past decade the Santos administration.
banks, insurance companies, ble. It is necessary to identify it was said that Colombia had Mac Master was Director
and lawyers. In many ways it is the appropriate global value the most expensive energy for the administrative
the association for the private chains and make strategic de- on the continent, which was department for social
sector. The association began cisions as a country in order to only partially true, and it was prosperity of Colombia. He
as an industrial association, be competitive and attractive because we had an uncom- was one of the founding
and I joined the association in the eyes of major corpora- petitive exchange rate. Now, partners of Inverlink,
during a challenging time as tions. The national industrial we have the second cheapest the first investment bank
industrial activity in the coun- sector has to decide where labor costs and the second created in Colombia in
try was falling dramatically. to be active. In our book, we cheapest energy cost, and the the mid-80s. He was also
propose that Colombia be current situation is a return in charge of Colombia’s
In 2015, ANDI published the the global leader in food and to the natural equilibrium for most important projects in
agriculture, for a variety of the economy and competi- infrastructure, transport, and
book Strategy for a New Indus- reasons. We have the land, tiveness. telecommunications. Mac
the people, the water, the cli- Master is a board member
trialization. What steps does this mate, and the big companies. What are you expectations for of foundations such as
The market is large enough to Fulbright Colombia, Batuta,
book suggest Colombia take to provide companies with the the economy in 2016? and Conexion Colombia for
initial support to start work- Semana magazine.
pursue reindustrialization? ing and expanding, and then The years 2015 and 2016 will
start exporting to the rest of both be transition years. We
One of the topics this book the world. have to take advantage of the
covered was how to solve ob- fact that the global economy is
stacles to competitiveness What do you predict will be the on hold by making all the re-
created by infrastructure, tax- medium-term impact of the cur- forms that we need to imple-
es, and permits and licenses, rency devaluation? ment. We have to be prepared
and how to promote social The most significant aspect in terms of infrastructure and
dialogue. We believe in social of the devaluation is that the tax system. This is the
dialogue; however, we need we are still recovering from agenda we proposed to the
extremely clear and strict rules the exchange rate we had in country and the government
about how companies should 2003—at that time the rate and they have adopted it, cre-
deal with specific issues. There was COP2,900 to the dollar, ating a large matrix and nam-
are many things that have oc- ing every involved ministry for
curred as a result of the way each activity. ✖
the market was designed, in
terms of free trade agreements
(FTAs) for example, which are
not completely balanced. The
book also recognizes the fact

Economy THEBUSINESSYEAR 27

B2B

How has the local econo- What opportunities are there for
my opened up in the last few international investors who are
years? looking to invest in Colombia?

ALEJANDRO OSSA JUAN CAMILO AOC There is a feeling in the AOC There are many oppor-
regional market that Cali and tunities in different sectors for
CÁRDENAS MONTOYA BOZZI Valle Del Cauca are becom- companies that import many
ing much more open for busi- products from Asia and process
General Manager, General Manager, ness. Throughout 2015, we or add value in their countries,
Invest Pacific Promision supported about 13 different and then export either to Asia
companies in setting up their or other Pacific Latin American
REGIONAL businesses, creating over 420 countries. We want to identify
investments jobs. The companies that have those companies and inform
arrived in the region are related them of the fantastic access they
Colombia wants to attract companies from to the service industry, includ- can have to the Pacific and en-
all over the world to set up production sites ing BPO, KPO, and IT firms, as courage them to set up produc-
to not only cover the domestic market, but well as multinationals from the tion facilities in Colombia from
also export overseas. manufacturing, agricultural, which they can cover the local
metal mechanics, and automo- and the Latin American Pacific
The content on this page is taken from exclusive interviews. Read the full versions at thebusinessyear.com How does your company help to JUAN CAMILO MONTOYA tive sectors. Companies’ drive markets. Different companies
develop the region in which it is BOZZI Promision is a kind of to establish themselves in Co- around the world specialized in
based? private equity fund. We have lombia relies heavily on being infrastructure can also develop
been in business for 30 years a part of a value chain that in- production sites here to pro-
ALEJANDRO OSSA CÁRDENAS in Santander, and the firm has cludes the Andean region and vide better parts, better equip-
We want to take advantage of invested and promoted several the entire Pacific coastline. ment, or boost development of
the already established eco-sys- important companies for our infrastructure in Colombia. We
tem in Valle del Cauca, of which region. At one point, we were JCMB Traditionally, the econ- expect about $4 billion per year
the largest sector is sugar and all key players and promoters of omy of Santander and the in infrastructure investment in
its related industries. In the food natural gas distribution, cable private sector have focused Colombia for the next 20 years
and beverage industry, there is a TV, and internet services when mainly on the regional and na-
great opportunity for companies they first started to be offered. tional markets, and we lacked a In which sectors is Promision
to enter the region and develop We were also shareholders in more international approach, invested in at the moment?
or expand their business. Thanks Terpel. Looking at our palm oil offering more exports and be-
to my experience in developing plantations and real estate devel- ing more attractive to FDI. We JCMB We are the main share-
businesses in China and Asia, I opments, Promision has mixed still need to move forward in holders in the free trade zone,
had the opportunity to identify several types of investments in that regard, but Santander’s Zona Franca Santander, which
many opportunities in food and different industries in compa- economy has become quite is an interesting real estate de-
beverage in Valle del Cauca from nies of different sizes and, over- diversified across the oil, ser- velopment to promote region-
this part of the globe. There is all, has made important contri- vices, agriculture, trade, retail, al competitiveness. We also
a business community taking butions to the entrepreneurial education, and healthcare sec- participate in housing through
shape in China that is extremely environment here in Santander. tors. Right now, our average Urbanas and have a private
eager to develop and create new We have been deeply involved in GDP growth has been one of equity fund called Santander
tastes and introduce other types regional development. the highest among the main Inmobiliario. We are invested
of ingredients or food items. regions of Colombia. We are in the medical devices industry
short in foreign trade and in- through Mediimplantes, which
vestment but we have been do- is a Santander-based company
ing quite well, especially in the founded by a group of neuro-
last 10 years, in GDP growth. surgeons to produce spinal cord
According to the main social implants. We also participate in
indicators we have one of the Promitec, a food intermediate
broadest middle classes in the for additives for the poultry feed
regions of Colombia, with low industry. We are also involved
inequality rates. in cocoa plantations here in Co-
lombia and in Ecuador through
the company Agrotropical. ✖

28 THEBUSINESSYEAR COLOMBIA 2016

FORUM

WHY COLOMBIA?

The many opportunities
available in Colombia across
sectors offer companies great
potential.

JAIME TRUJILLO EDUARDO

CAICEDO RODRIGUEZ TAMAYO

Managing Partner, Baker President, Shell Colombia
& Mckenzie Colombia

L aw firms in general, and us in C olombia needs to utilize all its
particular, have become a little options. The country will need
spoiled over the past few years enhanced oil recovery (EOR) for
because they have been fantastic years and
we have been able to take advantage of Co- its existing fields and it needs to develop
lombia’s economic growth. A trend we see
in Colombia is the confidence that foreign the onshore side in other areas that are
investors have in the country—sometimes
it seems they have more confidence than not as developed yet. These areas include
Colombians themselves have with respect
to the country. The trend in 2015 has been the northern part, for example Catatumbo,
plenty of interest and work from the likes of
international private equity funds and inter- and in the Putumayo. There is also poten-
national strategic investors, which look at us
from a distance and compare Colombia and tial in Middle Magdalena. Plus, the offshore The content on this page is taken from exclusive interviews. Read the full versions at thebusinessyear.com
Latin America on the fundamentals and do
not get bogged-down by the daily news and is clearly a part of Colombia’s potential.
political worries; they have a longer-term
perspective. The legal framework in Colom- Offshore gas is expensive, and monetiz-
bia is friendly. For example, for a foreign
private equity fund to establish an office in ing it presents significant challenges. We
Colombia and invest in the country, it needs
practically no regulatory authorization. So have to work with the government to get
the likes of Advent and Brookfield, which
have both local and foreign funding, as well the proper fiscal incentive regulatory pol-
as Victoria, Southern Cross, and Lindsor,
can all make significant investments in the icies in place so that we can have a good
country. These companies faced little, if any,
regulatory obstacles. market where we can both supply local

demand and have solid contracts for ex-

ports; it takes time. Colombia is a frontier

basin, meaning it still has high technical

risks. The only way to remove these risks is

to provide incentives to these companies.

You have to balance the risk-reward on this

and the incentives have to be there. Co-

lombia fits into the category of frontier ex-

ploration and is a possible future heartland

for Shell, and that is part of Shell’s strategy.

Of course, as a frontier portfolio we will go

through a major reevaluation, but so far

Colombia ranks positively.

