IFC Finances Buenaventura Port in $224M Deal, For US$1.88B Total In Colombia Since 2004
The World Bank’s private lending arm, the International Finance Corporation (“IFC”), announced earlier in October a large new transaction. The IFC has provided a combination of three different loan facilities totaling US$224M to finance the modernization and expansion of the Buenaventura Port on Colombia’ Pacific coast, very close to Cali.
The IFC has been very active in Colombia in the last several years, as described in several prior posts on this site. The deal brings to more than $1.88 Billion the value of the IFC’s deals in Colombia since 2004.
Overall, just the top ten IFC transactions from 2004 to present total a whopping US$1.35B. About half of that amount, $670M, was committed in the finance and insurance sector, with Banco Davivienda the single biggest recipient overall (and in the top ten) at $320M. Other sectors in the top ten are Transportation and Warehousing ($384M), Utilities ($157.5M), Chemical ($100M), and Oil, Gas & Mining ($85M).
Of all 36 IFC financing transactions in Colombia from 2004 to present, the two biggest years by far were 2007 and 2008. Seven deals occurred in 2009, for a total of $304.25M, ten in 2008 worth $415.5M (not including the unspecified amount of the Giros y Finanzas micro-lending loan facility), eleven in 2007 worth $655M (not including “up to $75M” invested in Grupo Bolivar common shares of equity to recapitalize its insurance group), four in 2006 worth $365M, three in 2005 totaling $140M (not including the Promigas loan facility), and one in 2004 (Carvajal’s transaction of unspecified size for plant modernization).
My updated table of the IFC’s deals, in descending order by size, are shown below.
| Rank | Year | Proj. No. | Company Name | Sector | IFC Amt. ($USM) | Notes |
| 1 | 2007 | 26235 | Compania de Gerenciamiento de Activos Ltda.(CISA) NPLs | Finance and Insurance | $275 | A1 and A2 loans and equity of up to 15% at SPV level, and syndication of B1 and B2 loans as part of $306M project to finance the purchase of a portfolio of Non-Performing Loans (NPLs) and other Non-Performing Assets (NPAs) a majority of which were accumulated by the government of Colombia post the financial crisis of 1999. IFC would provide both debt and equity financing to a local Colombian SRL established by the Consortium. |
| 2 | 2009 | 28479 | Sociedad Portuaria Terminal de Contenedores de Buenaventura (“TCBuen”) | Transportation and Warehousing | $224 | Colombia’s Pacific Port development, engineering, construction, dredging, equipment purchases, and operation of the terminal.IFC investment comprises an A Loan of $25 million, for IFC’s own account, a B Loan of $117 million from syndication banks, and a C Loan of up to $15 million. |
| 3 | 2006 | 25520 | Banco Davivienda S.A. | Finance and Insurance | $200 | Financing for acquisition of Granbanco SA. $75 million of direct equity investment into Davivienda and $125 million ($65 million expected for IFC’s own account) of subordinated debt. |
| 4 | 2008 | 27396 | Termoflores | Utilities | $157.5 | The total project cost is estimated at about $278.2 million. The proposed IFC investment is a $65 million A Loan for IFC’s own account and $92.5 million B loan from participants. The project (Flores IV) is located in Barranquilla, Colombia, 948 kilometers north of Bogotá and 2 kilometers west of the Magdalena river. The Flores IV project consists of the construction of a 169 MW gas-fired combined cycle unit by the expansion/conversion of the existing gas turbines in Flores II and III from open cycle to a combined cycle facility. Flores IV will utilize the waste heat from Flores II and III to provide 169 MW of additional capacity without using significant additional gas. |
| 5 | 2005 | 24282 | Banco Davivienda S.A. | Finance and Insurance | $120 | The project consists of a financing package of up to $120 million to support the expansion and consolidation of the Bank’s operations in Colombia. The project will help Davivienda continue to expand its retail business while maintaining a strong presence in the mortgage industry. |
| 6 | 2007 | 25795 | Org. Terpel SA | Chemicals | $100 | $60M A loan and $40M B loan to fuel distribution company for capital expansion and recapitalization project cost of $280M |
| 7 | 2006 | 24463 | Petrotesting Colombia SA | Oil, Gas, Mining | $85 | Oil and gas exploration, distribution services, equity and debt investment for $85M to strengthen financial position project over two years adoption of best practice corporate systems (such as those related to governance, environmental, social, community programs and accounting) |
| 8 | 2007 | 26520 | Grupo Bolivar | Finance and Insurance | $75 | Equity shares for recapitalization to separate cross-holdings of insurance companies Sociedades Bolivar S.A., Compañía de Seguros Bolivar S.A., Seguros Comerciales Bolivar S.A. and Capitalizadora Bolivar S.A., which hold a number of the Group’s operating companies. |
| 9 | 2008 | 25930 | Cartagena PortTerminal de Contenedores Cartagena SA (Contecar) | Transportation and Warehousing | $60 | A Loan for IFC’s own account in $210M four year capital expansion program to develop Contecar into a world class container port terminal. The capital expenditure program is expected to increase Contecar’s annual capacity from 144 thousand TEUs to 850 thousand |
| 10 | 2008 | 25899 | Avianca | Transportation and Warehousinng | $50 | Corporate loan to finance aircraft acquisitionAerovias del Continente Americano S.A. (Avianca or the company) is planning to renew its fleet over the period 2008-2012 to reduce costs, improve efficiency and safety as well as provide better passenger service (the “Upgrade Program”). The company has negotiated the purchase of 42 aircraft over the next 5 years (including at least 12 Boeing-787s and a number of Airbus-319/320s) to replace its MD-83 and Boeing-757/767 aircraft. The proposed project is to provide financing of up to $50 million to Avianca and its subsidiaries to help finance the implementation of the company’s fleet renewal program. |
| 11 | 2007 | 26473 | Bogota Distrito Capital – Bogota Street Rehab-ilitation | Transportation | $50 | Senior Loan million senior loan to the metropolitan municipality of Bogota Distrito Capital, to finance part of its 2007-2008 capital expenditures program for and rehabilitation of the City’s urban streets network as well as incremental construction of sidewalks and walking/bike paths. |
| 12 | 2006 | 24811 | Fundacion Social | Finance and Insurance | $50M | IFC is considering providing Fundación Social (the “Fundacion”) a long term loan of up to $50 million part of which may be exchanged into equity in any of the Fundacion’s investee companies. Following the appraisal the management team at Fundacion and IFC will jointly agree on the specific terms for this investment. This investment will allow IFC to support the activities of an entity which has an impressive track record of investing in socially responsible projects and targeting lower income households as its core clientele. |
| 13 | 2007 | 25599 | Sodimac | Wholesale and Retail Trade | $50 | Home Improvement retailer recapitalizationThe specific locations of the new stores have not been determined yet. However, the Company’s store expansion will be focused in the main cities in Colombia where the company is already located and might also include some other smaller city in the country. |
| 14 | 2008 | 25672 | Tecnoquimicas | Chemicals | $45 | $25M equity and up to $20M standby loan for $100M capital project for 8 existing chemical facilities mostly around Cali |
| 15 | 2008 | 26175 | Abocol (Abonos Colombianos) | Chemicals | $30 | A Loan for carbon credits.The first project involves upgrading the technology of the current NPK plant, through the ODDA process maintaining its production capacity at 300,000 MTY of NPK solid granulated, producing the raw material for the production of 100,000 MTY of solid granulated calcium nitrate as by-product, and replacing 85% of mono ammonium phosphate usage with phosphate rock as raw material.The second project involves:- installing a nitric acid plant, with capacity to produce about 80,000 MTY,- installing an ammonium nitrate solution plant with capacity to produce about 82,000 MTY, and- building a calcium nitrate plant, with capacity to produce about 100,000 MTY of calcium nitrate solid granulated and 25.000 MTY of calcium nitrate liquid 100% concentration by 2009. |
| 16 | 2007 | 24680 | Interbolsa | Finance and Insurance | $30 | The project consists of a “PCG” for up to $30 million equivalent to Interbolsa. The facility will comprise of:- a PCG in local currency for up to $30 million with a final maturity of up to six years and- a warrants of up to $10 million to be negotiated.Interbolsa is seeking to issue the first local currency medium term bond by a securities broker in the Colombian market to strengthen its liquidity, diversify funding sources, and reduce market risk. The project consists of a partial credit guarantee, “PCG” of up to $30 million that would enhance the rating of the bond up to two notches from local rating agencies. The project will also help Interbolsa continue to strengthen it liquidity and strengthen its proprietary trading business as well as consolidate retail brokerage activities in Colombia. |
| 17 | 2006 | 24934 | Kappa Resources Colombia SA | Oil, Gas, Mining | $30 | $30M of $90M project Kappa Energy Limited SA, Kappa has requested the IFC to provide a corporate revolving credit facility and the IFC is also considering an equity investment, oil and gas exploration in the Magdalena Valley and the Cerrito gas field in the Catatumbo Basin near the city of Cucuta. |
| 18 | 2009 | 27549 | Riopaila | Agriculture and Forestry | $30 | Riopaila Castilla is implementing a cost reduction and technological improvement program from 2008–2012 while diversifying its agribusiness activities. Specifically, Riopaila Castilla’s Investment Program entails:adding co-generation capacity with the objective of selling excess energy to the national grid;replacing and modernizing equipment and machinery across production units; andrestructuring short- and medium-term debt that is maturing in 2008–2010.With this Investment Program, Riopaila Castilla expects to:- further integrate the sugar-cane value chain;- improve efficiencies and cut costs by reducing the consumption of steam and energy per ton of cane milled;- carry out needed maintenance investments and equipment upgrades to firm up its competitive position in Colombia; and- strengthen its balance sheet by extending maturity of short- and medium-term debt. |
| 19 | 2007 | 25569 | Cartones America SACartones II | Pulp and Paper | $25 | Up to $5M in equity and total $20M investment to acquire facilities in Chile, upgrade Colombian facilitiesCartones America’s (CAME, the Group, or the Company) 2006-2008 investment program and includes:- acquisition of a 60% stake in Chilempack, (Chile);- upgrade and expansion of CAME’s manufacturing facilities in Colombia, Venezuela, Ecuador, Chile and Peru; and- refinancing existing short-term debt.Earlier project approved: 20721 (2003) |
| 20 | 2008 | 26567 | Crediservicios | Finance and Insurance | $25 | coinvestment with Crediservicios in a Fondo de Capital Privado [Private equity Fund] for payroll deductible loans to low and middle income employees.The project involves supporting Crediservicios (Crediservicios or the company), a locally established, mid-sized company, in offering pay-roll deductible loans to clients spread across Colombia. The company’s core clientele are low to middle income employees who traditionally do not have access to the banking system.According to a survey conducted by USAID on September 2007, only 26.1% of the low-income households in Colombia (socio-economic groups 1, 2 and 3) have access to credit with banks, cooperatives or NGOs, while 35% obtain short-term resources from friends or informal lenders at interest rates as high as 280% per annum. Crediservicios plays an important role in reducing this gap as it actively provides financing solutions for this underserved segment. |
| 21 | 2009 | 27961 | Greystar | Oil, Gas, Mining | $20 | The total project cost of the exploration and pre-mine development phase of the project is estimated at C$131 million, and the company is seeking to raise up to US$20 million from IFC. It is proposed that IFC will initially contribute approximately C$12.04 million in equity with a right to invest approximately up to an additional C$12.19 million on the exercise of warrants to be issued as part of the equity subscription (these estimated proceeds are based on current exchange rates). IFC’s investment would be used to fund completion of the BFS, ESIA, and other needed ground works to prepare for the project development stage. For the period from 2001 to the present, the company raised C$122 million in equity financing, including the exercise of warrants related to the financings.The Angostura project is located 55 km by road from Bucaramanga, the capital of the Santander Region. The deposit elevation ranges from 2,600 to 3,400 meters above sea level. The project is in a traditional mining area; it enjoys access to the existing power grid, water and materials, and a skilled local work force. There are three villages which are located within 15 km of the project site.Development Impact: Colombia has substantial mineral resources, but the country still suffers from country risk perceptions among many potential foreign investors. A successful project of this size would likely spur significant additional global mining interest in Colombia, particularly valuable at a time when Colombia has demonstrated considerable progress in addressing security issues and political risk and is well positioned for continued economic success.IFC has identified Colombia as a primary target for mining investment because of the potential for substantial development impact from the mining sector. This would be IFC’s first mining investment in Colombia.A mine development of the expected size could have substantial impact on the local communities, not only through direct employment and services, but also from government royalties and taxes that flow back directly to local municipalities. It is estimated that 97% of the royalties will flow back directly to the region, with 87% of total royalties flowing to the municipality level. The Government of Colombia and oil and gas companies have been working with IFC on a pilot municipal level royalty management and capacity building program in the petroleum sector. The Government of Colombia, the Ministry of Mines, and mining associations have expressed interest in expanding this program to the mining sector. The two municipalities where the project is located could be part of any second pilot program, further ensuring greater development benefits to the local communities. |
| 22 | 2007 | 25897 | Procafecol (Promotora de Café de Colombia) | Agriculture and Forestry | $20 | $20M in equity for expansion of 150 Juan Valdez coffee shops in Colombia and select international markets |
| 23 | 2005 | 22588 | Women’s World Bank | Finance and Insurance | $20 | The total project cost is estimated at $20.0 million. IFC’s proposed investment consists of five separate local currency loans, reflecting the independent nature of the WWB affiliates. The five entities will be individually appraised and the investments will be tailored to the specific needs and circumstances of each entity. IFC’s financing will allow the affiliates to further expand their lending activities, diversify their funding sources and strengthen their position in the market. IFC’s financing will enable these entities to serve an additional 70,000 microentrepreneurs and thereby generate exceptional development impact in terms of employment generation and poverty reduction. |
| 24 | 2008 | 26257 | Finandina (Financiera Andina S.A.) | Finance and Insurance | $17 | The company’s core clientele are consumers, micro entrepreneurs and transport vehicle owners who use the credit offered by Finandina to undertake investment projects needed to improve the freight distribution capacity within Colombia.Colombia’s banking penetration of 23% as of December 2006 is still low in relation to international standards and accordingly there is an unmet demand for credit from local SMEs active in the transport arena. Finandina plays an important role in reducing this gap as its financing solutions are tailored to suit the needs of this underserved segment. 10% equity stake to help provide car and vehicle financing to consumers, micro enterprises and transport owners |
| 25 | 2009 | 27780 | Termo Rubiales | Utilities | $16.5 | The total project cost is estimated at about $68.5 million. The proposed IFC investment is a $16.5 million loan. The project is located in the Llanos Basin, 465 km from Bogotá in the Meta Department.Development Impact: IFC is investing in Termo Rubiales to support the development of Meta Petroleum, a promising player of the oil industry in Colombia that has embarked in an ambitious plan to increase the production of the Rubiales field. The investment in Termo Rubiales would be directly supportive of Government policies to increase local production and private investment in the oil sector. |
