The Business Year - Colombia 2016

Finance THEBUSINESSYEAR 49

B2B

LUIS MIGUEL JUAN RAFAEL being local independent enti- frastructure and construction
PÉREZ ties to becoming part of larger sectors are strong. Raw materi-
GONZÁLEZ banking groups. That is when al suppliers will have plenty of
CEO, BTG Pactual Bolsa y Renta decided that it business ahead of them, pro-
ESPINOSA was time to look for an interna- viding what is needed for those
Colombia tional bank that ideally shared infrastructural projects, and
President, Credicorp our same partnership culture that should keep Colombia on
Capital so we could retain the best tal- an even keel until things gener-
ent on board; that was a Latin ally pick up throughout the re-
brokerages American institution where Co- gion and on a global level.
lombia would be a relevant part
With the increase in large-scale development of the business, and finally we JRP On top of the region’s mac-
projects and new regulations leading to greater chose an investment bank over roeconomic potential, we are
participation from outside parties, brokerage a commercial bank that would seeing a series of political devel-
firms are playing an increasingly important role in allow us to continue serving our opments that have reinforced
facilitating the mobilization of funds in Colombia. clients with an specific focus pro-market views that are wel-
on the investment side that is comed by investors coming
The content on this page is taken from exclusive interviews. Read the full versions at thebusinessyear.com How does your organization fit Our strategy has been to diver- not common in Colombia. BTG from developed countries, as
into Colombia’s financial ser- sify our income through differ- Pactual complied with all these well as from Latin America.
vices industry? ent products and segments. Our requirements. Moreover, the We may see some short-term
goal is to be the access point similarities in terms of the his- volatility coming from these
LUIS MIGUEL GONZÁLEZ for international investors who tory, reputation, and organiza- changes and from the global
ESPINOSA We are a financial want to come to Colombia. This tional culture were striking. We scenario, but for the long-term
broker focused on advisory ser- has been one of our traditional were a perfect match, and four view those processes are crucial
vices operating in Colombia, strengths compared to similar years after the signing, we are for a future of more growth and
Peru, and Chile. We have four companies. proud of the deal that was car- stability throughout the region.
lines of business, namely capi- ried and of the amazing results Colombia has always been a
tal markets (sales and trading), JUAN RAFAEL PEREZ Bolsa of becoming part of the leading safe haven in terms of stability
asset management, corporate y Renta was a small boutique regional Latin American invest- compared to the rest of Latin
finance, and a trust business. firm: we excelled in equities, ment bank with a strong local America. We expect this trend
We are not an investment bank research, wealth management, presence. to continue and add to our pos-
per se, as that license does not and had deep relations with the itive growth perspective; this
exist in Colombia. We are closer key players and clients in the What is your assessment of the could generate high risk-adjust-
to a private American invest- market. However, we needed current investment climate in ed returns for anyone looking
ment bank than we are to a to expand the balance sheet, Colombia? into the country. Infrastructure
broker. We are active in capital grow the distribution capabili- projects are also gaining rel-
markets in Colombia, offering ties, and offer a global reach to LMGE We have two outlooks for evance and will probably ac-
our services to those who want our clients in order to be a lead- the Colombian economy, one count for a larger portion of GDP
to invest in Colombian markets er in the market. Around that of which is our local view, which growth in the coming years.
or foreign investors who want time, there was a trend where is skewed by our knowledge of Entrepreneurship is another
to invest in the stock exchange. the top firms were moving from the Colombian economy, and important economic force. In
that is somewhat pessimistic. Colombia, we have well-es-
Our other outlook is regional, tablished and young business
and compared to the rest of Lat- leaders who are creating value
in America, Colombia is in pret- for local and international mar-
ty good shape, even though we kets and propelling additional
are not growing as much as we growth. Furthermore, there are
would like. The Latin American other important trends in the
situation looks grim these days, country that generate a positive
mainly due to Brazil. But over- perspective, such as the young
all, we believe it is a good time population, the growing mid-
to come into Colombia, and we dle class, and the increasing
are generally optimistic. It de- formality in employment and
pends on the sector as well. The more recently the expectations
oil sector for example is suffer- for the conclusion of the peace
ing. On the other hand, the in- process. ✖

50 THEBUSINESSYEAR COLOMBIA 2016

FOCUS FIDUCIARY TRUSTS

TRUST IN THIS

One of the fastest-growing forms of financial services entities, fiduciary
trusts in Colombia are playing a growing role in financing the country’s
ongoing development.

FIDUCIARY TRUSTS IN COLOMBIA are financial leverage of those projects. Neverthe-
less, trusts are moving to other segments of Co-
some of the most important legal entities and lombia’s economy where they have identified
have been key in the country’s economy for new opportunities for growth. In an exclusive
the last few years. Colombia, after Chile, is the interview with TBY, General Manager of Ac-
second most important market for the fiduciary cion Fiduciaria Pablo Trujillo explained that his
business in Latin America, as there are nearly 30 company is strengthening its presence in ag-
fiduciary trusts that manage around 36% of the riculture. “The agriculture sector in Colombia
COP550 trillion ($188 billion) that the Colom- is complicated, but we have to invest in infra-
bian financial system has invested in different structure in that area,” explained Trujillo, who
assets, according to Asofiduciarias, the associa- is one of the pioneers of the wave of expanding
tion that unites the entire sector in the country. trusts in Colombia.
Fiduciary trusts provide a variety of asset man-
agement services throughout the Colombian International financial companies that have
economy, such as payment administration, real started operations in Colombia are quickly rec-
estate, bursarial, and guaranty fiduciary. How- ognizing the importance of having a legal entity
ever, the sector that has shined the brightest for that provides fiduciary services. Chilean Corp-
fiduciary trusts is construction and real estate. banca, Spanish bank BBVA, and even Citibank
Trusts have created a business that has given a all have trusts in the country. Brazil’s BTG Pac-
new level of confidence to developers to carry tual, which recently opened offices in Colom-
out their projects. bia, has announced that it will follow suit and
establish an affiliate company that will offer
Trusts have existed in Colombia since 1924; fiduciary services.
however, they skyrocketed in the late 1990s af-
ter the domestic construction industry surfed The trust with the best performance through
a buoyant economic wave, which eventually the first half of 2015 was Fiducor. According to
broke and left the industry in shambles. Fol- rankings published by the magazine Dinero,
lowing that period, developers began to work Fiducor had a profitability of 49% between Jan-
with fiduciary trusts to ensure the viability of uary and June and also was the company with
projects before laying the first brick. “Trusts are the lowest debt level. Accion Fiduciaria was the
tools that have given the business more confi- second-most profitable company in the sector,
dence, which is important because the buyer as its profits grew 23% in the same period and it
knows their money is secure and the construc- maintained itself as one the leading companies
tion company knows the buyer cannot cancel in this sector. The third, fourth, and fifth com-
partway through the project,” Antonio Perez, panies were Cititrust, Allianza, and Fiducolom-
General Manager of high-end developer Lamb- bia, respectively.
da, told TBY in an interview.
Despite the economic slowdown that Colom-
Colombia is now witnessing a huge growth bia experienced in 2015, the amount of assets
in roads and infrastructure. Thus, trusts are managed by trusts increased by approximate-
approaching their businesses to remain a rel- ly 15% YoY. Asofiduciaria explained that the
evant tool among the procedures and mecha- factors spurring that growth are the agility of
nisms available lead financing activities for the the sector and the stable demand for fiducia-
country’s massive 4G road projects. The coun- ry trusts even in times of economic downturn
try is set to experience a great development in thanks to the established reputation among
road infrastructure, though as of now fiduciary corporate clients of trusts as an important de-
trusts will be limited to participating only in the velopment tool. ✖

Image: Frederic Muller

Finance THEBUSINESSYEAR 51

B2B

JUANA CAROLINA PABLO TRUJILLO fiduciary
TRUSTS
LONDOÑO General Manager,
Fidcuiary trusts in Colombia
President, Fiducoldex Accion Fiduciaria face an interesting array of

opportunities and challenges in
light of macroeconomic conditions

and recent government actions to
stabilize the economy.

The content on this page is taken from exclusive interviews. Read the full versions at thebusinessyear.com How are recent government ac- so than it was for 2015. The real Normally fiduciaries control area known for its landscapes,
tions affecting your business? estate sector has also taken a the same type of business: Medellín was considered the
hit, which is an important driv- payment administration, real most entrepreneurial city of
JUANA CAROLINA LONDOÑO er of the economy. Prices in- estate fiduciary, bursarial fidu- the world in 2015, and Bucara-
The government is trying to creased rapidly in the previous ciary, guaranty fiduciary, and manga is also rising in impor-
control the number of investors years, and now the real estate so on. What makes us differ- tance.
to boost economic growth. I sector is reducing its activities ent is our customer service; we
hope that external factors, the in Colombia. Nevertheless, make payments on time and PT The growth that we experi-
peace agreement for example, the construction industry has our transactions are done at the enced in 2013 and 2014 contin-
will be extremely beneficial grown considerably, but it will moment when they need them. ues, and this meant that 2015
for the country. For Fiducol- not surge as much as it used to. We also have the support of the was great for us. However, I
dex in particular, we want to It is vital that Colombia adopts government, which is import- expect 2016 to be challenging.
continue providing excellent a policy of industrialization. ant in terms of being reliable. The 2014 fiscal reform and its
service to our customers and The authorities have to incen- effects were barely noticed in
become a stronger fiduciary. tivize and motivate industry, What are your projections for 2015, but I think we will feel
At the moment, we are in 10th because the country has grown 2016? the impact in 2016. Some of
place out of the 27 fiduciaries too dependent on imports and those taxes come into effect
in the country, and we aim to manufacturing is weaker than JCL We want to be a fiduciary in 2016, which will be tough
reinvest as much of our capital it should be. The government that generates a large prof- for some companies. We are
as possible, as fiduciary trusts has to foster a reindustrializa- it and become the most agile interested in investing abroad
has been a crucial economical tion policy in the country. and efficient fiduciary on the but the devaluation presents
mechanism that has generated market. We aim to satisfy our a challenge. One of our focus-
swiftness and stability in the How is your portfolio distribut- customers’ needs through the es is to strengthen agricultural
development of infrastructures ed across different industries? innovative products that we development. The agriculture
across the country. offer. Customer service is an- sector in Colombia is compli-
JCL We participate in consor- other noteworthy point for cated, but we have to invest in
PABLO TRUJILLO Colombia tiums and administrate many our future. We are planning to infrastructure in that area. We
has become less interesting for projects in Colombia. We are launch two new products relat- have an advantage with a trust
foreign investment, and some focused on administration and ed to administration and pay- we have developed, so I am
companies have begun to take pension payments programs in ment. There are many small not worried about 2016. As for
their capital elsewhere. Coun- Colombia. Autopistas del Cafe cities in our country that are construction, I believe that the
tries such as Panama have a was one of the first and main generating a major impact in number of projects will fall and
more attractive fiscal environ- clients. We currently have a the Colombian economy. Not consecutively this will have a
ment, which has been challeng- consolidated list of clients and only is Barranquilla growing in slowing effect. Public works
ing for Colombia. The depreci- they are loyal to us because the businesses sector, it is also and infrastructure on the other
ation of the peso will also be a of the high-quality treatment important for infrastructure. hand will increase, and that is
negative factor for 2016, more and services that we provide. Cartagena is a popular tourist where we expect growth. ✖

52 THEBUSINESSYEAR COLOMBIA 2016

Colombia’s insurance sector, like those of many other EMs, tells a
familiar story of low penetration, bags of investment potential, and
increasing reserve requirements pushing consolidation.

Review I N S U R A N C E

ALL TO PLAY FOR

THE INSURANCE SECTOR was buoyed more international players. In 4Q2015 UK- MANUEL
based Lloyd’s announced it was to open an ARÉVALO
in April as finance watchdog Superfinanciera office in Bogotá. The office opened its doors
announced a 5.56% YoY growth in profits. The in June, with Chairman John Nelson stating Country Manager,
figures were right in line with a Fitch Ratings that, “As Colombia realizes its economic po- Coface
report from early 2016 predicting premium tential, insurance and reinsurance can play a
growth of 6-8% for the full year. The agency key role in supporting this economic growth What sectors are most import-
went on to forecast a challenging environment by improving resilience, taking risks out of the ant for Coface Colombia?
for profits due to the highly competitive nature country, and helping the economy recover after Agriculture is one of our three
of the sector and the impact of new reserves catastrophes.” Indeed, a Lloyd’s report found main sectors, as are construction
regulations, not to mention volatility on the that the country has an underinsurance gap and the entire value chain of the
capital markets. of $570 million against its natural catastrophe construction business. Housing
exposure. A further Lloyd’s study, the City Risk construction did well during
But despite pressures, the sector offers sol- Index, carried out with Cambridge University, 2015, and now we are expecting
id long-term prospects. A penetration rate of found that Bogotá and Medellín will generate several infrastructure projects
1.6%—compared to a 6.1% global average—of- “$2.5trillion in economic growth over the next from the government. The 4G
fers plenty of room for growth, as does the large decade but could have $44bn at risk from a se- road plan was supposed to
population of almost 50 million. Strong public ries of threats.” start three years ago, and many
spending on infrastructure works also offers up companies were waiting for that.
strong potential. Colombia’s life insurance sector remains rel- Another sector that is performing
atively nascent compared to its larger non-life strongly is electronics, with sales
The majority of premiums are currently writ- cousin, with growing household income rates booming in recent years. Due to
ten by local insurers, yet the aforementioned the currency depreciation, we
factors have begun to draw the attention of saw a decrease in sales in the
electronics sector starting from
GROSS LIFE PREMIUMS WRITTEN (% YOY) the end of 2015 that we expect to
continue in the coming months.
SOURCE: FASECOLDA, BMI
Are large infrastructure proj-
Gross life premiums written, COP Gross life premiums written, USD ects losing momentum?
Gross non-life premiums written, COP Gross non-life premiums written, USD Most of these projects are
attractive, because Colombia is a
25 country that has been developing
well over recent years and still
20 offers great opportunities for
investors. It is increasingly stable
15 and tax reliefs make it even more
attractive. The momentum has
10 been lost; however, the situation *Read the full interview at thebusinessyear.com
is tighter than before. It is not
5 clear whether investors are
willing to put their eggs in one
0 basket at the moment, given the
4G plan’s history.*
-5

-10

-15

-20 2014 2015 2016 2017F 2018F 2019F 2020F
2013



54 THEBUSINESSYEAR COLOMBIA 2016

and improving life expectancy predicted to in- Colombia’s life insurance sector remains
crease demand in the former going forward. In relatively nascent compared to its
non-life, growth is likely to come from better larger non-life cousin, with growing
distribution networks and product offerings, household income rates and improving
according to a BMI report. The same report life expectancy predicted to increase
forecasts growth in the non-life insurance pre- demand in the former going forward.
miums from $5 billion in 2016 to $8.6 billion in
2020. In terms of penetration, the report pre- Overall, the insurance sector’s total volume of
dicts non-life insurance penetration growing assets stood at COP55.4 trillion in April 2016, up
a touch from 1.8% to 1.9%. In life, in line with COP3 trillion on April 2015 and up COP512.8
the old maxim that the only way is up, BMI billion since March 2016.
predicts the segment gaining market share and
representing 29% of all premiums by 2020. That All being said, Colombia offers up much the
translates into a growth in life premiums from same story as a host of EM insurance markets,
$19 billion in 2016 to $3.5 billion in 2020. but that does not detract from its status as a hot
prospect for insurers both local and foreign.
Back in 2016, and Superfinanciera an- Look out for consolidation, the arrival of more
nounced that in April 2016 the most profitable foreign players, and an expansion of distribu-
insurer was the local Seguros Bolivar, which tion networks across the country as industry
hauled in COP41.52 billion over the month. players fight to get more policies into the hands
This was followed by Previsora and Alfa, which of more Colombians. ✖
made COP14.45 billion and COP9.73 billion,
respectively. From April 2015 to April 2016,
the watchdog also reported an 8% increase in
premiums and a 17% rise in registered claims.

Finance THEBUSINESSYEAR 55

INTERVIEW

COVERED
everywhere

TBY talks to Héctor How has the business of Willis How has the implementation Merging with
Martinez, CEO of of new services and products Watson Towers
Willis Colombia, on Colombia evolved over the last worked in Colombia?
recent developments, Implementation has been Colombia is third
applying its global five years? challenging. It is a system that largest market in
expertise in Colombia, has been used in several Wil- region
and the upcoming Willis Colombia has changed lis offices around the world,
merger with Towers dramatically in many ways. but we were going to be the are their broker and partner
Watson. Willis acquired 100% of the op- first office in Latin America in risk management. We have
eration in Colombia three years and the first office that would three separate lines of prod-
BIO ago, which forced us to change launch the system in Spanish. ucts; affinity, human capital
some of the ways that we were We were working with our IT and benefits, and property
Héctor Martinez was doing business. We had an team in London, the region- and casualty. We are growing
born in Bogotá. He excellent base in the country, al IT teams in São Paulo and in all of them but have had
studied in both Spain and but we wanted to bring the Mexico, and the developer the strongest growth in hu-
Colombia, graduating with best of Willis around the world in London with a developing man capital and benefits in
a degree in psychology to Colombia. We have many hub in Singapore. It required 2015.
from Universidad de la resources globally; we have a great deal of work both from
Sabana in Bogotá. His centers of excellence for dif- our partners and ourselves. What factors explain why Co-
professional career started ferent areas in our head offices We have had no problems lombia has the one lowest level
at an insurance company in London and New York, and or issues with the launch of of insurance penetration in Lat-
in Colombia, after which he we wanted to bring all the tools the new system and can see in America?
completed his postgraduate and knowledge to Colombia. A that our employees and col- These rates are the product of
studies in London. He joined new process was started by our leagues are now seeing the a lack of knowledge and the
Willis in London in 2001 and current CEO when he joined benefits of the new system. fact that our culture of insur-
since then has occupied in January 2013; he wanted to ance is still in its infancy. As
various positions within create a broker that was closer What opportunities will the risk managers, we see one of
the company. In 2013 he to the client and one that was merger with Towers Watson the reasons is that the people
returned to Colombia to not just transactional—a bro- bring to the company in Latin have other needs before buy-
be part of the reinsurance ker that was more analytical. America? ing insurance. Certain levels
operation, and in 2014 We changed and hired many The opportunity is, as our of society and large compa-
became the CEO of Willis people in Colombia, and the chairman explained, for our nies are able to buy insurance
Colombia. senior team in the country has clients, as they are the ones with no problem, but the
an average of two years tenure who will benefit from this middle class and below are
in the company. possible merger. It is an ideal under protected because they
merger because we are com- have other priorities. ✖
Will you continue to bring new plementary companies that
do not do the same business.
products into Colombia that The services it provides and
the services that we provide
are already operational in other will create a stronger force
in the risk management and
countries? brokering business.

We will bring knowledge, but What industries have the best
particularly knowledge tai- customers in Colombia?
lored to the needs of the local Our client base is mainly cor-
companies. A product offered porate, and we are strong in
to a client in New York or in the food, manufacturing, and
Boston will not be the same as energy sectors. We are also
a product offered to a client to strong in utilities and work
Bogotá or in Medellín. Compa- with some of the largest util-
nies here are evolving rapidly, ities firms in the country: We
and we have to keep evolving
even faster, as we cannot af-
ford to lose pace to those com-
panies that 10 or 15 years ago
were medium-sized compa-
nies in Colombia but are now
present in 20 countries.

56 THEBUSINESSYEAR COLOMBIA 2016

INTERVIEW

measured 40-60% average
APPROACH annual growth
rates
TBY talks to Juan Pablo Lozano, President of
Afiancol, on the evolution of the company,
developing market trends, and opportunities for
greater economic equality.