Economy THEBUSINESSYEAR 29

LUZ ELENA DEL JOSE LEOPOLDO ZENAIDE GUERRA

CASTILLO GONZALEZ Corporate
Communication and
Director General, Ford General Manager, Yara External Affairs Latin
Colombia America, DSM

C olombia is becoming an import- C olombia is a country that is blessed C olombia has important social proj-
ant emerging market for Ford. We with many different landscapes, ects related to nutrition; therefore,
are now the third largest market from mountains to plains, all of the food industry is experiencing

in South America, behind only Brazil and which offer different opportunities for agri- significant development. DSM is an import-

Argentina. We are an excellent example of culture. In Colombia, it is possible to grow ant global partner of the UN World Food

how an operation in an emerging market is anything. We look at what crops can grow Program, which plays a major role in sup-

run thanks to the strong brand that we have profitably in the country, and that is because porting social projects in Colombia. Colom-

built in the country with our excellent com- of the availability of water and the geograph- bia is relevant because the government and

The content on this page is taken from exclusive interviews. Read the full versions at thebusinessyear.com munication strategy. We offer global prod- ical make-up of the country. There are sev- the associations are conscious of the impor-

ucts, and we managed to position ourselves eral crops that could be improved, such as tance of nutrition for children. We do not see

as an aspirational brand different from what cocoa, and the government is developing Colombia as a difficult place to hire and train

other competitors can do in the market. We initiatives to expand areas in cocoa as well as people, which is why it is such a strategically

do not see Colombia as a discount market; rubber. Those two are relatively new crops important place for us. Furthermore, differ-

we know that the industry will not become that could develop in the coming years. ent trade agreements have been signed with

as large as it is in Brazil or Mexico; however, There are also a number of crops we already many countries; therefore, Colombia can

we can have a good and healthy operation harvest, such as palm oil, which could be in- be an even greater strategic location to re-

in the country. In the following years, we creased. Agriculture has the strong potential ceive and export raw materials. We are more

want to become a more recognized brand. to heal wounds among Colombians. There concentrated on nutrition and health in Co-

Our vision is to have a market share above will be more arable land, which is good news lombia. For that reason, human and animal

7% with the lineup that Ford has. Ford has a for the sector and for the people as it will nutrition and health, personal care, and food

strong commercial vehicle lineup in the US increase employment. Jobs mean stability specialists are the businesses lines in Co-

and Europe with its transit trucks, and we and development, and those areas that had lombia that show the greatest potential. The

do not have this product line in Colombia; been left aside for years will have a chance to work we do with engineering plastics could

therefore, we still have some segments that improve their economies and progress. It is bring new opportunities to Colombia in the

we want to cover. Incorporating commercial important to ensure that farming is seen as near future. Our focus is to develop our Co-

vehicles will bring new opportunities to cov- a good business. If we make that possible it lombian staff, hire people, train them, and

er our portfolio with more products. will help the sustainability of the sector. look for other markets.

30 THEBUSINESSYEAR COLOMBIA 2016

FOCUS BOGOTÁ

LIVING la VIDA

At the heart of one of Latin America’s most thriving economies shines
Bogotá, a bustling center of urban social and economic development.

THE CAPITAL CITY is the main engine of between 1998-2000, faces the challenge of de-
veloping the city’s long-awaited metro system,
both a country and its economy. With a met- which the city governments have been unable
ropolitan area of around 10 million people, to construct since 1950. Fewer than one-in-
Bogotá represents nearly 25% of the Colom- five of the city’s 8 million residents owns a car,
bia’s GDP and is among the top three Latin which translates into scores of people using
American cities for doing business according buses for their daily commute. The city cur-
to the World Bank. The city’s diversified econ- rently has a bus rapid transit system, known as
omy sets it apart from other Colombian cities, Transmilenio, which moves around 2 million
which often depend excessively on one sector. people per day. The Transmilenio system was
Consequently, the GDP of the capital rose 3.5% developed nearly 15 years ago during Peñalo-
in 2015, compared to the country’s 3.2% overall sa’s first term, and the city debates whether to
growth. The city’s Secretary of Economic De- improve it or finally develop the metro.
velopment, Freddy Montero, explained, “The
capital was not hit as much as other regions in Mayor Peñalosa envisions the metro to be
the country since we do not pump any oil.” mostly above ground, as construction will be
quicker, cheaper, and easier, due to the engi-
The service sector is the largest contribu- neering challenges posed by the city’s moist
tor to the capital’s economy and represents soil. An underground rail in Bogotá is estimat-
61.6% of its GDP according to the Observatory ed to cost around $200 million per km to build,
of Economic Development of Bogotá. Com- whereas the cost of an aboveground rail system
merce made up 15% of the city’s income and would fall to $12 million per km, making a sig-
manufacturing 8%. The construction industry, nificant difference. Unlike former mayor Gus-
which has been one of the main drivers of the tavo Petro, who planned to build a fully sub-
economy, decelerated and represented 5% of terranean metro, Peñalosa opts for developing
the city’s GDP, as developers sought opportu- an underground subway only in the north and
nities in elsewhere in the country where there an elevated section in the southern part of the
was a growing demand and cheaper real estate. city. In April 2016, the local government cre-
The financial sector represents around 11% of ated Metro de Bogotá, a public entity that will
the capital’s GDP and is to Bogotá what the oil be in charge of the construction of the mass
industry is to Colombia. The main banks and transportation system and the maintenance of
insurance companies are based in the capi- trains. The mayor announced this year that the
tal, which generates significant revenues for tender for the construction of the first line will
the city as well as a demand for highly skilled take place in 1H2017, and analysts expect that
workers. Nevertheless, the city is taking steps this key transportation upgrade will also help
to boost other sectors such as tourism, which reduce pollution.
in recent years has experienced significant
growth. At the heart of Latin America, Bogotá’s Bogotá is the 27th most polluted city in Latin
excellent location creates major opportunities America according to a study carried out by the
for the MICE tourism segment. The capital re- World Health Organization. The capital has a
ceived 1.1 million tourists in 2015, 30% of which 440km bikeway to combat pollution, and may-
attended business events. The District Institute or Peñalosa expects to add 200 additional kilo-
of Tourism announced this year that it expects meters before 2020. The metro and bikeways
to receive 1.5 million international visitors by will significantly enhance the quality of the
2019, fueled mainly by business tourism. air and mobility, making Bogotá one of Latin
America’s best cities to live in and boosting its
In late 2015, the city elected Enrique Peñalo- already thriving economy. ✖
sa as its new mayor. Peñalosa, who also served

Economy THEBUSINESSYEAR 31

BOGOTÁ

Metropolitan population of THE CONTINUED GROWTH GDP rose $ $ National
10 million OF SOCIETY AND BUSINESS economy
3.5% rose
Enrique Peñalosa elected new IN BOGOTÁ UNDERLINES
mayor in late 2015 THE VALUE THAT THE CITY in 2015 3.2%
(served between 1998-2000)
HOLDS FOR COLOMBIA’S 25% of the nation’s GDP
LONG-TERM POTENTIAL.
3Among top-three
Received 30% attended
1.1 million business events Latin American cities
tourists in 2015 for doing business

City’s metro first 1.5 million Fewer than 1-in-5 of
proposed in 1950 international the city’s 8 million
visitors residents owns a car
Underground Aboveground expected by
2019 (fueled Transmilenio bus rapid transit
$200 million $12 million mainly by system moves 2 million people
km to build km to build business per day
tourism)
Developed nearly 15 years ago
61.6% Services
City has 440km of bikeway
In April 2016, local CONTRIBUTION 15% Commerce Peñalosa expects to add
government created TO CITY’S GDP 200 new km before 2020
Metro de Bogotá, 11% Financial
a public entity in charge sector
of construction of mass
transportation system and 8% Manufacturing
maintenance of trains. 5% Construction

Tender for the construction SOURCES: WORLD BANK, OBSERVATORY OF ECONOMIC
of the first line will take DEVELOPMENT OF BOGOTA, DISTRICT INSTITUTE OF
place in 1H2017.
TOURISM, WORLD HEALTH ORGANIZATION

32 THEBUSINESSYEAR COLOMBIA 2016

VOX POPULI

FREE TRADE ZONES
A good atmosphere for business, security,
location, and incentives: Free trade zones across
Colombia have much to offer investors

A n instrumental change EDGAR ORLANDO T he Cauca FTZ has a to- on the sugar industry and was
between 2014 and MARTÍNEZ tal area of 1.4 million dominated completely by the
2015 transitioned the MENDOZA sqm and since 2009 agro-industrial sector. Industri-
has generated around 5,300 di- alization has increased educa-
administration of FTZs from Executive Director, rect jobs and 9,000 indirect jobs tion and improved the quality
Cámara de Usuarios related to manufacturing, trans- of life of locals with better infra-
the Customs Authority to the de Zonas Francas port, security, maintenance, structure and social conditions.
and so on. Of the 5,300 direct
Ministry of Foreign Trade. This with an easier fiscal system jobs, around 65% employ peo- EDUARD MINA
that allows businesses to spend ple local to the region, which is CARABALI
was an important change be- that money on the company. a positive indicator. According
The Colombian FTZ model has to DANE’s economic indica- Chief Executive, Zona
cause it expedited the approv- become a reference for other tors, the Cauca FTZ ranks fifth Franca Cauca
countries. Mexico, Ecuador, among Colombian FTZs, with
als of new FTZs. FTZs attract and Brazil all look at our model $76 million in exports in 2014.
to replicate our work in Colom- More than 90% of the zone’s
a great deal of investments to bia by giving incentives linked commodities are exports, and
to investment and job creation the top export destinations are
the country—in 1Q2015, COP4 targets. The next step is to link Mexico, the Caribbean islands, The content on this page is taken from exclusive interviews. Read the full versions at thebusinessyear.com
the FTZs to the global value the US, Ecuador, and Venezue-
billion was invested in these chain. In addition, we have to la. The Cauca region and specifi-
ensure that businesses focus cally the Cauca FTZ is defined by
zones. To date, there have on innovation, design, and fiscal benefits and customs facil-
added value. ities that facilitate the growth of
been 241,000 jobs generated companies that are then able
to reinvest that money. This
has created industrialization
and job generation for locals.
Before, this region was focused

by FTZs. FTZs here have made

companies much more effi-

cient. We provide companies

NIVEA SANTARELLI FRANCO Caribbean coast as well as being in the center of
the country. If you look at GDP per capita and
CEO, Zona Franca Santander security, Bucaramanga and Santander have the
best results in the country. It is growth that is
T he Santander FTZ has been in operation sustainable because there are a large number of
since 2009. It has turned into a platform entrepreneurs rather than a few companies that
with more than 40 companies operat- monopolize the economy. There are many SMEs
ing and 32ha of urbanized and developed space. that have made the region more productive. We
It has a strong focus on specialized sectors, such generate nearly 1,800 jobs in this FTZ and it is
as the global services sector. Santander is strong growing day by day as new companies arrive.
in terms of human talent, which is what investors
look at when they want to outsource. We are also
strong in logistics; Santander is in the northwest
of Colombia and is close to all the cities on the