| 26 | 2008 | 26399 | Century Energy Corp. | Utilities | $15.5 | $13M A loan, $2.5M C loan, for IFC account, in $43.7M project for development, construction and operation of two small run-of-river hydropower plants in the Guadalupe river basin, 95 kilometers (km) north of the city of Medellin, in the Antioquia Department in western Colombia. Arms-length, fixed price engineering, procurement and construction (EPC) and operation and maintenance (O&M) agreements with HMV Ingenieros. |
| 27 | 2008 | 26399 | Century Energy Corp. (Century Hydros) | Utilities | $15.5 | Development, construction and operation of two small run-of-river hydropower plants in the Guadalupe river basin, 95 kilometers (km) north of the city of Medellin, in the Antioquia Department in western Colombia. The two plants, Caruquia S.A. (9.5MW) and Guanaquitas S.A. (9.8MW) are expected to begin commercial operations in late 2009 and early 2010, respectively.The project companies will enter into arms-length, fixed price engineering, procurement and construction (EPC) and operation and maintenance (O&M) agreements with HMV Ingenieros which is also wholly owned by the Helm Group. HMV Ingenieros is one of the largest engineering consulting firms and the leading consultant for the power sector in Colombia.Total project cost is estimated at $43.7 million ($21.5 million for Caruquia and $22.2 million for Guanaquitas). The project will be financed with $31.0 million of debt and $12.7 million of equity contribution from Century. The proposed IFC investment includes a $13.0 million A loan and a $2.5 million C loan, for IFC’s account. |
| 28 | 2007 | 25895 | MEB Port(Terminal Maritimo Muelles El Bosque) | Transportation and Warehousing | $15 | A loan for capital expansion program of $27.1MIn 1992 Terminal Maritimo Muelles el Bosque S.A. (MEB) began executing a 20-year concession (extended in 2005 for another 20 years until 2032) to develop and manage a new multipurpose port in the Bay of Cartagena, on Colombia’s Atlantic coast. Muelles el Bosque Operadores Portuarios S.A. (MBO and together with MEB the company), a sister company to MEB, is the operator of the port facility. The port occupies and area of 13 hectares and is the second largest in the city of Cartagena and the fifth largest in Colombia. In 2006 it received 438 ships and handled 46,278 containers, 253,179 tons of general cargo, 412,714 tons of grains and 52,760 tons of coke (fuel).The proposed project includes:- the extension of the south container terminal berth by 180 meters;- the expansion of the container yard by 3.2 hectares and the paving of the existing container yard;- the acquisition of an additional mobile crane and other container yard equipment;- the extension of the north berth by 50 meters;- the building of two additional warehouses/silos;- purchase of land to increase container storage space; and
– the upgrade of the port’s IT systems. |
| 29 | 2007 | 25852 | Tribeca Partners SA | Collective Investment Vehicles | $15M | Tribeca Fund I investment, to help fund reach target, give comfort to local investors not familiar with FCPs, and ensure fund is structured to international standards to ensure best practices in particular in back office |
| 30 | 2009 | 27689 | Uniminuto | Education Services | $8 | The total project cost over the 2009-2010 period is estimated at $18 million. The proposed IFC investment is a $8 million A loan for IFC’s own account.The physical infrastructure component of the investment program consists of three projects in Cundinamarca, including expansion of two key facilities in Bogota and Soacha, as well as construction of a new (phase 1) facility in Girardot. Land has been secured in all cases, and project planning is at advanced stages.Development impact: Increased Access to Tertiary Education Services – Colombia has made significant advances in gross enrollment ratios at all education levels over the past 5 years yet access and coverage for certain segments of the population remain weak. While average gross enrollment ratios for tertiary education are estimated at 29%, government data indicates that coverage in Bogota may exceed 50%, yet remain below 10% in various departments. Additionally, schooling has traditionally been less accessible to students of lower socioeconomic backgrounds. Through its network approach, commitment to distance learning technologies and presence in more than 11 departments, Uniminuto is expected to contribute to increased coverage for students in more remote areas of the country. |
| 31 | 2009 | 27745 | Covinoc SA | Finance and Insurance | $5 | The proposed investment consists of an equity investment in common shares for up to US$5 million earmarked at strengthening Covinoc’s ability to administer pools of non-performing assets. This investment is expected to assist the Company in the implementation of the growth plan put forth by its management and shareholders. |
| 32 | 2009 | 27952 | Cartones | Pulp and Paper | $.756 | Cartones America is planning to reduce their use of energy at their plant in Cali, Colombia. The energy efficiency improvement project planned by Cartones consist several sub-projects which will help it to reduce its energy consumption and thus reduce the operating cost for energy by almost 17% annually. This project is an overall energy systems improvement which will consist of improving the electrical system, such as lowering the voltage setting on the transformers, improving the transmission efficiency of motor by using poly V-belts instead of ordinary V-belts, increase the efficiency of the electric motor by replacing large standard efficiency motors with high efficiency motors and also down-sizing motors so that they operate at optimal loading, the plant will also install variable speed drives on some application so that the supplied power to the machines matches the demand and also improve its lighting and refrigeration systems. On the thermal side the plant will be improving the efficiency of its boilers by installing automatic air-fuel regulators, improving its insulation on its steam pipes, valves and flanges and most importantly it will be improving the steam/ condensate management system at its Paper machine 3 so that its specific steam consumption will be reduced. Together, these “Cleaner Production” investment for energy efficiency qualify for funding via IFC’s Board approved Cleaner Production Lending Pilot, a $20 million Facility via which IFC can provide Cleaner Production sub-loans to its existing portfolio clients.The estimated total project cost is $755,814 and the proposed IFC investment is an A Loan (Cleaner Production Loan) of $756,000 equivalent for IFC’s account. This investment in Cartones America will be a sub-loan for the above mentioned dedicated lending facility established as part of IFC’s Cleaner Production Lending Pilot initiative.The Cleaner Production Investment will be implemented at Cartones America’s Cali plant, which is located about 190 miles South-West of Bogota. |
| 33 | 2004 | 20932 | Carvajal | Pulp and Paper | TBD Project cost for modernization programThe company’s expansion, rationalization and modernization plans in the 2003-2007 period, to help its Project Core Businesses to grow (organically and through acquisitions), to become leaders in their sectors, and to achieve international competitiveness. In particular, the project includes the following components:- Paper Manufacturing/Conversion:Modernizing and rationalizing its existing plants;- School/Office Supplies:Modernizing its facility in Brazil, and expanding its operations, mainly in Mexico and Brazil;- Yellow Pages:Rationalizing and growing its operations in Brazil;- Book and Text Book Publishing/Editing:
Growing its operations in Mexico and Spain; and – Plastic Packaging: Modernizing its Colombian facilities, and expanding its operations there and in Mexico. In addition, the project will also contemplate environmental and social and health and safety improvements at some of the company’s facilities in and outside Colombia. |
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| 34 | 2008 | 26538 | Giros y Finanzas Compania de Financiamiento Comercial SA | Finance and Insurance | microfinance and lending to low income households in Colombia | |
| 35 | 2007 | 26520 | Grupo Bolivar | Equity investment in common shares for up to $75 million to recapitalize the Insurance Companies and restore its solvency margins to levels before elimination of non-insurance related investments). Grupo Bolivar is the third largest local financial conglomerate in Colombia. The Group is a strong player in the insurance industry, with second largest market share through the Insurance Companies, and in the banking industry, with the third largest bank in Colombia, Banco Davivienda. | ||
| 2005 | 24514 | Promigas | Utilities | Promigas has requested IFC to consider providing a corporate loan facility that would support a number of initiatives for the 2005-2007 period. These include potential investments in additional gas transmission and distribution assets in Colombia as well as the acquisition of new assets throughout South America.The proposed IFC facility would support a number of initiatives currently pursued by Promigas during 2005-2007, including potential investments in additional gas transmission and distribution assets in Colombia as well as the acquisition of new assets throughout South America. The total investment program is estimated at a maximum of $319.0 million if all projects are carried out concurrently. The proposed IFC investment in discussion with Promigas, comprised of an A and B Loan, would fund part of this program. |
Private Equity Actors In Colombia
In anticipation of the first Colombia Private Capital Forum, in Bogotá, November 19, 2009, this post discusses the known private equity and venture capital players in Colombia.
Organized by the Latin America Venture Capital Association, and spearheaded by President Eduardo Elejalde of the Latin America Equity Fund Managers, who is one of the most experienced in the field in Colombia, the Forum promises to be a showcase for many of the major stakeholders, including institutional investors, fund managers, multilateral institutions, Bogotá lawyers, and Colombian government officials.
The participants, as of this writing, are scheduled to be:
- Luis Guillermo Plata, Minister of Trade, Industry and Tourism
- Pierre-Yves Mathonet, Head of Risk Management, Venture Capital Unit, European Investment Fund, Author, J-Cure Exposure, Managing a Portfolio of Venture Capital and Private Equity Funds
- Marieke Roestenberg, Investment Officer, FMO
- Friederike Hofmann, Investment Officer, SIFEM
- Erik Peterson, Regional Managing Director, Aureos Capital
- Jorge Ramos, President, ING Pensiones y Cesantías
- Susana Garcia Robles, Senior Investment Officer, Multilateral Investment Fund
- Eduardo Elejalde, Founding Partner, LAEFM
- Roberto Borras, Director of Financial Superintendency of Colombia
- Santiago Montenegro, President, ASOFONDOS
- Carlos Fradique-Mendez, Partner, Brigard & Urrutia
- Diego Henao, Transaction Services Partner, PricewaterhouseCoopers
- Dario Duran, Director, Altra Investments
- Hector Cateriano, General Director, SEAF Colombia
- Francisco Mira, Chief Executive Officer, Promotora de Proyectos
- Pablo Felipe Serna, Founder, SPOT Investments
- Carlos Gomez, Managing Partner, PalmFund Management
- Diego Serebrisky, Managing Director, Advent International
- Juan Pablo Pallordet, Director, Citigroup Venture Capital International
- Fernando Garcia Rossell, Senior Vice President, Brookfield Asset Management
- Ariel Muslera, Director of Strategy and Product Development, LAVCA
- Juan Pablo Ospina, GEM Colombia
- Peter Jones, Senior Advisor, Private Equity, Darby Overseas
- Camilo Casas, Corporacion Andina de Fomento
- Juan Pablo Cordoba, President, Colombian Stock Exchange
- Gustavo Ardila, President, Bancoldex
A number of these players — but not all — were already known for their role in private equity in Colombia. On March 15, 2008, Semana Magazine ran a detailed article listing the private equity funds operating in Colombia in reaction to legal reforms. The list is summarized below; legal reforms will be analyzed in the next posts in this series. A couple of more recent developments have been added.
Brookfield Asset Management closed a US$400 million infrastructure fund in early September 2009, as I wrote the following day. It raised US$320 million from other investors and is the largest private equity infrastructure fund in Colombia. A brief story in English is available on The Financial Post. It was reported on Portafolio (in English) that explains the basic purpose and principal in charge;
Brookfield Asset Management has formed a fund for investments in infrastructure projects, raising so far US$320mil, with most of the capital coming from Colombian institutional investors. Fernando Garcia-Rossel manages Brookfield’s business in infrastructure for the Andean region, while this fund aims to reach US$400mil. (Emphasis added.)
Brookfield’s decision was summed up perfectly by The Financial Post, in a way that asks similarly positioned investors, “Is this as spot-on as it sounds?”
“We saw an opportunity to enter a country we’ve been monitoring for a while,” said Denis Couture, senior Vice President, Corporate and International Affairs. “’The investment climate is positive and the need for infrastructure significant,” he added.
El Tiempo reported that The Global Emerging Markets Group (GEM) and Fiduciaria Bogotá, an affiliate of Banco de Bogotá, of the Grupo Aval, the largest financial group in Colombia, signed an agreement to create a private equity fund entity with US$220 million called “The GEM-FiduBogotá Colombia Private Equity Fund.” Grupo Aval is controlled by Luis Carlos Sarmiento Angulo, with 28 percent of the assets of national banks and CFCs. The arrangement was promoted by the ProExport office in New York, and the fund will provide capital to small and medium-sized domestic enterprises in the industrial sector through minority stakes.
Colpatria and Darby Highway Fund
The United States-based Group Darby Private Equity and Mercantil Colpatria launched an infrastructure fund specializing in business road development. The new fund intends to attract US $300 million in capital from pension and unemployment insurance funds.
Managers Darío Durán and Mauricio Camargo are focused on biofuels and pharmaceuticals. The fund began in 2005 and in the spring of 2008 had investments of US$80 million, in several business projects. One, a call center called Digitex, handles calls from Spain and has a presence in Guatemala, El Salvador and Peru. Another portfolio company is Colfrigos (cold storage facilities). Altra is also eyeing the pharmaceutical business in Peru, where it already has an investment in the company Infarmasa. Altra formed a distinct fund for each project. Altra’s group of investors include several of the most important family businesses in Colombia, plus American, Swiss, Venezuelan, and Peruvian investors. Their investment cycle is five to eight years.
Capital Partners
Manager Jaime Maldonado seeks opportunities in logistics, distribution and retailing businesses. He was reported (by Semana Magazine) to be structuring “Arcadia” – a fund of at least US$30 million and up to US$100 million to gain control of companies in conjunction with the Correval firm (the investment manager). They had a portfolio of six companies where they could make their investments.
Tribeca Capital Partners/Tribeca Funds
Manager Luc Gerard is aiming his fund at companies with highly specialized niche markets. Tribeca manages resources of institutional funds such as AFP and Interbolsa. Tribeca was one of the early leaders in the wave of private equity funds that arrived in Colombia and is among its best known names. Its portfolio investments include: EMI, specializing in the care of medical emergencies; Onda de Mar [Sea Wave], which manufactures swimwear; and Accede [Access], a telecommunications solutions provider. The funds has also acquired Etiqueta Negra [Black Label] in Argentina, one of the most exclusive apparel brands around.
LAEFM Colombia
Eduardo Elejalde is the undeniable leader of the PE/VC industry in Colombia, historically and currently focused upon oil and forestry. LAEFM has three established funds: Hydrocarbons I, with a value of US$62.3 million; Forest I, with a value of US$ 16.3 million; and Hydrocarbons II, which closed its initial funding round with US$52.2 and aims to reach US$70 million. LAEFM has investments in 15 oil projects with eight operators who have drilled several oil wells, and three of them are performing, while they seek to determine the commercial viability of others. They returned to their investors more than nine million dollars, as of spring 2008. The forest fund invests in commercial plantations that produce varieties such as Teak, Melina, Pine, and Eucalyptus.
