The Colombian Exchange Oct 2006

The Colombian Exchange:An Investment Opportunity

By: Juan Pablo CordobaPresident BVC

2

Colombia…

I. I. Macroeconomic stabilityMacroeconomic stability

II. Continued Institutional Strengthening II. Continued Institutional Strengthening III. Favorable investment conditions III. Favorable investment conditions

IV. Capital Markets Growth and IV. Capital Markets Growth and ConsolidationConsolidation

V. Challenges for the futureV. Challenges for the future

VI. An investment opportunityVI. An investment opportunity

3

Colombia is growing consistently at a faster rate than the region

Growth of GDP: Colombia vs. Latin AmericaGrowth of GDP: Colombia vs. Latin America (1980-2005) (1980-2005) % %

Source: Comisión Económica para América Latina y el Caribe – CEPAL, DANE

4,35,13

4,3

2,18

2,58

2,8

-2,68

1,28

2,78

2,45

4,35

1,42

-4

-3

-2

-1

0

1

2

3

4

5

6

1980-1985 1985-1990 1990-1995 1995-2000 2000-2005 2005

Latin america Colombia

4

Standard Deviation of GDP Annual Growth

0%

1%

2%

3%

4%5%

6%

7%

8%

9%

10%V

en

ezu

ela

Uru

gu

ay

Arg

en

tina

Ecu

ad

or

Pe

rú

Pa

na

má

Ch

ile

Co

lom

bia

Me

xico

Bra

sil

…it is not only growing faster but it is also one of the most stable

Source: CEPAL, BVC

5

Since 1999 inflation is single digit and stable

0

5

10

15

20

25

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006 (

p)

Inflation Rate % (1994 – 2005)

4.5%

Source: Dane

CPI Annual Changes (Standard Deviation)

67

,0%

18

,1%

14

,2%

14

,0%

11

,6%

9,9

%

9,5

%

5,4

%

5,3

%

5,1

%

4,2

%

1,8

%

1,0

%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Nic

ara

gu

a

Pe

rú

Bra

sil

Arg

en

tin

a

Ecu

ad

or

Ve

ne

zu

ela

Uru

gu

ay

Gu

ate

ma

la

Me

xic

o

Pa

rag

ua

y

El S

alv

ad

or

Bo

livia

Co

sta

Ric

a

Ch

ile

Co

lom

bia

Pa

na

má

Source: CEPAL, BVC

6

Public sector deficit has decreased

-9

-6

-3

0

3

1991 1993 1995 1997 1999 2001 2003 2005 2007

Sector público consolidadoEntidades descentralizadas y sector público financieroGobierno central

Pronóstico

Source: CONFIS

Fiscal accounts (% de GDP)

7

Monthly exports have grown steadily since February 2003

800,00

900,00

1000,00

1100,00

1200,00

1300,00

1400,00

1500,00

1600,00

1700,00

1800,00

May

-97

Ag

o-9

7N

ov-

97F

eb-9

8M

ay-9

8A

go

-98

No

v-98

Feb

-99

May

-99

Ag

o-9

9N

ov-

99F

eb-0

0M

ay-0

0A

go

-00

No

v-00

Feb

-01

May

-01

Ag

o-0

1N

ov-

01F

eb-0

2M

ay-0

2A

go

-02

No

v-02

Feb

-03

May

-03

Ag

o-0

3N

ov-

03F

eb-0

4M

ay-0

4A

go

-04

No

v-04

Feb

-05

May

-05

Ag

o-0

5N

ov-

05F

eb-0

6M

ay-0

6

Exportaciones US$ millones

Exportaciones USD MM

Source: Bloomberg

8

International terms of trade have improved

Source: Banco de la República

116,18

80,0

90,0

100,0

110,0

120,0

130,0

140,0

150,0

Dic

-86

Dic

-88

Dic

-90

Dic

-92

Dic

-94

Dic

-96

Dic

-98

Dic

-00

Dic

-02

Dic

-04

Ind

ice

ITCR Comercio Total

ITCR Comercio Total

9

Perception of Colombian Risk has decreased

Source: Cbond, Fedesarrollo

JPMorgan Emerging Market Bond IndexBasis Points over Treasury

10

Standard & Poor´s reviewed Colombia's perspective and changed it from stable to positive,

Moody´s changed from negative to stable the perspective on Colombia's foreign debt bonds

Rating agencies have shownconfidence in Colombia

11

Colombia…


II. Continued Institutional StrengtheningII. Continued Institutional Strengthening III. Favorable investment conditions III. Favorable investment conditions