How has the company evolved sume responsibility and also we have managed to find our is the Employees Bank and
embargo the vehicle. We have niche market and we have this was born from a cooper-
over the last decade? also become a stronger player become a strong player there ative. Unfortunately, the gap
thanks to partnerships such as with a competitive product. between rich and poor people
Initially, we engaged with per- the one we signed with PMI, We will, however, open offices is growing. There is still a cul-
formance bonds associated an insurance company, re- in other neighboring coun- tural element of informality
with public works, but after lated to people affected by El tries as we see more opportu- and other historical factors
the law was reformed we start- Niño. It offers us comprehen- nities and facilities there. holding back Colombia from
ed to work with the contract- sive support, which provides economic equality. Neverthe-
ing of outsourcing contracts. us with a reinsurance capabil- How would you assess devel- less, the concept of economic
In 2009, we took our business ity that no other company has opments in the reinsurance solidarity can really help to
in a new direction, with co- in Colombia. sector? narrow economic gaps in our
operative funds, which is also There is a lack of appropriate society. ✖
known as economic solidarity. How do you see the company regulatory framework and we
We initially launched a prod- have raised this topic to the BIO
uct that was extremely well evolving in the near future? national authorities. In this
received, called Aficativa. Ever context, we are few steps be- Juan Pablo Lozano has been
since that strategic move, we I see us increasingly targeting hind compared to other Latin in the insurance industry
have grown at average annual employee funds and cooper- American countries and we since 1996 when he joined
rates between 40% and 60%. atives. When it comes to em- should consider our current the insurance company
ployee funds, we have been situation and how conve- Confianza S.A., where he
What are the main features of increasingly engaging with nient it is. There is concern held the post of messenger
large companies and public among insurance companies for three years. In 1999 he
Afiactivia? institutions and we see this as that they could end up los- was appointed president of
the path to take. We would like ing business and they are not an NGO until 2008, when
It offers guarantees to the to have a stronger presence very keen on such a regulatory he was appointed executive
employee fund in relation to in the construction sector as framework for reinsurance. vice president of the Inter
the debtor balance. In other well. This industry will be the Afiancol bonding company.
words, when an embargo of main economic engine of the What opportunities does eco- He served in this role for
a debtor takes place, we give national economy in 2016. I nomic solidarity offer? two years until 2010 when
an immediate response, pay- expect to consolidate our ac- There are plenty of opportu- he was appointed president
ing the credit fees, and we tivity in the cooperative seg- nities and the fact that many by the board, a position he
manage the collection of the ment over the next year and banks have decided to enter has executed successfully,
money from the debtor. One close the year with a moderate the business means a great leading the company
of the competitive advantages growth rate. We see poten- deal. It has a high social com- to develop and grow
that we offer over insurance tial to grow with our renting ponent that at the end of the into becoming the most
companies is that we consid- bond Afiarriendos. I also fore- day is an essential ingredi- important bonding firm in
erably reduce bureaucratic see a crisis in the insurance ent in this recipe. Colombia the country.
barriers in order to pay. Over- market within five years due stands at the forefront of eco-
all, payment guarantee is our to increasingly low interest nomic solidarity in the region.
main strategy and mission. rates. There are also far too In my opinion perhaps only
For example, when people many players and, in fact, we Guatemala is ahead of us. In
ask for credit to purchase a have seen several companies Guatemala, the largest bank
vehicle and they do not have joining efforts through merg-
a good credit record, we offer es and acquisitions. I think
payment guarantees. If the
person does not pay, we as-

61 66 THEBUSINESSYEAR 57

Mauricio De La Mora TBY talks to Reyes Reinoso, 71
Rodríguez, President of National President of Reficar, on staying
Hydrocarbons Agency (ANH), on competitive, expansion plans, For Colombia, clean energy
promoting investment. and direct investment. is the lynchpin of its efforts
to offset El Niño and meet its
environmental goals.

Energy & Mining

REVIEW

C Alternative sources look to be the future of Colombia’s energy supply
given sluggish oil production figures and depleting reserves.

POWERING AWAY

olombia is bless- said. The country, howev-
ed with numerous er, consumed 293,000bpd
fossil fuel reserves in 2015, allowing it to export
most of its oil production.
and natural re- May’s production figure was
an 11.8% fall from a year ago,
sources including petroleum, the ministry added, without
giving any reasons for the
coal, and natural gas. The fall, though market watchers
have attributed it to slump-
country is the largest coal ing global oil prices. The
figures were also a marked
producer in South America reduction from the average
1 million bpd Colombia pre-
and was the fifth-largest coal viously saw in 2013, though
the EIA believes that oil pro-
exporter in the world in 2015. duction in the country will
continue to average 1 million
Colombia also comes in third bpd in 2016 and 2017.

in the region behind Venezu- Crude oil production
started leveling off in 2014
ela and Brazil in terms of oil and 2015 after seeing rapid
growth between 2008 and
production. Production of oil 2013, and a drastic drop in
output would eventually re-
and natural gas in the coun- sult in the country starting to
import crude oil by 2022. The
try saw dramatic growth after lack of sustainable reserves is
all the more exacerbated by
regulatory reforms enacted the fact that Colombia has
had problems attracting for-
in 2003 led to increased ex- eign investment into the sec-
tor, with its rugged terrain,
ploration and development the rebel attacks on pipe-
lines, and lack of transport
by foreign investors in the

oil and natural gas sector.

However, despite continued

exploration and announce-

ments of oil discoveries,

there are estimates that Co-

lombia had 2 billion barrels

of proven crude oil reserves Image: National Hydrocarbons Agency (ANH)

at the end of 2015, down 5.6% Better days are ahead for Colombia’s
energy supply after a year of droughts,
from 2014, and local officials security threats, and falling oil
production.
estimate that the current re-

serves will only last about

six more years. The Andean

nation produced an average

of 904,000bpd in May, the

Mines and Energy Ministry

58 THEBUSINESSYEAR COLOMBIA 2016

infrastructure posing as barriers to invest- velopment of the sector. However, production ENRIQUE *Read the full interview at thebusinessyear.com
ment. In June, the head of the oil industry’s has been falling since 2012 and the country is SISTIVA
union said Colombia will need about $7 bil- expected to lose its self-sufficiency in 2017. In VARGAS
lion in investment annually over the next 10 January the head of state-owned oil and gas
years to boost oil exploration and production. company Ecopetrol said Colombia will begin General Manager,
The oil industry, however, expects investment importing 39 million cubic feet per day (mcfd) Proquimsa
of $610 million for exploration and $3.2 billion of natural gas from neighboring Venezuela to
for output in 2016. In 2015, Colombian Presi- meet domestic needs and will negotiate to in- How does Proquimsa differ-
dent Juan Manuel Santos introduced a large crease the level of imports in the future. entiate itself from its compet-
stimulus program to curb the slowdown in itors?
economic growth that, among other things, Most of Colombia’s natural gas production We operate by taking into
will introduce measures to support the min- is conducted by Ecopetrol, Equion Energia, consideration our clients’ ne-
ing and energy industries. In addition, mar- and Chevron. In December 2015 ExxonMobil cessities, as providing personal
ket watchers are hopeful that a permanent announced it had filed for an environmental attention to our client in any
cease-fire between the government and the permit to explore for shale oil and natural gas difficult situation is an obligation
Revolutionary Armed Forces of Colombia in the Middle Magdalena basin in the north. for us. Quality service is a must
(FARC) signed in June will play a large role in Colombia’s regulators outlined the regula- for Proquimsa, and when the cli-
making the country more appealing to inves- tions surrounding fracking in 2015, and if ent is happy, so are we. Quality
tors, security-wise. The deal ended more than the approval goes through it would be the control is particularly high, as it
50 years of armed aggression; local police es- first such project in the country. Gas provid- is a core element of our compet-
timated that between 2000 and 2015 alone, er Promigas Colombia is also constructing a itive advantage that we do not
oil firms paid millions in extortion and ran- gas storage complex off Colombia’s northern compromise. Furthermore, we
som payments to armed groups, FARC rebels coast in preparation for imports of LNG. The have a test plant and labora-
bombed over 1,800 oil pipelines, and as many complex is expected to become fully opera- tory where we investigate new
as 4.1 million barrels of oil have been lost to tional in November 2016 and will be able to materials and new alternative
rebel bombings since the mid-1980s. Future unload LNG and turn it back into gas at a rate processes in order to improve
growth in oil production will require greater of 400mcf a day. LNG imports are expected to our products and strengthen our
exploration and oil discoveries to replenish go some way to make up for the shortfalls in competitiveness.
and increase Colombia’s reserves, along with the country’s energy supply. Gustavo Adolfo
improvements to infrastructure security. Delvasto, Director of Delvasto & Echeverria, What trends have you ob-
which advises the Ministry of Mines and En- served in this sector over
NATURAL GAS ergy, told TBY the new import terminal will be recent years?
a major turning point in the international en- Lubricant consumption in Co-
Average natural gas production in Colombia ergy market, as Colombia’s natural gas market lombia since 1998 has remained
totaled 1.057 billion cubic feet per day (bcfd) is currently isolated from the world. “We are stable at around 42 million
in March, down 0.71% from February’s output planning a similar plant near Buenaventur- gallons per year. Day by day, the
of 1.065bcfd, the energy ministry said. In total, an on the Pacific Coast that is scheduled for industry is designing much more
the country produced 413bcf of dry natural about six years. Then, we will have two plants efficient engines and machines
gas in 2015, while total consumption averaged on both coasts for exporting and for LNG,” he that do not need as much main-
400bcf. Colombia had proven natural gas re- said, adding that the focus for the coming year tenance as they did in the past.
serves of nearly 4.8tcf at the end of 2015. Nat- will be to connect the plant in the Caribbean In addition, the quality of lubri-
ural gas production, like oil production, had to international markets. Delvasto also not- cants (synthetics) are improving
been on the rise in the last few years due to ed the government is investing in developing continuously, prolonging the life
increased investment in exploration and de- networks for distribution of natural gas across of the lubricants and therefore
the country through pipelines and urban net- lowering consumption. Another
ELECTRICITY GENERATION (GWH) (2013) works, working with distribution companies negative factor has been the
such as Fenosa, EMP, and SURTIGAS to col- illegal lubricant market coming
SOURCE: INTERNATIONAL ENERGY AGENCY‌ laborate on the expansion of networks and in from other countries. This
public service of natural gas. illegal competition is penetrat-
<1% Wind ing into the formal markets by
10% Coal RENEWABLES offering lower quality products
and lower prices.*
1% Oil Colombia is currently heavily reliant on hy-
dropower; of the electricity generated in the
18% Gas country in 2015, hydroelectric plants account-
ed for 70%, followed by natural gas (12%), coal
3% Biofuels (7%), petroleum (10%), and other sources.
Renewable energy, tellingly, makes up just
68% Hydro 0.1% of total energy generation, compared to
11.4% in Chile and 6.2% in Peru. Months of a
devastatingly strong El Niño phenomenon left
large portions of the country suffering from
extreme drought, draining the country’s sub-

Energy & Mining THEBUSINESSYEAR 59

stantial hydroelectric capacity and leaving the make the Colombian energy supply more reli- LNG imports are
country vulnerable. Colombia has been forced able and cost effective. Mauricio De La Mora, expected to go some
to evaluate its energy security and look toward President of the National Hydrocarbons Agen- way to make up for
developing wind, solar, and other non-hydro cy (ANH), noted in an interview with TBY that the shortfalls in the
renewable sources of power. The country is Colombia has to find a way to increase pro- country’s energy
blessed with many non-conventional energy duction and make room for unconventional supply.
resources like solar, wind, and biomass. The energy. Colombia has had close cooperation
department of La Guajira was identified as with the US in this area and was in the process
having great potential in wind energy, esti- of signing a MoU with Canada, he said.
mated to have average annual winds speeds of
up to 10m per second, one of only two regions Wind and solar energy have not yet
in Latin America with winds of this speed. The caught on fully in the country due to their
country as a whole also has a daily average less-than-competitive rates and the historic
solar radiation of 4.5 to 5kWh per sqm. There lack of recognition of the benefits of renew-
is also a positive outlook for biomass energy able energy generation. In addition, there are
production, as the country produces large few companies with the financial and techni-
quantities of agricultural and forestry waste, cal capabilities to assume the high initial costs
has a professional and sophisticated agricul- of renewables projects, especially given that
tural sector, and plenty of expansion capital there has been little government support for
available. In 2014, Colombia adopted a New such ventures. Encouraging broad develop-
Renewable Energy Law in an attempt to make ment of renewable energy could go a long way
better use of and adopt renewable energy and to address Colombia’s energy supply con-
cerns in the long run. ✖

60 THEBUSINESSYEAR COLOMBIA 2016

INTERVIEW

pump IT

TBY talks to Rubén What have been your main ac- ways to the economy in order Trade association
Darío Lizarralde, to provide a more sustainable created in 1988
President of tion lines since being appointed system of growth to Colom-
Campetrol, on bia. We are trying to change Aims to point out
production rates, what president of Campetrol in 2014? the conception of the unique problems and
oil and gas contributes exclusivity of the oil sector. offer solutions for
to the economy, and I have worked primarily on the oil sector
competition in the two fundamental aspects. How can the oil sector contrib-
sector. The first of these is to show ute to the Colombian economy Sees oil
the country the importance with other alternatives? exploration as an
BIO of the future of oil, as it rep- Campetrol has shown to the obligation
resents around 50% of the Colombian government and
Ruben Dario Lizarralde is country’s exports and over ministries how the oil sector such volatility in oil prices, it
the President of Campetrol. 25% of its tax revenues. It is a could help other sectors to is difficult to boost the sec-
He completed his master’s sector that positively impacts create a more stable econo- tor. Companies are currently
degree in management the country’s economy, even my. We think about the future, experiencing difficult times,
from the University of Miami with the currently low prices because oil will eventually dry struggling to survive while
and a course in senior facing the oil sector. The oil up and Colombia should not trying not to diminish pro-
business management sector is the largest exporter in miss the opportunity to devel- duction. It is a complex situ-
at the Business School the country, which is why it so op alternative sectors while we ation for companies and the
(Inalde) of the Universdad directly impacts the economy. still have this natural resource. sector on its own, because in-
de la Sabana. In 1977, he Depending on the flows of for- Some of these alternatives in- vestments have been cut and
became a manager and eign currencies, the economy clude the agroindustry and many people have lost their
administrative director has the opportunity to grow industrial sectors. We have jobs in regions where the oil
of the Corporación through exports and the level shown to regional govern- sector is the only econom-
de Ahorro y Vivienda of foreign currencies. From ments how the oil sector could ic prospect. Some measures
(Colmena) and, in 1981, was my point of view, the oil sector directly contribute to the have been taken, and Cam-
appointed administrative was and is a somewhat dor- development of industry in petrol has aims to help the
vice president of the mant sector despite its already Colombia; we are focused on sector. We have convinced oil
Federación de Aseguradores important role in Colombia’s that and if we do not strength- companies of the repercus-
Colombianos (Fasecolda). economy. en the economy, we will find sions of their decisions and
Later, he served as Deputy ourselves in a risky position. how the falls in oil production
Minister of Economic What level of growth in produc- Colombia has missed several affect everyone. It is the main
Development and, in 1982, chances to start this process, business chain of the country
he was made administrative tion has the Colombian econo- but there are still opportuni- and connects the economy
vice president of the ties to do that. with society. It is a challenge
Compañía Colombiana my seen over the last few years? that we face with the current
Automotriz. He served as How could the peace agreement production decrease. ✖
the Minister of Agriculture There were some policies boost the oil sector?
and Rural Development undertaken a few years ago This is a crucial issue for de-
from 2013-2014. that have contributed to the veloping the oil sector, be-
strengthening of investment cause many remotes areas
in the oil segment in the econ- where guerrillas are present
omy and that has spurred have not been explored by the
production up to 1 million oil industry. We have to give
bpd. This process started in more importance to regional
the last years of Pastrana’s authorities and public enti-
government to impress the ties, and we have to strength-
intermediate companies, and en them in those regions. We
the production level over the need to further institutional-
past decade has risen from ize Colombia, and oil can play
nearly 600,000bpd to around a significant role in doing that.
1 million bpd. That increase
in production generated more How competitive is the oil sec-
income for Colombia; how- tor in Colombia and what steps
ever, the country should have is Campetrol taking to face this
administrated this ideal con- difficult scenario?
dition to boost other indus- In these kinds of scenarios of
tries, which unfortunately did
not happen. Since I arrived at
Campetrol, we have tried to
demonstrate how the hydro-
carbon and oil sectors could
have contributed in different

Energy & Mining THEBUSINESSYEAR 61

INTERVIEW

INCREASING
integration

TBY talks to Mauricio tegrate Colombia into the Oil measures in order to reduce
De La Mora Development Program, which government take for frontier
Rodríguez, Former seeks to reduce poverty with areas. Finally, the time-con-
President of National resources from the sector. scious and efficient processes
Hydrocarbons Agency refer to the optimized licens-
(ANH), on promoting What were the results of the ing times.
investment, gaining
knowledge of offshore Baker & McKenzie study for the What are your expectations for
activities, and the the near future?
short-term outlook. ANH to boost competitiveness? We have been able to promote
more than $1.2 billion in in-
Promoted over We identified four major ar- vestment. In the short term
$1.2 billion in I am satisfied with what we
investment eas that could definitely be have done to ensure that oper-
ators will carry out their oper-
shore activities, enhanced oil improved. These include ations correctly. Our team has
recovery (EOR), and coal bed been recognized by the indus-
methane (CBM). There are improving prospectivity, try. The President of the World
only a few individuals in Co- Bank claimed that Colombia
lombia lucky enough to have strengthening the ANH, mak- is the most-prepared country
had exposure to these areas for the drop in oil prices. The
in previous roles. We need ing economically attractive country has adjusted well to
help from countries that have the current situation. ✖
extensive experience in these projects, and encouraging
areas, so we went to Australia, BIO
which was the first country to time conscious and efficient
introduce CBM, and we have Mauricio De La Mora
just signed an MoU for CBM processes. The first on the list Rodríguez received a
regulation development. To degree in petroleum
What is the ANH doing to pro- gain more knowledge about was the quality of our geolog- engineering from the
offshore activities we have University of America and
mote investment in the offshore signed agreements with the ical and geophysical (G&G) a master’s in hydrocarbons
governments of both Australia industry management
segment? and the UK. For unconven- information. In the past this from the Viña del Mar
Article 28 of the PND and tionals we are in the process University. He has more
Agreement 2 of 2015 allowed of signing an MoU with Cana- information would only be than 26 years of experience
equal time conditions for off- da, and we have had close co- in the hydrocarbons
shore contracts awarded by operation with the US in this provided when an operator or sector. Rodríguez has
2014. That means the period area. For EOR we are learning served in key areas such
of exploration and produc- from Canada and the US. Fi- other party expressed interest as drilling production,
tion for all offshore contracts nally, we have requested that optimization, transport,
became nine and 30 years, the government of Norway in- in acquiring a specific block. reservoir engineering,
respectively, while before it and new ventures. He has
was six and 24. On the oth- We realized that we needed to held senior positions in
er hand, in a joint effort with companies like BP, GHK
the Ministry of Mines and increase our prospecting ef- Oil & Gas, Mercantile, and
Energy we are preparing to Interoil. He is the Former
draft technical regulations for forts by providing more G&G President of ANH.
offshore activities, which we
hope will be adopted by the data on a permanent basis. At
Ministry in early 2016. Finally,
the government issued new the same time we will provide
rules allowing the declaration
of tax-free zones for offshore investors with four additional
exploration and production
activities, which significantly ingredients: an environmen-
reduces the rate of income tax
and provides benefits for sales tal baseline, infrastructure
tax and tariffs.
information, a social base-
How important is the develop-
line—as there are some com-
ment of unconventionals for Co-
munities that are opposed
lombia’s oil industry?
We have to find a way to in- to the oil business and other
crease production and make
room for unconventionals. communities that are far more
We need help in four main
areas: unconventionals, off- supportive of it—and secu-