Manager Hector Manuel Catariano is guiding SFAF’s pursuit of Colombian businesses with opportunities to compete abroad. His funds have achieved two investments as of spring 2008, with a value close to US$ 17 million. It holds shares in the company Refinancia, which specializes in buying portfolios of distressed debt. In addition they made an investment in Bodytech, the chain of sports and medical centers. They planned four additional investments of approximately three million dollars each. In addition to resources from pension funds and insurance companies they are looking for money from multilateral and bilateral agencies.
Global Securities Capital Fund
Manager Juan Carlos Gomez is looking at industries with opportunities arising from the potential free trade agreement with the United States, but this firm does not specialize in any sector. This firm has equity funds invested in Latin America and the United States with resources under management in excess of US$1 billion dollars. In Colombia they were, in spring 2008, at the stage of attracting investors to develop a fund of US$ 40 million.
Manager Javier Diaz is focused on small and medium-sized enterprises. It was seeking investors in spring 2008 and hoped to reach a level of between 30 and 50 million dollars. There were already commitments that correspond to a third of the expected capitalization.
Manager John White is also watching industries that show great potential under the proposed US/Colombia free trade agreement. This fund was seeking investors in spring 2008 and was projected to last for 10 years. He believes that Colombia is a country very attractive today for international diversification.
ND Capital Partners
Managers Julio Torres and Peter Grossich are oriented to the infrastructure project sector in Colombia and countries in the region. In spring 2008, they were structuring and funding ND Infrastructure Fund I. They hoped to raise between 100 and 150 million dollars, by June 2008 and were looking at road projects, power plants, transportation and oil and aqueduct and sewer projects and biofuels. They are mainly oriented toward projects in Colombia, Peru, Panama, Costa Rica, El Salvador and Guatemala.
Dispute Resolution In Colombia Compared to Brazil And Mexico
When businesses assess emerging market economies, how important are dispute resolution systems?
Each of Brazil, Colombia, and Mexico has been enjoying substantial economic growth over the last several years. Each also faces very negative worldwide perceptions about corruption in their legal systems.
The Latin America Venture Capital Association reports on the 2009 LAVCA Scorecard on “perceived corruption.” Brazil ranks very highly overall (75 out of 100 points in 2009 as in 2008), but received only 1 out of a possible 4 points for perceived corruption. Mexico’s overall score is 58 (as in 2008), but again, it received only 1 out of a possible 4 points for perceived corruption. Colombia’s overall score is a much-improved 57 (up four points from 2008, moving from sixth to fifth position), but, again, 1 out of 4 possible points for perceived corruption.
The same LAVCA scorecard provides a rough basis of comparison for “strength of the judicial system,” and in each country the score was 2 out of 4 points.
Overall, these low ratings suggest that investors face either real or at least stigmatic hurdles in the important arena of judicial dispute resolution.
When it comes to bankruptcy procedures, LAVCA scores Brazil 3 out of 4 points, Colombia 2 out of 4 points, and Mexico 1 out of 4 points.
Closely related to enforcement issues are the protection of minority shareholders and corporate governance requirements, which are scored 3 out of 4 in all three countries Also related are rankings on intellectual property protection, which is scored 2 out of 4 in all three countries.
LAVCA reports overall on the strengths and “challenges” that stand out in each economy. For Brazil, its strengths include protection of majority shareholders rights and bankruptcy procedures, areas in which there has been progress over the last several years, while its challenges are the protection of IP (“further progress could be made”) and in perceived corruption (“serious challenge”).
Colombia’s strengths include improved minority shareholders rights and corporate governance, while among its challenges are perceived corruption and the weakness of the local judicial system (“still roadblocks”).
Mexico’s strengths include corporate governance, protection of minority rights (“though there remains room for improvement in each”), while its “challenges” include the judicial system, control of corruption, and modernization of bankruptcy laws.
Another way of looking at some of the same issues is The World Bank 2010 Doing Business report (link is to Colombia page). Among the factors measured concerning the effectiveness of local dispute resolution systems are:
- “protecting investors” – liability for self-dealing (Extent of Director Liability Index), shareholders’ ability to sue officers and directors for misconduct (Ease of Shareholder Suits Index) and Strength of Investor Protection Index. The indexes vary between 0 and 10, with higher values indicating greater disclosure, greater liability of directors, greater powers of shareholders to challenge the transaction, and better investor protection),
- “enforcing contracts” (determined by following the evolution of a payment dispute and tracking the time, cost, and number of procedures involved from the moment a plaintiff files the lawsuit until actual payment), and
- “closing a business” (time and cost required to resolve bankruptcies.
Breaking these measures down as they relate to dispute resolution issues, the data show wide variability within each country and comparing among the three countries:
| World Bank Doing Business Rating Category | Brazil | Colombia | Mexico | Lat. Am./ Caribbean | OECD Avg. |
| Protecting Investors (Worldwide rank 2010) | 73 | 5 | 41 | – | – |
| Protecting investors overall[1] | 5.3 | 8.3 | 6.0 | 5.1 | 5.8 |
| – director liability | 7 | 8 | 5 | 5.3 | 5.0 |
| – ease of shareholder suits | 3 | 9 | 5 | 6.0 | 6.6 |
| Enforcing Contracts (worldwide rank 2010) | 100 | 152 | 81 | – | – |
| – procedures (number) | 45 | 34 | 38 | 39.7 | 30.6 |
| – time (days) | 616 | 1346 | 415 | 707 | 462.4 |
| – cost (% claim) | 16.5 | 52.6 | 32.0 | 31.3 | 19 |
| Closing Business (worldwide rank) | 131 | 32 | 24 | – | – |
| – time (years) | 4.0 | 3.0 | 1.8 | 3.3 | 1.7 |
| – cost (% of estate) | 12 | 1 | 18 | 15.9 | 8.4 |
| – recovery rate | 17.1 | 52.8 | 64.2 | 26.8 | 68.6 |
| Avg. Combined Rankings[2] | 101 | 63 | 49 | – | – |
In terms of worldwide rankings, blending the three categories, Brazil’s average is lowest (no. 101), Colombia’s is in the middle (no. 63), and Mexico’s is highest (no. 49). Mexico outranks Colombia but not by as much as both outrank Brazil. There are fairly wide disparities between the rankings within each country, Brazil ranks 73rd for protecting investors, 100th for enforcing contracts, and 131st for closing a business. Colombia ranks a stunning 5th for protecting investors, and a quite respectable 32nd for closing a business, but 152nd for enforcing contracts. And, it is worth noting, Mexico ranks 41st for protecting investors, 81st for enforcing contracts, and a very strong 24th for closing businesses.
How useful are these comparisons? Colombia for example compares very favorably to the world, to Latin America, and to the OECD on protecting investors, and Colombia compares favorably to Latin America and the Caribbean on closing businesses, with rankings that are fairly high. Colombia’s bankruptcy procedures for closing a business are considerably better-ranked than the LAVCA Scorecard ranks them. But the data point for costs and delays in enforcing contracts sends Colombia’s ranks down considerably (rank no. 152 vs. no. 5 and 32, respectively, in the other categories). It is a real outlier.
The methodology the World Bank used (Djankov et al) for measuring contract enforcement relies entirely upon a hypothetical court process, however, and it does not measure private arbitration in any way. This is a serious weakness for any country, like the three in this study, where the norm in the economy for commercial disputes resolution is commercial arbitration. For enforcing contracts in courts, all three countries received very low rankings.
Arbitration is very robust in each of the three countries (see this site’s post about arbitration in Colombia). Indeed, it not only provides a superior alternative to the poorly-rated court systems, but it may provide superior alternatives to courts in general, even in more advanced economies, for reasons of expertise and availability of the decision-maker, and privacy in private commercial matters. It is also flexible, to the extent that foreign arbitration may be perceived by international players at a minimum as a confidence-building measure, and to the extent that foreign arbitration is on a par with local arbitration.
Thus, the already positive signs for the Colombian dispute resolution system in terms of investor protection, corporate governance, and bankruptcy procedures should not be discounted because of the weak local court system for enforcing contracts – unless and until the strong local system for arbitration and recognition of foreign arbitration is tested and factored into the analysis.
[1] Scores awarded are out of a possible 10 points.
[2] Calculated from the World Bank data by summing the three rankings, dividing by three and rounding.
Legal Stability Contract – Translated For the First Time
What is a “legal stability contract”? As I have discussed in other articles here (click on the “Legal Stability Contracts” category, to the right), the concept is borrowed from government concession contracts that protect the concessionaire from adverse regulatory action that undermines the concession. In a fairly novel application of this concept, to promote investment, Colombian government agencies will sign a contract with investors of more than (currently) about $1.8M to prevent adverse changes to listed legal standards governing the investment, in exchange for a premium and accomplishment of the investment and its jobs and other objectives. The legal standards that are stabilized by the contracts vary, of course, as do the investor’s obligations — the amount of investment, the legal stability premium, the number of jobs anticipated, and so forth. According to my study, however, they are mostly tax-related provisions.
How does a legal stability contract actually work? For those interested in reviewing one in English, there has not been any publicly available English translation — until now.
GYPLAC, S.A., a plasterboard manufacturer, is building a manufacturing facility at the Mamonal Free Trade Zone in Cartagena, Colombia. It signed Legal Stability Contract No. 1 of 2009, which I have chosen at random to provide a relatively recent example of a stability contract.
This is not a certified translation (rely on your friendly local Colombian lawyers to get the details right), and I have taken the liberty of adapting the “legalese” to conform to what readers of American contracts might expect. I have also changed the format by adding line breaks to improve readability.
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Ministry of Trade, Industry, and Tourism
Republic of Colombia
Liberty and Order
Legal stability contract EJ – 01/2009Entered into Force Between the Nation — MINISTRY OF TRADE, INDUSTRY, and TOURISM – and GYPLAC S.A.
Among the undersigned, namely, LUIS GUILLERMO PLATA PAEZ, identified with citizenship card No. XXXXXXX of Bogota, in his capacity as Minister of Trade, Industry, and Tourism, appointed by decree No. 057 of 15 January 2007 [Act of Possession] No. 1359 of January 16, 2007, and those acting on behalf of the representation of the NATION – Ministry of Trade, Industry, and Tourism, pursuant to provisions of Decree Law 210 of 2003, and in consideration of paragraph (f) of Article 4 of Law 963 of July 8, 2005, hereinafter referred to as the “NATION,” the party of the first part, and as the other party, Mr. LAZARO FELIPE MONTES TRUJILLO, of legal age, residing in Manizales, identified with the Citizenship Cedula No. XXXXXXXX, in his capacity as General Manager and acting on behalf of GYPLAC S.A., a company identified with the NIT. No. XXXXXXXXX-X, constituted by public deed No. 2983 of the Second Notary of Manizales entered on April 28, 2007, recorded on the Trade Register on March 26, 2008, under the number 53099 of Book IX, all of which constitutes the certificate of legal existence and representation and issued by the Chamber of Commerce of Manizales on September 17, 2008, hereafter referred to as the “INVESTOR,” we have agreed to conclude this contract of legal stability, upon the following considerations:
[CONSIDERATIONS]
1. Law 963 of July 8, 2005 (the “Law”), Decrees 2950 of 2005 and 1474 of 2008, and CONPES Documents 3366 of August 1, 2005 and 3406 of December 19, 2005, permit legal stability contracts with the purpose of promoting new investment and/or expanding existing investments in the country.
2. As provided by paragraph f) of Article 4 of the Law, such contracts must be signed by the minister of the portfolio in which the investment will be made.
3. The contractual commitment made by the nation through this document does not create any budgetary obligation for the State.
4. The investor is not ineligible on grounds of incapacity or incompatibility as described in Article 91 of Act 963 of 2005, or those contained in General Contracting Act 80 of 1993 and the rules that implement, modify, or supplement it.
5. The investor has duly certified its compliance with the obligations under the Integrated Social Security System, family compensation systems, SENA, and ICBF, in accordance with all requirements of Article 23 of Law 1150 of 2007.
6. By means of communication received at the Ministry on March 12, 2008, the investor presented its request for legal stability contracts.
7. The Committee for Legal Ministry on August 23, 2008 analyzed the application and Evaluation Report of the Technical Secretariat, and decided to authorize the application for a legal stability contract with the company GYPLAC SA, by its official Act No. 07 of the same date.
8. In the same meeting, the Committee directed that due to the nature of the economic activity that is the objective of this investment, this contract for legal stability should be signed by the Minister of Commerce, Industry and Tourism in a non-delegable fashion.
9. The investor is not listed in the Fiscal Responsibility Bulletin of the Comptroller General’s Office.
10. The National Government issued Decree 1474 of 2008 which ruled that legal stability contracts would not require a guarantee of compliance.
In accordance with the foregoing, this contract shall be governed by the following clauses:
FIRST CLAUSE: Purpose of the Contract. The purpose of this contract is the realization by the investor of the project consisting of installing in the Zona Franca in Mamonal – Cartagena, a production plant for plasterboard – carton for use in construction, as described in the application filed by the company GYPLAC SA, for which purpose the NATION ensures the legal stability of the standards identified as critical for the investment mentioned in Clause Four of this contract.
For all purposes, the phrase “legal stability” means guarantee that NATION extends to the investor to continue to operate under the legal norms for the duration of the contract, in case of any adverse change.
SECOND CLAUSE: Description of the Investment Project Amount and Term. The investment project which the investor is advancing consists of assembling in the Free Trade Zone located in Mamonal – Cartagena, a production plant for plasterboard – carton for use in construction, with an initial installed production capacity of approximately fifteen million square meters (15,000,000 sq. mts.) of panels a year and, when completed (scheduled for 2017), [a capacity that] will reach a total of twenty-five million square meters (25,000 000 sq. mts.), as described in the application of the Company. The total amount of the investment is One hundred billion three hundred sixty-one million three hundred and ninety-nine thousand Pesos (COP$100,361,399,000.00) between 2007 and 2017, according to the timing [shown in] the third clause.
THIRD CLAUSE: Partial Investment. The total sum covered by the preceding clause shall be made in the amounts and given within the years indicated below.
Figures expressed in thousands of pesos:
Year Investment 2007 COP 14,120,189 2008 COP 54,803,415 2009 COP 7,961,378 2017 COP 23,476,418 Total COP 100,361,399 The total investments made during the term of the total contract will not be less than the amount stated in the Second Clause of this document.
FOURTH CLAUSE: Legal Provisions Stabilized. Under the First Clause, the rules subject to legal stability are the following:
a. [Following tax provisions]
Taxpayers. Articles 12, 13 and 14 of the Tax Statute [the “Estatuto Tributario,” or “E.T.”]
Income. Articles. 25, 26, 27, 28, 36, 36 ¬ 2, 36-3, 40, 45, 48, 49 and 50 of the ET.