12

Number of presidential terms of less than a year since 1940

02468

1012141618

Bol

ivia

Arg

entin

a

Gua

tem

ala

Ecu

ador

Chi

le

Pan

amá

Bra

sil

Per

ú

Par

agua

y

Uru

guay

Ven

ezue

la

Nic

arag

ua

El

Sal

vado

r

Méx

ico

Col

ombi

a

Long tradition of democratic

elections and presidential stability

Source: CEPAL, BVC

13

Source: Colombian National Planning Department (DNP)

Stability in steering monetary policy

14

Judiciary system independence and Supreme Court magistrates stability

15

• Substantial progress has been made in improving internal security over the last 4 years

Source: Defense Ministry

Source: Fondelibertad, DNP

Progress in reducing the consequences of the internal conflict

16

Source: World Bank (www.DoingBusiness.org)

Investor Protection Index

0

1

2

3

4

5

6

7V

enezuela

Hondura

s

Guate

mala

Mexic

o

Ecuador

Boliv

ia

Latin A

merica &

Caribbean

El S

alv

ador

Panam

a

Nic

ara

gua

Uru

guay

Arg

entina

Bra

zil

Chile

Para

guay

Colo

mbia

OE

CD

Peru

Healthy investor protection standards

Source: World Bank (www.DoingBusiness.org)

17

Source: Encuesta de opinión empresarial. Fedesarrollo

Se ha recuperado la confianza

Economical and socio-political

35

47

-90

-70

-50

-30

-10

10

30

50

feb

-94

oct-

94

jun-9

5

feb

-96

oct-

96

jun-9

7

feb

-98

oct-

98

jun-9

9

feb

-00

oct-

00

jun-0

1

feb

-02

oct-

02

jun-0

3

feb

-04

oct-

04

jun-0

5

Socio-políticas

Económicas

• Net indicator between favorable and unfavorable perceptions

BVC

cambiar el título

18

Colombia…


II. Continued Institutional Strengthening II. Continued Institutional Strengthening III. Favorable investment conditionsIII. Favorable investment conditions




19

Source: DANECalculations by Ministerio de Hacienda y Crédito Público

Investment rate has been constantly increasing since 1999

Investment Rate (Gross fixed capital formation / GDP)

22,3%

Promedio = 17,5%

10%

12%

14%

16%

18%

20%

22%

24%

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

20

Source: DANE-DIAN

Increased imports of capital goods

Capital Goods Imports/Millions Dollar CIF (accumulated 12 months)

31,6%

2.000

3.000

4.000

5.000

6.000

7.000

8.000

9.000A

go

-98

Dic

-98

Ab

r-9

9A

go

-99

Dic

-99

Ab

r-0

0A

go

-00

Dic

-00

Ab

r-0

1A

go

-01

Dic

-01

Ab

r-0

2A

go

-02

Dic

-02

Ab

r-0

3A

go

-03

Dic

-03

Ab

r-0

4A

go

-04

Dic

-04

Ab

r-0

5A

go

-05

Dic

-05

Ab

r-0

6

-50%-40%-30%-20%-10%0%10%20%30%40%50%

Amount Gross

21

International investors recognize investment opportunities in Colombia

Source: Balanza de Pagos Banco de la República.

Sab Miller buys Bavaria. Investment US$ 4.715 MillionsFlujo de IED (1994 – 2006) US$ Millons

10,1

1,4 1,0

3,1

5,5

2,8

1,52,1 1,8

3,0

6,0

2,32,5

1,0

1,0

3,0

5,0

7,0

9,0

11,019

94

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

(P

)

22

Lately, many foreign companies have shown their confidence in Colombia

Sab Miller (South Africa):• Buys Bavaria, the most important beer company in Colombia• Investment: US$ 4.715 Million

Phillip Morris (USA):• Buys Coltabaco, the biggest Colombia tobacco company• Investment: US$ 300 Million

Falabella (Chile)• Department Store starts operations in Colombia• Investment: US$ 100 Million

Petrobras (Brazil)• Buys petroleum business in Colombia• Investment: US$ 140 Million

Maverick Tube Corp. (USA): Buys Tubos del Caribe and Tubos Colmena• Investment: US$ 156 Million

23

Lukoil (Russia):• Increases it's investment in petroleum explorations • Investments: US$ 55 Million