rity information. As for the

strengthening of the ANH, our

market strategy will be based

on two central elements: a

custom service approach in

accordance with our custom-

er segmentation model, and a

mixed and permanent licens-

ing model. Regarding eco-

nomically attractive projects,

our advisors recommend us to

make adjustments to explor-

atory programs for onshore

frontier areas and increase

competitiveness through po-

tential adjustments to fiscal

62 THEBUSINESSYEAR COLOMBIA 2016

INTERVIEW

leading the
COMPETITION

TBY talks to Manuel What were the market factors solidate the JC valves and the • Imports and
Fermin, Director of high-pressure cylinders we commercializes
Confervio Agregados, that led to the establishment of commercialize through these valves
on transferring projects. In this context, we • Founded in 2012
knowledge into Confervio Agregados in Colom- have certified all our products
the country, the and represented products in How has the devaluation of the
devaluation of the bia? Colombia, something that has peso affected the company?
peso, and factors of been a challenge in itself due to It has had an impact on our
success. The political, economic, and the fact that if you do not pro- business. We import prod-
security situation in Venezu- vide certified products, you are ucts from China, the EU, and
BIO ela pushed us into Colombia, not competitive in this market. the US. Consequently, the
where we set up Confervio depreciation has generated
Manuel Fermin was born in Agregados. Additionally, we What are the main factors be- unexpected extra costs. How-
Asuncion, Margarita Island have to keep in mind that secu- ever, we must be constant
on November 1, 1965. He rity levels in Venezuela are far hind your success? and continue with our busi-
graduated from the Central from optimum. Colombia was Our experience in the oil in- ness consolidation. This is our
University of Venezuela and is a booming economy in dustry has been one of the key main business objective along
in Caracas in 1990 with a which the oil sector has yet to elements in our success. Also, with the diversification of
degree in public accounting. reach its full potential. We see despite the large number of our products and customers.
Later, Fermin specialized the opportunity to transfer all players in the sector, there are With time, we can produce
in finance and ABC-Cost our knowledge and experience segments in it in which there high-technology products
Systems at the Instituto in this sector into Colombia. is still not much of an offering, in Colombia, something few
de Estudios Superiores Arriving in this country and such as valves. In this context, companies already do in the
de Administración, starting from scratch was a big we have been very competi- industry.
receiving a post-graduate challenge because the cultur- tive with delivery dates. I think
degree in 1994. He has al and sector differences are that our quality and certified What are some of the other
served in management palpable. In fact, Venezuela’s products have also contribut- competitive advantages of Co-
positions in major oil and oil reserves are larger than ed to our rapid expansion. It lombia?
petrochemical companies, Colombia’s. However, it was is also increasingly in demand Having access to the sea is
such as Venezuelan PDVSA, a great learning experience for suppliers to have certified a competitive advantage for
Pequiven, CORIMON, and pushed us to diversify our processes. Confervio got its any country. Both Colombia
PRALCA, and other service business portfolio, targeting processes certified last year. and Venezuela, for example,
and construction companies other industries such as ce- Our success and consolida- have access to the Caribbe-
in the oil sector. ment. tion will most likely be based an Sea. However, Colombia
on companies considering our also has access to the Pacific
What industries offer the highest products for their engineering Ocean, meaning access to the
projects. east and west coasts of the US,
potential for Confervio Arega- Caribbean countries, Europe,
What are the main differences in China, and the rest of Asia. In
dos? Colombia, import and cus-
doing business in Colombia and toms clearance procedures
The food and beverage and are also much faster and more
the cement industries are our in Venezuela? organized than in other neigh-
two top priorities right now, Legal security levels in Colom- boring countries. ✖
and we put in great effort into bia are much higher; Colom-
entering and consolidating bia has reached high levels
our activity there. In fact, we of finance and legal security
manage concrete production thanks to the strengthening of
plants in Venezuela and we its finance and banking sys-
aim to do the same in Colom- tems. For example, there is
bia. We currently have two more certainty to get your in-
offices, in Bogotá and Cart- voices paid within the terms
agena. We will be opening a agreed in Colombia. The bu-
new office in Villavicencio and reaucratic burdens or steps
Barrancabermeja. This move toward registering businesses
is aimed at participating in are faster and much more or-
two key projects; the expan- ganized in Colombia as well.
sion of the Barrancabermeja
refinery and the construction
of the Meta refinery. We have
the aim to introduce and con-

Energy & Mining THEBUSINESSYEAR 63

VOX POPULI

UPSTREAM
ACTIVITIES

For companies in Colombia focused on
upstream activities, 2015 was a highly
successful year, and this year is poised to
be just as fruitful.

The content on this page is taken from exclusive interviews. Read the full versions at thebusinessyear.com CAMILO PRIETO W e have a new project to develop a refinery in a RICARDO ANDRÉS
southern province of Colombia in the coming SARMIENTO B.
General Manager, months. We are still working on that, and it is
Discovery Energy an interesting opportunity to transfer all the vertical inte- CEO, Estrella
gration from the oil products directly to more sustainable International Energy
F inancially speaking, products, such as gasoline and diesel for generation in a Services
2015 was a difficult downstream project. We are working in parallel with the lo-
year for us as well as cal government and national government to combine forc- I n 2015, the compa-
the whole oil and gas sector due es on this next project. We are expecting it to be ready in ny performed well
to the fall in oil prices. The vol- two years. We are currently looking for new blocks and pros- despite the crisis in
atility of prices has driven many pects for exploration and production. The Putumayo area is the oil industry. In addition to
companies to cancel projects the most important for us in the country, where we already Colombia, Estrella also has a
and investments in Colombia have two blocks, one on our own (in YD-PUT-1 Mompos footprint in Peru and Argentina,
and worldwide. This situation has a 100% working interest) and one in partnership with where the company was found-
has directly affected the opera- Petro Caribbean. We are working on different strategies to ed. We had a good performance
tion of the rigs that we operate continue exploration and work on buying projects for pro- until the middle of the year, after
for our clients. Operationally duction. Because reserves are low, it is a good opportunity which point we started feeling
speaking, we had a good year in for future profits if we invest now. the consequences of the fall in
terms of the QHSE, non-produc- oil prices, especially in Colom-
tive times, and overall perfor- MARIO bia where the activity dropped
mance. We managed to change ZAMORA S. suddenly. We had good activity
the cost structure of our projects until nearly October, then a bit
with many clients while main- CEO, Mompos Oil more activity at the end of the
taining our existing contracts year. 1Q2016 was not particular-
and even signing some new MARCELA VACA TORRES ly bad thanks to activity carried
ones. The change in oil prices over from 2015; however, the sit-
in 2015 was critical and was the Director, GeoPark uation has become critical since
primary topic of conversation then. There has not been any
among all of our clients and sup- activity in the last few months.
pliers. Everybody was trying to Ecopetrol, the company that
predict the price, but the volatil- moves the market, recently re-
ity was unpredictable. The most started activity with five rigs.
important factor was ultimately There are some small and me-
the project. dium players that are active, but
larger companies have essen-
tially stopped.

A fter completing our 2015 drilling pro- We successfully drilled, completed, and tested
gram successfully, we reported three the wells and started extended production with
new discoveries. Our production by virtually no interruptions. Construction of fa-
cilities started early during the 2015 program,
the end of the year was approximately 34,000 always assuming exploratory success. We have
a modular investment program that allows us
barrels gross, nearly 13,000 barrels over the to increase or decrease the activity based on oil
price behavior. Currently we are in a scenario
previous year. It was a successful year in terms in which we have estimated one development
well, one exploratory well, and we could be
of discoveries and reserve booking, yet not one drilling.

with the highest investment. We invested in

facilities for the discoveries made in 2014. We

had four wells, two exploratory wells and two

appraisal wells, which are all producing now.

64 THEBUSINESSYEAR COLOMBIA 2016

FOCUS REFINERY

REFINED TASTES

The Refinery WIDELY REGARDED as the most advanced to 0.6%. One of the technologies that has been
of Cartagena implemented at Reficar is a fully automated
(Reficar), which refinery in Latin America, Reficar’s rejuvena- scheme, involving several hundred kilometers
was modernized tion will shrink the growing trade deficit the of fiber optics, which will provide reliable and
and opened in late country has been suffering from since the fall in real time information to the managers of the
2015 after nearly 10 oil prices. The refurbished Reficar has a refin- plant, helping to optimize its performance.
years of work, will ing capacity between 80,000 and 165,000bpd,
strengthen Colombia’s and according to the US Energy Information One of its unique characteristics is the Naph-
downstream muscle Administration, Colombia consumes roughly tha Hydrotreating Unit. The unit removes sul-
and boost the national 300,000 million barrels per day. The Minister of fur from gasoline to deliver clean fuels. This
oil industry. Finance, Mauricio Cardenas, is therefore con- unit is unique to just five refineries in the world.
fident that Reficar’s contribution could reduce Another advantage is the plant’s flexibility to
the budget deficit by between $1 billion and process about 150 different types of oil, which
$1.5 billion a year. will bring a wide array of revenue streams to
the refinery. Among those types of fuel, one
The quality of Reficar’s products and its loca- of the most relevant will be the production of
tion in Cartagena make the refinery a competi- petroleum coke, a solid fuel used regularly by
tive addition to the oil and gas landscape. The the cement and electricity industries. Reficar is
refinery will also have a significant impact on forecast to generate 75 million tons of this fuel
propelling the local oil industry and the nation’s a month, a segment of what the plant will be
GDP. According to the Ecopetrol, the owner, the manufacturing in total.
refinery could spur GDP annual growth by up

LATIN AMERICA’S MOST ADVANCED
REFINERY PROVIDES A WIDE RANGE OF
PRODUCTS TO SUPPORT AND DEVELOP
COLOMBIA’S DOWNSTREAM SECTOR.

WAT E R
supplied by
Aquas de Cartagena
(ACUACAR)

NATURAL GAS
supplied by Promigas

85%
domestic crude
15%
imported crude

Capacity from
80,000bpd to 165,000bpd

Energy & Mining THEBUSINESSYEAR 65

Reficar is being welcomed by the plastics in- companies that were involved in the project.
dustry, which is in need of development along Inexperienced contractors, lack of planning,
the Colombian Caribbean coast. The General delays, strikes, and other unexpected factors
Manager of Reficar, Reyes Reynoso, pointed out plagued the modernization project from the
in an interview with TBY that the moderniza- start. However, “the project, despite the cost
tion of the refinery is the first phase of consol- overruns, will be profitable. It will produce in-
idating the downstream sector in the Atlantic. come to pay its debt and generate utilities,” said
“With the refinery in operation there will be Reynoso during a press conference.
potential for further industrialization within the
petrochemical industry,” he added. Reficar will be fully operational in 2016,
coming at a crucial time for the Colombian
Nevertheless, despite all its advantages, the economy, with the low commodity prices. Al-
refinery has been in the spotlight after Ecope- though it was designed during a high oil price
trol incurred in a budget overrun of more than environment, “The current pricing for crude
$4 billion, a 100% increase over the original oil provides an even better opportunity than
costs. Costs skyrocketed and Colombians are originally planned,” claimed Reynoso during
now demanding public authorities take re- his interview with TBY, who added that it is
sponsibility for the overrun. time for the industry to “renew business strat-
egies.” “This is a well-managed company, and
The Comptroller General, a public spending my perspective on Colombia’s oil industry in
watchdog, is considering investigating several general is positive,” he said. ✖
Reficar executives as well as some of the foreign

MAIN PRODUCTS
SULFUR
PROPYLENE
NO. 6 FUEL OIL
LPG
HIGH-SULFUR GASOLINE
JET FUEL
DIESEL
MARINE DIESEL

SOURCE: EL TIEMPO PROJECT EXPANSION 31,000ft
165,000m3 structural steel
concrete

640,000m 4.8 million m3
pipe of cables & wires

66 THEBUSINESSYEAR COLOMBIA 2016

INTERVIEW

GROWING • Modern refinery
potential to become fully
operational
TBY talks to Reyes Reinoso, President of Reficar, in 2016
on staying competitive, expansion plans, and • 34,000 workers
direct investment in Colombia.

What are Reficar’s competitive tion networks in Colombia. It be positive for Colombia’s shape to cover our nation-
advantages in the Latin Ameri- is a modern refinery and the future. First, this project was al market. Anywhere from
can refining sector? infrastructure is designed to financed and built in the mid- 20,000 to 40,000bpd could be
Our location and the quality of run with a reliable, real-time dle of the banking crisis, and available for exports, and we
our products makes the Cart- information system that is yet Colombia was still able to could become competitive
agena refinery a competitive in full communication with capture a competitive rate. in the Caribbean and Central
choice versus the Gulf coast the laboratory. This means Honoring bank payments will and South America. Never-
refineries for the Caribbean we monitor flows, barrels send the right message to the theless, our first export cargo
and South American markets. per day, gallons per minute, banking community. We do was aviation fuel that stayed
In addition, Reficar has the temperatures, pressures, and plan to pay on time. Second- in the Caribbean, and there
latest technology and a fully which valves are opening and ly, we believe the banking was a gasoline component
automated scheme incorpo- closing at all times. We can community that helped us at going to the US.
rated into our design. We have gather information about the that time is satisfied with the
over 45,000 instruments and quality of products directly performance of the project What is your short-term outlook
several hundred kilometers from any unit via several on- so far. In this regard, it sends
of fiber optics. By square me- line analyzers. the message that this size of for the Colombian energy indus-
ter, the network is one of the project is viable in Colom-
most intensive communica- How have low oil prices affect- bia. A megaproject of this try?
ed Reficar’s performance given kind has never been under-
BIO that the refinery was designed taken here before, and it has I am optimistic for several rea-
during a high oil price environ- been completed and we are sons. Colombia has grown to
Reyes Reinoso has over ment? starting to produce. With the be a peaceful place to live and
30 years of experience in The impact is positive since refinery in operation there that plays a huge role in the
implementing engineering it is our main raw material. will be potential for further growth of the country. I have
and construction projects The current pricing for crude industrialization within the high expectations about Co-
and commissioning oil provides an even better petrochemicals industry. The lombia, particularly because
refining mega projects in opportunity than originally refinery is the first phase of of Ecopetrol’s potential. We
the US and Venezuela, his planned. Crude oil is usually the downstream sector, which have an economist as our new
native country. Last June, a seller’s market, but we are is followed by the chemical president with a fresh perspec-
he joined Ecopetrol as currently in a buyer’s market. and petrochemical industry, tive, and he is proposing a pro-
manager of the Cartagena There is an opportunity to buy which is waiting for our oper- found transformation of the
refinery with a mission crude from everywhere at a ations to stabilize to proceed. company. The current low oil
to lead the change of the competitive price given the prices are an opportunity to re-
management processes current market. What are your expansion plans new business strategies. When
for commissioning and the prices come back up, we
subsequent operation of the FDI in Colombia has decreased for exports? will be more prepared than
expanded and modernized between 2014 and 2015. How ever. We have made significant
refinery. can Reficar help Colombia at- We have just started testing internal savings with a mini-
tract more FDI? the market. This is novel be- mum affect on our employees,
There are several ways in cause historically we have and we are still making money.
which foreign investment can never exported, and now we This is a well-managed com-
have the opportunity to do pany, and my perspective on
so. We are now also in better Colombia’s oil industry in gen-
eral is positive. ✖

Energy & Mining THEBUSINESSYEAR 67

INTERVIEW

NEW opportunities

TBY talks to Guillermo J. Gamez,
CEO of CTAC, on R&D, the
company’s portfolio, and doing
business in Colombia.

What unique technology does the technology are based on nology can do wonders in Works with
CTAC use? three phases. The first one helping operators make better companies
Our technology is the result of is a remote satellite sensor investment choices, which is a around the world
more than 30 years of investi- followed by laboratory data major step. In 2016, oil com-
gation developed by scientists processing using resonance panies began to rethink their Uses satellite
from Ukraine and Russia and frequencies that allows us to methods. We try to invest 20- technology to
millions invested aiming to detect any undersurface de- 30% of our annual revenues locate natural
help develop the hydrocar- posit that alters the electro- in R&D because we want to resources
bon and mining sectors. Our magnetic field of the Earth, increase our knowledge on
technology is called Oil & Gas which gives rise to anomalies the topic. government is making the
Finding Technology (OFT), of the local type that evidence right adjustments to make it
Minerals Finding Technolo- the presence of the material How large is your client portfo- more profitable and attractive
gy (MFT), and Water-Finding sought. The satellite uses a for investors.
technology, and that is exactly platform that captures elec- lio, and how is it divided?
what it does. In general terms, tromagnetic information from We work maybe 70% in hy- What are CTAC’S expectations
any of these applications of any area of interest around drocarbons, 25% in miner- for 2016?
the world. After that, togeth- als, and 5% in water. Water The energy market has to
BIO er with the client we select research is interesting be- wake up from the lethargy
the most interesting areas cause it is becoming more it fell into as result of low oil
Guillermo J. Gamez is and proceed to fieldwork (the important each day, and prices. It is necessary to start
a mechanical engineer second and third phase). Our our technology can help this again and reactivate the econ-
who graduated from the technology focuses on explor- problem worldwide. We have omy. We are ready to help the
Polytechnic Institute of ing areas where the fluids of the unique capability to find industry to do it faster, more
Volgograd in Russia and interest are detected, unlike fresh water and differenti- cost-effectivly and by taking
earned his master’s in seismic technology, which ate these deposits from salty care of the environment. Next
design internal combustion looks for geological traps or water deposits. We foresee year and the following will be
engines. In 2009, he structures where hydrocar- water as the future, because great for Colombia. The peace
co-founded Advanced bons might accumulate. Like everyday the world is more agreement and the oil prices
Technologies Company complementary methods, concerned about it. In Co- will create many opportu-
Colombia "CTAC SAS." the proposed technology is a lombia, we are trying to help nities for international and
Gamez has more than wonderful tool for the indus- the government control these national investors. In addi-
10 years of experience try and geologists. deposits and explore them tion, the new legislation will
in consolidation of with responsibility. encourage the private sector
technological innovations, How important is R&D for outside the oil and gas indus-
introducing innovations to What characteristics would you try to invest in other sectors,
the market and support for CTAC? which will create plenty of
different branches of the highlight about the sector for in- new opportunities. ✖
mining and energy sectors. The last few years have been of
great importance for our com- ternational investors who want
pany because of the industry
circumstances. As the compa- to invest in the country?
nies in the oil and gas sector The most important thing for
worry for the market situa- international investors in Co-
tion, we find this moment to lombia is how much work still
be an opportunity for change. remains to be done. Colombia
Companies are now trying to has explored and exploited no
think differently and are more more than 30% of the whole
aware of the importance of country’s resources, and the
strategic management. In the level of the entire infrastruc-
last few years, the oil prices ture in downstream is low.
have gone from above $100 Therefore, there are many
to $20, so now everything is new opportunities to develop
possible. Nowadays, our tech- and improve. International
companies can explore new
areas of the country, and the

