The Colombian Exchange Oct 2006

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  • The Colombian Exchange Oct 2006

    1. 1. The Colombian Exchange: A n Investment Opportunity By: Juan Pablo Cordoba President BVC
    2. 2. Colombia… I. Macroeconomic stability II. Continued Institutional Strengthening III. Favorable investment conditions IV. Capital Markets Growth and Consolidation V. Challenges for the future VI. An investment opportunity
    3. 3. Colombia is growing consistently at a faster rate than the region Growth of GDP: Colombia vs. Latin America (1980-2005) % Source: Comisión Económica para América Latina y el Caribe – CEPAL, DANE
    4. 4. … it is not only growing faster but it is also one of the most stable Source: CEPAL, BVC
    5. 5. Since 1999 inflation is single digit and stable Source: Dane Source: CEPAL, BVC Inflation Rate % (1994 – 2005) 4.5%
    6. 6. Public sector deficit has decreased Source: CONFIS Fiscal accounts (% de GDP)
    7. 7. Monthly exports have grown steadily since February 2003 Exportaciones USD MM Source: Bloomberg
    8. 8. International terms of trade have improved Source: Banco de la República ITCR Comercio Total
    9. 9. Perception of Colombian Risk has decreased Source: Cbond, Fedesarrollo JPMorgan Emerging Market Bond Index Basis Points over Treasury
    10. 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 shown confidence in Colombia
    11. 11. Colombia… I. Macroeconomic stability II. Continued Institutional Strengthening III. Favorable investment conditions IV. Capital Markets Growth and Consolidation V. Challenges for the future VI. An investment opportunity
    12. 12. Long tradition of democratic elections and presidential stability Source: CEPAL, BVC
    13. 13. Source: Colombian National Planning Department (DNP) Stability in steering monetary policy
    14. 14. Judiciary system independence and Supreme Court magistrates stability
    15. 15. <ul><li>Substantial progress has been made in improving internal security over the last 4 years </li></ul>Source: Defense Ministry Source: Fondelibertad, DNP Progress in reducing the consequences of the internal conflict
    16. 16. Source: World Bank (www.DoingBusiness.org) Healthy investor protection standards Source: World Bank (www.DoingBusiness.org)
    17. 17. Source: Encuesta de opinión empresarial. Fedesarrollo Se ha recuperado la confianza Economical and socio-political <ul><li>Net indicator between favorable and unfavorable perceptions </li></ul>
    18. 18. Colombia… I. Macroeconomic stability II. Continued Institutional Strengthening III. Favorable investment conditions IV. Capital Markets Growth and Consolidation V. Challenges for the future VI. An investment opportunity
    19. 19. Source: DANE Calculations by Ministerio de Hacienda y Crédito Público Investment rate has been constantly increasing since 1999 Investment Rate (Gross fixed capital formation / GDP )
    20. 20. Source: DANE-DIAN Increased imports of capital goods Capital Goods Imports/ Millions Dollar CIF (accumulated 12 months)
    21. 21. International investors recognize investment opportunities in Colombia Source: Balanza de Pagos Banco de la República. Sab Miller buys Bavaria. Investment US$ 4.715 Millions Flujo de IED (1994 – 2006) US$ Millons 10,1 1,4 1,0 3,1 5,5 2,8 1,5 2,1 1,8 3,0 6,0 2,3 2,5 1,0 1,0 3,0 5,0 7,0 9,0 11,0 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 (P)
    22. 22. Lately, many foreign companies have shown their confidence in Colombia <ul><li>Sab Miller (South Africa): </li></ul><ul><li>Buys Bavaria, the most important beer company in Colombia </li></ul><ul><li>Investment: US$ 4.715 Million </li></ul><ul><li>Phillip Morris (USA): </li></ul><ul><li>Buys Coltabaco, the biggest Colombia tobacco company </li></ul><ul><li>Investment: US$ 300 Million </li></ul><ul><li>Falabella (Chile) </li></ul><ul><li>Department Store starts operations in Colombia </li></ul><ul><li>Investment: US$ 100 Million </li></ul><ul><li>Petrobras (Brazil) </li></ul><ul><li>Buys petroleum business in Colombia </li></ul><ul><li>Investment: US$ 140 Million </li></ul><ul><li>Maverick Tube Corp. (USA): Buys Tubos del Caribe and Tubos Colmena </li></ul><ul><li>Investment: US$ 156 Million </li></ul>