Enbridge (Canada)• Ecogás operator, The biggest natural gas transporter of

Colombia• Pension Funds will also invest in this company

Glencore International AG (Suisse)• Ecopetrol partner in the Cartagena refinery• Investment: US$ 800 Million

Flughafen Zurich (Swiss)• With the participation of several Colombian companies, these

firm won the concession for running the El Dorado Bogotá airport for the next 20 years

• Investment: US$ 650 Million

Millicon International Cellular S.A. (Luxemburg) (• Strategic partner of the telephone company: móvil PCS,

Colombia Móvil S.A. • Investment: US$ 500 Million

… From different countries and in different sectors of the economy

24

Colombia…






25

0

1.000

2.000

3.000

4.000

5.000

6.000

7.000

8.000

9.0006-

97

10-9

7

2-98

6-98

10-9

8

2-99

6-99

10-9

9

2-00

6-00

10-0

0

6-06

1-06

1-06

2-06

2-06

2-06

3-06

3-06

3-06

4-06

4-06

4-06

5-06

5-06

5-06

6-06

StocksPrivate Debt and OthersPublic Debt (TES B)

US

D M

illion

s

Source: Colombian Stock Exchange, Inverlace, Central Bank

Trading volume has been growing … but it can grow even further

Average Daily Turnover (Local Market)

26

Capital markets growth and consolidations

Fixed Income markets

Demand side

Institutional investors

Equity

Supply side

27

Stock market shows dynamic growth

Fuente: BVC

19

50

19

55

19

60

19

65

19

70

19

75

19

80

19

85

19

90

19

95

20

00

20

05

0,0

2,0

4,0

6,0

8,0

10,0

12,0

11%

Volume traded of equity/GDP

28

… How ever it continues to be small

Monthly VolumeJuly 2001 - May 2006

0

500

1.000

1.500

2.000

2.500

3.00007

- 01

10 -

01

01 -

02

04 -

02

07 -

02

10 -

02

01 -

03

04 -

03

07 -

03

10 -

03

01 -

04

04 -

04

07 -

04

10 -

04

01 -

05

04 -

05

07 -

05

10 -

05

01 -

06

04 -

06

Month

Vol

ume

(Mill

ions

of d

olla

rs)

-

2.000

4.000

6.000

8.000

10.000

12.000

IGB

C (C

losi

ng)

VOLUME IGBC (Closing price)

Fuente: BVC

29

Listed companies per sector

Source: BVC

August 2006

Sociedades inversoras

15%

Servicios públicos11%

Otros18%

Agricola11%

Comercial2%

Financiero12%

Industrial31%

Number of listed companies: 98

30

Most traded stocks and stocks with greater gains

August 2006Source: Bolsa de Valores de Colombia

23081

73

63

55

50

48

43

43

41

0 50 100 150 200 250

SURAMINV

CEMARGOS

BCOLOMBIA

INTERBOLSA

EXITO

INVERARGOS

COLINVERS

PAZRIO

CORFICOLCF

CHOCOLATES

75.51%

49.22%

31.12%

22.22%

19.11%

0% 20% 40% 60% 80%

COLTEJER

ODINSA

INTERBOLSA

TABLEMAC

FABRICATO

Trading volume month (USDMM)

31

Capital markets growh and consolidations

. Equity .

Demand Side

Institutional Investor

Supply Side

Fixed income markets

32

Colombia's market size peers with the biggest markets of the region.

Source: Bank of International Settlements (Quarterly Review June 2006)

33

Market liquidity overcome the average …

Source: Bank of International Settlements (Quarterly Review June 2006)

34

Source: Bank for International Settlements, 2005.