68 THEBUSINESSYEAR COLOMBIA 2016

INTERVIEW

a critical TIME

TBY talks to William water treatment plants, for Hopes to double What is your medium-term out-
Ariza F., CEO & oil production, industrial and income in 2016 look for the oil industry in the
General Manager domestic water, treatment region?
of Galqui-Tececor, and disposal of special waste, Invested heavily Each market is at a particular
on the company’s tank cleaning procedures un- in Tececor plant point. For example, Mexico
specializations, der work in confined spaces, is currently restructuring its
innovation, and equipment rental storage, Regional oil industry after the Pemex
the outlook for the and mobilization of special expansion years. Pemex provides inter-
future. fluids for the oil industry. ambitions esting challenges in terms
One of our main aims is to of how to increase produc-
In what areas is Galqui spe- send back treated water to dium- to long-term vision, tion levels. The production
cialized? the fields from where it was which needs regular invest- potential is huge in Mexico;
We are a Colombian compa- extracted in order to effi- ment. If the country does not hence, why we have already
ny specializing in oil services. ciently manage the resource. discover a large field within set up meetings with Pemex.
We guarantee operators the next couple of years, the Peru is a completely different
and oil service companies a How does the company invest situation might become crit- field; it has yet to be explored
standardized and efficient ical. and reserves are widespread.
execution of our services. in innovation? Some discoveries have al-
We prioritize customer sat- In water treatment, we have What other industries offer op- ready been made such as Los
isfaction as well as the health improved hydraulic designs portunities for Galqui? Angeles field. Argentina has
and physical integrity of our and have incorporated some We would like to research a some promising fields such
workers, whilst managing the technologies that have driv- new technology process that as Vaca Muerta, which has
environmental impact of our en up innovation in the sec- takes advantage of the tem- great potential.
work. We also focus on the tor. For example, we have perature of residual water
social responsibility we have imported water pumps from above ground to generate What are your expectations for
to the communities where we Japan that generate micro electricity. We have a joint Galqui for 2016?
operate. We specialize in wa- bubbles. This shortens the project with the Universidad We hope to double our in-
ter and waste treatment, en- treatment process as well as Nacional and we are looking come for 2016 after a three-
gineering, and management increases the quality of the for expertise in this particular year period in which we
of plants, as well as other ser- water. We are still looking area. The Rubiales field pro- invested a great deal in the
vices such as design, supply, for new technologies abroad duces about 3 million barrels Tececor plant and its con-
installation, and operation of that would enable us to re- of water and the temperature struction. After that period of
cycle this water and use it in of that water is very high and time, this year we already had
the industrial process it orig- it needs to be cooled before it some positive cash flow and
inates from. This would ben- can be properly treated. This we have high hopes for 2016;
efit companies using large is expensive and our idea is to we have interesting projects
volumes of water, especially increase that temperature in and contracts. ✖
because it would help them order to generate electricity.
to economize in terms of li- We are currently developing BIO
censes. This is already hap- a working team with a Span-
pening on a small scale, but ish company to implement William Ariza F. has 35
we want to start implement- this project. years of experience working
ing it on a much larger scale for service companies
across the entire country. within the oil sector in
Colombia, in areas such
How do you see Colombian oil as drilling, production, and
environment.
reserves in the medium to long

term?
It is critical for the country to
invest in exploration and re-
search, especially taking into
account the important role
that oil plays in the economy.
Colombia has its own sup-
ply secured for at least seven
years; however, there has not
been enough investment in
exploration lately for a me-

Energy & Mining THEBUSINESSYEAR 69

FORUM

GAS, NATURALLY

Not only do good regulations keep the Colombian natural
gas industry competitive, increasing demand throughout the
region and the Americas is providing the sector with all the
necessary fuels.

GUSTAVO ADOLFO NICOLÁS BOTERO LUIS GONZALO

DELVASTO President, Gasnova GÓMEZ GUERRERO

Director, Delvasto & General Manager,
Echeverria Metrogas

The content on this page is taken from exclusive interviews. Read the full versions at thebusinessyear.com W e had a good year in 2015 because, P ropane is a hydrocarbon derived T he natural gas market is com-
despite the oil industry recession from oil. The main producer of petitive as well as regulated. The
in Latin America, gas had a good propane in Colombia is Ecopet- price is regulated, so distributors
year. All the investment projects have con- rol, which manufactures around 90% of its cannot establish their own prices. For this
tinued as planned; one in particular in Co- production. It is possible to get propane in reason, it is essential that we be more effi-
lombia is a large LNG project in the Carib- a natural way or through a refining process. cient and secure a certain number of users
bean Sea, which is led by Promigas and is This hydrocarbon has many advantages, as in order to find a balance between the in-
one of the most important projects in Latin it is a liquid good, which makes it easier to come and the outcome. That is why it is a
America right now. Natural gas is a chain transport and to be compressed. It also gen- business where efficiency is a must. More-
that is dynamizing for the markets. While erates plenty of caloric energy. It has become over, being a public service provider oblig-
the North American oil markets are expand- a formal and regulated market in this peri- es us to provide a reliable offering to our
ing, in Latin America, the price of an oil od that now provides energy to the lowest customers. Natural gas is a key part of pro-
barrel makes it very hard on the companies income classes due to its economic price. viding safe and clean energy. Furthermore,
because Venezuela, Colombia, and Mexico Propane is the main substitute for firewood the respect for the environment makes it an
depend a great deal on these revenues, as and coal, contributing to reduced damage attractive product for users and it can bring
do Ecuador and Bolivia to a lesser extent. In to the environment. We mainly distribute development to the rural areas of the coun-
general, the prices of gas are not linked to propane by tanks or cylinders rather than try that we would like to reach. It is difficult
the prices of oil. The internal market of nat- through ducts. Propane is the third leading to serve those municipalities, because they
ural gas in Colombia has many companies gas in the world for combustion engines in are small places and the transport to reach
that are continuing production, transporta- residential, commercial, and industrial uses. them increases the price. There is a higher
tion, distribution, and commercialization, In my view, propane is in a good position to volume of users from the residential con-
and the government of Colombia has many compete against natural gas. In Colombia, sumption segment, but the total demand is
projects for the natural gas industry. This is propane is currently provided to more than higher in the industrial sector. Natural gas
the scope of our business now: consultan- 1,040 of 1,100 municipalities, and it is used generates plenty of energy and emits less
cy for the government. The main custom- by 3.5 million families. Our main consumers CO2 when compared to carbon energy.
er now is the government, specifically the are households, followed by industry and Natural gas is a cheap energy source, and
Ministry of Mines and Energy. Natural gas hotels. We are trying to legalize its use in new industry could start using us as an ener-
has the most potential within the energy industries such as transport and the food in- gy source for many of its processes. Many
market because there is high customer de- dustry, where it is mandatory to use this gas companies in Colombia are creating au-
mand, but suppliers do not have sufficient because its zero CO2 emissions avoid envi- to-generation plants to supply energy and
gas production to meet these needs. ronmental pollution. cover their necessities.

70 THEBUSINESSYEAR COLOMBIA 2016

INTERVIEW

TBY talks to Federico all the
Echavarria, RIGHT
advantages
Country Manager
of AES Chivor, on
diversification, the
effects of El Niño, and
the legal framework in

Colombia.

AES Chivor’s reservoir to get through the which is a key component for a well-known international
hydro facilities end of El Niño. We have cer- the development of non-con- company that will bring its
located in eastern tain obligations with the mar- ventional renewable energy. know-how while respecting
basin of Colombia ket, and we have the capacity We hope that we can make the skills and knowledge of the
and the water storage needed new investments in Colombia local people. This is an excel-
How does the lack of water af- to make sure that we are able in energy storage. The country lent demonstration of Colom-
fect consumers in Colombia? to comply with all of our ob- is also promoting wind and bia’s openness to foreign in-
Fortunately, some proac- ligations beyond El Niño. We solar energy through chang- vestments and both local and
tive distribution companies are already used to this effect ing regulations, which will international companies. ✖
signed contracts five years because it happens every four create opportunities that we
ago with fixed prices. The to five years. We endured ex- can develop in the future. BIO
contracts market ultimately tensive rationing in 1992 and
affects the end consumer, and 1993, and we structured the How attractive is the current Federico Echavarria has
because distribution compa- sector to prepare the country legal framework for foreign in- been the General Manager
nies signed contracts well in for this type of event. vestors to invest in the energy of AES Chivor in Colombia
advance there has been a min- sector? since February 2009. Prior,
imal impact on citizens, even What stands out about the Tun- One of the advantages of Co- he was the Vice President
though there was a significant jita plant, which will become op- lombia is that it has a strong for North America Business
increase in prices on the spot erational later this year? commitment to private invest- Development. In 2007, he
market. There are some com- Tunjita is unique because it ment and welcomes foreign was the Vice President of
panies that have more expo- takes advantage of existing investors who can compete North America Central,
sure to the spot market and infrastructure and the water under the same conditions as responsible for overseeing
it could have some impact; resources of Chivor, so we the local competitors. the operation of the AES
however, the structure of this are able to produce addition- Plants in Oklahoma,
sector puts a ceiling on the al energy. The project is in its What are your views on the pri- Texas, and Mexico. He has
impact so that they are pro- final stage of construction and vatization of Isagen for the sec- also previously served
tected. we expect to complete it by tor? as General Manager
the middle of 2016 and start The government investment of Merilectrica, a local
How will El Niño affect your op- producing in the second half in Isagen was reaching a ma- thermal generator, and
erations in 2016? of the year. Construction has ture stage, to the point where the Head of Investment
We are prepared, and it is part taken about four years be- there was no significant dif- Banking at Corfinsura
of our risk management pol- cause we need to make sure ference between the role of (now Bancolombia), a local
icy. We need to ensure that that the impact of the current the government and the role private financial institution.
we have enough water in our operation at Chivor is at a of the private enterprise, so He is an industrial
minimum. the government decided the engineer and obtained his
money could be better in- undergraduate degree from
Is Chivor planning to diversify vested in other sectors of Universidad de Los Andes
and invest in other kinds of en- the economy, particularly in and holds an MBA from
ergies? much-needed infrastructure. Harvard Business School.
AES in general is very enthu- That was the reason why the
siastic about diversifying its government privatized Is-
energy portfolio. Currently we agen, which was very success-
are leaders in energy storage, ful, and it was able to sell it to

Energy & Mining THEBUSINESSYEAR 71

RENEWABLES FOCUS

CLEANING In order to meet that goal, there are in course three important
COLOMBIA wind park projects developed by the company that will produce
474MW. The Director of the Ministry of Energy’s agency UPME
For Colombia, clean energy is the lynchpin (Unidad de Planeacion Minero Energetica in Spanish), Jorge Va-
of its efforts to offset El Niño and meet its lencia, said in a congress that these projects will be developed in
environmental goals. La Guajira because it is the area with the biggest potential for wind
energy.
ACCORDING TO THE NATIONAL ASSOCIATION of Ener-
Solar power is also yet to boom in the Andean country. Due
gy Generators (Acolgen), hydropower is the most developed clean to its location in the equatorial zone, Colombia has interesting
energy in Colombia. But every three to eight years the country is prospectives. Recently, companies such as Energía del Pacífico
hit by “El Niño”, which is characterized by severe droughts. This (EPSA) invested more than COP1.24 billion in the construction of
impacts directly the performance of hydroelectric plants, and that the largest solar energy laboratory located in the municipality of
is why Colombia is beginning to explore other energy sources. Yumbo. “This lab was created to try to reduce the carbon trace, to
develop applied investigation of renewable energy and to lead the
Colombia submitted its new climate action plan to the UN national change in these kinds of incentives,” pointed out General
Framework Convention on Climate Change (UNCCC). Manager of EPSA, Oscar Ivan Zuluaga.

The largest expectation is focused on wind energy. These days, Another energy that has potential to grow is geothermal. The
in Colombia there is only one wind plant located in La Guajira; Colombian Institute of Electrical Energy and the Latin American
a pilot project with a nominal power capacity of 19 MW, which Energy Organization have identified three potential areas for this
represents only 0.4% of Colombia’s estimated potential power. In source at Azufral in Nariño Department, Cerro Negro-Tufiño in
addition, a recent report by the Colombian Ministry of Mines and Nariño, and Paipa in Boyaca. However, geothermal energy in Co-
Energy assures that in 2018, Colombia will be generating 3,000MW lombia remains in its infancy.
by wind energy alone.
Biomass has a high potential due to Colombia’s extensive ag-
ricultural industry. Biomass is made out of natural residues such
as banana, rice, coffee pulp, and animal waste. Biomass barely
represents 0.1% of the current electricity production, a very small
figure although it can be totally altered in the following years due
to its estimated power generation of 16 GW per year that can be
applied for thermal and electrical usage. ✖

72 THEBUSINESSYEAR COLOMBIA 2016

Coal mining represents a significant portion of the country’s mining
sector, with coal and gold being the major players in the sector.

Review M I N I N G

TUNNEL ON

Colombia’s mining sector is one that is largely In 2015, Colombia was the fifth-largest coal
untapped, yet it has the chance to play a sig- exporter in the world, when thermal coal exports
nificant role in the country’s economy in the rose by 7.6% compared to the year before to 80.64
future. Colombia has large reserves of coal million metric tons.
and gold, as well as a number of other min-
erals and rocks. For the past few years, the coal reserves, which is the largest in the South
government has been pushing to increase for- American region. In 2015, Colombia was the
eign investment in the sector and has issued fifth-largest coal exporter in the world, when
thousands of mining licenses. More recent- thermal coal exports rose by 7.6% compared to
ly, with the signing of a ceasefire with FARC, the year before to 80.64 million metric tons. Co-
places that were once dangerous for mining lombia’s main export markets for coal are the
companies, or would have high exportation Netherlands, which imported 17.495 million
fees, will soon start to become open to foreign metric tons and represented an 11% increase
activity. The private sector carries out 100% in YoY terms, Turkey, which imported 11.561
of activities in Colombia, with the main for- million metric tons and represented a 24% in-
eign investors being Drummond, BHP Billiton crease in YoY terms, the US, which imported
Glencore, Amcoal, and Rio Tinto, which has 6.356 million metric tons with a 17% increase
carried out large-scale exploration projects in YoY terms, and Brazil, which imported 6.121
across the country. Even though the mining million metric tons representing a 13% increase
sector is relatively untapped, it still contrib- in YoY terms. While many export markets saw
utes a significant amount to the economy. In increases, some countries saw significant
2013, it paid $1.2 billion in taxes and royalties drops. The UK saw a 32% fall in imports of coal,
and represented 2.1% of the country’s GDP. falling to 4.187 million metric tons, and Chile
And while in some countries the sector has a saw a 23% drop in imports to 4.424 million met-
poor reputation, in Colombia communities ric tons. Most of the coal heading for foreign
are quite welcoming of mining companies. In markets went through the Puerto Bolivar export
2015, an independent survey was carried out terminal. Owned by Colombia’s largest thermal
by Brújula Minera in which it found that 73% coal miner, Cerrejon, the port moved 32.864
of the people surveyed in the mining regions million metric tons of coal, which was a slight
believed that mining was a positive thing for fall compared to 2014 by 3.8%. However, Puerto
Colombia. One of the reasons for this could Drummond saw a 27% increase in YoY terms to
be the fact that the sector employees around 27.756 million metric tons while Puerto Nuevo
1 million people, both directly and indirectly. saw a 7% drop to 16.622 million metric tons
However, while there are many positives, the according to data released by Colombian ship-
sector can still have a negative environmental ping agent Deep Blue.
impact on the country; the worst offenders for
this are informal or illegal mining operations. Along with being a major exporter, Colom-
bia is also home to one of the world’s largest
COAL mines, the Cerrejón mine. Operated by Car-
bones del Cerrejón Limited, the mine covers
The coal sector is one of the most developed an impressive 69,000ha and is divided into
segments of the mining sector in Colombia. three main areas: Cerrejón North Zone, Cer-
According to BP Statistical Review in World
Energy 2015, the country had 6.7 trillion tons of

Energy & Mining THEBUSINESSYEAR 73

rejón Central Zone, and Cerrejón South Zone. the WCA, the CMA will be able to tap into glob-
The mine is estimated to contain 5.24 billion al best practices and knowledge to help create
tons of coal. To help reduce the environmen- a sustainable coal mining sector. In addition,
tal impact of the mine, Carbones del Cerrejón the CMA will be able to use the WCA to help
Limited has turned to Australian company create partnerships and new lines of business.
Pacific Environment to help to control the en-
vironmental impact of the mining activities GOLD
and facilitate improved safety, sustainability,
and production. Being an open cut coal mine, Colombia represents one of the largest An-
it has the potential to expose local commu- dean gold producers; however, the segment
nities and the surrounding environment to has a considerable problem with illegal min-
significant amounts of dust and air pollution. ing. In August 2015, it was estimated that 80%
Carbones del Cerrejón Limited hopes to use of all gold mining in the country was illegal
Pacific Environment’s EnviroSuite technology and equated to a $2.5 billion industry. Illicit
to implement cloud-based technology at the miners are present in 233 municipalities and
mine. It is hoped that by centralizing data the have caused the destruction of 16,784ha of old
company will be able to better monitor the im- growth forest and contaminated 19 rivers. In
pact the mine has. The technology will also be July 2015, President Santo unveiled a new plan
able to map the mine and analyze and identify to tackle the problem, including fresh mea-
dust concentration so that problem areas can sures in the fight against rebel forces, which are
be specifically and efficiently tackled. Air qual- thought to be the main cause behind the illegal
ity will be monitored through the mine and the mines. President Santos also allowed a period
surrounding area and the data will be collected for miners to “come clean,” whereby illegal
for analysis. As a major international mine, the mines could file for licenses and begin paying
pressure to produce results when combating taxes as well as carry out environmental impact
the environmental impact of mining activities studies. For those miners that remain illicit,
can be high, which this new system is expected new, more severe criminal penalties have been
to provide. brought into place to combat the issue. Along
with the financial and environmental impact,
In April 2016, the Colombian Mining Asso- rebels behind the mines are thought to have
ciation (CMA) announced that it was to join displaced up to 200,000 people in 2013 alone
the World Coal Association (WCA), which is from their homes as a result of being caught in
the global network for the coal industry. The the crossfire.
CMA represents close to 92% of the nation’s
coal mining production as well as the explor- On the legal side of mining, things look
ers, producers, and providers of goods and bright. Gran Colombia Gold Corp, the coun-
services related to the mining sector. One try’s largest gold producer, announced that
of the main tasks of the CMA is to facilitate it had hit its targets for 1Q2016 by producing
knowledge transfers to its affiliates and work 31,489 ounces of gold, up 4.8% on 4Q2015 and
on improving the sector in its technical, envi- up 31.4% on 1Q2015. This means that the com-
ronmental, and social capabilities. By joining pany is on track to meet its yearly target of be-
tween 120,000 and 138,000 ounces of gold. ✖

BRYAN JABBA

General Manager, Austin Ingenieros Colombia

*Read the full interview at thebusinessyear.com What are the main projects that the company is What is your outlook for Colombia’s mining
currently involved in here? industry?
One of the largest projects we are now involved in is Overall, 2015 was difficult and we expect 2016 to be
the repair and maintenance work for various mines. similar. Coal prices have been stationary and that is
Capital expenditure is difficult for companies and our main commodity. The other commodity we have
they are keen to maintain their existing machinery in Colombia is nickel, and that is beating coal. Ulti-
rather than buy new equipment. We largely focus on mately, we need to move according to the market
the port project because it is part of our relationship in Colombia. For 2016, our focus is to increase our
with an existing customer. How we develop the com- participation in Colombia from our current 35-40%
pany will depend on how many projects we get in market share to around 50-55% for the different
this field. Depending on how the mining sector per- sectors we operate in. Our focus for 2016 has to
forms, we are also looking to build a new facility and be to keep our current work in the various mining
workshop to serve the various mining operations. segments.*