    23. 23. <ul><li>Lukoil (Russia): </li></ul><ul><li>Increases it's investment in petroleum explorations </li></ul><ul><li>Investments: US$ 55 Million </li></ul><ul><li>Enbridge (Canada) </li></ul><ul><li>Ecogás operator, The biggest natural gas transporter of Colombia </li></ul><ul><li>Pension Funds will also invest in this company </li></ul><ul><li>Glencore International AG (Suisse) </li></ul><ul><li>Ecopetrol partner in the Cartagena refinery </li></ul><ul><li>Investment: US$ 800 Million </li></ul><ul><li>Flughafen Zurich (Swiss) </li></ul><ul><li>With the participation of several Colombian companies, these firm won the concession for running the El Dorado Bogotá airport for the next 20 years </li></ul><ul><li>Investment: US$ 650 Million </li></ul><ul><li>Millicon International Cellular S.A. (Luxemburg) ( </li></ul><ul><li>Strategic partner of the telephone company: móvil PCS, Colombia Móvil S.A. </li></ul><ul><li>Investment: US$ 500 Million </li></ul>… From different countries and in different sectors of the economy
    24. 24. Colombia… I. Macroeconomic stability II. Continued Institutional Strengthening III. Favorable investment conditions IV. Capital Markets Growth and Consolidation V. Challenges for the future VI. An investment opportunity
    25. 25. Stocks Private Debt and Others Public Debt (TES B) USD Millions Source: Colombian Stock Exchange, Inverlace, Central Bank Trading volume has been growing … but it can grow even further Average Daily Turnover (Local Market)
    26. 26. Capital markets growth and consolidations <ul><ul><li>Fixed Income markets </li></ul></ul><ul><li>Demand side </li></ul><ul><ul><li>Institutional investors </li></ul></ul>Equity Supply side
    27. 27. Stock market shows dynamic growth Fuente: BVC 11% Volume traded of equity/GDP
    28. 28. … How ever it continues to be small Monthly Volume July 2001 - May 2006 Fuente: BVC
    29. 29. Listed companies per sector Source: BVC August 2006 Number of listed companies: 98
    30. 30. Most traded stocks and stocks with greater gains August 2006 Source: Bolsa de Valores de Colombia Trading volume month (USDMM)
    31. 31. Capital markets growh and consolidations <ul><li>. </li></ul><ul><ul><li>Equity </li></ul></ul><ul><ul><li>. </li></ul></ul><ul><li>Demand Side </li></ul><ul><ul><li>Institutional Investor </li></ul></ul>Supply Side Fixed income markets
    32. 32. Colombia's market size peers with the biggest markets of the region. Source: Bank of International Settlements (Quarterly Review June 2006)
    33. 33. Market liquidity overcome the average … Source: Bank of International Settlements (Quarterly Review June 2006)
    34. 34. Source: Bank for International Settlements, 2005. Growth opportunity in the corporate bond market Corporate bonds in circulation as a % of GDP
    35. 35. Growth of corporate debt August 2006 Source: Superfinanciera, BVC Corporate bonds
    36. 36. Sectors that issue corporate bonds August 2006 Source: Superintendencia Financiera <ul><li>Retail </li></ul><ul><li>Cement </li></ul><ul><li>Hotels </li></ul><ul><li>Agropecuario </li></ul><ul><li>Industrial </li></ul><ul><li>Other </li></ul>Corporate Bonds USD$7,302 MM
    37. 37. Upcoming deals <ul><li>Isagen </li></ul><ul><li>Will soon have an IPO of 20% of its equity </li></ul><ul><li>Granbanco-Bancafé </li></ul><ul><li>Government stake (99,98%) to be auctioned, with a valuation of US$454 MM </li></ul><ul><li>Ecopetrol </li></ul><ul><li>Will soon have an IPO of 20% of its equity, with a valuation of US$ 2,000 MM to US$5,000 MM </li></ul><ul><li>Promigas </li></ul><ul><li>EMHC, an Enron subsidiary, to sell its 33% stake in Colombia’s main gas transport company. Estimated value: US$ 350 MM </li></ul><ul><li>Acerias Paz del Rio </li></ul><ul><li>43% of the company’s shares to be sold. </li></ul>
    38. 38. Capital markets growth and consolidations <ul><li>Supply Side </li></ul><ul><ul><li>Equity </li></ul></ul><ul><ul><li>Fixed income markets </li></ul></ul><ul><li>. </li></ul><ul><ul><li>. </li></ul></ul>Demand Side Institutional Investors
    39. 39. Growth of institutional investors Source: Superfinanciera, BVC Mandatory Pension Funds
    40. 40. Colombia… I. Macroeconomic stability II. Continued Institutional Strengthening III. Favorable investment conditions IV. Capital Markets Growth and Consolidation V. Challenges for the future VI. An investment opportunity
    41. 41. <ul><li>4 main issues that BVC is currently working to improve: </li></ul><ul><li>Number of issuers </li></ul><ul><li>Diversity of products offered in the Colombian market </li></ul><ul><li>More investors </li></ul><ul><li>Improve regulatory environment </li></ul>New outstanding projects favor market development
