A Baker's Dozen Celebrating 13 Years in Colombia

TIME FLIES

I landed permanently in Medellín exactly 13 years ago today and started broking Colombia six months later having initially told the good people at Asesores that they were wasting their money as there was no foreign market ! It is one of the few times I have been completely wrong since arriving in this beguiling country so full of conflict and contradiction which has achieved a tremendous amount since 2005 although one still feels it has been in spite of itself as opposed to because of itself - here are my thoughts on what has changed, or not in some cases. I remember doodling once when I arrived a spider design with the the eight legs being the things that Colombia needed to achieve in order to make significant advancement, sadly the full list escapes me but I do remember that the 8 have now been accomplished. The list did include the end of capital controls, the re-establishment of investment grade, a US FTA & a peace agreement with the FARC - it is perhaps a measure of how far the country has come that some have slipped into the mists of time whilst others such as the OECD and the 4G projects were too much of a fantasy that they didn’t even appear in what is at times my vivid imagination. THE CORPORATES There have been so many successes over that period but perhaps the greatest has been the reinvention and recognition of the blue chip companies that occupy the COLCAP index, without naming names I remember a meeting with a now international powerhouse when I first arrived who didn’t quite understand what I was doing in their office even though it was a listed company and after having explained that I was there in order to put together a report for foreign investors - how times have changed, now over 50% of the COLCAP’s EBITDA comes from overseas, there are multiple regional market leaders to be found here in Colombia and Central America is fast being colonized. The rewards have been there - market caps have ballooned and overseas investors have stepped in, in the early years you would see a a few trades a month, that has now changed completely and foreigners are now the number one participant in the equity market. There is no need to name any specific company, we all know the names and I congratulate them - executives here are now recognized by international investors as being amongst the best at what they do and long may that continue. TOP DOWN The handling of the economy has been a big success too, the 2008 financial crisis simply bounced off the armoured plating and the oil shock has been handled immensely well, other emerging markets have suffered by comparison. The Central Bank has been firm and independent, Dario Uribe was a colossus in the role and Juan Jose Echavarria has equally avoided the Sirens sat in Government who wanted to give helpful advice. Another overall success, although there is work to do, is that the global image of Colombia has been lifted out of the Abyss, arguably to the extent that the international image is overly positive - the foreign press have certainly changed their tune and in terms of tourism it has become one of the most discussed and recommended destinations on the planet. The peace process and the globetrotting of President Santos have greatly helped in this regard - the foundations were in part laid by President Uribe but it is only in the last years that the profile has really improved. The final positive factor has been the dramatic emergence of a middle class in Colombia, be it car ownership,buying first homes, travelling or eating out a major, major consumer society has developed - on top of that unemployment has dropped, formal employment has risen, subscriptions to pension schemes are rising and the number of people with bank accounts has leapt. WORK TO DO All the above total 2 steps forwards and very large steps at that however there are steps that haven’t been taken or which haven’t been big enough and must be addressed. The GINI coefficient is a disgrace, only Honduras ranks worse in Latam and globally there are just a few banana republics and close to failed states lagging behind - that despite 15 years of rapid economic expansion. Poverty rates have fallen and that is to be commended but they are still depressingly high and there are two core reasons - a lack of political will and of course the biggest blight of all, corruption. It is depressing to think of where this country should and could be but stories are all around of back-handers and people on the take, forget Odebrecht that was small potatoes - it is all about the small transactions, the extorsión, the favours for contracts. Open any newspaper and there is a politician at some level being investigated and no one seems to learn, after all a country where you can buy a vote for a cheap breakfast is arguably lacking the moral courage to stand up and change, the great hope is that as people get educated and earn more then those same votes will become too expensive to buy Politically a few days ahead of the election we are where we were when I arrived, the hard right are likely to return to power as they were 2002-2010, we had the Santos years where so much was achieved and history will eventually be very kind to him but right now we are back with the same old faces taking the country forward. Of course I use the term forward loosely as in many respects they want to move the country back to where we were - Duque may be relatively fresh faced but his handlers are anything but and that is likely to be a major problem, 60%+ did not vote for him in Round 1 and many of them are at the end of their tether when it comes to the oligarchs that they feel have ruled Colombia for the past 30 years - this could be a bruising four years if Duque can’t shift that GINI coefficient downwards. Finally (I could sit here and write for hours but that is for the book at some stage) the justice system simply doesn’t work and a country with no justice is on the way to failure. There may have been some high profile convictions for narco-terrorism or corruption but still too many walk away and even more importantly things take far to long to resolve - to take one simple example, Interbolsa one of my former residences, went to the wall in 2012 having stolen enormous mounts from innocent investors, incredibly the case continues...it is just one of many examples but when it comes to white collar crime expensive lawyers are a fantastic defence mechanism. These are three major areas of concern which are all somehow inter-linked and have to be addresed but again they should not distract from the overall advancement the country has experienced. HOPES FOR THE NEXT YEAR That Duque leaves the peace process alone, that he doesn’t allow a divided country to tear itself to pieces over a deal that is 99% set in stone anyway, it will jam up Congress and arguably lead to a negative reaction from the overseas agencies and Governments who have already invested sizeable capital. That new blood comes into the BVC, that there is political will to support the expansion of the capital markets which are currently being suffocated in red tape. We have COLTEL hopefully coming but let’s see more and perhaps come spin offs, there are a number of companies that have divisions that are big enough to stand alone. That the 60%+ who did not vote for Duque in the first round are cared for at the clinics, educated in the schools and above all live a more peaceful life. Of all the misnomers circulating in the global press arguably the biggest it is that Colombia is at peace - it may be in one respect and as much of the country lives in the cities they don't notice but the criminal gang members that roam the countryside number in the 1000s and have no respect whatsoever for human life, they need to be crushed. And finally that Colombia grows up as a country and much of this is in the hands of the individuals who reside here, regardless of economic standing. There are too many excuses at all levels for behaving badly - it may only be running a traffic light, paying a little less in tax, not having insurance, turning up late or simply making excuses but all that has to be left behind. Fewer countries have had a tougher adolescence than Colombia that has somehow survived a quasi civil war, the world’s largest ever drugs business and abominable politicians - but now its time to become an adult, no more feeling sorry for itself - there are a queue of countries who have been through similar growing pains ready to help. THOUGHT I was raised in the image of Margaret Thatcher and she has remains an idol long after her passing but here in Colombia I have found much more sympathy for the 'have-nots' - when I look at the local 'estrato' system (6 being the richest sliver) we find that 5 & 6 contain just 15% of the population (2014) - no-one reading this lives below that threshold. With that number in mind my thoughts turn to 1984 and the book of the same name which I actually studied in 1984 for my A Levels, I am no radical socialist and never will be however the GINI factor (amongst other data points) leads me to believe the following quote from Winston Smith may one day have relevance.......... “ If there is was hope, it MUST lies in the proles..... eighty-five percent of the population of Oceania"