74 THEBUSINESSYEAR COLOMBIA 2016

INTERVIEW

THE
international
STAGE

TBY talks to Oliver Hoelzer, General Manager of Liebherr Colombia, • Established in
on working in Barranquilla, foreign players, and the significance of the Colombia in 2012
country for the group. • Focused on
infrastructure and
Last year was a record year in path, as we expect the Colom- in Bogotá, but even the small- mining
terms of worldwide revenues. bian construction sector will est pieces of equipment for the
How did Colombia contribute, grow, although we will still quarry mines are still quite big. tomers here in Colombia, we
and how was Liebherr’s perfor- focus on mining, as sooner or have been affected. The COP
mance in Colombia? later the picture will change. Why did you decide on Barran- devaluation is affecting our
First of all, Liebherr Colom- quilla as the location for your business and we are afraid
bia covers the mining line of What is the competition like in head office? that the operators in the con-
Liebherr and the construc- Colombia? Have you seen many We started in mining and struction sector, which is cur-
tion equipment, namely mo- foreign players entering the there was no other division rently experiencing a boom,
bile cranes, deep foundation market and competing against that wanted to join Liebherr will decide that this is not a
equipment, tower cranes, and local players? Colombia, so we opted for good time to buy equipment
the maritime division line. We That depends on the product Barranquilla. Barranquilla from Europe, and we expect
are called a mixed-sales com- we are talking about. For ex- is the operational center for customers to postpone pur-
pany. Of course, every division ample, in mining, which is the mining; all the sub-contrac- chases. The COP is the main
performed differently, and as division that I am in charge of, tors are based here. Another determinant of our business
you know, mining has been we do not have unusual play- factor was that Barranquilla right now. Last year our main
experiencing continuing dif- ers. The big four in mining on was close to the mines where sector was civil construction,
ficulties since 2013, but other the excavation side are Cater- all of our equipment was op- while in mining we suffered a
sectors relating to construc- pillar, Ingersoll Rand, Hitachi, erating; it is four to five hours recession with regards to our
tion and infrastructure are and Liebherr. In trucks, there to Cerrejon and to the Cesar sales figures. We had a posi-
performing pretty well. We are a couple more competi- region, which is why we opted tive turnover, increasing it by
want to continue walking that tors, who are mostly Chinese, for this city over Bogotá. 3.4%, but it was not enough
but at this stage they are not as due to the mining crisis as
BIO strong. It is completely differ- How important is Colombia for well as the COP devaluation,
ent in earthmoving, for exam- the Liebherr Group? as our liabilities are in Europe.
Oliver Hoelzer has been ple, where the smaller exca- You cannot just take the fig- Right now, our concern is that
with Liebherr for more vators are Chinese and really ures. If you take the turnover customers will decide to post-
than 15 years. He started strong, but not yet in mining. generated by Colombia versus pone purchases and projects,
out with the company in the turnover of the Leibherr which represents a big oppor-
Madrid, before moving What gaps in the market can Group in total, then we are not tunity for us. We are cautious
on to positions in France, Liebherr help fill? important. But we do have a about how this project will
where he served as group I do not think that there are couple of very important cli- develop in this high dollar and
leader, and later Colombia, any opportunities in the min- ents here that are using our euro environment. ✖
where he currently serves ing market that are not being mining equipment. Colombia
as General Operations tackled by us. The mining is a mining country. There are
Manager. Hoelzer has a market in the country is rath- opportunities on the horizon
degree in international er small, consisting of a few once coal prices improve.
business. mines and contractors, and
that is it basically. There are Has devaluation affected Lieb-
a couple of quarry mines, herr significantly?
and we also have some of our Because we purchase goods
equipment in operation here from Europe to sell to cus-

Energy & Mining THEBUSINESSYEAR 75

B2B

OSCAR MUÑOZ JAIME ZUÑIGA

General Manager, GALINDO

Geocol General Manager,
SIAM

GEO techniques and gained a better market posi-
tion. These days the company’s
Geotechnical companies have been flocking to Colombia for strategy is to diversify our client
the quality and accessibility of its resources. portfolio, as we are still reliant
on the oil industry and 72% of
The content on this page is taken from exclusive interviews. Read the full versions at thebusinessyear.com What geotechnical characteris- cific projects, while at the same nies having closer ties with the our sales come from that sec-
tics does Colombia have? timesharing knowledge regard- communities and discussing tor. Right now we are looking
ing geotechnics. with them frankly the scope of at other markets that look more
OSCAR MUÑOZ Geography in the project and potential im- promising such as infrastruc-
Colombia is very diverse. The What is the importance of en- pacts that may be generated as ture, which will probably be the
country has different rock for- vironmental impact for compa- well as the measures proposed best performing sector of the
mations and that is why we have nies in Colombia? as a solution. It is desirable that Colombian economy in 2016.
to analyze well all the details be- the companies allow the com-
fore starting any project. That re- OM Environmental studies are a munities to take ownership of JZG The company has two busi-
ality makes the road prices more must. If a company wants to de- the project and disclose knowl- ness lines defined. The first being
expensive due to the huge need velop an infrastructure project edge of the potential risks, so with private entities in the hydro-
for the construction of tunnels in Colombia, they need to have that any issues between the carbon, mining, and infrastruc-
and bridges. Colombian geogra- an environmental study. There community and the company ture sector, while the second is
phy is quite complicated. Unlike are many regulations and rules can be solved harmoniously to with government entities. In the
other countries, Colombia is a that have been developed in Co- give security and confidence to first case, we carry out environ-
very mountainous nation and it lombia recently about that sub- communities. mental studies to achieve envi-
is a challenge to develop roads. ject. Public organizations and ronmental obligations, and in the
Nevertheless, companies such institutions force companies What were your main accom- second case to help with regional
as ours have a broad experience to be rigorous with all the nec- plishments last year? studies that allow the government
working in these conditions. essary studies in order to fulfill to make environmental regula-
all legal obligations. Thankfully OM It was a good year, even tion of the areas under study. In
JAIME ZUÑIGA GALINDO Co- we see that demand for these though the oil price went into the last year, we have worked in
lombia has many different kinds studies to develop a project in a free fall. We started the year a more united way with the gov-
of rocks, depending on the re- Colombia has grown. with many new operations, and ernment due to the economic cri-
gion and the kind of project that signed some contracts in the sis caused by the sharp drop in oil
companies want to develop. It is JZG These days the commu- first months. That helped us to prices. Diversification is key, and
not the same to do a motorway nities are very organized and obtain good annual results but we try to approach companies
or a tunnel. When we do not have the knowledge of the ex- there was definitely a slowdown related to infrastructure. In the
control a type of rock, we have ploration and exploitation of in the second half when oil pric- hydrocarbons sector, we have the
agreements with other compa- hydrocarbons, so they are very es plummeted. To cope with the competitive advantage of having
nies that have the necessary ex- distrustful with the information scenario, we decided to reduce equipment featuring the latest
pertise. We work with them and presented to them. Hence the prices to our customers and, technology in Latin-American
they help us develop some spe- importance of new oil compa- thus, became more competitive and highly trained professionals
that allow us to carry out projects
with the same QA/QC standards
of international companies but at
a much lower cost. ✖

76 THEBUSINESSYEAR

81 86 96

Daniella Souza, President Colombia’s industrial sector has Improved government support
Colombia & LATAM Andean shown its resilience in the face has made SMEs in Colombia
Region of Dow Chemical, on the of a turbulent macroeconomic particularly crucial for driving
new export landscape. environment. the country’s development.

Industry

REVIEW

Colombian industry has been hit hard by the ongoing global oil price
slump, but the sector has remained steadfast thanks to public sector
infrastructure initiatives and ongoing investment from abroad.

COOL, CALM,
AND COLLECTED

T he Colombian Real sales growth was record-
industrial sector ed at 6.1% for the same period.
is finding its feet This indicates a recovery in
the sector, given that growth
again after a diffi- for 2015 stood at 0.9% and
sales at just 1.4% according
cult couple of years. Although to the state statistics bureau,
DANE. The industries that
the economy has remained have contributed the most to
industrial growth each month
negatively affected by de- over the past year are refined
petrochemical products, bev-
pressed commodity prices, erages, non-metallic mineral
products, iron and steel pro-
industrial production has in- duction, glass and glass prod-
ucts, and articles of clothing,
creased in YoY terms as new as well as soaps, detergents,
perfumes, and cosmetics.
infrastructure and production
Growth in the petrochem-
facilities come online. Eco- icals and petroleum refining
segment, however, is largely
nomic growth stemming from the result of the completion
of renovation works at the
improved security and a more Cartagena Refinery (Reficar).
In anticipation of the facili-
stable political system have ty’s 50th year of operations in
2006, the incumbent admin-
created better conditions for istration decided to initiate a
massive expansion project to
industrial growth. In addition, double its capacity. Despite
allegations of overspending
the devaluation of the peso in on the project and delays in
its implementation due to
2015 along with new policies various changes to the con-
tracts involved, in addition to
introduced by the Ministry of

Trade, Industry, and Tourism

have increased the competi-

tiveness of the sector, provid-

ing the basis for optimistic ex-

pectations for the year.

In June 2016, Colombian Image: Pedro Domecq Colombia

industry registered its 13th June 2016 marked Colombia’s 13th
consecutive month of real production
consecutive month of real growth in the industrial sector, partly
the result of the recommencement of
production growth, at 6.6%. In operations at the Cartagena Refinery.

the same month of 2015, the

sector grew by 4%. In the first

half of 2016 alone, real indus-

trial production grew by 5.9%,

or 2.8% not including petrol

refining and its derivatives.



78 THEBUSINESSYEAR COLOMBIA 2016

prolonged instances of industrial inaction, its infrastructure projects as well as in exports to The production of
resolution has at least allowed the country to the Caribbean and Central and South America vehicles in Colombia
begin offsetting disproportionate gasoline and contributed to the segment’s expansion. The has been declining
fuel imports. It has also led to higher exports manufacture of glass and related products grew gradually over recent
of these products to the US, Europe, and the by 18.7% in 1Q2016 as new production plants years, and free trade
Caribbean. In any case, the upgrade was neces- were launched, such as Tecnoglass’ $43-million agreements with
sary from both a competitiveness and environ- Barranquilla facility, while demand grew both major car exporters
mental standpoint. The inauguration of the re- at home and abroad. The manufacture of metal such as South
finery has been by far the largest contributor to products also experienced an upswing in recent Korea could have a
industrial growth since November 2015, as its months, with 14% real production growth in detrimental effect on
closure had represented a major burden on the June 2016 and real sales of 6.7%. Anti-hurricane the industry.
state’s refining capacity and industrial develop- window frames exported to Panama and the US
ment in general. The segment will continue to contributed to this increase after the tropical
make advances in the coming year as Reficar’s cyclone season began on June 1.
output jumps from the pre-expansion figure
of 75,000bopd to over 160,000bopd. Colombia The automotive industry in Colombia is a
also produces agrochemicals and chemical ad- critical segment and an area of high poten-
ditives for construction, both segments with tial. Roughly 11 million vehicles are in use
strong growth potential in the short term. in the country at present, of which around
four-fifths are privately-owned. This low lev-
The production of beverages has consistently el of car ownership, given that the national
contributed to industrial growth in Colombia population exceeds 47 million, shows the
over the past year. New factories have boosted many possibilities for growth. Approximately
capacity, such as the Cundinamarca Coca-Cola $17 billion has been set aside for road infra-
FEMSA factory, which began operations in ear- structure development over the coming years,
ly summer 2015. Increased warehousing and and the growth of the country’s middle class
infrastructural capacity have also helped the suggests demand for cars will increase in par-
segment to grow and over the past year it has allel. The sector contracted by around 14%
represented the most dynamic of all industrial between 2014 and 2015 as a result of the drop
sub-sectors. Along with other agricultural prod- in oil prices, but prospects are generally good
ucts and foodstuff, export figures for beverag- for the short term. In 2015, over 280,000 cars
es have increased substantially. June 2016 saw were sold in Colombia, with around 30% of
$564.9 million free on board (FOB) worth of ag- these produced locally. The manufacture and
ricultural, food, and beverage exports leave the assembly of cars is led by Renault and Gen-
country, an increase of over 17% from the same eral Motors (GM), with an annual capacity of
month in 2015. approximately 80,000 and over 100,000 units,
respectively. Light truck production is the do-
The non-metallic minerals segment also ex- main of GM and Hino (Toyota), while Daimler
hibited increased momentum in 2016. This is produces buses and complete knock-down
largely attributed to a rise demand in the con- (CKD) kits. Half of all auto parts used in Co-
struction sector and larger procurement con- lombian automotive production are sourced
tracts becoming available, particularly for so- from local firms, with the remainder imported
cial housing projects. For the 2015-2018 period, from over 100 different countries. Auto parts
the government has set aside funds to provide sales reached over $4 billion in 2015, having
more than 50,000 Colombian families with state grown by 4%, and Colombia also exports auto
subsidies for buying homes, a policy which has parts to Ecuador, Peru, Mexico, Venezuela,
naturally led to increased construction activity and the US.
across the country. In addition, a rise in civil

VICTOR HUGO REY In which cities do you foresee a greater growth? *Read the full interview at thebusinessyear.com
We see growth in various regions of the country.
General Manager, Casalimpia Along the Atlantic coast, we see growth in Cartage-
na and Barranquilla; we also see it in Medellín, Cali,
To what extent has the devaluation of the peso Bucaramanga, Armenia, Manizales, and Ibagué,
affected your sector? where there is great commerce, industry, and
We have been affected by this devaluation, as some tourism development. Naturally, each city has its
elements of our business lines are imported, mainly specific niches, but we see, in general, great oppor-
chemical products, machinery, and tools. However, tunities and growth, which is why we are designing a
our business depends considerably on local employ- strategy centered on each sector. Wherever we see
ees, and therefore, although devaluation has not growth, we try to ensure that the adequate services
affected this aspect, inflation has. In a macroeco- needed by our clients are being provided.*
nomic context, devaluation has made Colombia a
much more interesting market for foreign invest-
ment: today, investing in Colombia is approximately
60% cheaper than it was a few years ago.

Industry THEBUSINESSYEAR 79

However, the production of vehicles in Co- clothing grew by 5.9% in 2015. Entry into the
lombia has been declining gradually over re- Pacific Alliance has provided a boost to the
cent years, and free trade agreements with segment recently. Prior to the agreement, ex-
major car exporters such as South Korea could ports of textiles and clothing from Colombia to
have a detrimental effect on the industry. Ne- any of the other members had to contain do-
gotiations with Japan and Turkey could wors- mestically-sourced fabrics or fabrics sourced
en this situation. Colombia has trade agree- in the importing country if customs duties
ments with the US, Canada, the EU, most Latin were to be eliminated. Now, materials can be
American nations, and the Pacific Alliance. sourced in any of the member countries, a fact
While these have benefited the Colombian that has increased competitiveness for Co-
economy in numerous ways, including the lombian firms. As the source of hundreds of
auto industry, the issue of competitiveness is thousands of indirect and auxiliary positions,
one that needs to be addressed if the country’s textiles and clothing represents a key industry
industrial sector is to remain buoyant. The for job creation. In addition, 8.5% of new com-
Ministry of Trade, Industry, and Tourism has panies registered in 2015 were involved in this
created a program for developing the automo- segment.
tive industry named PROFIA, and the stated
goal is to make the country a regional base for On the whole, expectations are high for Co-
vehicle assembly. lombian industry. In a period of low oil prices,
Colombia’s economy has demonstrated resil-
Colombia is also a noted producer of tex- ience through its ability to rely on diversified
tiles, with diverse materials and unique artis- industrial production. The country’s various
anal traditions giving the nation its reputation FTAs will continue to present both opportuni-
for expertise in the segment. In addition to cre- ties and challenges to local businesses, testing
ating various types of garments, the country is industrial competitiveness in a more global-
the fourth biggest footwear producer in Latin ly-integrated environment, while the Reficar
America and also exports leather products and facility will guarantee overall sectoral growth
other goods. The production of textiles and for the remainder of 2016. ✖

ikonosoft-tby01c.pdf 1 11/02/16 4:20 p.m.

80 THEBUSINESSYEAR COLOMBIA 2016

INTERVIEW

lighting
THE WAY

TBY talks to Eduardo How was the past year for GE in How important is the energy IN NUMBERS
Jaramillo Cuervo,
President & CEO of Colombia? sector for GE? Present in Colombia
General Electric (GE),
on the role GE intends We have been present in Co- Traditionally, the oil and gas 90for almost
to play in developing lombia for almost 90 years, industry was one of the key
Colombia’s energy and, in this time, we have sources for growth. We also years
value chain and seen positive and sustain- see great potential for pow-
creating a diversified able results, while emphasiz- er generation in renewables, What strategies is the company
matrix to support the ing our social responsibility non-renewables, and even implementing to ensure that the
country’s energy needs commitment. Talent is crit- non-conventional renew- digital revolution takes place in
for years to come. ical for GE and that is what ables. We want to support Colombia?
shapes the way we do busi- our customers not only with The digital revolution is the
BIO ness and the way we main- equipment, but with business new industrial revolution. It
tain our integrity. Overall, solutions. There are also op- is absolutely critical that this
Eduardo Jaramillo Cuervo 2015 was positive locally and portunities for developing the takes shape in Colombia be-
is the current CEO of GE globally. GE is present in Co- country’s grid requirements. cause it is related to the com-
for Colombia. Cuervo is an lombia with all its business We also participate in intelli- petitiveness of the economy.
industrial engineer from the units and that strong pres- gent light technologies help- GE’s equipment is already
Universidad de Los Andes ence signals our commit- ing consumers to save 40% to “intelligent and digital,” with
in Bogotá, and has an MBA ment to the country. 50% of their bills. sensors to gather data on
in finance specialist studies performance so that we can
from the Kellogg Graduate What steps are you taking to What efficiencies could be im- better predict and optimize
School of Management in the asset operation and main-
Northwestern University. gain more market share? plemented in Colombia to make tenance. That is applicable
to everything we do, from lo-
First, the company acquired the price of electricity more comotives to airplanes. We
Alstom, a French company believe the digital industrial
with deep involvement in competitive? revolution will bring us to the
the energy value chain. It is next level of growth.
strong in renewables and has It is a combination of several
built a strong presence in hy- things along the whole val- What do you expect of GE for
dro and offshore wind farms. ue chain; the matrix needs to this year and in 2017?
That global acquisition is be well diversified in the long There are challenges in sev-
an important pillar for our term. For non-renewables, eral of the industries in which
future growth in Colombia. Colombia needs to make the we participate, but good op-
Additionally, we acquired a right investments to increase portunities remain in oil and
local distributor for health- natural gas reserves to have gas, energy, and healthcare.
care, Gemedco, a company competitive and reliable gen- Companies like GE can help
that for a long time was the eration. We can also provide develop the country in that
distributor of GE’s healthcare highly competitive steam sense. ✖
products with an excellent technologies that have low
position in the market. Part generation cost, are environ-
of the motivation for that mentally friendly, and will
acquisition was to be closer not affect the communities
to our customers and grow in which these plants oper-
beyond what we have been ate. We are confident that a
doing over the last few years. smart use of our resources,
We have established a strong including gas, coal, and wind,
plan for strategic growth in and the right technologies to
key areas where we believe create a diversified matrix will
the country will be growing. maintain not only competitive
prices, but more price stability
in the long run.