Costs. Articles 58, 59, 62, 66, 68, 75 and 80 of E.T.
Gross income. Articles 89 and 90 E.T.
Deductions. Articles 104, 105, 107, 108, 108 ¬ 1, 108-3, 109, 110, 114, 115, 117, 120, 121, 122, 123, 124, 124-1, 126-1, 127, 127-1, 128, 129, 130, 131, 134, 135, 136, 138, 139, 140, 142, 143, 145, 146, 147, 148, 158-1 and 158-2 of the ET; DIAN Concepts 28651 of May 22, 2003, 14662 of June 5, 1987, and 007936 of February 1, 2000; Article 1 of Resolution 2996 of 1976 issued by the Ministry of Finance and Public Credit and Article 2 of Decree 4980 of 2007.
Net Income. Article 178 of the ET.
Special net income. Articles 188 and 189 of the ET.
Tariff. 240-1, 245 and 254 of the ET.
Transfer pricing. Article 260-7 of ET.
Property and Property Taxes. Articles 267, 267-1, 269, 270, 273, 280, 281, 285, 287, 292, 293, 294, 295 and 296 of the ET.
Occasional earnings. Articles 300, 311 and 313 of the E.T.
Deduction at source. Articles 366-1, 387-1, 389, 390, 391, 407, 408 and 418 of ET.
b. Act 1004 of 2005, items 2, 3, 4 and 9.
c. Decree 2685 of 1999, Articles 394, 395 and 396.
All of the foregoing provisions are considered by the investor as determinative of its decision to invest.
FIFTH CLAUSE: Legal Provisions Excluded. The following legal standards will not be subject to legal stability hereunder:
1. Provisions which, notwithstanding their inclusion in the preceding clause, are declared invalid or unenforceable by the competent authority during the term of the contract. In this case, the guarantee of legal stability shall cease with respect to such standard(s) as of the date on which the corresponding decision has become final.
2. Any other provision which, by law or regulation, may not be subject to legal stability.
SIXTH CLAUSE: Obligations of the Investor. The investor shall:
1. Make the investment provided for in the second and third clauses of this contract, in the amounts, by the dates, and under the other conditions mentioned there.
2. Pay to the NATION the premium for legal stability in the amounts and under the conditions indicated in the Eighth and Ninth Clauses of this contract.
3. Directly generate approximately one hundred and fifty (150) jobs during the term of the contract.
4. Strictly comply with all laws and regulations which are or shall be established governing the activity to which the investment relates.
5. Pay taxes, fees, and other social contributions and other social and labor charges punctually to which the investor is subject.
6. Faithfully comply with all rules which are or will be established that guide, condition, and determine the conservation, use, management and exploitation of the environment and natural resources.
7. Contract at its own expense for the audit referred to in the Fourteenth Clause of this Contract, maintain it during the term of the duration of the contract one (1) additional year, and report on March 31 of each year on the results of the audit to the National Planning Department and Committee on Legal Stability.
8. Reply to requests for information made by any member of the Committee on Legal Stability and/or the nation.
SEVENTH CLAUSE: Obligations of the NATION. The NATION shall:
1. Guarantee to the INVESTOR that, throughout the term of the Contract, the legal standards referred to in the Fourth Clause, considered to be the determinants of the investment, shall continue to apply in the event that such standards are modified in any adverse way.
2. Extend the guarantee referred to in the preceding paragraph to the total economic activity of the investor.
3. Ensure that information the INVESTOR provided in confidence enjoys protection under the applicable law.
EIGHTH CLAUSE: Legal Stability Premium.The INVESTOR shall pay to the NATION, Ministry of Finance and Public Credit, Account No. XXXXXXXX to the National Treasury Department – “Other Fees, Fines and Contributions Not Specified,”Code 333, at the Bank of the Republic, as a legal stability premium, plus interest thereon, under the fifth article of Law 963 of 2005, at the equivalent of zero point five percent (0.5%) of the value invested through the first half of 2009, i.e., the sum of THREE HUNDRED EIGHTY FOUR MILLION FOUR HUNDRED AND TWENTY FIVE THOUSAND PESOS (COP 384,425,000 M/Cte), and the equivalent of one percent (1%) of the value invested in 2017, i.e., the sum of TWO HUNDRED AND THIRTY FOUR MILLION SEVEN HUNDRED AND SIXTY FOUR THOUSAND PESOS (COP 234,764,000 M/Cte), for a total of SIX HUNDRED NINETEEN MILLION ONE HUNDRED AND EIGHTY NINE THOUSAND PESOS (COP 619,189,000 M/CTE). This amount is owed from the date this Contract takes effect.
NINTH CLAUSE: Manner of Payment of the Premium. The INVESTOR shall pay the premium in a single installment within thirty (30) days after this Contract takes effect.
TENTH CLAUSE: Confidentiality of Information. Confidential or privileged information that has been provided by the INVESTOR to the NATION shall be protected under applicable law.
ELEVENTH CLAUSE: Term of Duration. Subject to the provisions of the Sixteenth Clause, this Contract shall remain in effect through a term of fifteen (15) years from the signing by the parties to the contract, after complying with the requirements of execution contained in the Nineteenth Clause.
TWELFTH CLAUSE: Assignment or Subrogation. In case of assignment or subrogation, full or partial ownership of the investment under the contract, the new owner must obtain prior approval of the Committee for Legal Stability provided in Article 41 of Law 963 of 2005, to maintain its obligations and rights under this contract.
THIRTEENTH CLAUSE: Oversight. The Director of Productivity and Competitiveness, Ministry of Commerce, Industry and Tourism, will verify full compliance with the obligations of the INVESTOR set forth herein, in accordance with Ministry Resolution No. 2286 of September 27, 2007
Oversight reports must be submitted every six (6) months to the Committee of Legal Stability.
FOURTEENTH CLAUSE: Auditor and Reports. The INVESTOR will hire at its own expense an independent auditor to review and certify compliance with the commitments made in this Contract. The audit may be conducted by the INVESTOR’s public auditor or by a different party. Not later than March 31 of each year, the auditor must supply to the Department of Planning and the Committee on Legal Stability a detailed report on the satisfaction of the obligations achieved during the year or fraction thereof.
FIFTEENTH CLAUSE: Applicable Regulations. The present contract is subject to Act 963 of 2005, Decree 2950 of 2005 and 1474, 2008, and such other Colombian rules as may replace, amend, or repeal the foregoing. For all legal purposes this Contract shall have as its legal domicile the city of Bogotá DC.
SIXTEENTH CLAUSE: Termination Clause of the Contract. The present Contract shall terminate for any of the following reasons:
1. Upon the expiration of the [contractual] term or duration.
2. By mutual agreement between the parties.
3. Upon the termination of all of the duties under the contract due to a declaration as null and void of all of the standards referred to in the Fourth Clause. In the event such judicial declaration as null and void does not include all obligations hereunder, the agreement shall continue in force for the remaining provisions.
4. Anticipatorily, by the NATION, unilaterally and by administrative act, in any case where:
a. The INVESTOR fails timely to perform, or withdraws all or part of, the investment described in the Second and Third Clauses;
b. The INVESTOR fails timely to pay all or any part of the premium for the legal stability in the manner required in the Eighth and Ninth Clauses of this Contract;
c. The INVESTOR incurs the incapacity contemplated in Article 90 of Act 963 of 2005;
d. The INVESTOR fails without justification to satisfy its obligations under the present Contract.
5. For any other reason contemplated by the law.
SEVENTEENTH CLAUSE: Arbitration Clause. All disputes arising under this Contract, not settled by the parties directly, shall be submitted to an arbitration tribunal, which will consist of three (3) arbitrators, one of which shall be appointed by each party and the third by mutual agreement between the two sides. Any award that is issued shall be legally binding.EIGHTEENTH CLAUSE: Stamp Tax. This Contract requires a national stamp tax due by the INVESTOR which shall be based upon the value of the legal stability premium, and shall be paid as required by Article 532 of the Tax Statute.
NINETEENTH CLAUSE: Approval and Execution. To become effective, this Contract must be executed by the contracting parties. To be executed the following provisions are mandatory:
a. Payment of any stamp tax which may apply;
b. Fulfillment of the publication requirements in Official Journal of Public Contracting;
c. Registering the Contract by the INVESTOR at the National Planning Department in accordance with Article 100 of Act 963 of 2005.
TWENTIETH CLAUSE: Contract Documents. Each of the following documents shall be an integral part of this Contract:
a. Act No. 7 of the Committee on Legal Stability from its August 23, 2008 session;
b. To the extent not inconsistent with the text of this Contract, the application presented by the INVESTOR to the Ministry of Trade, Industry and Tourism on March 12, 2008, as well as supplements or additions thereto furnished by the investor. In the event of any inconsistency between those documents and this Contract, this Contract shall prevail.
The record is signed in Bogota, DC.
By the NATION: Ministry of Trade, Industry and Tourism
Luis Guillermo Plata Paez
By the INVESTOR
Lazaro Felipe Montes Trujillo
Foreign Investors Have Signed 16 of 46 Legal Stability Contracts
Legal Stability Contracts provide investors a way to contract with the government to prevent adverse legal and regulatory developments that hurt an investment. They have been touted as a way of attracting foreign investment on the ProExport site. In fact, ProExport’s website lists the legal stability contracts that have been signed and with which companies. Avianca is one signatory, and it is, in fact, foreign-owned (by a Brazilian firm).
My research into the list of companies on the Minsitry’s website that appear to be foreign investors, and other information I have obtained, identifies several of the contracting parties as foreign investors, including (but not limited to) Siemens Manufacturing S.A., Laboratorios Baxter, Sodimac, Arcelor Stainless, Sociedad Inversiones Inmobiliarias De Colombia, Novamar Development, Hoteleria Internacional, Schlumberger Surenco, Bavaria, Cervecería Del Valle, and Almacenes Exito. (I refer readers to the Ministry’s list, however, as the authoritative current information on who has signed the contracts.)
The published list consists of only 28 published contracts, a figure that has remained unchanged for several months. In June 2009, however, the Trade Ministry reported that 42 stability contracts have been signed as of June 25, 2009 (see slide 15).
This led to two questions which I put to Luis Guillermo Plata, the Minister of Trade, Industry and Tourism, to get a better understanding of how this innovative mechanism works in practice:
- Are stability contracts intended primarily to attract foreign investment?
- How many stability contracts are there, and if more than there are published, why are some not published?
Minister Plata answered almost immediately, through a member of his staff, Julio José Rodriguez, that:
1. Legal stability contracts are designed to bring new investments into the country, be they domestic or foreign, under the principle of equality. Although they are intended to result in new investment from outside, they are not an exclusive mechanism for FDI (Foreign Direct Investment). [Emphasis added.]
Today we have 60 legal stability contracts approved, of which 46 have already been signed. Of these we have 16 contracts signed with foreign investors not including domestic firms that may have foreign capital injections. [Emphasis added.]
2. Of the 46 contracts, there are 28 published on our website. The others have not been published while awaiting all the requirements of improving our contract required by state procurement law, the published record only contains contracts that have taken effect, and not all have done so. As you can see, it is a legal matter that until they have taken effect they may not be published.
This is very helpful information. First, stability contracts are meant to help attract investors, not just foreign investors. Second, they have attracgted foreign investors. Sixteen contracts of the 46 signed contracts, or about one third, were signed by foreign investors. The policy is one of equality for all investors, not one that provides special treatment to foreign or domestic players.
Third, there are many more contracts than the published list reveals. In June 2009, there were 42 reported – now there are 60 approved and 46 signed agreements. The explanation is that they have not all taken effect.
The projects involved in the twenty-eight published contracts are:
| Company | Date | Project Description |
| Alpina | February 3, 2003July 8, 2005 | Industrial expansion plan for Alpina SA |
| Proficol Andina B.V. Sucursal Colombia | January 2007 | Relocation and expansion of the plant capacity for insecticides and fungicides |
| DIVCO | July 8, 2003 | Enhancements of a plant for production gelatin or starch gums in the Free Trade Zone of La Candelaria |
| Almacenes Exito S.A. | January 16, 2007 | Expansion and consolidation of Exito stores through property acquisition, construction, and staffing of fifteen (15) retail establishments and warehouses of the distinct kind operated by the company as hypermarkets or supermarkets |
| Sociedad de Fabricación de Automotor | January 16, 2007 | Injection process of large plastic parts for vehicles |
| Comertex S.A. | January 15,2007 | Construction of a warehouse for commercial distribution of products |
| Cervecería del Valle S.A. | January 15, 2007 | Construction and commencement of a new brewery in Yumbo |
| Bavaria S.A | January 15, 16 2007 | Five Year Investment Plan by brewery |
| Avesco S.A. | January 15, 16 2007 | Master plan for parent company of Kokoriko fast-food chicken restaurants: expansion and modernization of production plant, enlargement of freezing capacity, opening and remodeling of restaurants |
| Empresas Públicas de Medellín E.S.P. | July 31, 2006 | Hydroelectric project PORCE III whose installed capacity will be 660 Megawatts |
| Teledatos Zona Franca S.A. | January 15, 16, 2007 | installation in the Bogota free trade zone of call center with 1114 positions to provide telephone contact service to domestic and foreign firms . |
| Hotelería Internacional S.A. | Same as next | |
| Nova Mar S.A. | January 15, 16, 2007 | construction and operation of a high spec hotel, located on 73rd Street on 9th avenue in the city of Bogotá |
| Sociedad Schlumberger Surenco, S.A. | July 26, 31, 2006 | application of technological developments and practices optimizing water injections required to boost oil production in mature wells Cassava Project. |
| Interconexión Eléctrica S.A. E.S.P. ISA E.S.P. | July 26, 31, 2006 | construction of power transmission lines Primavera-Bacatá and associated works, 2 of 2003 UPME transmission line to 500 kV. cuicuito sencilio, Bolivar-Copey-Ocana-Primavera and associated works and expansion of the Cano Limon substationEnlargement of Cano Limon |
| Cine Colombia S.A. | May 31, 2007 June 1, 2007 |
Comprehensive expansion and modernization of a total of 54 new and remodeled cinemas |
| Zona Franca Argos S.A | January 15-16, 2007 | new production line for Portland cement in the city of Cartagena, which will increase the capacity of it in approximately 1.8 million tons per year. |
| COMAI | January 15, 16, 2007 | Purchase a lot in the Candelaria Free Trade Zone in Cartagena, for the assembly of a splitter tower |
| Propileno del Caribe S.A – Propilco S.A | January 15, 16, 2007 | Expansion of polypropylene production capacity to meet rising domestic demand |
| Inversiones Inmobiliarias de Colombia S.A. | January 15, 16, 2007 | construction and operation of a complex of high specification office and retail, in Bogotá |
| Renting Colombia S.A., | January 15, 16, 2007 | Ongoing expansion and renovation of light cargo vehicle fleet for operational leasing |
| Arcelormittal Stainless Service Andino S.A. | January 15, 16, 2007 | Steel Service Center in the free zone of Barranquilla to process raw materials and semi-finished products. |
| Leonisa S.A | January 15, 16, 2007 | technological conversion of the company through acquisition of fixed assets for next generation production processes of weaving, finishing, rubber bands, thermal cutting, integration and clothing. |
| Productora de Confección PROCO | January 15, 16, 2007 | expansion and modernization of production processes of the company, through acquisition of 53 latest technology machines to optimize the textile process and four (4) warehouse located in the Zona Franca de Rionegro |
| Gas Natural Comprimidos S.A., GNC S.A. o GAZEL. | July 26, 31, 2006 | Construction of 90 new service stations for natural gas fueled vehicles |
| Avianca S.A. y SAM S.A | August 11, 2003 | acquisition of Airbus A-319, A-320 and A-330 aircraft and ground support equipment such as: pay-movers, dollies, Dorti, conveyors, and trailer levers, tools, components, and spare parts required for maintenance of aircraft. |
| GYPLAC S.A. | January 15, 16 2007 | plant assembly in the Free Zone Mamonal – Cartagena for plasterboard production for use in the construction sector |
| Novavento S.A. | January 15, 16, 2007 | acquisition of snack and coffee machines, and investment in infrastructure for direct sales |
New Modernized Competition Law
Colombia’s Competition Law was updated in late July, after two years of consideration. Law 1340 of 2009 (no English translation appears to exist yet, but the old law was translated and available through Globalex) updates the old competition laws, primarily Law 155 of 1959, Decree 1302 of 1962 and Decree 2153 of 1992. Its main features are a central authority, national public notice of proposed combinations, statutory timeframes for the authority to consider proposed transactions, a presumption in favor of approval of transactions that concern less than 20% of a market, rule of reason analysis dependent upon the impact of a transaction on competition, presumptions in favor of transactions that increase or are not harmful to competition as shown by empirical evidence, and increased penalties matched with flexibility to reward whistleblowers and self-reporting.