Economy THEBUSINESSYEAR 33

SANTIAGO VARGAS T he Surcolombiana been important because re-
FTZ is located in the gions like ours need such tools
RAMOS Huila area, just 4km to attract foreign investors and
away from the city of Neiva. develop local industries.
General Manager, The area was created in 2010,
Zona Franca Santelca and we have an area of 53ha OLGA LUCÍA
available today. It was estab- MONJE
C artagena is the most exemptions to companies that lished due to the region’s po-
important port for set up production facilities in tential. We are important in the General Manager,
the country and the Santelca. Therefore, there are production of coffee and par- Zona Franca
two kinds of tax exemptions ticularly special coffees, cocoa, Surcolombiana
fourth most important in Lat- and consequently our occu- and fruits. We can be a food
pation index is 85%, which is basket for the region. We have
in America. It is the most im- high. The majority of compa- a strong level of human capital
nies in Santelca FTZ are in the to develop different sectors.
portant industrial city on the industrial sector; for example, We are also a key player in the
we have many firms in the development of the southern
coast, which is what makes it packaging industry. We are part of Colombia. We are sec-
diversified and are happy with ond in extraction of minerals,
attractive. Our location reduc- the dynamism of the sectors. although currently this is not a
The companies are important significant industrial activity in
es import and export transport for fostering exports in Colom- the Huila. All the raw materials
bia, especially when the peso are sold without adding value,
costs. Furthermore, there is has decreased its value against which is why some investors
the dollar. and the Chamber of Commerce
The content on this page is taken from exclusive interviews. Read the full versions at thebusinessyear.com a skilled labor force in Carta- of Neiva decided to create this
FTZ to promote industrial de-
gena, which makes the city a velopment. For regions such as
ours, the creation of FTZs has

perfect location for industries

to flourish. Free trade zones

have certain tax exemptions.

In addition, we made an agree-

ment with the government of

Cartagena to offer extra tax

MANUEL HERRERA

General Manager, Zona Franca La Cayena

W e have improved the infrastructure in forgetting about the large Colombian compa-
the FTZ in terms of communications nies that want to locate close to the coast. Bar-
and public services for the industrial ranquilla offers a great opportunity to export
park. We have focused on more specific mar- goods and is in an excellent location, which
ket niches, becoming more specialized, and offers a key opportunity. There is a great op-
offering more value. We want to understand portunity for offshore exploration and pro-
the potential that the Caribbean region offers duction. There is still a great deal to be done,
and improve the opportunities for interna- but if oil was to be found then a supply chain
tional investors. We are currently spreading could be established in our FTZ. We are work-
the word that La Cayena has excellent logistics ing to position our FTZ as the best option for
and cheap operating costs for investors. We companies that offer services to the offshore
want to attract international players without oil and gas industry.

34 THEBUSINESSYEAR COLOMBIA 2016

INTERVIEW

go forth and
CONQUER

TBY talks to Guillermo 2015 was the 70th anniversa- Do you think that the devaluation IN NUMBERS
Botero Nieto, ry of Fenalco’s establishment. of the Colombian peso can help
President of Fenalco, How has the organization con- promote a stronger industry and Fenalco was created in
on the company’s tributed to Colombia’s econo- commerce?
contributions, the my? Generally, the devaluation will 1945
effects of FTAs We have played an important slow the economy, because
on Colombian role and have always been a Colombia is a country that Fenalco has more
commerce, and his positive player for the coun- imports many commodities than
expectations for the try over the years. Fenalco or it is an intermediate goods
economy. has helped to develop many importer. The amount of im- 18k
important sectors of the econ- ported fast moving consumer
BIO omy, such as financial, trans- goods has already fallen. affiliated companies
port, security, and industrial
Guillermo Botero Nieto is companies. In the last few years, Colombia as footwear, liquor, cigarettes,
President of Fenalco. He is a signed several FTAs with differ- fabrics, or auto parts. With 46
lawyer from the University Fenalco covers many sectors of ent countries. What effect have million inhabitants, Colombi-
of the Andes and is a the economy, but which sectors these agreements had on Co- ans consume 2.5 pairs of shoes
former teacher at the same does the company represent lombian commerce? per capita annually, which is
college. An entrepreneur most? The treatments are econom- around 120 million pairs. If
with extensive experience, We have a strong presence in ic, political, and geopolitical Colombian production lev-
he has business experience sectors related to commerce instruments. It is known that els can only satisfy 60 million
in the areas of foreign and services, with more than countries with open econo- pairs, the country has to im-
trade, logistics, and parallel 18,000 affiliated companies mies grow more than closed port another 60 million pairs.
operations. Botero assumed and members, constituting ones. It is necessary to take ad-
the role of chairman of 18 macro sectors. In the au- vantage of those FTAs and try How do you expect the economy
Fenalco in November 2003 tomotive sector, there are to find sellers and businesses to perform in 2016?
and has been a member of many players such as distrib- beyond our borders because I expect that 2016 will be a
its board since 1985. utors, sellers, dealers, and this will reinforce the national calm year, with a growth be-
garages. We also have large commerce industry. Now is a tween 2% and 3%; however,
supermarkets as well as small good time, with the devalua- for us this is low in comparison
ones, which demonstrates our tion of the peso, to go out and to previous years. For Colom-
strength in the retail trade; it is conquer other markets or to bians, to grow less than 3% is
a long chain that does not end. recover old markets that were painful and we consider it a
lost. crisis. I do not view it as a crisis;
How do you assess the perfor- however, it is true that some
mance of commerce in Colom- How big is smuggling in Colom- sectors, such as automotive
bia in 2016? bia and how does it affect the na- and home appliances, have
I expect 2016 to be a difficult tional economy? suffered falls. ✖
year for the Colombian econ- It is difficult to measure; how-
omy. It is difficult to estimate ever, official figures estimate
how much commerce will that it is valued around $6 bil-
contribute to GDP; however, lion, which is 10-12% of Co-
in 2015 commerce contrib- lombian imports. Smuggling
uted a significant amount to occurs in some of the most
economic growth and we are sensitive markets that have
satisfied with its performance. high import restrictions, such

Economy THEBUSINESSYEAR 35

PACIFIC TRADE FOCUS

MAKING WAVES

The development THE DEVALUATION OF the peso has signifi- Colombia and Japan began a bilateral conversa-
of new FTAs in the tion on an FTA that is yet to be signed. The latter
Pacific region has cantly affected Colombia’s foreign trade, with plans to increase its exports of iron, steel, indus-
positive long-term both imports and exports falling in the first 10 trial machinery, coffee, and flowers to the Asian
implications for the months of 2015, compared to the same period country. According to the Colombian Ministry
economy and trade on in the previous year. Despite the grim short- of Commerce, Industry, and Tourism the coun-
Colombia’s west coast. term outlook, recent development of new FTAs try’s sales to Japan surged by 42% between 2004
in the Pacific paints a bright long-term picture and 2014 and hit $200 million. The FTA could
to boost the economy and trade on Colombia’s increase those figures dramatically, although
west coast. it is not yet determined when the treaty will be
closed.
The Pacific Rim region has seen remarkable
progress in terms of trade and economic inte- On the other hand, the FTA with South Ko-
gration in recent years. In late 2015, 12 American rea was already signed in 2013 and approved
and Asian countries signed the Trans-Pacific by Congress in 2014, despite the fact that it is
Partnership (TPP), an agreement that aims to awaiting the “final blessing” by the Constitu-
lower trade barriers, which was only endorsed tional Court as President Santos put it in a press
by Mexico and Peru as the sole Latin members. conference last year during the official visit of
That agreement will consolidate one of the larg- the South Korean President, Park Geun-hye, to
est global trade blocs created in the recent years, Colombia. In 2013, bilateral trade reached $1.5
and Colombian officials are still studying wheth- billion and it will likely grow as the Latin coun-
er to join the club or not. try increases its sales of agriculture products to
South Korea and increases its high-technology
However, before taking part in that trade imports from the Asian nation.
deal—which integrates about 40% of global eco-
nomic capacity—Colombia wants to boost eco- In addition to the FTAs, Colombia has made
nomic ties among the Pacific Alliance nations. several attempts since 1989 to join the Asia-Pa-
Made up of Chile, Colombia, Mexico, and Peru, cific Economic Cooperation (APEC), a 21-econ-
the Pacific Alliance is the most promising trade omy forum that has taken several steps to boost
bloc in Latin America, as they represent nearly trade among Asia, Oceania, and America. Co-
36% of the regional GDP. The collective goal of lombia is the only nation in the Pacific Alliance
these nations is to propel economic integration that is not also a member in the APEC. Conse-
as well as to further free trade with a clear orien- quently, several Pacific Alliance Ministers have
tation toward Asia. publicly supported the Colombian candidacy to
join the forum.
Pacific Alliance countries have made several
treaties to integrate their stock markets, creat- Nonetheless, Santos, who was invited last
ed joint diplomatic missions, and held several year to the 23rd APEC Economic Leaders Sum-
state meetings, and more. Nevertheless, in terms mit in Manila, claimed that it was not just all
of commerce with Asia, Colombia is behind as the Pacific Alliance countries lobbying for Co-
compared to the other three members of the lombia’s membership to the forum, but APEC
Pacific Alliance. Whereas nearly 40% of the Chil- nations as well. “All the countries have told us
ean and Peruvian exports are shipped to China, they are very interested in Colombia’s mem-
Japan, Korea, or India; only 20% of Colombian bership,” said Santos, who is looking forward
sales are sent to those countries. to strengthening the country’s relevance in
Asia before his second term in office finishes in
In order to sell more products to Asia, the San- 2018. ✖
tos administration started to negotiate a FTA
with Japan and another one with Korea. In 2012,