Industry THEBUSINESSYEAR 81

INTERVIEW

How important is Colombia for THE CENTER the current situation; however,
the Andean region? of gravity Dow has been there for a long
All of the regional operations time and made the decision
are managed from Colombia, TBY talks to to stay. In spite of difficulties
which represents more than Daniella Souza, Dow will remain in the country
60% of total sales. In 2014, we President Colombia as we believe that the business
started to align our vision and & LATAM Andean environment will improve.
make several investments to Region of Dow
ensure were ready to lead the Chemical, on the new What are your expectations for
region. Now, we have 20% export landscape and the rest of 2016?
more people working from building foundations The devaluation of the Colom-
Colombia than when the re- to support long-term bian peso opens an opportu-
gion was created. Dow was growth. nity for exports. Colombia is
recognized as one of the great growing by 3-4% per year in
places to work in Colombia What level of R&D does Dow segment and the chemicals the areas of the country with
for the first time, which rep- and polyurethane business. no rebel presence; therefore,
resents an important achieve- carry out in Colombia? Dow is investing in produc- the potential in new regions
ment after the restructuring. ing even more locally. Those that will be open to invest-
The beginning of the year was Dow in Colombia does R&D two sites together account for ments is exciting. These will
difficult due to the demand in conjunction with univer- 40% of what is exported, not be leapfrog investments; for
variation and the uncertainties sities, as Dow does not have only meeting the country’s instance, infrastructure in the
surrounding currency, among local laboratories. We have needs but also opening a door rural areas where investments
other factors. Once the value agreements with two top uni- to foreign markets. Dow is di- stopped 50 years ago will ad-
chain understood that curren- versities for the development versifying its production port- vance to a better stage starting
cy fluctuations are permanent, of products, as we also do with folio, which already consists in 2016. Dow is betting on Co-
the industry adjusted and we some of our customers where- of globally competitive assets. lombia, which is why our Pres-
saw a much better third and by we work together, having Achieving 40% of exports is ident for Latin America was
fourth quarter, ending 2015 our R&D knowledge and peo- great progress, as in the past here in June along with our
with a 4% YoY growth. ple who come in from around we were less competitive in board of directors. ✖
the world to develop tailor the export market.
BIO made solutions for our local IN NUMBERS
needs, such as solutions for Can you elaborate on what Dow
Daniella Souza began her building a tertiary road on the 40%
Dow career in 1997, and coast of Colombia. For those is doing in Peru, Ecuador, and
worked in the Guaruja kinds of projects, an expert is of output can be
manufacturing site for selected to perform all the tests Venezuela? exported
four years as a production that are required with the soil,
planner and as a Six Sigma conditions, and climate, to de- Recently, the whole leadership Colombia represents
improvement engineer. velop local solutions. team of the Andean Region more than
She then moved to the met in Peru to assess the op-
São Paulo headquarters What are the main goals of your portunities that currently ex- 60%
as the Latin America ist there. As it is a region with
Supply Chain Planner for $23 million investment plan for double-digit growth for some of sales in the Andean
various businesses. From years already, Dow has been region
2006-2010, she was in the next four years? increasing the presence of its
Michigan at the company’s operative structure every year. $23
headquarters where she The investments that Dow is In Ecuador, we are betting in
was a Global Planner and making are also in joint col- terms of logistics and posi- million investment
then Global Supply Chain laboration, and depending tioning, and have made some plan for the next four
Planner, before moving on the results of current dis- changes to how Dow partici- years
to Brazil to become the cussions it may increase. This pates in that market. The be-
Latin America Purchasing $23 million is what Dow have ginning of 2016 has been diffi-
Director. In September invested in increasing capaci- cult in Ecuador; however, it is
2014, she undertook her ty and expanding our produc- a country in which we should
current role. She holds a tion portfolio in Barranquilla continue to invest. Some of
BSc in chemical engineering and Cartagena. Barranquilla our competitors and other
from Escola Politecnica is 100% aligned with the agro players left Venezuela due to
Universidade de São Paulo business, while Cartagena is
and an MBA from Fundação evenly split between the agro
Getúlio Vargas.

82 THEBUSINESSYEAR COLOMBIA 2016

INTERVIEW

signed, How does Litoplas invest in in-
SEALED,
delivered novation?
Being an underdeveloped
TBY talks to José Luis Mora, General Manager of Litoplas, on how the country has its advantages;
packaging sector has weathered recent macroeconomic storms and how it you have the opportunity
is leveraging technology to better serve customers. to travel to other developed
markets and learn from their
How do you evaluate Litoplas’ 12% in volume. The currency 32-34% increase experiences. In this context,
performance in 2015? devaluation in 2015 helped us in turnover and one of our competitive ad-
It was a challenging year due to be more competitive both 11-12% increase vantages is flexibility and
to the macroeconomic trends in domestic and international in volume in 2015 adaptability. Therefore, our
in Colombia and the region. markets, where we have be- focus on innovation goes
We underwent a transforma- come more competitive ex- becomes essential, especial- towards that adaptability
tion and adaptation process porting our products and ser- ly with old machinery and of foreign experiences and
to increase our competitive- vices. Decreasing oil prices equipment. knowledge of our reality.
ness. For example, we up- did not have a big impact on
graded our technology, which our operations, but they did What opportunities and gaps Who are your main customers?
enabled us to close the year create volatility. In Colombia, do you identify in the market? We are a B2B company with
with strong growth of around availability and competitive- The market is well served a strong focus on protecting
32-34% in turnover and 11- ness within the energy sector with high quality compa- the goods of our custom-
has suffered from last year’s nies; however, there are ers. Our responsibility is to
BIO trends because production opportunities in terms of enable customers to pro-
costs are greatly linked to oil consumption across social vide the market with their
José Luis Mora is a prices. This situation gen- strata where people do not products that have the same
graduate in industrial erated uncertainty and high consume much flexible pack- characteristics and shapes
engineering from the levels of inflation. In such a aging. For example, people as when they are produced.
University of Central challenging context, we have from strata 1 do not consume One of the main challeng-
Florida and has a masters become more focused on flexible packaging at all and es for us when serving such
in manufacturing with an the food industry, a segment currently around 35% of Co- large customers is flexibility
emphasis on manufacturing that has not suffered as much lombia’s population are from in packaging, especially be-
plastics. He started to work from lower demand as other that strata. Also, consump- cause the packaging not only
in Litoplas in 1984 and has segments have. We directly tion per capita at the moment protects the product, but also
32 years of experience in export 8% of our production, is around 8% below levels communicates for the brand.
managerial positions at but the level of our indirect of developed countries. We From a logistics point of view,
the local level and solid exports is above 25%. have to educate the public serving these big brands and
knowledge and experience that flexible packaging has their several products re-
in business management What growth opportunities is more advantages than glass quires flexibility and a great
operations and development or other rigid materials. Also, deal of responsibility, for
of business growth Litoplas looking at in 2016? we have the advantage of be- they are well-known brands
strategies. He has been ing more environmentally that communicate a great
General Manager of We will invest in new pro- friendly than other packaging deal through their packaging.
Litoplas S.A. since 1997, duction equipment that will types and driving innovation
providing an innovative and increase our production ca- up in the industry. This target What is your outlook for the
avant-garde vision. He is pacity by 25%. All of our in- audience offers many growth
also on the board at the vestment in machinery and opportunities. economy of Barranquilla in
Chamber of Commerce and equipment is always aimed
Combarranquilla. at increasing unit volumes. 2016?
One of the key elements in We need to strengthen the
our industry is efficiency industrial network and the
and to achieve that you need synergies between the in-
to invest in technology and dustrial sector and compa-
equipment. Over the years, nies, as well as between the
industrial reconversion also public and the private sector,
bringing the conversation to
the academic sector as well.
We have the opportunity to
secure faster growth rates in
Barranquilla than in the rest
of the country. Barranquilla
also needs to take even more
advantage of its privileged
geographic position and its
surroundings to boost ex-
ports, as we do not face large
logistics costs. ✖

Industry THEBUSINESSYEAR 83

INTERVIEW

TBY talks to Diana Pabón Morales, General Therefore, products such as
Manager of Quimica Cosmos, on the factors ours are not a priority. How-
behind the company’s growth in 2015, ever, we see an increasing
upcoming projects, and why Colombia remains movement in the region and
an attractive destination for investors. small to medium cities in
terms of infrastructure such
the COLOR as shopping malls, which
of MONEY presents a great opportunity
for us. Also, the government
How was 2015 for Quimica Cos- tectural paints market and it Does the company export any has launched two housing
mos? was a positive year for Quimica of its products? programs targeting middle
We entered the year as a more Cosmos. Currently, we do not export, and low-income families to
consolidated brand in the despite having a consolidat- whom they provide support.
market, taking second place What factors drove your growth ed position in the nation- We see government support
in terms of market share, only al market. We see plenty of to further boost the construc-
behind Pintuco. We reached in 2015? room to grow our current tion sector. We also invest in
our sales budget and ended We expanded activities in our 12% market share in Colom- new technologies and inno-
with 12% YoY growth. This architecture product line; we bia, getting closer to Pintu- vation to develop new prod-
growth was above the GDP grew business coverage with co (50%). We see export of ucts demanded by the market
and 5% higher than our growth our traditional products reach- products as the next natural as well as environmentally
in 2014. Overall, we further ing the entire country, even step in the next few years. friendly products. We have
consolidated our brand in the to areas where other compa- We would most likely look at two laboratories: one mon-
second position in the archi- nies are not present. We also Central America. itoring quality and another
boosted innovation and new developing new products.
IN NUMBERS technologies in the launch What makes Colombia an at- For new products, we can
of new products; last year we tractive destination for foreign either do internal testing or
Increased production launched a product with three investors? alternatively our suppliers
capacity by different features within wa- Colombia has always been can support us on the de-
ter-based paints: antibacterial an interesting market for velopment of new products
50% paint, low odor, and low VOC investors. Attracting invest- with their products. We al-
gas emission. Finally, we im- ment in dollars is key for the ready invest heavily in the
for architectural paints plemented an expansion in development of the country environment; for example,
segment in 2015 terms of infrastructure and and since the devaluation of we treat rainwater to use it in
production, increasing pro- the peso in 2015, profitabili- the production of our paints.
Reached sales budget duction capacity by 50% in the ty for investors, especially for We also have a residual and
and had architectural paints segment those who produce locally industrial water treatment
with new machinery with the with local raw materials, has plant and are monitored by
12% vision of being able to serve the increased. It is a great mo- the main national agencies.
market’s future needs. ment for investors to come We also manage chemical
YoY growth to Colombia. There are other waste through partnerships
How do oil price trends impact factors such as the peace pro- with a third party to comply
12% cess, the social and econom- with national regulations. ✖
your business? ic development, and higher
market share in The country’s economy is standards in terms of trans- BIO
Colombia susceptible to changes in oil parency and accountancy,
prices, and current trends which brings higher security Diana Pabón Morales is
triggered a devaluation of the levels for investors. General Manager of Quimica
Colombian peso. This had an Cosmos. The company
impact on imports because we What are your expectations for is ranked number two in
import 70% of our raw materi- the development of the paint architectural paints in
al for the production of paints. sector? Colombia. She has been
Another element that had cer- There are plenty of challeng- with the company since
tain impact on our activities is es ahead due to the devalu- 2000, working in areas such
the fact that oil derivate prod- ation of the peso. We have as purchasing and logistics,
ucts did not have the same seen an increase in prices quality management
impact in price as oil price had and this is the main con- systems and later
globally. We expected a fall in cern for Colombian families. transitioned into purchasing
price of oil derivate products manager, allowing her
that did not happen. to become an expert in
international business and
strategic negotiations.

84 THEBUSINESSYEAR COLOMBIA 2016

FORUM

local chemical An attractive country with a high growth
COMPANIES prospect, Colombia’s local companies are
competing to remain competitive amidst
interest from international players.

RIGOBERTO ALFREDO CORREA LUIS CARLOS ALEJANDRO GÓMEZ

BOHORQUEZ MUÑOZ MARTINEZ President,
Productos Químicos
General Manager, President, Disan General Manager, Panamericanos (PQP)
Bellchem Group Philaac

W e grew 25% YoY in O ur investments in Co- P hilaac is trying to de- R &D is particularly im-
2015, making it one lombia are always in velop products that portant to PQP, as our
of our best years yet. human resources and meet the needs of our goal is to migrate to
What pushed our growth was end customers, rather than mid- specialty products and slowly
that we are committed workers technological infrastructure. dle or intermediate clients. Our leave commoditized products
and people know the company products are not the cheapest; behind. This is something that
and have confidence in us. We We are building two new labs, however, they have qualities applies not only to PQP, but all
have done things well for many that make us one of the most the companies in the Colombian
years and customers constantly one for animal nutrition and attractive companies in the chemical sector. On the chem-
refer Bellchem to other firms. sector. We see the paint sector ical side of the business, Co-
We treat every single customer another for diverse industrial as having great potential for in- lombia is slowly implementing
the same way; a small compa- vestment right now. Colombia public and private initiatives to
ny today might become a large applications. We already have has a good legislation to facili- change its focus from commod-
one tomorrow. Around 35% of tate the entry of new business ities to products that have more
all our sales in 2015 were to Ven- a lab for personal care, cosmet- and investors to the country, R&D that can provide improved
ezuela. We are one of the few and there is still also much to be margins of return and higher
Colombian companies to sell ics, detergents, and soaps. We done. In Colombia, it is possible entry barriers against future The content on this page is taken from exclusive interviews. Read the full versions at thebusinessyear.com
chemicals in Venezuela. We also to find many more opportuni- competition. Colombia is open-
see new opportunities in Peru will create some new blends ties. Our upcoming strategy is ing to the world, and today we
and Ecuador as well as Venezu- based on developing new prod- compete not only with our local
ela because of the strengthening to meet the specific needs of ucts. We have already launched competitors, but also have in-
of the dollar. We see opportu- several new products in 2016, ternational players taking inter-
nities to go to these countries our customers. We will not which tells us that we are hitting est, as it is becoming an attrac-
and expand. International sales the nail on the head in terms of tive country with a high growth
will account for around 1% of compete with our customers putting out what the country prospect. We have accumulated
our revenues in 2016, while that needs. It is a difficult and in a plenty of experience and knowl-
figure last year was around 30%. but rather offer them more certain sense risky strategy, but edge from our 43 years in the
What we export outside of Co- right now we have to take risks market. Additionally, we have a
lombia is in addition to our local value-added products. We are in order to improve our product broad and talented engineering
market; we do not want to disre- portfolio and avoid performing employee base, which makes
gard the local market. moving toward value-added below our full potential. us technically strong. We have
been in the region for many
products in general as opposed years and our competition ac-
knowledges our expertise, and
to finished, mass consumption our clients choose our products
because of our quality.
products in order to comple-

ment our overall portfolio. I

expect 2016 to be similar to

2015. It will not be a great year,

but we will overall be in good

shape. Disan has a large num-

ber of projects under way and

we aim to reinforce our pres-

ence in certain markets where

we do not have a large market

share, such as paints and coat-

ings, construction, and food.

Our plan is to bring this to Co-

lombia, Ecuador, and Peru.

Industry THEBUSINESSYEAR 85

B2B

DANIEL CHAVES RIKER MARTINEZ recurrent. The majority of the all the electrical motors and
energy generated in Colombia is devices for automation.
General Manager, General Manager, hydroelectric; thus, it is manda-
tory for companies such as ours What factors have facilitated
Festo Colombia Danfoss to invest in R&D and come up your large market share?
with products that reduce en-
cEoLmECpTonReICntAsL ergy consumption. We have de- DC We have had a direct pres-
veloped drivers that are related ence in Colombia for more than
From a production and engineering to water saving, and Colombia 30 years with technologies that
point of view the future for Colombian will demand such controls in have been deployed on a global
companies looks bright the near future. For example, scale. FESTO was founded 90
there is a device that can sense years ago and our founders were
The content on this page is taken from exclusive interviews. Read the full versions at thebusinessyear.com How was 2015 for your compa- customers increase productiv- pressure and send a signal to pioneers of pneumatic technol-
ny in Colombia? ity. In tough environments like the drive that controls the water ogies. In addition to the amount
this, productivity is a priority pump motor so that they are not of time we have spent in the
DANIEL CHAVES 2015 was a for our customers; therefore, we always running at full speed. We market, we have seen a contin-
good year for FESTO in gener- focus on developing energy effi- see a higher demand for these uous improvement in automa-
al terms, although we faced a cient solutions and introducing devices in the country. tion products and solutions we
tough environment, especial- new products. We are experts can offer due to our continue
ly regarding industrial growth on end-of-line and packaging What industries do you focus on investment on R&D. The ongo-
levels. We were mainly focused solutions for original equip- in Colombia? ing development of automation
on didactic and industrial auto- ment manufacturers (OEMs), and didactic solutions along
mation solutions, also support- among other solutions, and will DC Food and beverage is one with local support to increase
ing the operations and mainte- replicate other solutions as well. of the key industries for us, but customer’s productivity is what
nance of industrial companies. We have also successfully devel- we have a presence in many has really set ourselves apart
oped electric, factory, and pro- other industries like pharma- from the competition.
RIKER MARTINEZ 2015 was a cess automations over the last ceuticals, water treatment, pet-
year full of challenges because few years. rochemicals, cement, pulp and What role does Colombia play in
we import products to Colom- paper, and mining. Through our the company’s global portfolio?
bia and the devaluation has RM Danfoss is a committed Didactic business unit we also
been a hurdle for us. The cur- company for both the environ- serve educational and technical RM Colombia represents close
rency depreciated 45% in one ment and energy issues. Many training institutions. We are the to 15% of the total sales in Amer-
year, which is a large amount. of our products are related to market leaders in our sector, so ica, and Latin America makes up
Nevertheless, the volume of our energy consumption, primarily we are focused on improving 10%. In our opinion, Colombia
business grew, so it was a year of in the realm of refrigeration and our performance and widening is a positive economic environ-
consolidation in the country. air conditioning, and we build our skillset to better serve our ment despite the devaluation of
compressors that are more ef- target market. the peso. Currently, the compa-
What are some of the projects ficient than our competitors'. ny is focusing on Colombia and
your company has been in- There is a particular need in RM In Colombia, we are work- Mexico as the main nations in
volved in? Colombia to bring products ing on three segments: cool- Latin America. There has been
that reduce energy consump- ing, drives, and heating. In the great demand for our products
DC We continue to execute our tion, especially on the northern first business line, cooling, we in Bogotá as global warming
mission, which is to help our coast where droughts are more have all of the devices for con- has made the city much warm-
trolling, air conditioning, and er. There is also large growth in
refrigeration. We are working the economy of medium-sized
with refrigeration for domes- cities in the country and we
tic, commercial, and industrial believe there will be greater de-
markets. As for drives, we are mand from cities such as Bucar-
tending to the electronic con- amanga, Barranquilla, or Cali in
trols market, which manages the short run. ✖

86 THEBUSINESSYEAR COLOMBIA 2016

FOCUS EXPORTERS

SEND IT ELSEWHERE

Colombia’s industrial THE INDUSTRIAL SECTOR in Colombia due to falling commodity prices, good perfor-
sector has shown mances by the manufacturing, construction,
its resilience in the was the engine of the national economy during and finance sectors all helped Colombia out-
face of a turbulent 1H2016 despite the many challenges that it perform its neighbors.
macroeconomic faced. Although exports could be expected to
environment, rise after the Colombian peso lost about 35% The manufacturing industry was the larg-
registering a solid of its value in the last 12 months, the reverse est contributor to the country’s GDP as it ad-
performance in has taken place; total Colombian exports de- vanced 5.3% in May. The strong manufactur-
1H2016 by taking creased by 20% YoY in May 2016. According ing performance was triggered by astonishing
advantages of unique to data from the National Department of Sta- growth in 16 of its 24 sub-sectors. Downstream
opportunities. tistics (DANE), in May alone oil exports plum- oil-related activities increased by 20.6% thanks
meted by 45.2%, while coal fell 39.1%, and to the construction of a new refinery in Cart-
even coffee dropped by 22.7%. Through the agena, while the beverage segment grew by
first five months of 2016, exports registered a 16.4%. As many goods and raw materials have
sharp year-over-year decline of 27.9%, repre- to be purchased abroad, the loss in purchasing
senting a loss of $11.5 billion for Latin Amer- power of the peso made those products more
ica’s fourth largest economy. Meanwhile, the expensive, hurting local firms. Nevertheless,
Colombian economy grew by 2.5% overall in there are certain companies that have benefit-
1Q2016, a better than expected performance ed from the peso’s depreciation and are even
compared to other countries in the region; the increasing their exports. In the textile industry,
output of Brazil’s economy shrunk by 0.3%, a sector that was protected by the peso deval-
while that of Chile advanced by 2% and Argen- uation against imports, domestic sales have
tina grew by 0.5%. Despite the blows suffered increased dramatically. ✖

Industry THEBUSINESSYEAR 87

B2B

CLOTHING
manufacturing

CARLOS ALBERTO FABIAN DUQUE After a trying period with the
devaluation of the peso, textile
DE JESUS General Manager, manufacturers and companies are
getting ready for better times ahead.
President, Fabricato Finotex
S.A.