    42. 42. <ul><li>Colombia Capital Program </li></ul><ul><ul><li>Get closer to the real sector </li></ul></ul><ul><ul><li>Communication campaigns </li></ul></ul><ul><ul><li>Ono to One coaching </li></ul></ul><ul><ul><li>Work with associations </li></ul></ul><ul><ul><li>Changes in regulation to facilitate new issues </li></ul></ul><ul><li>Program’s goals: </li></ul><ul><ul><li>Increase the amount of issuers, institutional investors and private equity funds </li></ul></ul><ul><ul><li>Develop alternative finance and investment mechanisms for issuers and investors. </li></ul></ul><ul><li>4 components: </li></ul><ul><ul><li>Support for first time issuers </li></ul></ul><ul><ul><li>Formation of private equity funds. </li></ul></ul><ul><ul><li>Efficient dissemination of information. </li></ul></ul><ul><ul><li>Promotion and evaluation </li></ul></ul>1. Increase the number of issuers
    43. 43. 1. Increase the number of issuers Sponsoring Entities Banco Interamericano de Desarrollo
    44. 44. 1 . Increase the number of issuers: 12 potential issuers in the first group <ul><li>Industrial </li></ul><ul><li>Food </li></ul><ul><li>Food </li></ul><ul><li>Construction </li></ul><ul><li>Fitness </li></ul><ul><li>Food </li></ul><ul><li>Food </li></ul><ul><li>Chemicals </li></ul><ul><li>NGO </li></ul><ul><li>Hotels </li></ul><ul><li>Retail </li></ul><ul><li>Food </li></ul>
    45. 45. 1 . Increase the number of issuers: 4 private equity funds <ul><li>Local funds: </li></ul><ul><li>Tribeca </li></ul><ul><li>Seaf Colombia </li></ul><ul><li>Corficolombiana </li></ul><ul><li>Promotora de Proyectos de Medellín </li></ul><ul><li>International funds: </li></ul><ul><li>ACTIS (present in Asia, Africa and Latin America) </li></ul><ul><li>AIG </li></ul>
    46. 46. <ul><ul><li>A Clearing House and futures market are expected to be functioning by 2007 </li></ul></ul><ul><ul><li>Alternative investment vehicles will provide long term funding for private companies </li></ul></ul><ul><ul><li>Derivatives </li></ul></ul>2. Diversification of Products offered in the Colombian market
    47. 47. <ul><li>More individual Investors </li></ul><ul><ul><li>Implement high impact and effective education programs </li></ul></ul><ul><ul><li>Promote meeting points for investors (“Punto BVC”) </li></ul></ul><ul><ul><li>Design and implement value propositions for different segments (i.e. “Bolsa Millonaria” contest) </li></ul></ul><ul><ul><li>Launch massive communication campaigns </li></ul></ul><ul><ul><li>Implement alternative and economic access channels (i.e. Internet) </li></ul></ul><ul><ul><li>Design incentive schemes for traders attracting more investors </li></ul></ul><ul><ul><li>Improve the Web page to make it more accessible </li></ul></ul>3. More investors
    48. 48. <ul><li>More Institutional Investors </li></ul><ul><ul><li>Help improve market conditions to depend the capital markets </li></ul></ul><ul><ul><ul><li>Creation of market indexes </li></ul></ul></ul><ul><ul><ul><li>Derivatives market </li></ul></ul></ul><ul><ul><ul><li>Liquidity </li></ul></ul></ul><ul><ul><li>Training in specialized issues </li></ul></ul><ul><ul><li>Offer more and better information for the making of decisions </li></ul></ul><ul><ul><ul><li>Corporate debt bonds </li></ul></ul></ul><ul><ul><ul><li>Pricing </li></ul></ul></ul><ul><ul><li>Attract foreign investors </li></ul></ul>3. More investors
    49. 49. <ul><ul><li>The BVC is working with the government to lead regulatory changes that will improve and strengthen the capital markets </li></ul></ul><ul><ul><li>Strict rules for market operation have been approved </li></ul></ul><ul><ul><li>Self regulation has been extended to all market participants </li></ul></ul><ul><ul><li>Certification of all traders will begin in 2007 </li></ul></ul><ul><ul><li>Corporate Governance rules </li></ul></ul><ul><ul><li>New IPO regulation to protect minority interests to be issued </li></ul></ul>4. Regulatory aspects
    50. 50. Colombia… I. Macroeconomic stability II. Continued Institutional Strengthening III. Favorable investment conditions IV. Capital Markets Growth and Consolidation V. Challenges for the future VI. An investment opportunity
    51. 51. <ul><li>One-year wait period to foreign investment was removed </li></ul><ul><li>Market liquidity in government bonds and peso markets guarantee best execution at low cost </li></ul><ul><li>Market organization and electronic trading should provide confidence to foreign investors </li></ul>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

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