*Read the full interview at thebusinessyear.com RODRIGO J. SARASTI G. ation of the country’s currency is a negative factor
for targeting international projects. Nevertheless,
President, Sarasti & CIA the production of steel in Cali is interesting due to
its proximity to the port; however, in these uncer-
How is state of the steel consumption in Colombia? tain times we are not planning anything in particu-
Steel is a necessary component for the construc- lar. It could be interesting to build a new plant or a
tion sector, and it is a particularly important mate- new factory to provide our material to the Valle del
rial in Colombia. This business has a huge potential Cauca department and its surrounding areas. If we
to be developed, and our iron-steel line alone has had to do business abroad, we would be focused
grown by around 20% each year, producing 1,800 on Ecuador and Peru. For this reason, we focus
tons per year. We expect to have interesting proj- on Cali because of the connection with the port of
ects and to continue working at our current level. Buenaventura.*

Are you planning to expand into international
markets?
We only work in the Colombian market; the devalu-

36 THEBUSINESSYEAR COLOMBIA 2016

FORUM

SECURITY Security has always been an important issue in Colombia,
and companies are bringing new and innovative solutions
to truly make a difference.

JAIME HOYOS FELIPE LAGOS, JOHN JAIRO SIERRA

General Manager, General Manager, Alto General Manager, Su

Cajas Fuertes Ancla Oportuno Servicio

T he security industry in Colombia C ompanies hire us for their securi- S u Oportuno Servicio was estab-
comprises about 1.6% of the GDP. ty needs, and we pursue all legal lished in Barranquilla in 1957. To-
Nearly 5% of the world population processes relating to theft against day, we have approximately 6,000
is potentially a criminal, which means that workers. We do more than simple security
5%, or 2 million people, of the Colombian the companies that hire our services. We go services; over the years, we have analyzed
population is potentially a criminal. Even for different sectors and identified the risks
the post-conflict situation, demand for se- after all kinds of thieves, be it someone who faced by different industries, while at the
curity in Colombia will not fall; the demand same time developing security solutions for
for security is huge worldwide and will re- steals one dollar or a larger crime. We share each. This is just one of the ways that we add
main so. We are more focused on personal value to our services. Most companies are
services and banking; each bank orders its all the information about the theft with the cutting costs, in particular the oil sector, but
own safe. Each one has its own character- the industrial sector as well. Companies are
istics, and that is where we fit in. We build community and with the media. We share demanding more services for the same cost.
high-impact safes to protect against high We are involved in government concessions,
risks. We are entering into smart safes and all data relating to the crime and the crim- for example, the supervision of the construc-
high-technology products. We are currently tion of one 4G highway in Cauca Valley in
focused on ATM machines, which has been inal so that people are aware and the com- Bogotá. There is currently heavy emphasis The content on this page is taken from exclusive interviews. Read the full versions at thebusinessyear.com
a great market for us. We started building on technology-based services. We have proj-
ATM machines in 2015 and have been suc- munity can get together to prevent such ects with drones, phone supervision, alarms,
cessful. We are in Ecuador, Chile, Panama, and GPS. Today, these services have to be
Venezuela, and Peru; however, our presence crimes from happening in the future. This live, making us able to communicate quickly
is still small. Nevertheless, the Colombian and efficiently. Drones are one of our main
market is substantial enough that it requires also allows the company that has hired us advances; they add more value to the oper-
most of our focus. We still want to keep those ations because they can take pictures and
operations abroad, but it is not currently a to take precautions to prevent similar theft provide real-time surveillance monitoring.
priority for Caja Fuertes Ancla. We are con- We want to be pioneers in that technology.
solidated in Colombia and are the market in the future. We work a great deal with utili- We also have our own applications to con-
leaders, and we want to remain holding that trol our services through smart phones. In
position. It is important to be all around the ties companies, mostly water and electricity, 2016, we are contemplating markets such
country; however, Bogotá is still the key mar- as Peru, Panama, Argentina, and Ecuador.
ket to conquer first. retail companies, and supermarkets. We are Those countries have other companies op-
erating there with which we could work and
responsible for finding those who steal wa- partner. We expect to make such a move in
a few years.
ter, electricity, gas, or retail goods. Alto also

provides our clients with training and eth-

ics classes. Our team will also provide pub-

lic announcements and education on the

matter. In other words, much of our activity

is preventative. There is too much focus on

security here and not enough on prevention,

which is the most effective way to counter

petty theft. There is only so much that com-

panies can do with armies of armed guards.

It is far more important to have an effective

crime processing system or an effective

training, education, and public campaign

system.

Economy THEBUSINESSYEAR 37

JUAN MANUEL HECTOR AUGUSTO

CARRENO LOPEZ CASTAÑEDA

General Manager, General Manager,
ProtecCar Seguridad Napoles

W e started armoring helicopters for companies in the pri- W e currently have around 4,800 employees in Colombia. We
vate and in the public sector. We have armored some of have 30 offices spread across different regions and depart-
the helicopters for the Peruvian military, for example. ments of the country, with a clear structure to cover strategic
We started armoring helicopters a year ago but since April 2015, areas. We are also one of the first companies that started to hire wom-
we have also been armoring vehicles. It is challenging; there are en for this kind of work. The most demanding sector for our services is
several permits to obtain from the authorities before operations the government. Private security companies provide services to many
can start. There are 34 armoring companies in Colombia accord- state entities, such as bodyguards for state companies, politicians,
ing to the authorities, and it took us nearly eight months to set up and ministers. In the private sector, we provide security to Postobón,
the company. We started in April and since then we have armored one of the most important companies in Colombia. We also extend
nearly 150 vehicles. As their official partners, we are the only com- our services to residential buildings, universities, and both public and
pany that armors Jaguar and Land Rover’s vehicles without losing private schools. We cover some energy businesses and provide secu-
the warranty. We also serve many multinationals and executives rity during transport processes such as commodities transport from
who come to Colombia. We also have 25 armored vehicles that important Colombian ports to their final destinations. Particular ser-
we rent, particularly to oil companies. In our helicopter business, vices that have experienced the most demand are fixed surveillance,
we are focused on private companies that have helicopters. In the bodyguards for individuals, escorting goods in transportation pro-
public sector we work with Peru, Ecuador, and the military in Co- cesses, and monitoring offices and houses. We now offer an improved
lombia. People in Colombia are used to armored vehicles and even portfolio of goods and services. We have invested in digital security,
with a peace treaty, demand will increase because in the first year and it is important to be updated in electronic security. We have digi-
when the peace agreement is signed, there will be many former tal cameras, drones, and other new technology that can be controlled
guerrillas who will form criminal gangs. I expect a major security in real time from an office, home, or smartphone. Incorporating GPS
threat in Colombia in the post-conflict situation and believe de- technology allows us to monitor the location of people, cars, or trans-
mand for our services will not fall. port loads. Moreover, we have our own software to control and offer
our services throughout the whole country.

PEDRO CAMARGO

General Manager, Controles Inteligentes

O ur company focused on parking fied. Automated or self-service kiosks provide and have a low cost compared to opening a
systems, creating an automated reliability and low operation costs 24/7. We staffed branch and can be installed in many
provide real-time monitoring and mainte- and far reaching locations to improve service
security system for parking lots. nance services for our kiosks. Kiosks can fail coverage in many industries like: govern-
as any machine can, but the costs of repairing ment services, medical, subsidies payment,
Part of our complete solution includes kiosks and maintaining kiosks are far less than using insurance, public transportation, bill pay-
cashiers or tellers. By implementing an effec- ment, money transfers, and so on. For exam-
for payment. We realized that these same tive maintenance program, we minimize the ple: with kiosk installed in small towns, farm-
failures and the monitoring service allows us ers will be able to receive their subsidy, make
kiosks could be used for different markets. to detect problems in real-time so they can medical appointments and access services
be quickly corrected. Kiosks take little space that are usually only available in bigger cities.
We started modifying our kiosks to suit our