0,9%

0%

2%

4%

6%

8%

10%

12%

14%

Fran

cia

Rei

no U

nido

Chi

le

Ale

man

ia

Esta

dos

Uni

dos

Arg

entin

a

Espa

ña

Méx

ico

Ven

ezue

la

Bra

sil

Japó

n

Col

ombi

a

Indi

a

Cos

ta R

ica

Tur

quía

Growth opportunity in the corporate bond market

Corporate bonds in circulation as a % of GDP

35

Growth of corporate debt

August 2006Source: Superfinanciera, BVC

2.033

1.259

2.491

974 1.210

2.6511.987

3.564

1.861

861

6.411

7.302

-

1.000

2.000

3.000

4.000

5.000

6.000

7.000

8.000

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

MM

US

D

Securities Issuance Stock Corporate Bonds

Corporate bonds

36

Agua3%

Multilateral4%

Otros9%

Telecomuni-caciones

5%

Financiero39%

Carreteras5%

Entidad Territorial

5%

Inmobiliario7%

Bebidas11%

Energía12%

Sectors that issue corporate bonds

August 2006Source: Superintendencia Financiera

• Retail• Cement• Hotels• Agropecua

rio• Industrial• Other

Corporate Bonds USD$7,302 MM

BVC

BVC

cambiar nombres

37

Upcoming deals

Isagen

• Will soon have an IPO of 20% of its equity

Granbanco-Bancafé

• Government stake (99,98%) to be auctioned, with a valuation of US$454 MM

Ecopetrol

• Will soon have an IPO of 20% of its equity, with a valuation of US$ 2,000 MM to US$5,000 MM

Promigas

• EMHC, an Enron subsidiary, to sell its 33% stake in Colombia’s main gas transport company. Estimated value: US$ 350 MM

Acerias Paz del Rio

• 43% of the company’s shares to be sold.

38

Capital markets growth and consolidations

Supply Side Equity Fixed income markets

.

.

Demand Side

Institutional Investors

39

Growth of institutional investors

Source: Superfinanciera, BVC

Mandatory Pension Funds

US$14.041 MM

-1.0002.0003.0004.0005.0006.0007.0008.0009.000

10.00011.00012.00013.00014.00015.00016.00017.00018.000

Ene

-99

Jun-

99

Nov

-99

Abr

-00

Sep

-00

Feb

-01

Jul-

01

Dic

-01

May

-02

Oct

-02

Ma

r-03

Ago

-03

Ene

-04

Jun-

04

Nov

-04

Abr

-05

Sep

-05

Feb

-06

Jul-

06

US$ Millions

BVC

actualizar

40

Colombia…

I. Macroeconomic stabilityI. Macroeconomic stability





41

4 main issues that BVC is currently working to improve:

1. Number of issuers

2. Diversity of products offered in the Colombian market

3. More investors

4. Improve regulatory environment

New outstanding projects favor market development

42

• Colombia Capital Program Get closer to the real sector Communication campaigns Ono to One coaching Work with associations Changes in regulation to facilitate new issues

• Program’s goals: Increase the amount of issuers, institutional investors and

private equity funds Develop alternative finance and investment mechanisms

for issuers and investors.

• 4 components: Support for first time issuers Formation of private equity funds. Efficient dissemination of information. Promotion and evaluation

1. Increase the number of issuers

43

Banco Interamericano de

Desarrollo

1. Increase the number of issuers

Sponsoring Entities

44

1. Increase the number of issuers: 12

potential issuers in the first group

• Industrial

• Food

• Food

• Construction

• Fitness

• Food

• Food

• Chemicals

• NGO

• Hotels

• Retail

• Food

45

1. Increase the number of

issuers: 4 private equity funds Local funds:

Tribeca Seaf Colombia Corficolombiana Promotora de Proyectos de Medellín

International funds:

ACTIS (present in Asia, Africa and Latin America)

AIG

46

A Clearing House and futures market are expected to be functioning by 2007

Alternative investment vehicles will provide long term funding for private companies

Derivatives

2. Diversification of Products offered in the Colombian market

47

• More individual Investors

Implement high impact and effective education programs

Promote meeting points for investors (“Punto BVC”)

Design and implement value propositions for different segments (i.e. “Bolsa Millonaria” contest)

Launch massive communication campaigns

Implement alternative and economic access channels (i.e. Internet)

Design incentive schemes for traders attracting more investors

Improve the Web page to make it more accessible

3. More investors

48

• More Institutional Investors

Help improve market conditions to depend the capital markets

Creation of market indexes Derivatives market Liquidity

Training in specialized issues

Offer more and better information for the making of decisions

Corporate debt bonds Pricing

Attract foreign investors

3. More investors

49

The BVC is working with the government to lead regulatory changes that will improve and strengthen the capital markets

Strict rules for market operation have been approved

Self regulation has been extended to all market participants

Certification of all traders will begin in 2007

Corporate Governance rules

New IPO regulation to protect minority interests to be issued

4. Regulatory aspects

50

Colombia…






51

One-year wait period to foreign investment was removed

Market liquidity in government bonds and peso markets guarantee best execution at low cost

Market organization and electronic trading should provide confidence to foreign investors

An investment opportunity

All of the above, along with a clear political and economical landscape, should provide

investors with tremendous up-side potential in Colombia

The Colombian Exchange Oct 2006

Economy & Finance

Transcript of The Colombian Exchange Oct 2006