Bogotá law firms have been prolific in drawing attention to the new Competition Law’s central features. Posse Herrera & Ruiz distributed the analysis of the new law, prepared by partner Alvaro José Rodríguez, that is reproduced in full below.
In addition, Brigard & Urrutia published a review of the law that has been reproduced on the World Services Group professional services network website. Their review focuses on these points:
- Creation of a single antitrust authority – the Superintendent of Industry and Commerce or SIC.
- Increase of fines on legal entities and individuals who violate the law, with reduction or elimination of fines for those who cooperate in investigations.
- Threat of reversal of mergers. The SIC has the power to reverse a merger when: i) the SIC was not timely and fully notified or it was performed prior to obtaining the clearance; and ii) the companies involved do not comply with remedies imposed by the SIC.
- Automatic authorization of the merger if the relevant firms have less than 20% of the relevant market
- A detailed procedure that must be followed if the parties to the transaction hold more than 20% of the relevant markets
Prieto & Carrizosa published its report (in Spanish only, currently), noting;
- Among the most important issues is the establishment of the Superintendent of Industry and Commerce (SIC) as a national competition authority in the country, while the Superintendent of Public Service and the National Television Commission (NVIC) lose powers that previously had in this area. The law confirms, however, that the Superintendent of Finances and Aerocivil retain their powers over mergers and combinations in their respective sectors.
- Additionally, fines for anticompetitive practices are substantially increased while there are “partnership benefits” to people who report anti-competitive practices, which may include full or partial exemption from fines that would normally be imposed for taking part in behavior.
- It is important that companies review their approach to protocol, and trade practices. While a restrictive practice in the past, but could be worth “the risk” of an insignificant fine, now that risk is not consistent with the consequences of the sanction to be imposed and increased the chances that someone withdraws.
- The new law establishes a procedure that lengthens the time frames that the SIC has to decide on applications for approval of these operations, and requires an order of publication in a national newspaper, which jeopardizes their privacy.
And, Cavelier Abogados published its review of the Competition Law in its Infolex legal bulletin. They too focus on the “transfer of powers to the SIC… that ensures greater safety for investigations and an appropriate use of the state’s resources. Similarly, it eased the conditions under which interested parties and the general public can participate in this type of administrative actions when affected by behaviors that restrict competition.”
Comments are welcome here and readers should refer to these law firms for more information about this description.
The new Competition Law took effect when it was officially published, but the authorities that were formerly acting as competition authorities still retain their powers for six (6) months after the July publication. From now on, the Superintendent of Industry and Commerce (SIC) will have exclusive authority to review mergers, acquisitions, consolidations, or integrations (“operations”).
The SIC must annually determine the total amount of assets and operating income taken into account in order to define which operations are required to obtain prior approval from the SIC. The SIC must object to those operations that tend to create undue restrictions over competition. Even where the assets and operating income threshold is exceeded, an operation representing less than 20% of the relevant market will be authorized, provided SIC is properly notified. And, SIC may authorize combinations subject to conditions and the performance of certain obligations where it deems those conditions and obligations sufficient to protect competition. The Competition Law prevents the SIC from blocking a combination or other object the operation where there is evidence such as studies using recognized methodologies demonstrating that positive effects of combinations upon consumer exceed negative effects, and that the benefits or efficiencies cannot be achieved by any other means. Violations can result in fines on a graduated scale for entities of up to one hundred thousand legal minimum salaries (today COL$ 993,800,000 or approximately US$ 24,845,000) or up to a hundred and fifty per cent (150%) of the profit derived from the illegal conduct.
Also noteworthy – the Competition Law introduces the new concept of “value chain” (cadena de valor) and formalizes the obligation to report vertical integrations.
Procedures have been significantly modified, and the new procedure is of great is expected prevent needless notification procedures and the costs and time they entail where the SIC finds that the integration will not produce undue restrictions on competition. On the other hand, the law requires notice to the public of the proposed transaction where the SIC so requires it, which may cause delays and other complications where the notification process cannot start until the transaction has been made public.
TO: CLIENTS AND FRIENDS
FROM: POSSE HERRERA & RUIZ
DATE:
REFERENCE: LAW 1340 OF 2009- COMPETITION LAW
______________________________________________________________________
1. As a part of the legal services offered by our law firm, we have prepared this communication to present the innovations that in our concept the Law 1340 of 2009 (the Competition Law”) brings about. In particular, the Competition Law updates current antitrust legislation to the market conditions, by adequately following market users and by optimizing antitrust authorities´ legal and administrative tools.
2. Prior to the expedition of the Competition Law, antitrust matters in Colombia were mainly governed by the Law 155 of 1959, Decree 1302 of 1962 and Decree 2153 of 1992. With the issuance of the Competition Law our legislative framework has delved further into the topics of protection of competition, by regulating restrictive commercial practices — that is, foreclosure agreements and conducts and abuses of dominant position- and the regime of enterprise integrations, by unifying their procedures.
3. It is worth noting that, even though the Competition Law is in force from the day it was officially published, the authorities that were acting as competition authorities until the expedition of the Competition Law, will retain their powers in these matters for six (6) months after the issuance of the law. Nonetheless, (i) every preliminary investigation or complaint must be submitted to the Superintendence of Industry and Commerce (“SIC”) once the said term has expired, and (ii) the opinion of the SIC must be taken into account in every investigation or filing for integrations that is under study by any other competition authority.
4. RELEVANT ASPECTS OF THE COMPETITION LAW
4.1. Scope of application of the Competition Law
4.1.1 The Competition Law covers and applies to both natural and legal persons that conduct an economic activity or enterprise that has or may have effects in national markets, regardless of the sector of the economy.
4.2. General aspects regarding Mergers and Acquisitions in the Competition Law
4.2.1 The current antitrust legislative framework regulates mergers, acquisitions, consolidations or integrations (in general “operations”) by and between entities that have or may have restrictive effects on competition.
4.2.2 The SIC is confirmed as the exclusive competition authority for the application of antitrust norms and the norms of fair and free competition.
4.2.3 Modifying article 4 of Law 155 of 1959, the Competition Law empowers the SIC to annually determine the total amount of assets and operating income taken into account in order to define what operations are required to obtain prior approval from the SIC. In this regard the Competition Law prescribes that, even though the assets and operating income threshold is exceeded, an operation representing less than 20% of the relevant market will be authorized, but the participants are still required to notify it to the authority.
4.2.4 The introduction of the concept of “value chain” (cadena de valor) is particularly noteworthy as it formalizes the obligation to report vertical integrations, which was a contentious matter prior to the enactment of the Competition Law.
4.2.5 The exemption of the duty of prior notification for integrations between entities belonging to the same Company Group (Grupo Empresarial) is kept in the Competition Law. This exemption refers exclusively to Company Groups in the terms of article 28 of Law 222 of 1995, this is, a group of companies where, in addition to subordination, there is a unity of purpose and direction by the controlling or holding entity.
4.2.6 The SIC must object to those integrations that tend to create undue restrictions over competition.
4.2.7 The Competition Law entitles the SIC to revert an integration, merger, acquisition or the like that was not informed or was performed before the expiration of the period the SIC has, to study the corresponding operation. The above, only if the investigation allows the SIC to conclude that the operation either (i) imposes undue restrictions to the competition, or (ii) was objected or has not complied with the conditions under which it was authorized.
4.2.8 The SIC may authorize an operation subject to conditions and the performance of certain obligations, whenever it considers that those conditions and obligations are enough to guarantee the protection of free competition. For these 3 purposes, the SIC is entitled to verify and supervise the compliance with the conditions and obligations. The violation of the conditions or obligations may cause the imposition of sanctions, and could even result in the reversion of the operation.
4.2.9 If the participants in an operation show evidence, based on studies supported by methodologies of recognized technical value, that the positive effects of the operation upon consumers exceed the negative effects upon free competition, and that those benefits or efficiencies cannot be achieved by any other means, the SIC may not object the operation.
(a) In that case, the operation may be conditioned and the SIC shall
be able to request the guarantees it considers adequate.
(b) In addition, the SIC may issue instructions specifying the elements that must be taken into account for the evaluation and assessment of the studies.
4.2.10 Whenever the market conditions are such that effective and real competition is guaranteed, the SIC may refrain from objecting an operation, regardless of the percentage of participation in the market.
4.2.11 The participants in operations that are or have been investigated or conditioned shall pay to the SIC an annual contribution that must be fixed by the authority by means of resolution, proportional to the value of total current assets.
4.3. Regime of sanctions
4.3.1 One relevant innovation of the Competition Law is the possibility for the SIC to impose sanctions to individuals. The Competition Law caps the amounts of fines and sanctions for entities in one hundred thousand legal minimum salaries (today COL$ 993,800,000 or approximately US$ 24,845,000) or up to a hundred and fifty per cent (150%) of the profit derived from the illegal conduct. For individuals, the amounts are capped in two thousand legal minimum salaries (today COL$ 49,690,000,000 or approximately US$ 496,900). In the same sense, the law includes criteria for the graduation of the fine, and determines circumstances for the aggravation or [reduction] of the sanction.
4.3.2 Persons related or involved with the offender may not pay or guarantee the fine or sanction imposed.
4.3.3 The power of the SIC to impose a fine or sanction for the violation of the antitrust legal regime expires five (5) years after the commission of the violation, or after the commission of the last constitutive act of the violation in the case of continuing conducts, provided that the resolution imposing the fine or sanction has not been notified within that term.
4.4. Special procedure for operations
4.4.1 The participants will need to submit a pre-evaluation request that will have to be accompanied by a report of the operation and the basic conditions in which the same will be achieved, pursuant to the instruction that the SIC issues for those purposes.
4.4.2 Within the next three (3) days, the SIC shall determine whether or not the operation has to be informed. In case it does have to be informed, the SIC shall demand the publication of a notice in a nation-wide newspaper, and there will be a ten-day period during which the public may supply information relevant to the assessment of the operation. Whenever the participants make evident that for public order reasons the information must not be published, the same shall remain secret. A key issue that will give rise to much discussion is what could be considered as a “public order reason”. In this point it is important to clarify that, in our concept, public order reasons refer to those circumstances that may materially affect relevant public interests, such as the economic order or the stock market, and do not include the simple interests of the concerning parties of keeping the transaction confidential.
4.4.3 During the thirty (30) days following the presentation of the pre-evaluation
request, the SIC will determine whether or not it is appropriate to continue with the authorization procedure.
4.4.4 If the procedure continues, the SIC shall communicate it to the corresponding authorities in charge of regulation and oversight of the participants, requesting the supply of necessary information within the next fifteen (15) days. These authorities may include the regulatory commissions for telecommunications, energy and gas or sewage, the Superintendence of Companies, and others.
4.4.5 During that time, interested parties that may be harmed may request or propose actions in order to prevent or reduce the negative and anticompetitive effects of the restrictive conduct. In the same sense, whoever is investigated may have access to the information submitted by the public, in order to exercise its right to defend.
4.4.6 If the SIC has not objected or conditioned the operation within the following three (3) months after the participants have submitted all the required information, the operation will be understood as authorized.
4.4.7 The inactivity of the participants for more than two (2) months during any stage of the proceedings will be deemed as though they had desisted.
4.4.8 In our view, this new procedure is of great significance as it is expected to allow preventing a needless notification procedure with the costs and time it entails, in the cases the SIC finds that the integration will not produce undue restrictions on competition. However, a matter for concern is the need to make public the proposed transaction. This may cause delays because it may be the case that the notification process cannot start until the transaction has been made public. Under the prior laws, the SIC maintained confidentially and therefore it was possible to begin the process sooner. It is to be expected that more transactions be cleared at the pre-evaluation stage. If so, the new law may result in a typically shorter clearance time for the majority of the transactions. However, transactions that move on to the formal evaluation stage will probably take longer to clear than under the current regime.
4.5. Procedure of investigation of competition restrictive practices
4.5.1 The Competition Law created a new scheme whereby offenders can obtain benefits within an investigation proceeding by rendering information, documents or any other evidence concerning other participants in the operation that presumably violates antitrust laws. The benefits can be obtained whenever the offender turning the information in is not the mastermind, leader or instigator of the conduct, and depending on the accuracy, efficacy and opportunity of the information and collaboration.
4.5.2 If the person being impeached offers and grants suitable guarantees before the expiration of the term for requesting or supplying evidence, the investigation proceedings may be terminated in advance. The guarantees may be accepted by the SIC, in which case the same authority is entitled to monitor the compliance with the obligations. The breach of the said obligations will cause the imposition of sanctions by the SIC. Pursuant to the Competition Law it is the SIC who is entitled to regulate the conditions and forms in which the guarantees can be offered.