clients’ needs. For example, by incorporating

ID scanners and biometrics we were able to

build kiosks for subsidies payments; to claim

subsidies a person has to be securely identi-

38 THEBUSINESSYEAR COLOMBIA 2016

B2B

IVÁN GONZÁLEZ JUAN CARLOS consultancy
VEGA
President, IGA Getting companies to see consulting as a key
Consultores General Manager, Pro investment, particularly during periods of low
Integral Consultores
How did your company perform activity, is crucial for optimizing operations.
in 2015? atively fewer available resourc-
es. Consultancy is seen in the niche areas such as training. We Do you think during a recession The content on this page is taken from exclusive interviews. Read the full versions at thebusinessyear.com
IVÁN GONZÁLEZ IGA Con- developed world as paramount offer training for companies and companies actually need to pri-
sultores has been operating to the success of a business. we provide practical training as oritize the efficiency that con-
for 11 years, and we have gone Nearly 70% of companies in Co- well as classroom-based learn- sultancy services can bring?
through two recessions: the lombia are SMEs; however, the ing. We also offer career plan-
first in 2008 and then in 2015 problem with SMEs is that they ning and related services. IG Yes, companies do need to
with the fall in commodity often stem from family-owned prioritize this. Consequently,
prices. In 2015, the company’s companies that do not see the JCV There is a national plan to we have seen great competition
income and revenue fell. There value of consultancy. This is the push productivity; however, in terms of prices. IGA Consul-
are nearly 50,000 consultancy main challenge that we see for there are no adequate steps to tores is not the most expen-
companies like ours in Colom- consultancy in Colombia. change the culture and the men- sive in the market, nor is it the
bia, which makes this sector one tality of a nation. That is a subtle cheapest. We position ourselves
of the most competitive in the What steps are you taking to be change that takes place over in the middle. One problem we
country. We struggled in 2015 the consultant of choice? years. First, we have to change face is that when multinational
because we worked a great deal companies’ mindset, and the companies come to Colombia
with the oil sector, as well as IG We do not want to compete owners of companies have to they already have agreements in
their service companies. During on price; therefore, we try to become convinced that a con- place with international consul-
a recession, the first thing com- innovate and provide more ser- sulting firm can help reduce a tancy companies. This makes it
panies have to do is reduce their vices at the same price. We pro- company’s costs. That is a key challenging for local players to
workforce and that has made it vide our proposals an aggregate step, and consultancy will thrive obtain a share of this business.
a difficult year for us. value rather than simply setting in Colombia once firms realize
a low price for the work. Over the the value that this industry can JCV Companies with an opti-
JUAN CARLOS VEGA In terms last three years, we have tried to add. In 2015, Colombia entered mistic mindset see such reces-
of projects, 2015 has been the maintain our prices in order to a period of crisis, but compared sionary periods as an opportu-
best year out of the five that we keep our position in the market. to others in Latin America, it is nity. This is the right time to do
have been in Colombia. We ex- In short, we have to produce one of the countries that has that, especially now that com-
perienced exponential growth, more with the same amount performed the best. The first panies want to reduce invest-
even though the consulting of money as well as providing half of 2016 saw failing oil pric- ments in consultancy areas. In-
industry is closely related to that aggregate value. In such a es, rising inflation, and currency stead of being seen as a cost, we
the overall performance of the competitive market, we have to depreciation, all of which have must be regarded as an invest-
country. People in Latin Amer- differentiate ourselves. In the contributed to a shrinking econ- ment because of our capacity
ica, therefore, see consulting as area of placements, we are the omy, and consultant companies to help companies continually
an investment. It is a complex only company that notifies staff like ours are connected to this. trim their costs. ✖
issue, and we have a theory that of layoffs; we specialize in labor
South America is the horn of negotiations of large-scale lay-
abundance because of its plen- offs. This is our niche, as notifi-
tiful resources; hence, Europe cations and negotiations are not
and the US have had to think of covered by other consultancy
ways to become more competi- companies, which is what dif-
tive to compensate for their rel- ferentiates our service offering.
We are also exploring other

42 45 THEBUSINESSYEAR 39

Mauricio Cárdenas, Minister of Colombian banks have greatly 51
Finance and Public Credit, on expanded their operations in
budget cuts and joint strategies Central America in the last Fiduciary trusts in Colombia
within the Pacific Alliance. decade. face an interesting array of
opportunities and challenges.
Finance

REVIEW BANKING

I Colombia’s banking system has never been a sideline observer of domestic
politics and the global headwinds that determine the broader economy.

SECTOR
OF INTEREST

n 2015, World high took inflation to 8.97% in
Bank data placed July 2016 from 8.60% in June,
Colombia among according to the National Ad-
ministrative Department of
the region’s fastest Statistics (DANE). The Central
Bank’s (Banco de la Repúbli-
growing economies, due to ca de Colombia) interest rate
hikes since 3Q2015 should, by
astute macroeconomic and 2017, steadily bring inflation
back toward the 2-4% target
fiscal management. And re- range. The interest rate has
averaged at 8.77% percent
garding the peace dividend, since 1998.

president Juan Manuel San- Growth, too, slowed from
4.6% in 2014 to 3.1% in 2015.
tos expects the economy to Before recovering in 2017,
forecasts point to a further
grow annually by an extra decline to 2.7% for this year.
The heavy depreciation of the
percentage point once the peso, where the USD rose to
COP3,052 in March 2016 from
six-decade armed conflict its 2014 average of COP2,000,
has taken its toll as well. As
concludes. Meanwhile, giant Lorenzo Garavito, President
of HBI Banca de Inversion,
infrastructure undertakings, told TBY, “The devaluation
started at the end of 2014, but
too, are reflected to the fi- accelerated in the June-July
period, which created uncer-
nancial sector, notably the 4G tainty in the industrial mar-
ket.” This environment curbs
road project. A component of debt service capacity among
consumers and corporations,
Medellín-based Grupo Em- while also dampening cred-
it demand. In 2015 domes-
presarial Antioqueño (GEA),

Bancolombia, the nation’s

largest bank by assets ($46.6

billion in 2Q2016), boasts the

largest involvement among

local banks in the 4G Program, Image: David Persson

with roughly $390 million in- The diagnosis of the financial sector
is one of broad, if challenged, health.
vested in four out of five 4G The local banking sector of 24 players
is systemically regulated to ensure
road development projects to manageable capital adequacy.

have secured funding thus far,

according to WorldHighways.

Yet externalities such as

the weak oil and commodi-

ty environment and Chinese

deceleration have combined

with rising inflation (a 16-year

40 THEBUSINESSYEAR COLOMBIA 2016

tic credit to the private sector, while at 47% of FINANCIAL SECTOR SOME TOUGH VERDICTS...
GDP, was down 10.5% YoY. Slower loan growth ASSETS AS OF DEC. 31,
brings moderate improvement to banks’ 2015 (COP TRILLION) In January 2016 Fitch Ratings reviewed Co-
loan-to-deposit ratios. And yet as sector players (2011-14 CAGR OF 14.3%) lombia’s state-owned financial institutions,
find themselves competing for a limited supply of which just one, Banco Agrario de Colombia
of deposits, they have opted to raise rates to net SOURCE: GRUPO AVAL (with a market share of 4.94%), is a bank and fo-
more retail funds, whereby funding costs have cused on the rural sector. The other institutions
climbed. 505 are Banco de Comercio Exterior de Colombia
S.A. (Bancoldex), Financiera de Desarrollo Na-
...AND SOME NUMBERS 442 cional S.A. (FDN), and Financiera de Desarrollo
Territorial S.A. (Findeter). They are worthy of
The diagnosis of the financial sector is one of 389 mention in terms of their support of specific
broad, if challenged, health. The local banking sectors, namely infrastructure, agriculture, ex-
sector of 24 players is systemically regulated to 338 port finance, and business development. Fitch
ensure manageable capital adequacy. Financial 296 affirmed the national and international ratings
services’ stake in GDP rose 4.2% YoY in 4Q2015, of the four as BBB with a “stable” outlook, while
spurring economic growth. As of December 31, 2011 2012 2013 2014 2015 wholesale lenders Bancoldex, FDN, and Finde-
2015, Colombia’s financial system had assets of ter were singled out for NPLs at or close to 0%.
COP500 trillion while the compounded annual
growth rate (CAGR) of assets in the 2011-2015 And on July 27, 2016 Moody’s Investors Ser-
period was a robust 14.3%. Gross loans stood at vice changed its outlook for Colombia’s bank-
COP352 trillion (CAGR of 15%), gross deposits ing system to “negative” from “stable,” citing
were at COP306 trillion (CAGR of 14.7%), and likely slippage in business volumes and asset
net income was at COP9.6 trillion (CAGR 10.9% risks as low oil prices plague the economy.
for the period). The agency argued that declining profitability
would impair banks’ ability to support weak
However, the bank capital to assets ratio for capital levels through retained earnings. And
2015, at 14.1%, was down 5.5% YoY. The bank while it recognized that Colombian banks were
nonperforming loans (NPL) to total gross loans building defensive reserves in anticipation of
ratio for the year, at 2.8%, also slipped 2.3% loan delinquencies, it noted their “reliance
YoY. Net domestic credit provided by the fi- on low quality capital instruments that do not
nancial sector as a percentage of GDP was at provide meaningful loss absorption prior to
52.6%, down a hefty 25.84% YoY from 70.1%. the point of failure or meet international stan-
The deposit interest rate rose to 4.6% in 2015 dards.”
from 4.1% in 2014, and is forecast to decline to
4.2% in 2016. Domestic credit penetration as a Banks also have exposure to the oil and gas
percentage of GDP has been in the mid range of sector. As of March 31, 2016, for example, Gru-
Latin American economies. Consumer credit in po Aval (owning Banco de Bogotá, Banco de Oc-
2015 at 11% was down half a percentage point cidente, Banco Comercial AV Villas, and Banco
YoY. The sector solvency ratio of 15% exceeds Popular, on a one-third market share), had a
the 9% regulatory minimum, and since August $1.6 billion total exposure, at 3.5% of consoli-
2013, has complied with Basel III. In 2015 the dated loans. Incidentally, as of December 31,
system’s liquid assets to total assets ratio was 2015 Grupo Aval’s four banks had 27.8% share
5.4%, down from 8.1% in 2014. Meanwhile, fi- (COP140.5 trillion) of sector assets, followed
nancial sector loan portfolio growth stood at by the nation’s largest player, Bancolombia,
15.5% for the year. with 23.1%. The group also held 27.7% of total
net loans (COP96.4 trillion), 28.2% of deposits
Since 2000, Colombia’s financial services (COP86.3 trillion), and 34.2% of net income
sector has seen inflation-adjusted growth of (COP3.1 trillion) as of December 31, 2015.
78%, in the process becoming the greatest con-
tributor to GDP, at 18.78% by 2013. Local banks ...BUT CREDIT WHERE DUE
oversee over 75% of the domestic market. Over
time, saturation has widened larger player’s in- The IMF’s annual review for 2015 described
ternational horizons to 21 Latin American na- the financial universe as resilient to global
tions. Since the global financial crisis of 2008, shocks. It added that household indebtedness
Colombian banks have acquired the assets of was also in check, and that lending was in step
European institutions in Latin America at an with the business cycle, with total domestic
investment rate of $11 billion. Bancolombia credit growing 11% YoY in February 2015.
leads the field (29%), having invested around The non-performing loan ratio was healthy at
$3.2 billion in Central American acquisitions 2.8% for the year among private sector banks.
since 2010. Among the total loan portfolio, commercial
loans and mortgage financing climbed 15%