The content on this page is taken from exclusive interviews. Read the full versions at thebusinessyear.com How did the company perform in products. Colombia has to be an Why do you think some SMEs Finotex competes internation-
2015? innovative player with technolo- lack ambition to go abroad and ally with several companies.
gy in the textile world, and coun- succeed as exporters? What factors have helped you
CARLOS ALBERTO DE JESUS tries such as Turkey or Brazil can achieved that position abroad?
2015 was positive for the compa- be a reference for Colombia. FD The most important factor
ny. We had positive results and a is to believe in what you pro- FD From the beginning, when
large portion of that came from FD Colombia has a strategic plan duce. Sometimes Colombian the company was founded we
a real estate development that not to compete in basic products companies need to believe focused on providing a standard
we are doing. We had positive because it is not competitive in in their potential and their of service you would find in the
results in our textile operation this segment in terms of labor strengths. There is a great deal US or Europe. We have worked
as well, in which we made in- costs. We are competitive when of talent in Colombia that has on this through R&D and invest-
vestments in high technology to we provide added value to cloth- not been successfully har- ment. Part of this growth was due
increase our production and re- ing and other products because nessed yet. Some years ago I to our location in Barranquilla;
duce costs. then we can serve certain spe- led an industry cluster delega- we are close to the sea, which
cific niche markets where Co- tion from Colombia to events makes us more outward look-
FABIAN DUQUE 2015 was a lombia is well recognized. This in Europe, the US, Mexico, and ing compared to other cities in
wakeup call for Finotex as we is where we should focus our Central America. Of the com- Colombia. The natural focus is
saw the dollar increasing, which marketing. panies involved, only two were to look at opportunities abroad
generated many uncertainties able to consolidate important because it is cheaper for us to
and difficulties. Nevertheless, we How do you balance the imple- proposals; the other compa- take advantage of the ports’ in-
saw positive earnings in 1H2015 mentation of new technologies nies did not want to invest in frastructure. Step-by-step, we
compared to previous years. In with providing employment? order to go abroad. You need have increased our presence in
2H2015, we saw a boost in the to have the right culture and the international market.
local textile industry. It benefit- CAJ Implementing new tech- ambition within the company
ed from a stronger dollar, which nology can be challenging in the and some Colombian compa- What are your expectations
made it more difficult to buy textile industry; however, it is nies lack this. for2016?
abroad and increased demand ultimately necessary because if
from local players. For Finotex, a company focuses just on try- How important is the textile in- CAJ We expect 20% growth in
this made it easier to export as ing to maintain its number of dustry in Medellín? our business. We downsized the
well as increased the size of our jobs, it will become inefficient, company and focused on certain
local market. after which point everyone will CAJ This industry is import- business units in order to be effi-
lose their jobs. A company has ant for Medellín. The city is cient. We will grow while remain-
How can the textile industry in to be accountable and maintain acknowledged as one of the ing efficient and that is manda-
Colombia compete against other high productivity levels in order main places for the textile in- tory for the industry, which we
markets? to remain competitive, and that dustry worldwide, so it is the expect to do well thanks to the
is the idea we implemented at right place to be for a company local market.
CAJ Turkey could be a good Fabricato to turn it into a profit- like ours. We see a strong lev-
point of reference. The Colombi- able business again. A profitable el of know-how in Medellín. FD 2016 will be a positive year.
an industry cannot be a low-cost company can increase its pro- Colombia is also an important At the industry trade fair in Me-
producer, but it can instead pro- duction and consequently can domestic market, as the people dellín in January, the outlook and
vide high-quality, added-value generate new jobs. like to consume fashion goods. atmosphere was optimistic. ✖

88 THEBUSINESSYEAR COLOMBIA 2016

VOX POPULI

VEHICLES

The vehicle market in Colombia can be
defined by uncertainty, but with infrastructure
improvements occurring throughout the
country, the sector looks on track to gain
considerable momentum.

JUAN DIEGO GALINDO ANGEL W e started two new infrastructure is weak and the
operations last year, costs on that end have gone up.
General Manager, Cinascar Colombia one of which was for The FTAs we have signed will
a Chinese company called Fo- also help spur more business in-
D ifferent regions in Co- growing; four years ago, Chinese ton, which is a major producer ternationally. The content on this page is taken from exclusive interviews. Read the full versions at thebusinessyear.com
lombia have different products represented around of trucks and pickups. It helped
types of customers. 3.5-4% of the market and now us offset low demand for oth- CARLOS ALBERTO
Foreign companies that sell cars they are at least 6%. Cinascar er brands. The other invest- ESTRADA
for us come to Colombia to visit is a leader with the Chinese ment was with Daimler Mer-
the different regions in order to brands that we represent. We cedes-Benz for the assembly Regional President,
better understand the country. represent two brands—Chery plant of buses. It was a difficult Dana
From region to region there are and Zotye—and with these two year to replace public transport
differences in the kinds of cars brands we are the leaders in the buses in Colombia, but never-
that are in demand, so it is cru- whole Chinese segment with theless we took advantage of the
cial to conduct the proper mar- about 26% of total sales, with peso devaluation by exporting
ket research. The number and our closes competitors follow- parts to Brazil and are seeking
scope of Chinese products are ing us at around 16-17%. new projects in Mexico and
Australia as well. There have
been some opportunities that
have come our way through the
devaluation, which has made us
more competitive international-
ly. On the other hand, the cost
of getting our products to ports
for export has increased. Co-
lombia’s logistic and transport

JAVIER ALFONSO BOHÓRQUEZ FORERO

President, Auteco S.A.S.

U sually people pur- current means of transporta- the city. There are about 5 mil-
chase a new mo- tion, although they seek cheaper lion bikes in Colombia, and ap-
torbike every two options instead of buying new proximately 1 million of these
years. Nevertheless, those fig- vehicles. The largest segment is are utility bikes. Right now, we
ures might slow down in the utility vehicles, followed by the have a new product in the mar-
short term because of the price sport vehicle segment. Utility ket. We launched the new Pulsar
hike. We are seeing import- vehicles are the sort of bikes that 150 NS in the sports segment.
ant growth in the acquisition people use to work and to com- This product has been launched
of second-hand bikes because mute. These kinds of people already and has been a success-
people still need to renew their need to move quickly around ful model.

Industry THEBUSINESSYEAR 89

O ne of the reasons why the automotive industry is
not such a success here is because of weak infra-
structure, but there is also the challenge of high

taxation. The way that taxation and duties are structured

MARK GREWE makes it tough compared to places like Panama and Chile.

General Manager, At some point, this will improve as it is happening global-
Renault, Sanautos
ly; every year more and more markets are benefiting from
T he car market as a
whole fell 14% in 2015, FTAs. We are benefiting already from FTAs with North SANTIAGO
but fortunately we ALCOCER VÉLES
were able to maintain our YoY America, the EU, and the UK. As we move toward 2020 it will
sales. We sold the same amount General Manager,
of cars as we did the previous come to the point where there will be no import duties for Country Motors
year, in a poorer market, but
with a higher market share, so vehicles manufactured in places that have a free treaty with W e see there is a demand
that was positive for us. The for gas products, es-
market decreased, but Renault Colombia, and this is going to make vehicles more afford- pecially in the public
maintained a similar participa- sector, and we are going to de-
tion in the market. We were able able. Combined with the development of new roads and in- liver a bus that consumes COP
to maintain growth and this will gas as opposed to gas oil, which
happen in 2016 as well. The mar- frastructure, there should definitely be an opportunity for a makes it cheaper for consumers.
ket is likely to fall another 15% The introduction of gas and the
this year, and once again, we much larger market than we have today. level of education among the
are trying to maintain the same local population have changed
sales as we did in 2014. That will IVÁN PÉREZ the way consumers approach
be three years in a row, but in a us. Some years ago, a consum-
smaller market this year. In order VEGA er came to gain information;
to achieve that, Renault plans to however, these days a consum-
launch six new models and with General er comes informed and knows
this new product portfolio I be- Manager, Grupo the car they want in terms of
lieve we can increase our slice of Premier specifications. Media attention
the automotive market. surrounding these products has
The content on this page is taken from exclusive interviews. Read the full versions at thebusinessyear.com increased significantly. Smart-
phone connectivity in the car is
not a perk anymore; it is a con-
dition that every car has to have.

JAMES POSADA

General Manager, Marco Polo Colombia

W e expect that during the next five to recover their investment faster than before. I
years there will be a major change expect 2016 is going to be an average year, but
in the country’s bus fleet and many we have strong expectations for the following
of the current buses will be renewed. Our cus- years. We are preparing by introducing inno-
tomers are demanding lighter buses, and we vation and efficiency processes to our assem-
want to accelerate our assembly processes to bly plant, and buying the right equipment and
save money for the clients. One of our success machinery. In 2015, we exported 15 units to
points is that we can finish a vehicle in 20-25 Venezuela, and we expect to export the same
days. This benefits the client, because they start amount in 2016.

90 THEBUSINESSYEAR COLOMBIA 2016

B2B

DANIEL LEONARDO ALJURE surprise. There has been both As we exported, we started hav-
positive and negative reper- ing success in many countries
PICCIOTTO CEO, Aldor cussions; 35% of our sales are due to our capacity to innovate
derived from imported wines and build brands in emerging
President, Pedro and spirits and 65% of our sales markets. One of the first mar-
Domecq Colombia are local products. Devalua- kets where our brand succeed-
tion will also affect the cost of ed was South Africa, where we
consumer our local production, as some opened our factory in 2011,
GOODS of the components are import- in Johannesburg. Today, 50%
ed. We are expecting inflation, of our production is devoted
Colombia has a vibrant domestic which is normal when strong to the local market and 50%
market and local producers are devaluation occurs. It is part of is for exports. Before we sup-
finding enormous success in an economic cycle. It should plied the African market with
exporting their products. drive consumption of locally our factory there. We used to
produced spirits, and we ex- export from Colombia, and ex-
How was your performance in commodities, which bring dol- pect positive growth. Whiskey ports then made up 75% of our The content on this page is taken from exclusive interviews. Read the full versions at thebusinessyear.com
2015 and what do you expect lars into their economies. That and other products imported production. The plant in South
for the year ahead? has led to a restriction on the from Europe are experiencing Africa now meets African needs
amount of dollars these coun- price hikes and are now more so there is no need to ship our
LEONARDO ALJURE In 2015 tries have access to, and that has expensive. We welcome diver- products from Colombia.
there were high levels of vola- therefore reduced our presence sity of imported wines because
tility, and they produced some in those markets. The countries this should increase wine con- DP This has been more dif-
mixed results. Aldor relies on in which we operate in South sumption. We also expect our ficult than initially expected.
the African market, and has America are also dependent on product to replace some of the The volatility of economies
experienced huge growth and oil, albeit less than the African existing consumption of premi- and the political instability of
strong demand for our products markets. We have seen high de- um-imported products. Local- some countries are some of the
in the middle of a downturn in mand in the local markets, but ly produced wine and brandy challenges we have to take into
the commodities market. We due to the devaluation of most should be able to compete with consideration when exporting
have had double-digit growth currencies, there has been a re- higher-priced wines and spirits our products. Our goal now is
for the last three years and we striction on imported products, due to the devaluation of the to start exporting to countries
hope it will continue in the which affects our bottom line. peso. such as Ecuador, Peru, and
coming years. Our second divi- So on the one side we have had Chile. Most of the problems we
sion of the African market is the high demand, but on the other What has been your experience have encountered thus far are
Sub-Saharan markets, mainly profitability has been affected. in exporting? related to paperwork; the reg-
Angola, Mozambique, Zambia, ulations in Ecuador, for exam-
Zimbabwe, and Nigeria. Those DANIEL PICCIOTTO We grew LA Aldor started as an ex- ple, are stringent. The idea is to
have been difficult markets due over 15% in 2014. We had port-oriented company be- try to build relationships with
to the low commodity prices. been expecting devaluation cause of the competitive advan- importers in different coun-
Those nations are reliant on for a long time, so it was not a tage of the sugar platform in our tries. We are also investing in
region. Valle del Cauca is one of our plant in order to meet de-
the largest sugarcane producers mand. It already has a huge ca-
in the world. In the 1990s, Co- pacity, and it is easy to expand.
lombia enjoyed a competitive Our major concern is aging the
currency, and the production brandy, because selling more
costs were also competitive as brandy will require more bar-
an export platform for sugar rels, and a bigger warehouse,
and sugar derivative products. and that takes time. ✖

Industry THEBUSINESSYEAR 91

VOX POPULI

GLASS MAKERS

Though the Colombian glass market can
fluctuate, the industry has proven itself to
be relatively resilient, along with the help of
continued demand from abroad.

The content on this page is taken from exclusive interviews. Read the full versions at thebusinessyear.com ALFONSO GARCÍA the direct input of solar energy T here is strong de- was mostly exports, while from
(heat) and reflect less visible mand for our prod- 2008 to 2012 it was mostly the
General Manager, light, allowing for more direct uct in the US and we Colombian market driving our
Vidplex light transmission and reducing sometimes sell 18 months in growth. From 2013 until now,
energy costs directly and signifi- advance of when we have to de- we have been at about 50-50
S ome of our main cantly with air conditioning, for liver. This allows us to forecast between the Colombian and
strengths are our qual- example. Business and shop- what is coming for the year, as the US market.
ity products and our ping centers that are committed we already have the sales made.
safety standards. We are a com- to self-sustainable energy de- What we are going to ship this JOSE MANUEL
pany that thinks about people velopment are one of our main year was actually sold last year. DAES
first—both our employees and targets, and our glass will reduce We import around 90% of our
our customers. I would say that emissions and dependency on consumption of raw materials. CEO, Tecnoglass
one of the reasons we have be- non-renewable resources. We Raw materials have a neutral
come the leaders in the sector have calculated that we can save effect but all of our costs are
is our constant interest in pro- up to 50% in energy costs in in pesos, especially the labor,
viding the highest safety stan- buildings with this technology. and that gives us an advan-
dards for people and our work. In Colombia there is an increas- tage because labor costs 50%
We have also invested in quality ing demand for energy-saving less than it used to in dollars.
products so what we offer does products, and we meet that de- Our products are well known
really provide the service people mand with products that offer and people like them, so we
look for. Our bioclimatic solar comfort and design, too. have been growing. There is a
control glass with low emissivity construction boom in South
has become an alternative that Florida and that is one of our
combines design, comfort, and strongholds, but we are also
economy for demanding envi- growing in other areas like New
ronments today; they reduce York, Baltimore, Washington,
DC, Ohio, and Chicago. The
Colombian market has been
variable; from 1995 to 2007 it

CARLOS ANDRES NOVOA, We have grown alongside Co- by the end of this year we will
lombia’s 10-year construction finish with around 8% of total
General Manager, Ventanar boom. The economy has grown sales being exported. We have a
well over the last decade and we mid-sized deal in Trinidad & To-
T he year 2015 was the have grown with it. All of our bago with a major French con-
best in our history, products until 2015 have been struction company, Bouygues,
with the highest rev- national and sold in Colombia, and those are the first steps in
enue, income, and the most but in 2016 we are starting to this exporting adventure. We
square meters installed. It was export some of our business. made some exports in 2007 to
also a record year for the con- This is mainly because we did Venezuela that continued for a
struction business in Colombia, not have the capacity to export year and then closed. Colombia
so it was the best year we have products in the past, as our ca- is now entering the downswing
ever had. We also finished our pacity was full. We expect that of the construction cycle.
2007 expansion plan. In total,
our income has grown 12 times,
from around COP7 billion in
2005 to COP96 billion today.

92 THEBUSINESSYEAR COLOMBIA 2016

INTERVIEW

COLOMBANG!

TBY talks to Col. Juan Manuel Padilla Cepeda, General Manager of
Indumil, on the affects of the exchange rate, innovation, and prospects
for the future.

BIO How is the dollar exchange rate production and commercial- IN NUMBERS
ization of arms and explosives.
Col. Juan Manuel Padilla affecting your growth? 68%
Cepeda graduated as an What are some examples of
infantry second lieutenant We expect growth to be in the of revenue comes
from the General José María double digits in 2016. In 2015, research by Indumil that has from explosives
Córdova Military Academy our growth will be similar to
in 1987. Colonel Padilla also 2014 — around 5-6% —­but increased innovation in Colom- fy and we have a huge metal
has a bachelor’s degree the situation with the dollar is working capacity in one of our
in business management, going to impact us significant- bia? factories in Eramosa.
a postgraduate degree ly; most of our factories work There are many things that we
in human rights and with raw material coming have done in the past; for ex- Where do you see Indumil by
international humanitarian from abroad, especially explo- ample, we invested consider- the year 2020?
law from the Nueva sives. Explosives use ammo- able resources in developing I see Indumil continuing to
Granada University, and nium nitrate, which is some- prosthetic arms and legs for fulfill our potential as the big-
a postgraduate degree thing not really produced in people that were injured in gest provider for the armed
from the Colombian War the area. This kind of raw ma- combat. That is a project that forces. We will continue being
College. He attended the terial has to be imported from we are undertaking with the that as that is the mandate of
Higher Business Direction Eastern Europe or Asia. We Universidad Militar. Current- the constitution. Even though
Program (PADE) at Inalde export about 2.4% of the pro- ly, we are investing heavily in we are thinking about indus-
Business School. In 2014 he duction and are trying to in- mining research. Right now try, mining, and tunnels, we
was the Colombian Military crease exports but, until now, we have a scientific and tech- will not lose our focus on pro-
Representative to NATO our focus has been to produce nical research plan in one of viding the police and military
in Belgium. After 30 years for consumption within the our factories, in collaboration forces with what they need
of service he retired from country. In the last three to with universities and the Pres- and what we can provide for
active duty in February 2015 four years, Indumil has been idential Office in charge of them. However, by 2020, I see
when he was appointed looking to export more, but so mining, to conduct research Indumil as being the provid-
as the General Manager far it is a small part of our total on increasing efficiency in er of many products for the
of the Colombian Military production. mining. development of the country.
Industry. We want to participate in this
What steps has Indumil taken What are your main priorities development and we will do
whatever is needed. Because
over the past years to diversify for Indumil the coming years? of the current infrastructure
Our first priority is growth. situation of Colombia, roads
its product portfolio? We want to diversify the port- and railroads will be one of the
folio that we are offering to main engines of this develop-
Indumil has to perform based our customers, not only in ment. Right now we are par-
on what the constitution terms of products but also in ticipating in the construction
dictates—to produce and terms of services. Indumil is a of tunnels; for example, in An-
commercialize arms, am- production-focused company tioquia there is the construc-
munitions, and explosives. but we have not been provid- tion of 39km of tunnels and we
In the beginning explosives ing the service to our custom- are there providing explosives
was a minor business line for ers that we should. If we pro- directly to the tunnel. ✖
us; however, it is growing, in vide an explosive, we should
large part due to mining ac- also provide the knowledge
tivities and the construction of how to use it, such as the
of mining roads and tunnels. calculations needed to use the
The core of our business has explosive. We have eight lab-
not changed necessarily, but oratories that we need to use
it has given us the opportuni- not only for production but
ty to expand our business. In also for providing knowledge
Colombia we have a different services for the customer in
situation compared to the rest different aspects. Explosives
of Latin America or even the account for around 68% of our
whole world, as private com- sales, but we need to diversi-
panies are not involved in the

Industry THEBUSINESSYEAR 93

THE REGIONS FOCUS

SPREAD THE LOAD

Colombia’s economy is not just centered on its capital city; its regions play a vital part in the
livelihood of many of its citizens as well as its industry.