4.5.3 Injunctive measures for the immediate suspension of anticompetitive conducts were limited to those cases in which it can be considered that not taking the measures may jeopardize the investigation or the decision arising thereof.
4.5.4 Any vices or irregularities arising out of or from the proceedings will be deemed sanitized if the impeached person does not allege them prior to the expiration of the term the SIC has, in order to communicate to the person the report considering whether and infraction exists or not. If the vices or irregularities come up after that period, they must be alleged during the term in which the participant can oppose to the decision that brings to an end the proceedings.
4.6. State Intervention
4.6.1 The mechanisms by which the State (National Government) may intervene in order to limit or restrict competition by and between persons exclusively refer to (i) price stabilization funds, (ii) para-fiscal funds for promotion of agriculture, (iii) the establishment of guarantee minimum prices, (iv) regulation of internal markets of agricultural products, (v) safeguards regime (régimen de salvaguardias), and (vi) the mechanisms foreseen in Law 101 of 1993 and Law 81 of 1998.
Economists’ Forecast for Colombia
Pro-business government policies account for the fact that Colombia avoided a recession during the global economic crisis, according to three economists who addressed today in New York the Andean Economic & Financial Outlook 2010. They say the same factors account for sustained high levels of foreign direct investment and an outlook for prolonged economic and political stability. Some caution however that events with Venezuela, and the national elections in the spring of 2009, will interject some volatility.
The event was presented by the Colombian American Association, in conjunction with the Ecuadorean American Association, the North American-Chilean Chamber of Commerce, the Peruvian American Association, and the Venezuelan American Association of the US.
The three economists were: Luis Oganes, Head of J.P. Morgan Latin America Research; Alberto Bernal, Head of Research at Bulltick Capital Markets, and Gabriel Torres, Senior Credit Analyst, Moody’s Investors Service.
Pro-Investment Policies In Colombia
All agreed that progressive pro-market policies in Colombia have attracted very high levels of foreign direct investment – on the order of 4% of GDP, just below the world’s high-water mark, which is China, at 5%. The three also concurred that the fundamentals are in place for Colombia to continue to attract a high level of foreign direct investment. They noted that FDI in Colombia is coming in economy-building sectors such as infrastructure, manufacturing, and petroleum exports.
In infrastructure, “the money is there,” said Bernal, but government agencies are actually having difficulty getting the money to work. As for petroleum, Colombia, Bernal pointed out, has reached the point of producing 650,000 BPD and, by the end of 2009, is expected to reach 700,000 BPD, representing massive growth in the last several years. The growth in Colombian oil production is a significant source of economic strength and stability for the government, which owns 90% of Ecopetrol, but also for private investors (who own the balance) and, because of governmental transparency, the economy overall.
Both Oganes and Bernal pointed to a higher than predicted or predictable level of confidence underpinning the Colombian economy. On macroeconomic terms, Bernal considered it “unpredictable” that the Bank of the Republic (Banco de la Republica) would cut interest rates to historically low levels despite concerns the peso would depreciate significantly. It did not. And, while Oganes points out that the Banco de la Republica Board is divided on maintaining low rates, the most recent decision held the rates. Thus, confidence has been earned in the stewardship of the economy in Colombia.
Business-friendly policies in Colombia (and Peru) distinguish them from Ecuador and Venezuela. Bernal emphasized Colombia’s soaring in the World Bank’s “Doing Business” index – it is now considered better than even Chile on that measure. Venezuela is sixth from last place in the entire 183-country world surveyed. Bernal also pointed out significant bond issues in Colombia have been over-subscribed. Ecopetrol’s, for example, was over-subscribed ten times. This came only days after the usually very accurate World Bank published a prediction that there would be little or no interest in Colombian corporate bond issues. (Oops.) It is not the only Colombian corporate bond issue over-subscribed.
Dodging the Global Economic Crisis Bullet
Colombia escaped having a recession — three negative quarters of GDP growth — during the recent global economic crisis. Indeed, it did not have even two consecutive quarters of negative GDP growth, according to Oganes. His data (a request for permission to share or link to his data is pending — check back later) showed Colombia having negative economic growth (quarter on quarter, annualized) for the first time in 4Q08 of -5.9%, mildly positive growth in 1Q09 of 0.9% (he cautioned, however, that this data point may be revised downward), and turned downward again in 2Q09 -2.0%, and he forecasts positive growth of 1.9% and 3.2% in 3Q09 and 4Q09, respectively, for a 2009 level that is 0.5% below 2008. For 2010 he forecasts GDP growth of 3.0%, compared to an accepted figure of “potential” GDP growth of 5.0%.
Bulltick’s Bernal generally agreed with JPMorgan’s GDP growth predictions, but was somewhat more bullish on overall 2009 and 2010 GDP growth by 1.0-1.5%.
Oganes expressed cautious optimism that industrial production and retail sales had begun recoveries in Colombia in early 2009, but concern about central government fiscal deficits of 3.7-4.0% of GDP in 2009 (the June and September revised figures published officially) and 4.3% in 2010. On the other hand, his data showed “inflation surprised on the downside,” due largely to food price deflation. Excluding food, the “non-tradables” inflation remained “extremely stable,” he said.
Political Risks Are Overplayed
Oganes downplayed the “arm-wrestling” beteween Venezuela’s President Chavez and Colombia, stating flatly that “the risk of actual military conflict is exceedingly low.” Moreover, despite Venezuelan threats, economists have concluded it is almost impossible for Venezuela to find alternative sources of the record $6 billion in imports annually from Colombia. Bernal and Torres agreed. Bernal has prepared a report dated July 30 entitled “Despite Everything, Trade With Venezuela Will Not Fall.” (At link, select “Colombia Macro” and select the July 30 report.)
Bernal differed with Oganes on the meaning of an Uribe re-election, which both men assume will happen based upon presently available information. Oganes stated that markets may greet an Uribe re-election as “neutral to negative,” out of concerns for “institutional deterioration [as a result of permitting Uribe’s re-election].” But he also stated that such concerns “have been balanced by Uribe’s proven track record, and the likelihood that – even if Uribe can’t ultimately run – any likely successor would not deviate from pro-market policies. Bernal – who is Colombian – has concluded from dozens of interviews closely following the situation believes that if he wants to be, Uribe will be re-elected, because high popular demand will trump procedural problems with the referndum on re-election. Bernal believes that while re-election would be viewed positively overall as a matter of stability without the usual drawbacks in separation of powers. Indeed, he said, any sell-off associated with developments in the Uribe re-election process could pronmpt a buyer’s rally among those who have confidence in stability and the country’s pro-market policies. Thus, while Oganes saw the possibility that uncertainty “may begin to weigh on sentiment,” Bernal pointed out that markets may be reassured that Uribe is not a lame-duck. Moody’s Gabriel Torres commented that ratings are best when politics “is boring,” citing the possibility of a change of power in Chile. He did not see significant change in economic and industrial policies on the horizon in Colombia if Uribe were not elected, meaning, there would be no crisis and, from the economy’s point of view, it would be a “boring” election.
New Mining Code Amendments Attempt To Strike Balance
There is a report today on Portafolio.com (iGoogle(R) translation) discussing the effect of recent amendments passed by the Colombian Congress and approved by the President designed to revamp the national Mining Code. The report states that Mines and Energy Minister Hernan Martinez Torres, announced at a forum with Antioquia Governor Luis Alfredo Ramos, that the law makes adjustments to the mining code designed both to promote the industry and protect the environment.
The amendments require the Government to develop a mining management plan, designed to avoid conflicts. Extensions of mining concessions lasting twenty years will be permitted with a minimum two years but will not be automatic and must be shown to benefit the interests of the country.
The Governor of Antioquia, Luis Alfredo Ramos, has called for tougher mining laws to avoid predation in areas bordering the rivers and in some regions of Antioquia and Cauca. Government intervention is necessary, Ramos said, to protect the environment and water resources. Ramos alleged that there is a strong predation between municipalities and Girardota and Bello, in the northern metropolitan area of Medellin, Antioquia. He said it is essential to bring order to the mining sector, since the rules are lax and there is little governors such as he can do to mitigate their effects.
Another short review of the amendments, repuiblished on MetalsPlace.com, comes from Business News America.
One of the most significant changes the amendments will make is to increase state control over mining contracts in order to avoid speculation in mining areas.
The reforms also give small businesses the chance to legalize themselves with the aim of doing away with informal mining.
In addition, the amendments limit mining in national parks and other protected territories.
A brief mention of the amendments, when they were still under consideration, can be found in a presentation entitled “Mining Reform in Africa & Latin America: Sharing Experiences,” (slide 13) by Ana Elizabeth Bastida & Anida Yupari, at the Fourth International Study Group for the Review of African Mining Regimes (ISG) Meeting, Addis Ababa, March 11 2009:
- Recent amendments to allow the state to reserve areas for Large scale mining to be granted under contracts similar to concession contracts in the oil sector – company given rights to explore/exploit deposits in a specific geographic area.
- Regulation of lands belonging to indigenous communities:
- Preference right to be granted mineral rights in their areas
- Ban on mining in lands considered as sacred
- Royalties to be directed on infrastructure and services to benefit communities
SATCOL — Communications Satellite Bidding Process Has Begun (Updated Post)
Colombia has begun a US$250 million communications satellite contracting process, according to two reports prepared by enterprising Bogota lawyer Alejandro Delgado of Rodriguez & Cavelier.
The process will identify and select a contractor for the “design, development, manufacture, delivery, launching and operation of the Colombian Fixed Services or Broadcasting Satellite (FSS or BSS).” The bidding process is “open to space industry manufacturers or to satellite fixed services operators FSS which prove experience as ‘prime contractor’ for fixed services or broadcasting satellite manufacturing agreements.”
Ministry of Communications has announced in its website today that the following stages of the SATCOL’s bidding process have been postponed:
– Publication of the answers to the questions, observations and comments to the Draft RFP’s.
– Publication of the final RFP’s
– Hearing on risk assignment and distribution.
– Hearing to clarify the final RFP’s.
The Ministry said in its statement that it will release the dates of such stages on September 18, 2009.
The following are two detailed memoranda written by attorney Delgado.
Rodriguez & Cavelier Memo No. 1
Background
After a bidding process which Satel Counsel International, Sti Ltda and Incorbank S.A. won to advise the Ministry of Technologies, Information and Communications and preparing the bidding terms for the “Design, development, manufacture, delivery, launching and operation of the Colombian social communications Satellite System (CSCSS) during its risk period”, the drafts of these bidding terms have been published in the official Contracting website since the 26th of August in order to be commented (they are available for any comments or suggestions until 3:00 p.m. of the 9th of September).
• The main points of this document are:
• The Public bidding process main objective is the selection of the Contractor for the design, development, manufacture, delivery, launching and operation of the Colombian Fixed Services or Broadcasting Satellite (FSS or BSS) during its risk period and in accordance to these bidding terms.
• The bidding process is open to space industry manufacturers or to satellite fixed services operators FSS which prove experience as “prime contractor” for fixed services or broadcasting satellite manufacturing agreements and locating satellites into Geostationary Orbit GEO. Prime Contractor means the main Contractor who has under its direction and responsibility the execution of an agreement in which services and activities of subcontracted third parties will be integrated. The required elements of a prime contractor are complied with because at least, a satellite operator, a satellite manufacturer and a satellite launcher will be required, in which case either the satellite operator or the satellite manufacturer would act as prime contractor and the others most surely as contractors, unless they choose to participate as a Consortium or as a Temporal Joint Venture. Prime contractor means that the contract with its client has been in a ready to use modality for the delivery of the satellite in orbit (In Orbit Delivery, IOD) this modality includes its direct responsibility regarding:
1. Manufacturing the satellite and its delivery in ground (In Ground Delivery, IGD).
2. Launching, delivery in orbit (IOD) and operation during the risk period.
3. Insurance that covers launching campaign, enlistment, launching and first year of operation in orbit.
4. Ground Control Stations (TTyC, control mission, control payload).
5. Training and Technology Transference.
6. Access to the minimum Orbit Spectrum Resource necessary.
MAXIMUM BUDGET
The official budget of the Information Technologies and Communications Fund for this Project corresponds to USD$249.041.095,89, budget approved by CONPES no. 3579 of the 25 of March of 2009 .
• The selection mode, through which the contractor selection is going to be performed, corresponds to Public Bidding.
• Considering the essence, nature and characteristics of the contract to be executed with the Information Technologies and Communications Fund, its form will be “ready to use” or “turnkey contract”) according to the doctrine definitions.
• QUALIFICATION REQUIREMENTS TO PARTICIPATE IN THE SELECTION PROCESS
• Legal conditions. In the current process the participation of the following is allowed:
a. National and foreign Corporations which had filed their individual proposals and which their corporate purpose includes: (i) space systems production and/or (ii) artificial satellite operation for fix or broadcasting services.
b. National and foreign corporations which file proposals and are constituted as consortiums or as Temporary Union, and which the corporate purpose of at least one of the members includes (i) space systems production and/or (ii) artificial satellite operation for fix or broadcasting services. The others members of the consortium or the Temporary Union should have within their corporate purpose some of the next activities: manufacturing of space qualified components, satellite integration and assembly, tests and trials of space systems and/or components, launching of satellite systems, securing of space missions, broadband services assistance and production of VSAT networks.
When the proposal is filed as a consortium or a Temporary Union the member which certified the experience as a manufacturer or as an operator must have a participation of at least 66% both in the proposal and its execution.
The foreign corporations must prove to have a representative who is domiciled in Colombia and is duly authorized to represent them during the Public Bidding and specifically to file the Proposal, give participation and compromise to their represented at all moments of the Public Bidding proceeding, sign the request documents and declarations and also sign the Agreement. If they are adjudicated, they are obligated to constitute a branch office or have a representative who is domiciled in Colombia .
No corporation can participate in more than one proposal either as an Individual Bidder or as a member of a Consortium or a Temporary Union. Notwithstanding the aforementioned, in case an Individual Bidder, a Consortium or a Temporal Joint Venture files in their Offer, subcontractor proposals for any activity of the Agreement, those subcontractors can participate in other Offers which arise in this Public Bidding proceeding.
If your company is interested in the aforementioned bidding process, please contact Dr. Alejandro Delgado Moreno.
Rodriguez & Cavelier Memo No. 2
COLOMBIA
THE COLOMBIAN SATELLITE PROJECT SATCOL
Background:
After being invited to participate in the bidding process to advise the Ministry of Technologies, Information and Communications, and as a result of that process being declared deserted, ACAC started a new process (invitation 033-2009) which Satel Counsel International, Sti Ltda e Incorbank S.A. won.
These companies were in charge of preparing the bidding terms for the “Design, development, manufacture, delivery, launching and operation of the Colombian social communications Satellite System (CSCSS) during its risk period”.