Finance THEBUSINESSYEAR 41

YoY as of September, while consumer credit portantly, Colombia’s SMEs by geographical Over time, saturation
slipped to 11.7% from 13% YoY. coverage as at the end of 2013, out of 1,102 has widened larger
municipalities, just three towns lacked a bank players’ international
Three banks, Bancolombia (27% market and just one had zero coverage by any type of horizons to 21 Latin
share), BBVA (24%), and Davivienda (17%) financial institution. Tellingly though, while American nations.
hold close to 80% of the mortgage market. Yet Colombia’s banked population stands at 62%,
the prognosis is for continued growth from available data reveals that around 30% of
this low base in the historically low interest the adult population with a savings account
rate environment. According to ElColombi- is inactive, a result of the extensive informal
ano, just 971,493 mortgages were registered economy. In October 2015 the Inter-Ameri-
in Colombia as of 2014, equating to a meager can Development Bank (IDB) extended a $500
mortgage penetration rate of 3%. DANE num- million loan to Colombia to prop up financial
bers reveal that as of March 2014, the out- system reforms and facilitate government’s
standing mortgage balance was at COP41.44 goals. An notable sectoral advance had come
billion, amounting to 5.5% of GDP. This com- that January when Colombian banks adopted
pared to outstanding mortgage balances of International Financial Reporting Standards
8% in Brazil, 18% in Chile, 36% in Japan, 62% (IFRS) reporting, at a stroke improving finan-
in Spain, and 79% in the US, while in Holland, cial disclosure.
Denmark, and Australia, the figure was at
around 100% of GDP. The financial sector, while buffered by mac-
roeconomic realities, remains systemically
REFORM AND DIVERSIFICATION resilient. It also stands to be a beneficiary of
major changes at home, both structural and
The Santos administration wants to boost political over the years to come. ✖
financial inclusion among citizens and, im-

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PORTAFOLIO NEITHER

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42 THEBUSINESSYEAR COLOMBIA 2016

INTERVIEW

NopOportunity IN NUMBERS
LOST
Colombian economy

3%expected to grow by

in 2016

TBY talks to Mauricio How do you expect the new How do you expect FDI and ex- New tax reform to be
Cárdenas, Minister implemented in
of Finance and Public budget to affect the country’s ports to develop in 2016?
Credit, on budget 2016
cuts, Colombia’s economic position? One of the mechanisms we
competitiveness, and had in place to accommo- What joint strategies should Pa-
joint strategies within Oil played an important role date the fall in oil prices is cific Alliance countries imple-
the Pacific Alliance. in 2013, representing 20% of the flexible exchange rate. ment to boost economic growth
government revenues in 2013; Colombia has not interfered in the region?
BIO in 2016, the oil industry will in the forex market, which We are transitioning from one
only represent around 2%. led to a devaluation of the phase to another in the Pacif-
Mauricio Cárdenas has been We have implemented a tax Colombian peso against a ic Alliance; we achieved com-
the Minister of Finance reform that increased the tax stronger dollar. This enables mercial integration and now
and Public Credit of the contribution from companies. us to develop sectors like are working on financial inte-
Republic of Colombia since We also cut public investment agribusiness and tourism, as gration. We have implement-
September 2012, having and had a slightly higher fis- a higher exchange rate makes ed FTAs and agreements to
served as the Minister of cal deficit. This represents a our exports more compet- encourage the flow of services
Mines and Energy in the strong response to the drop in itive. This situation varies between the countries, and
Santos administration. oil prices. The budget for 2016 from that of dollarized econ- now want to achieve a higher
Between 2008 and 2011, he has seen cuts in several areas. omies or economies that are integration of financial mar-
was the Director of the Latin We have tightened our belts, strongly dependent on the kets. In this context, we have
American Initiative of the accounting for around 1% of US dollar. Devaluation will taken steps to achieve a high-
Brookings Institution in the GDP without impacting social also bring long-term results er integration of our stock
US. He earned his master’s and infrastructure expendi- due to the fact that compa- exchange markets. We also
and PhD in economics from ture. We refer to these policies nies’ investments take time want to boost investment and
Universidad del los Andes in as intelligent austerity. This to demonstrate results. All in traveling of investors among
Bogotá, Colombia, and from means a cut in the budget, but all, this devaluation and low these economies.
the University of California having clear priorities such as oil prices will help Colombia
at Berkeley, respectively. He continuing to reduce poverty diversify its economy and in- What goals does the ministry
has held numerous teaching levels and maintain growth crease the competitiveness of aim to achieve by the end of
positions and published rates. In 2015 we had growth our exports. President Santos’ term in 2018?
many books and academic above 3% and we expect to We would like to see a very
articles on subjects related continue at this level in 2016. What is your overall assess- solid economy with strong
to the Colombian economy. growth rates and a long-term
How will tax reform take shape ment of your term in office? vision. I would like to see a
more diversified economy—a
in 2016? Colombia is one of the fast- Colombia that is part of the
est-growing economies in OECD in which extreme pov-
In 2014, Colombia implement- Latin America in 2015 and erty stands below 5%. I hope
ed a tax reform that raised tax- this is thanks to the programs to leave a country in which the
es for companies. We recently we implement to boost bond credit rating is BBB+.
organized a commission of in- economic activity. This is We need to achieve peace,
dependent experts to compre- a major achievement with- because with peace Colombia
hensively revise the tax system in a year in which oil prices will boost growth by 1-1.5%. ✖
in the country. The objective is dropped—we need to keep in
to make the system more eq- mind that 50% of our exports
uitable and more competitive. come from the oil industry.
The commission recently fin- This has been made possi-
ished its report, and we expect ble thanks to trust and the
to implement a tax reform in focused social expenditure.
the country. One of the key We implemented several
ideas behind this reform is programs to prioritize social
to reduce the tax burden on investment and expenditure,
companies to a manageable and these have paid off.
level.

Finance THEBUSINESSYEAR 43

INTERVIEW

CASH
crops

What role does online banking TBY talks to Francisco Solano Mendoza, Parastatal bank
play in your operation? President of Banco Agrario de Colombia, on that promotes
In order to have new chan- the importance of online banking, increasing agriculture in
nels of access, we are devel- financial inclusion, and the outlook for Colombia
oping services for mobile Colombian agriculture in 2016.
devices. This will reduce our 747 branches
costs, make us faster, and Minister of Technology is the use of insurance because
make our service available working to give coverage to people do not understand the cattle, which need food im-
across the country. Internet the entire country. Working importance of being covered. ported from other countries,
is not always available large with the technology and ed- It is perceived as just another the devaluation of the curren-
cities, like Bogotá, Cali, and ucation areas and the other cost, not an investment. To cy was negative. The overall
Barranquilla. People are shift- ministers is important to us. this end, we are working with outlook for the agro industry
ing away from the old way of Having access to cell phones all the educational processes is positive. The government
doing transactions, but they and mobile data is also a criti- at our disposal, and we are needs to work with all major
need time to transition. In- cal advantage. On top of that, incentivizing these products agricultural institutions and
ternet penetration in rural clients need a bank and an by reducing the interest rate. focus on issues where we have
areas is also growing, as the institution. About 60% of our Home insurance is manda- a competitive advantage,
costs in transport are incurred tory in Colombia, but not in and we need to increase our
BIO because we transport money agriculture. With inclusion, it production in order to be a
by airplane or helicopter. It is is also important to educate supplier for the Colombian
Francisco Solano Mendoza, difficult for us to be so spread people and show them why people and the global market.
President of Banco out, but clients need money it is important to have ac- We were a major agricultural
Agrario de Colombia, is an to conduct transactions. This cess to formal credit, which player in the region, but now
economist and industrial means we can generate value is not easy. In many places we are almost at the end of
engineer from Los Andes through reducing the use of they have informal credit at the line, so we need to catch
University, where he also cash, but we need the infra- the store, with their friends up. We need to be specialized
earned a master’s in structure to meet that goal. or their neighbors, and so on. and define what we want to
economics and strategic Our goal is to reduce the use The interest rates may be high have. Until 1990, coffee was
management of marketing of cash and then be available in these instances, but they the main driver. The most
and sales. He has served in in other channels, not just get the money quickly and important thing is to define
leading positions in national with our branches and offices, easily. Banks are perceived as what we want to do next. In
and international entities but also with the mobile bank, more complicated. So we are that way, the ministry is work-
such as Fitch Ratings, the the e-wallet, ATMs, and all the working on making bank ac- ing with the planning area for
Colombian Coffee Growers other ways we can be avail- cess very easy. the agricultural sector. Our
Federation, and Millicom able to customers. bank will be aligned with the
International, which What is your outlook for the ag- agricultural planning. There
eventually brought him to What role has the bank played will be credit for everyone in
Colombia as the company’s ricultural industry for the com- every product, but the sup-
Finance Director, Regional in boosting financial inclusion port from the government for
Manager of Pricing, and ing year? agricultural institutions must
Pricing Manager. Prior to here in Colombia? be aligned with one policy in
joining the Banco Agrario For the agricultural sector, order to have long-term de-
de Colombia, he held such The two most important is- the outlook is above average. velopment. ✖
positions within the Ministry sues to us are bank inclusion In some segments such as
of Agriculture and Rural and agricultural insurance. In flowers, bananas, or coffee,
Development as Planning that way, we are working in in- the devaluation of the peso
Director and Budgetary surance for agricultural prod- had a positive effect and in-
Controller, Director of ucts, which is still low. We creased their income. But
Finance and Agricultural need to make a huge change in for other sectors, like pigs or
Risks, and Adviser.