BARRANQUILLA as Valle del Cauca is one of the largest sugar cane producers in
Latin America. “The food and beverage industry is a great op-
Barranquilla has a diversified and strong metal mechanic indus- portunity for companies to come to the region and develop or
try that has a solid export-oriented approach. The devaluation of expand their business,” explained General Manager of Invest
the peso against the dollar from 1H2015 to 2H2016 invigorated Pacific Alejandro Ossa. “We have also identified opportunities in
Barranquilla’s foreign sales. “The depreciation is an opportuni- different sectors for companies that are importing many prod-
ty for local players because exports are now cheaper and that ucts from Asia and processing or adding value to their products,
brings about new opportunities for us,” Mariano Ghysays, Gen- and then exporting either to Asia or to other Pacific Latin Ameri-
eral Manager of Superbrix, explained to TBY. Superbrix currently can countries,” Ossa added in his interview with TBY.
exports 90% of its products to countries such as the Philippines
and Vietnam and Ghysays believes the devaluation could trigger MEDELLÍN
a medium-term reindustrialization of Colombia.
Medellín has traditionally been regarded as the second most im-
CALI portant city in Colombia after Bogotá. Antioquia, the region to
which Medellín belongs, accounts for nearly 13.5% of the coun-
Cali is in the Valle del Cauca and in 2015 its economic activities try’s GDP. The “Paisas,” as Antioquians are known, maintain a
made up 9.3% of the national GDP, according to the National healthy rivalry with the “Bogotanos.” Medellín is widely regarded
Administrative Department of Statistics (DANE). Cali is close to as more organized than the capital, as it is the only Colombian
the port of Buenaventura, the main Colombian port on the Pa- city that has a subway, and over the past several years it has con-
cific, which provides an excellent location for those interested in sistently ranked among the three most innovative cities in Latin
exporting to Asia. In 2015, nearly 13 different companies in the America according to the agency 2thinknow. Some of the larg-
agriculture, manufacturing, metal mechanics, and automotive est Colombian companies are based in Medellín, such as Argos,
sectors set up their businesses in Cali. However, one of the in- Bancolombia, EPM, Nutresa, and Sura. ✖
dustries with the biggest potential to thrive is the food industry,

94 THEBUSINESSYEAR COLOMBIA 2016

INTERVIEW

build it
BETTER

TBY talks to Germán How do you think the manu- and society. We have to train PVC manufacturer
Forero, President facturing industry sector will them and provide them with in Colombia
of Gerfor, on the evolve? skills, because they are not
company’s recent The sentiment is that things used to living in society. We Plants in Peru
performance, the are going to improve. We see are willing to collaborate but and Guatemala
potential impact of that the government wants to we need the government to do
the peace process on continue infrastructure proj- something to help. For exam- to export and people would
Colombian industry, ects, and if that is the case ple, we need the government rather buy locally. That is why
and the outlook for things are going to improve. to train them before sending we decided to go to Peru and
the future However, nothing is agreed them to companies. Guatemala.
and there are no dates yet.
How did Gerfor perform in How can the devaluation of the What advantages would you
2015? What are your views on the peso open opportunities to fos- highlight for international inves-
Gerfor had an excellent year peace process, and how import- ter industrialization in Colom- tors looking to invest in Colom-
in 2015. We had interesting ant will it will be in fortifying the bia? bian industry?
growth and good profits. For economy? It is difficult for us to find cer- The human factor is import-
many years, we have contin- It will be key; however, it is tain raw materials in Colom- ant in Colombia; people here
ued down this path of growth, difficult to know what is going bia; hence, we need to import are dynamic and energetic.
and we expect to maintain to happen because we do not them, which could create The human capital is excel-
it. We have introduced new know exactly what has been problems if there are further lent, and I believe that is the
technologies and are invest- discussed and agreed to in devaluations. main factor they should look
ing in human resources and Havana. Even though we have at. Gerfor has nearly 1,200 em-
improving the skills among the peace process, another What new investments is Gerfor ployees in Colombia.
our workforce. The construc- problem that Colombia has planning?
tion industry in Colombia has is corruption. Corruption is We are doing several new in- What is your outlook for the Co-
developed recently and that huge in Colombia, meaning vestments. We are looking lombian economy in 2016?
has benefited us immense- although the peace process at important investments in There are people who say that
ly; however, we have to be is important, corruption also training for human resources, Colombia will have 3% growth
cautious of what happens in needs to be tackled. which is important. We are and others say that it will be
3Q2016 as things might slow also doing some automation near 2%. To make those fore-
down. We will have to see How do you think the industrial to improve and enhance our casts for a company such as
what happens with the peace sector and economy can suc- processes. In addition to this ours is difficult; however, at
process and oil prices. cessfully absorb a part of the there are some investments a micro level we can say that
guerilla members? we need to make in software. things are starting to move. ✖
There are some programs that We also have a plant in Gua-
the government has and we temala that requires some in-
have contributed with some vestments.
programs to try to incorporate
children who lived the streets Why do you have plants in Peru
into the industry. In those cas- and Guatemala, instead of ex-
es it was difficult to integrate porting locally produced prod-
them into our workforce. The ucts to these markets?
government has to have a It is expensive to sell to these
road map and a well-defined countries due to tax require-
program on how to bring ments. Besides, our products
these people into the industry are not ones that are easy

Industry THEBUSINESSYEAR 95

B2B

HOME
appliances

JOHN MATALLANA SAKAE MACHIDA Manufacturers in Colombia
are taking advantage of the
President, Indufrial President, opportunities presented by recent
changes in the global economic
Electrojaponesa landscape and the increase in
technical knowledge in the country
to enhance the competitiveness of

their operations.

The content on this page is taken from exclusive interviews. Read the full versions at thebusinessyear.com How has recent macroeconom- at those prices, and major inter- Cartagena is close to the port, port than via the road network.
ic volatility affected your opera- national companies have their a factor that helps us distribute It provides direct access to Cen-
tion here? own stores in Colombia as well. our materials efficiently. tral America and the east coast
of the US. For example, this
JOHN MATALLANA In the local Which segment of the market SM We do not have expansion month 80% of our goods were
market, prices rose due to the does Electrojaponesa target? plans at the moment, but if the delivered though the port. The
increased price of raw materials economy improves, we would key point is to optimize all the
following the depreciation of SM We sell home appliances, like to open new stores in oth- options and see the opportu-
the peso. However, in terms of televisions, audio products, er regions. In terms of interna- nities that the location offers to
exports our prices were much smartphones, tables, PCs, and tionalization we do not have organize production processes.
more competitive. One of our more. We target the middle planned strategies, we prefer to
main allies in Colombia is Pos- class in Colombia, providing put all our effort in one country SM We have had an online pres-
tobon, a soft drinks producer it with basic home appliances; rather than expanding our busi- ence for three years, but we are
that we support in cold chain the middle class in Colombia ness abroad. still making improvements.
services. If Postobon increases is growing and the market is Online demand in Colombia
its sales, it has to sell its prod- changing, which is why we are What is the production capacity is slow in comparison to other
ucts cold, so we have to be be- constantly adapting our busi- of your manufacturing plant? countries. Colombian people
hind it, providing it with fridges ness strategies. In Colombia are much more traditional; they
when necessary. Another pos- there are six different social JM We can manufacture around prefer to see items in the store
itive factor is the strong cam- classes according to income. 10,000-12,000 refrigerators a before buying them and the cul-
paign that we launched to en- For the majority of our 45 years month. This year we are ex- ture is distrustful of online plat-
courage SMEs to buy or renew here, our market was exclusive- porting three times more than forms and even banks, but the
refrigeration equipment. In Co- ly the high-income segment, in 2015. Also, we are renewing mentality is changing.
lombia, businesses are growing but there are important market the plant to reduce our car-
day by day, and we closed 2015 niches to be filled in the lower bon emissions and improve What are your expectations for
with 43% growth in sales in COP economic classes. our energy efficiency. Our new 2016?
compared to 2014. products are not harmful to the
Do you have plans in place to environment; for example, old SM Our main focus is constant
SAKAE MACHIDA The ex- expand beyond your current refrigerators needed around innovation. Our purpose is to
change rate had always been markets? three years to be degraded, now improve our products that we
stable, but this year the COP all of the dangerous gases can sell and improve the custom-
dropped by 40% against the JM We are interested in Florida be removed in two weeks. er service that we provide. We
US dollar. Normally, we im- in the US and Central America. aim to be different due to our
port some products from the We are not interested in Mexico What unique advantages does service and learn how to ad-
US from brands such as Sony, because it is a country where your company leverage? vise people according to their
LG, or Samsung, so it affects us. there are many big players al- necessities. Another goal is to
In order to find a solution, we ready. To be competitive there JM One of our main advantag- have a faster logistic process
started to import from China, we would need a local factory, es is our location in Cartagena, with effective delivery to the
but the project did not work. whereas other countries can be specifically its port. It helps to client. We also aim to offer
Colombians want well-recog- accessed from here, such as Ec- develop the local economy and high-quality technical service
nized brands for their home ap- uador and Chile. It is important for our business it is cheaper and everything related to rein-
pliances. It is difficult to import to highlight that our location in to deliver products through the forcing the costumer service. ✖

96 THEBUSINESSYEAR COLOMBIA 2016

FORUM

COLOMBIAN
SMEs
Improved support from the government and the greater market

agility afforded to companies of a smaller size have made SMEs in

Colombia particularly crucial for driving the country’s economic

development.

LUIS GABRIEL FONSECA JUANITA AREVALO JUAN MANUEL GOMEZ

VILLAMARÍN General Manager, Manager, Fundiciones

General Manager, Frana Helbert Universo
International

S MEs provide about 80-85% of the T his is a family-owned company in B efore the devaluation of the peso,
employment in this country. The its second generation. In the be- we did not have external compet-
market is strong, so we have to ginning, it was not a family com- itors, but other industries from
have a good cost and a competitive price, but pany; my father founded Helbert with other
it is becoming increasingly difficult to com- partners. He starting buying out the other Peru, Pakistan, or China entered the mar-
pete with Indian and Chinese companies. stakeholders and after 17 years it became a
We began exporting our products because family company. This is an advantage, and ket offering similar prices. That was the
they have international quality. Quality is we are not yet considering selling to other
critical because if the cores in the trans- possible investors. We have had a factory impetus to boost our service. The main The content on this page is taken from exclusive interviews. Read the full versions at thebusinessyear.com
formers are low quality, they are useless, and for a long time and we have our own ware-
one transformer could be $2-3 million. The house and our own foundry. Colombia is sources that we use for our materials are
government offered us loans with a special an industrialized country, and its weakness
award; nine years ago, we started a project is not in terms of manufacturing products Colombian, such as steel and iron, but the
with the government and we developed one but logistics, especially if a business is in Bo-
machine. In that case, we made the ma- gotá due to the distance from Buenaventura rest of the components for the machinery
chines and the government funded about and Cartagena. That increases the price of
40% of the costs. Swiss, Italian, and German the products for the customers significant- are imported. The equation has general-
companies are interested in this machine ly. This is a good time to open new markets
because before it was only made in Germa- because the devaluation against the dollar ly been positive, because what we sell is
ny, but now we are making it here. When provides the opportunity to assume freights
people ask me who our customers are, I tell or offer extra discounts to the customers and twice as much as what we buy. There is a
them Siemens and ABB. People know that increasing competitiveness. When we com-
Siemens and ABB have high-quality stan- pare what Helbert manufactures here to im- major need for more development of tech-
dards and strict requirements, so if Frana can ports of similar products, we are currently in
supply to them, we can supply to anyone. a good place. This puts us in a better position nology and transport in Cali. The area has
Banks are also assisting Frana by providing to compete against other countries like Chi-
funds at a special interest rate. In general, the na, for example, because for the past six to improved, but, for example, our internet
banks and government have been helping twelve months, imported products similar
SMEs in Colombia. to ours were more expensive, and we have connection is still poor. I expect the peace
seen that reflected in our sales. We export
25% of our production, and our principle process to develop the area, and boost edu-
markets are Ecuador and Costa Rica.
cation and job creation. When the country

starts exporting more commodity alterna-

tives to petroleum products, the economy

will grow. Most of Cali’s business opportu-

nities are internal. Colombians have to be

focused on the Pacific region and start with

nearby countries before the Atlantic econ-

omies can develop.

101 105 THEBUSINESSYEAR 97

David Luna Sánchez, ICT Business Process Outsourcing is 112
Minister, on the ambitious plan an important part of Colombia’s
to strengthen the quality of service sector and links it with The challenge in the coming
education via technology. international markets. year for IT companies will be to
provide customers with higher
levels of services.

Telecoms & IT
REVIEW

T Government plans for ICT sector development have proven effective, with
dramatic increases in connectivity improving productivity across the board.

RISING STAR

he perfect storm internet penetration rates
of unfavorable ex- across the country and con-
ternal conditions, nect at least half of Colombi-
an SMEs and households. The
low oil prices, and ministry’s primary goals in
doing this were to encourage
a slowdown in domestic con- user engagement, establish
infrastructure, and increase
sumption over the past two the range of services and ap-
plications available. Colom-
years has been tempered by bia ranks 64th on the World
Bank and World Economic
the many achievements of Forum’s Network Readiness
Index, and aims to move up
the Santos administration. the scale in the coming years
as it fosters internet and tech-
Initiatives to increase partici- nology use among the popu-
lation.
pation in politics and improve
The state has begun to pro-
rural development, as well as mote knowledge of computer
technology from the most ba-
the signing of a permanent sic introductory level right up
to postgraduate and advanced
ceasefire with FARC in August computer science programs.
A clear lack of computer skills
2016 have all contributed to in the Colombian workforce
has given rise to a number
a tentative sense of optimism of initiatives designed to im-
prove skills and engender cu-
among Colombians. But addi- riosity in young people about
the sector’s potential. In total,
tional government plans have over 6,000 people have bene-
fited from IT training over the
been steadily rolled out in the past two years as part of the
Vive Digital program.
background, offering yet more

reasons for a positive outlook

on the country’s economic

development. The first four-

year phase of the Vive Digital Image: Unisono

(Live Digital) strategy end- Efforts to introduce children to
computer technology are ongoing
ed in 2014, and has laid the in schools across Colombia, while
government funding for third-level ICT
foundations for a better-con- courses is hoped to offset the deficit of
qualified graduates over the coming years.
nected, more digitally literate,

and a more competitive and

productive Colombia going

forward.

Introduced by the Minis-

try of ICT (MINTIC) in 2010,

the scheme’s primary goals

were to exponentially increase

98 THEBUSINESSYEAR COLOMBIA 2016

MARKET SHARE OF MOBILE invest in Colombia’s younger generations. As ALBERTO *Read the full interview at thebusinessyear.com
PROVIDERS 1Q2016 part of the Semillas del Futuro (Seeds of the SAMUEL YOHAI
Future) program launched by Chinese tech-
SOURCE: MINTIC nology giant Huawei, 14 students are being President,
sent this year to gain first-hand experience in Colombian
4.27% Other the sector. The firm plays a leading role in the Chamber of
Colombian smartphone market. Information
4.21% Virgin Mobile Technology and
Perhaps the most important development Telecommunications
19.27% Tigo under Vive Digital has been the augmentation
of the country’s ICT infrastructure. Telecom- What defined 2015 for the IT
49.47% Claro munications services across the country are industry in Colombia?
commonly provided via the radio spectrum 2015 was an important year for
22.79% Movistar and are regulated by the National Spectrum the ICT industry here in so far
Agency (Agencia Nacional de Espectro). This as we continued to consolidate
In tandem with its expansion of internet form of transmission has become increas- ourselves as a basic necessity
coverage to over 95% of the country’s 1,122 ingly significant in recent years with the un- for all activities across the
municipalities, the ministry has also been precedented explosion in wireless data use. country. It is no longer optional
providing schools with IT equipment to intro- Colombia hosted the Dynamic Spectrum Al- for public sector entities to
duce young students to computers. In certain liance Global Summit in 2016, an indication modernize their ICT solutions,
rural areas, many of these students will have of its new and growing reputation as a major and we are able effectively com-
never had the chance to use this technology investor in technology and ICT. However, municate that it is not an option
before. A 2015 study from the National Con- fiber-optic infrastructure is expanding con- but a necessity. At the end of
sultancy Center (Centro Nacional de Consul- siderably, with four additional submarine ca- the day, Colombia will be more
toria) in Bogotá indicated that schools that bles added over the course of the initial Vive modern and competitive. It is
had benefited from this computer program Digital phase, bringing the country’s total positive that Colombia is embed-
showed lower rates of grade repetition, higher to nine. The most recent subsea installation ding the need to be modern and
rates of attendance, and had more students was completed in early 2015. It was built by competitive in its DNA by way of
moving on to higher education. The study es- telecommunications firm Claro and connects technological implementation.
timates that roughly 160,000 students stayed the country’s northern Caribbean coast with
in education as a result of having access to this Brazil, the Dominican Republic, Puerto Rico, What areas of the country
technology. The provision of powerful teach- the US, Mexico, and Guatemala. By offering would you emphasize for this
ing tools such as portable computers marks a private operators such as Claro various in- industry?
major step forward for Colombian education, centives, the ministry has drawn in crucial The first time I saw a 3D printer
given the grossly under-equipped state of infrastructure investment to create a nation- outside of the US and was not
many classrooms in years past. al network of fiber optic lines for high-speed in Bogotá but in Medellín. The
internet and voice and data transmission. people of Medellín have a clear
The curricula of both primary and second- Colombia’s terrestrial fiber-optic cables now vision to create a technological
ary education are being revised to ensure stretch to around 24,000km and cover most of ecosystem that not only services
that this technology is presented in a rele- the nation’s territory. the city, but the various compa-
vant manner to students who may have had nies in it as well. Medellín is a
limited or no access to computers before. Au- By 2014 and the end of the first Vive Digital friend of the ICT sector. There
thorities are acutely aware, however, that the program there were 8.88 million broadband are also cities like Barranquilla,
mere supplying of technology is only part of internet connections registered in Colom- for example, which are privi-
the solution, with a stronger focus on teach- bia, a considerable increase from the 8.2 mil- leged in the sense that it is on
er training clearly necessary to maximize the lion goal set in 2010. Over 50% of Colombian the northern coast, close to the
capabilities of the national education system. homes are now connected to the fiber optic landing of submarine fiber-optic
Tech-savvy teachers are not the only profes- network. By 2018 the ministry’s objective is cables and can be productive for
sionals in high demand in Colombia though. to triple the number of internet connections data seminars.*
The ministry expects there to be a consider- to 27 million and increase home connections
able shortfall of computer professionals in to 63%. Fast 4G coverage will be extended
the coming years if third-level enrolment in to 100% of the population by the same year,
ICT subjects does not increase. To this end while direct-to-home digital television will
the state is funding the bulk of course costs also be available to everyone.
for students choosing to follow this path,
with over 9,000 already signed up in 2016. The government has also been working to
Private-sector interests have also decided to improve telecommunications services outside
the main urban centers by supporting private
operators entering the mobile market. Fixed
telephony has been decreasing like in many
other markets as cellular coverage expands.
The number of fixed lines in use in early 2015
was registered at 7,195,264, but had dropped
to 7,077,787 by 1Q2016. Colombia has consis-
tently high rates of mobile penetration across
its population. By early 2016 total broadband