The drafts of these bidding terms have been published in the official Contracting website since the 26th of August in order to be commented (they are available for any comments or suggestions until 3:00 p.m. of the 9th of September).
The main points of this document are:
- The Public bidding process main objective is the selection of the Contractor for the design, development, manufacture, delivery, launching and operation of the Colombian Fixed Services or Broadcasting Satellite (FSS or BSS) during its risk period and in accordance to these bidding terms.
- The bidding process is open to space industry manufacturers or to satellite fixed services operators FSS which prove experience as “prime contractor” for fixed services or broadcasting satellite manufacturing agreements and locating satellites into Geostationary Orbit GEO. Prime Contractor means the main Contractor who has under its direction and responsibility the execution of an agreement in which services and activities of subcontracted third parties will be integrated. The required elements of a prime contractor are complied with because at least, a satellite operator, a satellite manufacturer and a satellite launcher will be required, in which case either the satellite operator or the satellite manufacturer would act as prime contractor and the others most surely as contractors, unless they choose to participate as a Consortium or as a Temporal Joint Venture. Prime contractor means that the contract with its client has been in a ready to use modality for the delivery of the satellite in orbit (In Orbit Delivery, IOD) this modality includes its direct responsibility regarding:
- Manufacturing the satellite and its delivery in ground (In Ground Delivery, IGD).
- Launching, delivery in orbit (IOD) and operation during the risk period.
- Insurance that covers launching campaign, enlistment, launching and first year of operation in orbit.
- Ground Control Stations (TTyC, control mission, control payload).
- Training and Technology Transference.
- Access to the minimum Orbit Spectrum Resource necessary.
MAXIMUM BUDGET
The official budget of the Information Technologies and Communications Fund for this Project corresponds to the following annual values, within the budget approved by CONPES no. 3579 of the 25 of March of 2009 and it counts with the Superior Fiscal Policy Council (FPSC) (CONFIS) tax approval by budgetary period:
The Values include all correspondent taxes, contributions and rates (in million pesos).
Exchange rate: 2044 Year Colombian pesos US Dolars 2009 156.263.000.000,00 76.449.608,61 2010 130.562.000.000,00 63.875.733,86 2011 123.463.000.000,00 60.402.641,88 2012 98.752.000.000,00 48.313.111,55 TOTAL 509.040.000.000,00 249.041.095,89
- The selection modality, through which the contractor selection is going to be performed, corresponds to Public Bidding.
- Considering the essence, nature and characteristics of the contract to be executed with the Information Technologies and Communications Fund, its form will be “ready to use” or “turnkey contract” (in Anglo-Saxon law) according to the doctrine definitions.
DURATION AND DEADLINES OF THE PUBLIC BIDDING PROCESS
The duration and deadlines of this contracting process are established as follows:
Bidding procedure Date Place Communication to the Chamber of Commerce 04-08-2009 Publication of the first draft of the Terms of Reference, the previous studies and the technical and financial annexes. 26- 08-2009 http://www.mintic.gov.cowww.compartel.gov.cowww.contratos.gov.co Publication of a press release. 27-08-2009 Nationwide newspaper Term to file questions, observations and comments to the draft of the Terms of Reference, the previous studies and the technical and financial annexes. Until 09-09-2009 at15:00 (03:00 p.m.) Point of Attention to the citizen and Operador– PACO, vía fax at number3442373 and/or e – maillicitación-satcol@mintic.gov.cocopy to: contrataciones.compartel@mintic.gov.co
Answer to the questions, observations and comments made to the draft of the Terms of Reference, the previous studies and the technical and financial annexes. Until 10-09-2009 http://www.mintic.gov.cowww.compartel.gov.cowww.contratos.gov.co Selection procedure opening: Publication of final Terms of Reference -Resolution whereby the public bid is officially opened. 10 -09-2009 http://www.mintic.gov.cowww.compartel.gov.cowww.contratos.gov.co Terms of Reference clarification hearing and of distribution and assignment of Risks. 14-09-2009 at 15:00 (03:00 p.m.) Offices of the Compartel program, located in the Eastern flank of the fifth floor of the Murillo Toro Building, Cra 7ª between streets 12 and 13 of the city of Bogotá D.C. Reception of observations, questions and comments to the Terms of Condition From 10-09-09 to l18-09-09 at12:00 horas (12:00 m) Point of Attention to the citizen and Operador– PACO, vía fax at number3442373 and/or e – maillicitación-satcol@mintic.gov.cocopy to: contrataciones.compartel@mintic.gov.co
Publication of the answers to the observations, questions and commentaries to the Terms of Condition Until 23-09-2009 http://www.mintic.gov.cowww.compartel.gov.cowww.contratos.gov.co Publication of addendums The working day previous to the Date of Closing, except for the established in the decree 2025 of 2009 article 2 paragraph 1. http://www.mintic.gov.cowww.compartel.gov.cowww.contratos.gov.co CLOSING DATE AND RECEPTION OFOFFERS 1-10-2009 at 15:00 (03:00 p.m.) Offices of the Compartel program, located in the Eastern flank of the fifth floor of the Murillo Toro Building, Cra 7ª between streets 12 and 13 of the city of Bogotá D.C. Request to the bidders for explanations of the offers filed. 08 -.10-2009 They are published in http://www.mintic.gov.cowww.compartel.gov.cowww.contratos.gov.co and/or submitted by e-mail or fac to the adrresses registered by the bidders. Reception of the answers to the requested explanations. 16-10-2009 at 15:00 (03:00 p.m.) Point of Attention to the citizen and Operador– PACO, vía fax at number3442373 and/or e – maillicitación-satcol@mintic.gov.cocopy to: contrataciones.compartel@mintic.gov.co
Publication of the Preliminary Evaluation Brief 26 -10-2009 http://www.mintic.gov.cowww.compartel.gov.cowww.contratos.gov.co Reception of comments, and observations to the Preliminary Evaluation Brief. Until 03-11-2009at 15:00 (03:00pm) Point of Attention to the citizen and Operador– PACO, vía fax at number3442373 and/or e – maillicitación-satcol@mintic.gov.cocopy to: contrataciones.compartel@mintic.gov.co
Publication of the document of answers and comments to the Preliminary Evaluation Brief and publication of the Final Evaluation Brief. Until 09-11-2009 http://www.mintic.gov.cowww.compartel.gov.cowww.contratos.gov.co Adjudicatory Public hearing. 11-11-2009 at 10:00 a.m. Offices of the Compartel program, located in the Eastern flank of the fifth floor of the Murillo Toro Building, Cra 7ª between streets 12 and 13 of the city of Bogotá D.C. Execution of contract. Until 19-11-2009. Offices of the Compartel program, located in the Eastern flank of the fifth floor of the Murillo Toro Building, Cra 7ª between streets 12 and 13 of the city of Bogotá D.C. Contract legalization and signature of theCommencement minutes. Until 26-11-2009 Offices of the Compartel program, located in the Eastern flank of the fifth floor of the Murillo Toro Building, Cra 7ª between streets 12 and 13 of the city of Bogotá D.C.
- QUALIFICATION REQUIREMENTS TO PARTICIPATE IN THE SELECTION PROCESS
- Legal conditions. In the current process the participation of the following is allowed:
- National and foreign Corporations which had filed their individual proposals and which their corporate purpose includes: (i) space systems production and/or (ii) artificial satellite operation for fix or broadcasting services.
- National and foreign corporations which file proposals and are constituted as consortiums or as Temporary Union, and which the corporate purpose of at least one of the members includes (i) space systems production and/or (ii) artificial satellite operation for fix or broadcasting services. The others members of the consortium or the Temporary Union should have within their corporate purpose some of the next activities: manufacturing of space qualified components, satellite integration and assembly, tests and trials of space systems and/or components, launching of satellite systems, securing of space missions, broadband services assistance and production of VSAT networks.
When the proposal is filed as a consortium or a Temporary Union the member which certified the experience as a manufacturer or as an operator must have a participation of at least 66% both in the proposal and its execution.
The foreign corporations must prove to have a representative who is domiciled in Colombia and is duly authorized to represent them during the Public Bidding and specifically to file the Proposal, give participation and compromise to their represented at all moments of the Public Bidding proceeding, sign the request documents and declarations and also sign the Agreement. If they are adjudicated, they are obligated to constitute a branch office or have a representative who is domiciled in Colombia[1].
No corporation can participate in more than one proposal either as an Individual Bidder or as a member of a Consortium or a Temporary Union. Notwithstanding the aforementioned, in case an Individual Bidder, a Consortium or a Temporal Joint Venture files in their Offer, subcontractor proposals for any activity of the Agreement, those subcontractors can participate in other Offers which arise in this Public Bidding proceeding.
- Financial Conditions
The Bidder and each of the Consortium and Temporally Union’s members must file approved financial statements corresponding to the last fiscal period in accordance with the law of the respective country.
1.9.2.2. Patrimonial requirements
The required patrimonial capacity percentage for the current process is: equal or higher than one hundred per cent (100%) of the total value of the Project’s Official Budget, which is calculated in accordance with this numeral.
The required patrimonial capacity shall be calculated with the following formula:
CPR=VTP x 100%
CPR= the required patrimonial capacity must be accredited in each case.
VTP= total value of the Official Budget
100%= established percentage in this numeral of the Bidding Terms.
When the Bidder is a Consortium or a Temporal Joint Venture, it must have a patrimonial capacity which is equal or higher than the result of multiplying the required patrimonial capacity to the participation percentage in the Consortium or the Temporal Joint Venture.
1.9.2.3 Absence of agreement of payments to creditors
Neither the Bidder nor the members of the Consortium or the Temporal Joint Venture can be in a restructuration’s process, bankruptcy proceeding, insolvency proceeding, financial insolvency or any other similar event in their respective legislation.
1.3.2.4 Credit Limit Approval
The Bidder must present the proposal with a certification issued by a National bank entity which is controlled by the Finance Superintendence or by a foreign bank which is certified by a similar entity to the Finance Superintendence of the country of the foreign bank. This certificate must establish the existence of a credit limit approval. In the case of the foreign bank, the certifications must be apostilled. MINIMUM REQUIRED CREDIT LIMIT: 5% of the value of the Official Budget.
- Technical Conditions
1.9.3.1 Operation Fleet
If the Bidder is a satellite systems operator its current fleet at must have least five (5) satellites in the Geostationary Orbit for fix services or broadcasting and operating in the control position regime (SKW). Satellites operating in inclined GEO are excluded.
1.9.3.2. Satellite Manufacturing
If the Offering Party is a Manufacturer of space technologies, it shall have manufactured at least ten (10) fixed services or broadcasting satellites which are currently operating in the GEO under position control regime (SKW).
1.9.4. Regulatory Conditions: Orbit Spectrum Resource (ROE)
Regarding the ROE, the Bidder must present a certification of a Member State of the Communications International Union (UIT) in which states:
(a) That said administration has the priority for the exploitation of that ROE accordingly with the UIT`s Radio-communications Regulation, or that it has coordination agreements with the administrations that precede it in priority.
(b) The satellital position of this ROE must allow an elevation angle of the earth stations of 30º in Ku band and/or higher than 40º Ka band.
(c) Express authorization for the Bidder for the exploitation of the respective ROE for this Project in case it is granted to him for a twenty (20) years period, starting on the date of launch that allows two consecutive cycles of usefulness term.
CHRONOGRAM AND GOALS
The Bidder must present in its Proposal an activities` chronogram which includes the deadlines in Chart 2, seeking to guarantee an appropriate execution of the Agreement.
Number Fase Stages Beginning Maximum time since the beginning Deadline from the beginning I. Design of the satellite
Preliminary review of the Design (PDR) Critical review of the Design (CDR)
FEC PDR
5 months 7 months
II. Assembling, integration and testing
Start of assembling, integration and testing. Post test review, In Ground Delivery (IGD) andPre-loading.
CDR End of assembling, integration and testing
8 months 7 months
III. Loading, launch andPreliminary acceptance in Orbit. Preliminary acceptance in Orbit. In Ground Delivery (IGD) 6 months IV. Preliminary acceptance of the ground segment.
Facilities acceptance Preliminary acceptance
FEC Loading and launch
28 months 5 months
V. Final delivery of the space segment. Final acceptance of the space segment. In orbit Preliminary acceptance 12 months VI. Final delivery of the ground segment. Final acceptance of the ground segment. Preliminary acceptance in Orbit. 12 months FEC: Effective date of the Contract
Guarantee of seriousness of the proposal
The Proponent must present a Guarantee of Seriousness of the Proposal which will be constituted in favour of the Contracting Entity (In the guarantee, the beneficiary must literally appear as “Information and Communication Technologies Fund”) for an amount equivalent to two point five percent (2.5%) of the official budget for the execution of the Project.
The Guarantee must be enforceable for ninety (90) calendar days, starting on the date in which the Bidding Procedure closes. In case the Proposal is presented by a Consortium or a Temporal Joint Venture, the Guarantee must be granted by all of the members.
Bank guarantees and insurance policies issued by banks or insurance companies which are legally established in Colombia will be accepted. The terms must be those of a guarantee issued for a public entity. The Bidder is required to extend the enforceability of the Guarantee of Seriousness of the Proposal when the Contractual Entity solicits it.
The Guarantee for the Seriousness of the Proposal must cover:
(i) The non signing of the agreement by the selected Bidder without just cause,
(ii) The non extension of the enforceability of the guarantee of the seriousness of the Offer, when the foreseen term in the documents for the adjudication of the agreement is prorogued or when the foreseen term for the execution of the agreement is prorogued, as long as said prorogues do not exceed a 3 month term,
(iii) The absence by the selected Bidder, of granting the performance guarantee demanded by the Fund to cover breach of contract’s obligations,
(iv)The withdrawal of the Offer after the term for Proposal presentations has expired,
(v) The absence of payment of the publication rights in the Contractors Single Paper (Diario Único de Contratación), which are foreseen as requisites for the legalization of the agreement,
(vi) When the withdrawal of the proposal is requested after the closing of the bidding proceedings, except in case of overcoming inability or incompatibility,
(vii) When after the granting of the contract, the legalization requisites of said adjudication are not complied within the established period,
(viii) If by the Proposal’s acceptance date, the documents issued abroad have not been filed at the Contractual Entity with the necessary consular proceedings for their validity in Colombia.
The policy must describe expressly and in detail all the liabilities it covers. The policy shall be delivered with the receipt of payment of the premium. Both the policy and the receipt must be the originals.
Minimum useful term of the mission
The useful term of the mission offered by the Bidder must be at least one hundred and eighty (180) months, starting from the preliminary delivery in orbit and for position (SKW) controlled regime operation for the one hundred percent (100%) of the design power.
[1] This paragraph is not clear. It should be subject to clarification from the Ministry of Communications.