44 THEBUSINESSYEAR COLOMBIA 2016

B2B

LORENZO SIMÓN RESTREPO investment
BANKS
GARAVITO Managing Partner,
Artika Banca de Shifting global and local conditions
President, HBI Banca Inversión in 2015 increased the attractiveness
de Inversión
of many of Colombia’s key
economic sectors, giving the
country’s investment banks a
central role to play in its continued

development.

How diversified is your invest- als as well as small, medium, ered by international banks. SR We have to take the risk The content on this page is taken from exclusive interviews. Read the full versions at thebusinessyear.com
ment portfolio? and large enterprises. Most of We compete for medium-sized into account and not just the
our clients are not permanent; deals with important local and financial return. A foreign in-
LORENZO GARAVITO We have we do a project and then move international players, and there vestor now needs fewer dollars
done business in most sectors on to a totally new client. We are a number of boutiques for to make the same investment,
of the economy. Being part of never know who our next cus- smaller deals. Still, our main but they will require a higher
Helm Group means that HBI tomer is going to be. We work competition is deals done with- return to compensate for more
understands very well the fi- with around 20 clients every out investment banks. We be- risk related to macro economi-
nancial sector as well as the year. Currently, Artika Banca lieve that the Colombian mar- cal instability and devaluation.
real sector. As an investment de Inversion is focusing on its ket now better understands the Besides, the tax rules changes
bank, we are strong in the ener- Multi Family Office service for value of having a process struc- every one or two years. I would
gy sector as the group is a direct high net-worth families. Most tured by an investment bank, think twice before investing in
investor in the sector and works families in Colombia have not like the case of Archie’s, where Colombia. Higher risk means
in many other sectors as well. managed their wealth in a pro- the value created by having an higher profits and higher losses.
In 2015 we closed deals with fessional way. We are bringing organized process was clear.
industrial companies, services in wealth management mod- You work with many foreign
companies, and companies in els that have worked in other How has the depreciation of the companies. What sectors are
the real estate, healthcare, and countries that can do well in Colombian peso affected in- these companies looking to in-
energy sectors. In 2016 we an- Colombia. We are using these vestment in the country? vest in when they come to Co-
nounced the sale of Archie’s, to teach families how they can lombia?
one of the main players in the organize, manage, and diversi- LG Today the Colombian mar-
restaurant sector. In the energy fy their wealth with the help of ket is clearly more attractive to SR Foreign companies look to
sector in 2015 there was great professional financial and legal foreign investors and we see invest in services such as busi-
uncertainty surrounding a new advisors who can work with more confidence in the econ- ness process outsourcing (BPO),
plan to change regulations, them to achieve their goals. omy from international players software, food, oil and gas, and
but eventually the government We are approaching wealthy than local players. The deval- mining. In the past, mining was
changed its plans. As of today, families that have successful uation will ultimately be good one of the sectors that received
the new regulation for small hy- businesses to maximize their for the Colombian economy. the most FDI. Today, most FDI
dro plants is still evolving. This net worth. We really needed it, and it will in mining goes through Bogotá,
uncertainty has slowed down create many opportunities in where most of the important
several investments decisions. How big is investment banking the export market. We need mining companies are based.
in Colombia? more of an industrial base as There is also an appetite for
SIMON RESTREPO Although we move away from natural the health sector and facilities
we are still a small investment LG Investment banking is resources. There are still sig- management. This has changed
bank, the company has grown growing. There are around 50 nificant uncertainties for the somewhat recently, because Co-
100% YoY. We only handle a investment banks in Colom- remainder of 2016, from deval- lombia is a more risky country
few important clients at one bia, which is clearly too many uation, inflation rates, interest to invest in now. People do not
time, but we focus on delivering for the number of transactions. rates, and tax reform, in addi- know what is going to happen in
results. We work with individu- Larger transactions are cov- tion to the peace process. the medium to long term. ✖

Finance THEBUSINESSYEAR 45

BANK EXPANSION ABROAD FOCUS

Colombian banks have greatly expanded their operations in Central
America in the last decade. The dramatic growth of the middle class and
the internationalization of the Colombian economy has propelled growth.
The market has shaken the shackles of the large players who used to
dominate the market, with smaller institutions expanding and widening
their coverage across the region.

FORTUNE FAVORS
THE BRAVE

WITH 40 MILLION POTENTIAL custom- hoff, explained how “cultural affinities” and
the fact that both regions speak the same lan-
ers and several FTAs, it is easy to see why Co- guage were key factors in the decision-making
lombian banks are looking to the wider region. process. “At that time, we realized that Central
Ironically enough, one of the factors that has America presented an interesting opportunity
helped propel this expansion is Colombia’s ex- to diversify risks and an interesting alternative
pat community. Every year, approximately $9 of sustainable and profitable growth,” said
billion flows into Colombia’s banking coffers Benninghoff.
in remittances from residents in the US. Such
a balance sheet has provided a healthy cushion In 2010, Grupo Aval acquired BAC Cre-
for regional expansion projects. domatic, a Nicaraguan group regarded as one
of the largest financial conglomerates in Cen-
The first national bank that made the jump tral America. Aval purchased a big chunk of the
was Bancolombia, which opened an office in group for roughly $2 billion and in the last five
Panama in 1973. The Antioquian giant became years Credomatic has more than doubled its
the first Colombian company to list on the assets from $8 billion to $18 billion since then.
New York Stock Exchange (NYSE). Bancolom-
bia went public in Wall Street in 1995, and its In June 2015, Aval’s net worth in Central
price has increased significantly over the last America rose to $2.4 billion. The company
30 years, surging from its $14.5 IPO to $70 in employs 23,000 people across seven countries
early 2013. In 2016, the stock has skyrocketed through 2,400 points of sale and attends to
and gained nearly 40% in Q1. about 3 million customers. Grupo Aval still sees
opportunities for growth in markets, particu-
Bancolombia then acquired Banco Agricola larly Peru, Chile, and Mexico. The company,
in 2007, one of the most important banks in El which is headed by the Sarmiento family, one
Salvador, paying $791 million for 100% of the of the richest in the world, has made it clear
company. Today, Banco Agricola has the larg- that all three are appealing options, although
est client portfolio in El Salvador and recently no acquisitions have been announced yet.
became the first bank in the country to issue
$300 million in bonds to the international mar- The latest Colombian financial newcomer to
ket. Next, Bancolombia acquired 40% of BAM Central America was Davivienda bank, which
Guatemala in 2012 for $217 million and a large belongs to the holding Sociedades Bolivar. In
chunk of the firm Banistmo in Panama in 2013. 2012, Davivienda acquired the operations of
After taking over the two strong and solid com- HSBC in Costa Rica, Honduras, and El Salva-
panies, the bank consolidated its position and dor. To date, the firm has nearly 810,000 cus-
has been performing well. tomers outside Colombia and in Central Amer-
ica its portfolio nears $4.2 billion and gross
Bancolombia is not the only Colombian profits in the region reached $60.1 million in
bank that has successfully ventured into other 2014. In Honduras as well as Costa Rica and
markets. Six years ago Grupo Aval also decid- El Salvador, the bank is among the top market
ed that Central America was fertile soil. In an players. If current growth patterns continue, it
interview with Colombian magazine Dinero, looks like more Colombian giants will be step-
the Vice President for financial planning and ping beyond their borders. ✖
IRO for Grupo Aval, Tatiana Uribe Benning-

46 THEBUSINESSYEAR COLOMBIA 2016

The COLCAP index had a fairly good run over the first half of 2016,
bucking the more docile trend seen among many of its emerging market
peers. The index managed to climb some 13.8% in YtD terms to 1,313.18
points by the end of 2Q16.

Review C A P I TA L M A R K E T S

BONUS
IN THE OFFING?

The Bolsa de Valores de Colombia (BVC) has November 2016, in cooperation with the Aso-
steadily developed since 1928 into becoming ciación de Comisionistas de Bolsa de Colom-
the leading capital markets entity in Colom- bia (Asobolsa). Gaining such an international
bia. Competition did exist for a while, with spotlight is important for emerging market
the long-standing Bogotá Stock Exchange also exchanges, often having to work hard to attract
sharing the stage with rivals in Medellín and capital and meet the exacting needs of the larg-
Cali, though these markets tended to specialize er investment concerns located in North Amer-
more in commodities rather than in broader ica, Europe, and— increasingly – East Asia. On
financial instruments, equities, commodities, the trading mechanics side, the BVC is also
and the like. By 2001, the three exchanges were looking to have the NASDAQ X-Stream INET
combined to create the BVC, and through re- trading platform operative as of 2017. The new
gional link ups the exchange has looked to trading platform has one key aspect that should
deepen the market and improve flows and li- spark interest in a number of foreign brokers
quidity levels. and investors: the potential to engage in more
sophisticated algorithmic and high frequency
In 2009, the BVC joined up with its peers in trading.
Argentina and Peru to lay down the founda-
tions of the Latin American Integrated Market However, generating investor interest re-
(MILA), which sought to unify the trading and mains a battle. Over the years, the number
settlement activities of all three markets for lo- of listed equities has waned somewhat, as
cal investors and make them more attractive, some shift their main listing to larger foreign
especially as most global interest was being markets, while others fail to make the grade.
drawn to the regional emerging market heavy- A total of 89 companies called the BVC home
weight, Brazil. In 2014, Mexico’s stock exchange in 2008, though by mid-2016 the number of
joined the MILA system as part of new efforts listings had fallen to 71. No initial public of-
to promote mutual trade and investment along ferings (IPOs) or secondary listings had been
Latin America’s Pacific coast, and by 2016 the added since 2014, though in late 2015 a local
MILA system was well in place to challenge the architectural glassmaker sought to place a
previous dominance in investors’ minds of the secondary listing on the BVC. Tecnoglass al-
Bovespa in São Paulo. However, the Bovespa is ready had a primary listing on the NASDAQ,
never far away. As the BVC is also listed as a pri- taking advantage of the larger investor pool in
vate company on the market, its second largest North America in 2003 when it staged an IPO.
shareholder just happens to the BM & Bovespa However, the listing on the BVC was com-
SA (9.84%), with private equity specialist Ban- plicated by its late filing of quarterly reports
card International Investment owning a slightly soon after entering the market, seeing the
higher 9.94% shareholding. stock suspended for a short time in May 2016.
The Baranquilla-based company, specializing
In 2016, the BVC is looking to celebrate not in architectural glass and targeting exports
just the potential peace dividend Colombia is to the US market, complied with requests by
expecting, but also its leadership of the World both NASDAQ and the BVC to amend its fi-
Federation of Exchanges (WFE) for the year. nancial statements, and reported a bumper
Although only joining the WFE 2004, the BVC year, with revenues up 21.2% in YoY terms to
is set to host representatives from the 63 mem- $239.4 million for 2015.
bers of the WFE at a conference in Cartegena in

