A careful balance of risk and safety

As of February this year, the Colombia Stock Exchange (BVC) operates the same opening hours as the New York Stock Exchange (NYSE). The change, announced in January, aims to internationalize the BVC and provide foreign investors better access to the Latin American markets.

The move also aids synchronization with the Peruvian and Chilean markets, with which the BVC has an integrated platform which started trading in May 2011. The platform is referred to as the Integrated Latin American Market (MILA).

MILA was created with the intention of integrating the region’s capital markets and investment banking operations, to subsequently enlarge businesses with an important presence in any of the MILA markets.

“It is very important that the wealth generated from the exploitation of natural resources be channeled.” David Bojanini, President of Sura

One such strategic move carried out to further strengthen the regional market is Banco de Crédito de Peru’s (BCP) acquisition, announced late last year, of 51% of shares of Colombian stockbrokers Correval.

The presence of leading Colombian and international companies listed in the BVC – such as Ecopetrol, Avianca, Davivienda, Pacific Rubiales, and Sura – are indicators of the current strength of Colombia’s stock exchange.  Its President, Juan Pablo Cordoba, notes a positive change in attitude among local business leaders: “Businessmen have opened up a lot more to the world, that is, companies have become ambitious and talk about doubling or tripling within three to seven years.” 

One such company, Grupo de Inversiones Suramericana (Sura) is listed on the BVC and registered with the American ADR-Level I program, with strategic investments in the financial, insurance and social security sectors.

David Bojanini, President of Sura, is certain that Colombia’s future is safeguarded, unlike Europe’s, due in part to the pension fund systems.

“I have no doubt that much of the crisis in countries like Greece, Italy and Spain can be explained by the high cost of the pension system,” he says. “Pension systems based on indefinite benefits or allowances are not easy to finance. The system created in Chile in the 80s – and which has been installed across Latin America – is based on pension funds and defined contribution systems and actually appears to be a solution to this pension problem.”

Diversifying paths

Colombia’s oil sector continues to attract exploration and mining to the country. Mr. Bojanini says: “We are aware that this cannot be our only attraction. It is very important that the wealth generated from the exploitation of natural resources be channeled toward other products with higher added value, so that the day these mostly non-renewable natural resources are gone, our growth rate is maintained.”

President Juan Manuel Santos has instigated a series of fiscal reforms regarding the redistribution of oil royalties. “You can see how the effect of economic growth is not running only in the areas of primary goods or raw materials, but it is also going to other sectors of production,” says Mr. Bojanini.

Sura recently positioned itself as one of the leading providers of financial services in the region following the acquisition of Dutch group ING’s Latin American insurance and pension portfolio, a strategic business move which became the largest acquisition of a foreign company ever carried out by a Colombian business. The group’s increased market presence within Latin America is expected to stiffen competition, more so with the ratification of the FTA. “We entrepreneurs need to transform our businesses to become more competitive and efficient in the scenario of free trade agreements with the U.S., Canada, Europe and South Korea, among others,” explains Mr. Bojanini.