Finance THEBUSINESSYEAR 47

On the fixed incomes side of the market, the As of mid-2016, the equity side of the ex- On the fixed incomes
BVC reported 131 issuers as of mid-2016, while change had a total market capitalization of side of the market,
issuances over the 2008-2015 period were con- some COP308.34 trillion ($108.34 billion), ac- the BVC reported
sidered to have brought in some COP103 tril- cording to the BVC. Despite the slump in en- 131 issuers as of
lion. The number of bonds issued has stayed ergy and commodity prices, which hit the Co- mid-2016, while
relatively steady over the years, though are lombian market hard since 2014, local energy issuances over the
slightly down on the high point of 152 set back giant Ecopetrol retains its top place in terms of 2008-2015 period
in 2009. The fixed market saw some COP512 market cap, at some COP57.36 trillion ($19.67 were considered to
trillion in trading over 1H16, with the cash mar- billion), accounting for 18.15% of the main have brought in some
ket taking up some 58.81% of those volumes. index. Ecopetrol has had a challenging year, COP103 trillion.
Derivatives also are active on the BVC, especial- engaging in a widespread cost-reduction plan
ly in the FX and interest rate futures categories. as well as divestments from some minor or un-
FX futures saw volumes of some COP41.99 tril- derperforming assets to bring it back into oper-
lion over 1H16, while interest rate futures were ational health and retain its role as one of Co-
at a lower COP29.10 trillion for the same period. lombia’s main export earners. Next in line was
Banco de Bogotá, with a market capitalization
ON THE BOARDS of some COP19.38 trillion ($6.65 billion). The
bank retains its leading place in the Colombi-
The main index for the BVC, the COLCAP, an finance market, with assets of COP152.3
had a fairly good run over the first half of trillion at end-2015, with its foreign operations
2016, bucking the more docile trend seen accounting for 42.2% of the total. Interestingly,
among many of its regional peers. The index fourth placed Grupo Aval is the majority share-
managed to climb some 13.8% year to date holder in Banco de Bogotá, retaining a 68.74%
to 1,313.18 points by the end of 2Q16. The stake, on a market capitalization of COP17.71
relative stability of the Colombian peso over trillion ($6.07 billion). In third place, however,
the period only added to the solid advance is investment player Grupo Sura, which came
seen on the boards. However, it should be in at COP17.96 trillion ($6.16 billion) as of end-
remembered that the market’s most recent June 2016. It too had significant investments in
heyday was back as recently as early Sep- some of the other top-10 companies by market
tember 2014, when the COLCAP was trying capitalization on the BVC, including Grupo Ar-
in vain to break through the psychologically gos, Bancolombia, and Grupo Nutresa, operat-
important 1,800-point barrier. That it didn’t, ing in a wide range of sectors from construction
and that mainstays in the index dependent through to FMCGs. Rounding out the top five
on previously strong hydrocarbon and com- is interesting entrant Empresa de Energía de
modities prices retreated, saw the COLCAP Bogotá, the country’s second largest power
whipsaw back to test sub-1,100 point levels in transmission company. The interesting thing
early December 2015. However, it was largely to note is that the company’s main shareholder
from that point that not only had hydrocar- on 76.28% remains the local government of Bo-
bon prices begun to stabilize, but Colombia gotá city, though Ecopetrol also has, for now, a
was also beginning to feel the possibility of a minority stake that it is looking to wind down as
peace bonus, once agreements on a ceasefire part of its afore-stated divestments from non-
with internal rebel groups had been achieved, core activities. ✖
and a deal seemed in the offing.

*Read the full interview at thebusinessyear.com JORGE IVAN ABREO How can the Colombian stock exchange be more
competitive?
President, AdCap We belong to the stock exchange and are interested
in Colombia’s capital markets having more relevant
What role does technology play in expanding clients. Companies in Colombia are not used to
your business? going to the financial markets. AdCap is promoting
We have a trading platform that I consider as capi- this change with campaigns to inform people about
tal because it unites customers with the markets the stock exchange and capital markets, which has
and allows customers to carry out investment de- allowed us to attract large companies. A conse-
cisions independently. We are currently analyzing quence of recent M&A trends in the financial sector
the market and have observed that it is evolving has been to strengthen banks as more important
toward more brokerage-oriented trading. We count players in the economy. They now have a stronger
on a person who is specialized in financial IT de- presence and more trust to offer to international
velopment in order to provide our customers with companies that come to Colombia.*
the latest technology. We are doing weekly video
analyses on YouTube with a specialist who shares
his opinions on how the market is going to evolve.

48 THEBUSINESSYEAR COLOMBIA 2016

INTERVIEW

VALUE in IN NUMBERS
the BAG
$861
TBY talks to Juan Pablo Córdoba,
President of the Colombian Stock billion April 2016
Exchange, on the rise in market market cap
indices, the outlook for securities in
2016, and the significance of MILA. 15%

The COLCAP index experi- which has raised the desire toward emerging economies growth in 1H2016
enced a sharp rise in 1H2016. to take positions in compa- has recovered and the tax trading prices
What factors drove this nearly nies that are traded on our scenario shows much antic-
30% increase? stock exchange. In addition, ipated rate increases. There How significant is the Inte-
The 2016 balance of the year there were some companies will be movements in the grated Latin American Mar-
has been positive; we have that were heavily hit in their range of portfolios, but we do ket (MILA) for the Colombian
had 15% growth in prices and prices by external factors. not foresee a major setback Stock Exchange?
have virtually erased the loss- However, they continued to for the market. MILA has demonstrated it-
es from 2015. The exchange generate value and profits, self as a driving force for
has also recovered liquidi- and these were companies What new companies do you our economies. In these five
ty, with growth of 25 or 30% with low prices compared to plan to list in 2016? years, the MILA has been the
in volume compared to the their fundamentals, generat- There are several companies driving force of business be-
last quarter of 2015. Several ing good entry opportunities. that are in the process of be- tween Chile, Peru, Mexico,
factors contributed to this ing listed. These companies and Colombia. We now have
performance. Institutional, What is the outlook for invest- have shown interest and a broader and more diver-
foreign, and local investors have made progress toward sified investment pool with
have resumed their posi- ments in securities in Colombia that end. We believe there new opportunities in assets
tions. They have also boosted are several companies in the through a local brokerage
purchases after the govern- for 2016? final stage and they expect a house. In addition, MILA
ment’s announcement that window of opportunity in the broadened the vision of our
it would adopt measures to We have seen institution- market to present their shares countries and made the gov-
improve tax conditions for al, natural, and foreigner and bonds, but this is a cor- ernments think of a deeper
investments in Colombia, investors increasing their porate decision in which the financial integration beyond
positions. Furthermore, the Colombian Stock Exchange the market, allowing flows
BIO government of Colombia has has no say. of savings and investment
committed to approve a tax in transit within an enlarged
Juan Pablo Córdoba holds reform that balances and en- How do you foresee the ex- border as is being created by
MA and PhD degrees courages businesses that are pected increase in the Federal the Pacific Alliance. We are
in economics from the generating employment and Reserve rates affecting the Co- moving in that direction, reg-
University of Pennsylvania. economic growth. Markets lombian Stock Exchange? ulators are accompanying the
In his professional career are waiting for these chang- What we have seen is that ner- initiative, and we will soon be
he has worked for the Inter- es and recognizing that the vousness leads to investment in discussions regarding an
American Development country has always imple- decisions being taken with integrated regional market.
Bank, the Ministry of mented the right economic utmost caution, and it is un- Today, MILA is the largest
Finance and Public Credit of measures, which gives more deniable that decisions of the market in the region, both
the Republic of Colombia, comfort to investors. Further- Federal Reserve move mar- in terms of the number of is-
the IMF, and the Deposit more, in a joint effort with kets worldwide; however, we suers and market capitaliza-
Insurance Corporation of the government, suggestions are convinced that the speed tion. At the end of April 2016,
Colombia (FOGAFIN). He is are being taken from the in- of these changes should not a total of 711 issuers were
the current President of the dustry and the government greatly affect Colombia pro- participating in MILA, while
Colombian Stock Exchange. announced measures aimed vided we aim to lower de- the market capitalization
at improving market liquidi- pendence on external factors. reached $861 billion. ✖
ty as well as increasing busi- Colombia absorbed the new
ness in the trading screens. oil prices well, and must now
Investments in Colombia ul- focus on productivity.
timately reflect international
and local conditions. Outside
of the country, the sentiment