New Environmental Sanctions Regime Announced
Colombia has adopted a new comprehensive environmental sanctions regime, reports Bogota lawyers Alvaro Rodriguez and Alexandra Correa of Posse Herrera & Ruiz. The new regime replaces what they describe as “an incoherent framework that made both enforcement of and defense against sanctions difficult and unpredictable.”
The innovation, however, is controversial, as it presumes the fault of the alleged offender, reversing the supposedly constitutionally-guaranteed presumption of innocence. The alleged offender bears the burden of proof, which Rodriguez and Correa describe as “heavy procedural and economic burdens.” The new legislation extends the statutes of limitation, increases fines, increases the list of aggravating and mitigating factors considered, and, interestingly, creates a national register of offenders.
- As part of our comprehensive legal services please find below a brief summary of the key aspects of the New Colombian Environmental Sanctions Regime enacted by Law 1333 of July 21, 2009 (the “Environmental Sanctions Regime”). We will highlight the main novelties and address their legal implications.
- Before the enactment of Law 1333 of 2009, the imposition of sanctions for violations of environmental regulations was subject to the procedure established in Decree 1594 of 1986, which was issued to enforce the sanitary measures related to water and effluent regulations contained in the same Decree. Additionally, articles 83 to 86 of Law 99 of 1993, which established preventive measures and substantive sanctions was applied. The result was an incoherent framework that made both enforcement of and defense against sanctions difficult and unpredictable.
- The main innovation of the new Environmental Sanctions Regime is that it presumes the fault (negligence or intent) of the alleged offender.[1] This is a departure from Colombian legal tradition based on the civil law concept of fault, which has generated heated debate, considering that under Colombian law the presumption of innocence is constitutionally guaranteed. The Environmental Sanctions Regime reverses the burden of proof, shifting it to the alleged offender, who will have to bear the heavy procedural and economic burdens of proving its innocence. This legal presumption applies also at the preventive measures stage.
- Other important changes include:
[10]Ibidem, article 66
4.1. Increase in Statute of Limitations of Environmental Investigations to 20 years[2]. This is a significant increase compared to the existing term, which was 3 years and could create a situation of legal insecurity as regulated parties could face investigations a long time after the relevant facts may have occurred, which coupled with the presumption of fault could make defending such investigations very difficult. On the other hand, it should be recognized that a 3-year statue of limitation was too short, especially for environmental matters where the effects of a violations could take many years to become evident.
4.2. New Extenuating and Aggravating Circumstances Established[3]. The latter include: (i) offenses against the threatened, endangered or protected natural resources as well as offenses against those covered by any type of ban, interdiction or prohibition; (ii) omissions or actions committed in protected areas or areas of special ecological importance ; (iii) to obtain economic benefit for the offender or a third party from the environmental offense; (iv) to obstruct the action of environmental authorities; and (v) to fail to comply with the obligations derived from the imposition of preventive measures.
4.3. Violations of Licenses as Permits Included as a Punishable Offense.[4] There is an addition to the definition of article 84 of Law 99 of 1993[5] consisting in the inclusion of violations to obligations contained in administrative acts of Competent Environmental Authorities (including environmental permits and licenses), and other behaviors that cause environmental damage.
4.4. Preventive Measures Not Subject to Appeal.
4.5. New and Tougher Sanctions. The Environmental Sanctions Regime adds some sanctions and modifies others[6]. For example, the amount of the daily fines was increased from three hundred (300)[7] current minimum monthly legal wages (“cmmlw”) to a maximum of five thousand (5000)[8]cmmlw. The law establishes the possibility of revoking environmental licenses or permits as opposed to former regulations that simply provided for the suspension of the license or permit. The suspension is now a preventive measure that may be enforced by the authorities with preventive faculties. Finally, restitution in kind and community work were also included as new sanctions. Other sanctions like the temporary or definitive closing of the establishment, the confiscation of species and demolition of building, were kept in the Environmental Sanctions Regime.
4.6. Clarification of Procedure. Tthe Environmental Sanctions Regime meticulously unifies the procedure. It creates a preliminary investigation stage[9] with a maximum duration of six (6) months, for the authority to determine the existence of an alleged violation. After the six (6) months, the authority will have to, either initiate the sanction process, or definitely close the investigation. Notwithstanding the above, the preliminary investigation shall not be extended to other facts different from those that led to the complaint or investigation.
4.7. Register of Offenders. The law also creates a register of environmental offenders, with the purpose of keeping a detailed register of environmental offenders, and will be administered by the MAVDT. The register is still subject to detailed regulation of key aspects such as the term during which the offender will appear in the register and the conditions to be removed from it.
4.8. Finally, it is important to take into account that the proceedings established in the Environmental Sanctions Regime are immediately enforceable[10], except for those cases in which charges have already been filed, where the former regulations will still apply.
[1] Law 1333 of 2009, by which the environmental sanction procedure and other provisions are established, articles 1 and 5.
[2] Law 1333 of 2009, Article 10.
[3] Articles 6 y 7.
[4] Law 1333 de 2009. Article 5.
[5] Article 84 of Law 99 of 1993: When ever occurs violation of environmental law dispositions on renewable natural resources, the Ministry of Environment or the Local Environmental Authorities will impose sanctions consisting in (…)
[6] Article 40
[7] For 2009, COL$149,100.000 or approximately US$72,917.
[8] For 2009, COL$2,485,000.000 or approximately US$1,215,283.
[9] Law 1333 of 2009, Ob. Cit. article 17.
El Tiempo Reports “Wave” of Foreign Investors Includes Canadian Firms
Today’s El Tiempo contains an interesting angle on the reported wave of foreign investment into Colombia: Canadian investors are a big portion of the new funds. Brookfield Asset Management just closed a US$400 million infrastructure fund, which raised US$320 million from other investors and is the largest private equity infrastructure fund in Colombia.
This is a link to the iGoogle (R) loose translation of the article.
Why Look At Colombia? Part II – Getting the Facts
From the point of view of law and business, accurate information is important. Will foreign investors, tourists, and even social justice groups, have the facts they need to do their work? If so, what legal regimes will help – and which need to be fixed – in order to facilitate peaceful and constructive development?
Groups like Foundation Caring For Colombia (on whose board I sit) can only do their vital work — ours is healing children through health, education, and art — if all stakeholders know what is really going on.
We expect information, but not balanced information, from international organizations like Human Rights Watch. They rightly shine a very bright light on human rights violations by the Colombian Army and the irregular armies of the FARC and demobilized paramilitaries — just as they do with the American Army in Iraq. Groups like HRW also address the lack of land/agricultural reforms, and the impunity of killers of trade unionist and journalists.
Reading their websites would definitely not, though, give a complete picture of what is going on in Colombia or even the U.S. That is not their job. Their job is advocacy. Getting attention for what is unreported because powerful organizations like governments don’t want to propagate the information.
But even Human Rights Watch reports under-reported progress. Plug in “Colombia gays” on their search bar (just click here). The country has made significant progress in providing equality to same-sex couples. I have been publicly introduced, on television and elsewhere, as my husband’s husband “esposo” – and far from experiencing discrimination, it seems to open doors to closer relationships with elected officials, executives, and others. Folks seem to respect and appreciate the honesty and warmth and confidence in our relationship.
In a similar way, the two posts in this series are designed to do the same thing, to get better information what is very much under-reported in Colombia, an astoundingly rapid social transformation. Part I reported the data. Part II here explores why Americans, in particular, have only old news and are missing the story. It’s because their press is missing the story.
Now, I know what you might be thinking. Who attacks the press without an agenda? I do have an agenda. I have firsthand long-term and reliable information on the basis of which I think the world could help continue the badly-needed social transformation of Colombia. I want the world to be encouraged, to participate, and not to shy away. I am not a journalist. I am a business person, a lawyer, and married into a Colombian family. That is my point of view.
The impression most Americans have is that Colombia remains awash in war and totally untrustworthy. That impression is keeping many American investors away.
But not as many Europeans. The leading investment bank on project finance in Colombia is BNP Paribas. French. There are about 50 Carrefour hypermarkets in France. Not one Wal-Mart. The top home improvement store chain is partnered with a Chilean firm, not a US firm, while the growing middle class expands consumption in the retail sector at unprecedented levels.
Americans, usually thought of as an intrepid bunch, are far behind the curve in many ways. Could the information deficit explain why Americans remain hesitant?
The focus of American news on Colombia is often on diplomatic tensions with Colombia’s neighbors, and the implication generally is that it is due to unreasonable behavior by Colombia or the United States. Now, the US has quite an odious history of backing Latin American strongmen (or “caudillos”). But how should one assess whether that is what we face in Colombia? In other words, are press reports about Colombia’s “transformation” balanced, in the sense that they provide enough information for people to make up their own mind to assess the situation? Or do they focus too much on the diplomatic stuff?
The place to start is with the two reporters working most on the Bogota beat for American newspaper readers are Juan Forero of the Washington Post and Simon Romero of the New York Times. (Click on their names to go to lists of their stories on their websites.)
They both are missing the big picture news of the social transformation. It’s like they are covering the fall of the Berlin Wall by mentioning only the unruly crowds, not the end of totalitarian government.
Neither paper has run a feature-length piece, say in their magazines, on the social transformation, for which there is a lot of reliable data and many more interesting stories. The Washington Post ran an editorial denouncing Chavez as a “caudillo” recently, but drew the wrong conclusion (that US diplomacy should directly confront his “braying” about war), wrong because it is wrong to take these “threats” seriously. But the focus remains unbalanced: war, military, drugs, violence.
Thus, the most recent NY Times magazine cover on Colombia was on semi-submersible drug boats. If this is the only boat they report on, if you’ll forgive the pun, they are missing the boat, and so are their readers.
Reviewing the list of stories run by the Post’s Forero not only proves the point, but raises serious omissions.
Comparatively, what is the role of the Venezuelan government in funneling arms, and raw materials for cocaine processing, to the FARC rebels? What is the role of the Ecuadoreans, on whose soil major camps with top FARC leaders were long tolerated, with at least some knowledge of government officials, and allegedly the President himself? Did you understand the US anti-drugs military aircraft and support crews are moving out of the US-leased and controlled base at Manta, Ecuador, onto Colombian bases under Colombian control? Is that information the American press should not bury?
His most recent (as of this writing) piece is: U.S.-Colombia Deal Prompts Questions : Lack of Debate, Dubious Motives Cited. Really? “Lack of debate?” Nineteen days earlier he published an article about the debate kicked off by the move. And the later story followed (by a couple weeks) President Uribe’s personal visit to every single South American capital, and the debate over the US troops agreement. “Dubious motives?” Fighting the drug war for decades is not dubious in any sense of that word, it’s a well-known fact. It has been the focus of the US presence for decades. The headline (not for the first time in his reporting) parrots a Hugo Chavez story line, here, that the US might be about to invade Colombia’s neighbors. Other than the rantings of Chavez, there is no original reporting to support this story line. Meanwhile, there is major news out lately confirming that Chavez himself is bankrolling and selling arms to the FARC terrorists who a drug-traffickers and kidnappers. But not getting much coverage by Forero.
U.S. Criticized for Extraditing Minor Colombian Drug Suspects is real whopper. In it, Forero leaves the impression that the extradition is so sloppy that the innocent are regularly caught up in it. Read it closely, though, and there is only one source for — an admitted drug trafficers’ defense counsel for that idea. Not a single other minor extraditee is named except the two covered in the story (who admitted their guilt and were returned to Colombia). It’s a sad story for the actual subjects of the article. It is sadder still to see such weak journalism in the Washington Post.
Does the story convey what’s actually going on with extradition? What are the other effects of extradition — the social transformation signs (or effects)? Such as the high conviction rate of terrorists with multiple life terms in the US, a change long sought and highly praised by the US? Is it not newsworthy that hundreds — hundreds — of real, hard-core, serious murdering drug-trafficking thugs have been put away for ever? If your family, like mine, had been menaced by these gangs, would you have an interest in this information?
An example of even-handedness in Forero’s case was to quote (though without any original reporting) from a new US GAO report linking Hugo Chavez to drug trafficking: Venezuela’s Drug-Trafficking Role Is Growing Fast, U.S. Report Says, Government Corruption, Aid to Colombian Rebels Are Cited.
In short, Juan Forero is capable of better. Readers should beware, though, for now at least, that his reporting is weak and his stories are unreliable.
Earlier this year, Simon Romero, whom the Times hired to replace Forero, reported on a “wider drug war” (my emphasis) threatening the indigenous population of Colombia. One month earlier, he wrote that Colombia’s security forces had captured the number-one drug lord and the hundreds of others already killed, captured, and/or extradited to the US. “Wider” drug war? or “Winning”? If that were true, would it not be news?
A good news piece does not have to be alarmist (”impending doom predicted!”). Rather what reporters need most are the facts — answers to the who, what, when, why, etc. What is the state of the “drug war”? What is being done to control the lawless coca-growing regions, displace the armed thugs that force the local farmers and poison their land and water with their toxic chemicals? What is being offered to the peasants as agricultural alternatives? How is life for an ordinary citizen of Colombia these days? What are the implications for the leftist popular governments elsewhere? Of those governments in Colombia?
To his credit, Romero covered the US report that coca-growing decreased an amazing 28% against last year. And he has been scrutinizing Hugo Chavez’s Venezuela and its complicity in arming the FARC narco-terrorists. He reported on Chavez’s threats to a radio station in July but he did not write on how Chavez shut down the TV network Globovision in early August.
But reviewing both story lists, what is overwhelming is the lack of attention to the macro social and economic effects of the Uribe presidency. He is a controversial figure everywhere, but about 70% of the population is so happy with their new quality of life they tell pollsters they want Uribe to have a third term as president.
The lack of any real original reporting also curses the stories coming out of Colombia. The usually-careful Andrea Jaramillo of Bloomberg in Bogota blew it last month covering a big story: whether Venezuela cut off imports from Colombia, threatening its economy. Venezuelan President Hugo Chavez certainly saidhe cut off imports from Colombia. But did he? He said it the same week his armed police raided and shut down television network Globovision (with some irregular forces helping them). The same week the Swedish demanded to know how rocket launchers Saab sold to Venezuela were found in FARC camps inside Colombia, with Chavez’s serial numbers on them.
Is that information that should have been reported? Or should the famously bombastic Chavez be taken solely at his word?
Jaramillo and Chamie apparently thought so. She wrote, quoting him, “‘This could be quite damaging for Colombia,’ Nick Chamie, head of emerging-markets research at RBC in Toronto, wrote in a report today. ‘This time Venezuela is actually carrying through on its threat to reduce its buying of Colombian exports.'” (My emphasis.)
Really? “Actually carrying through”? Where did they get that information? I emailed both of them to ask, and gave them (unsolicited) my information. Neither has responded or corrected.
Instead, the “update 1” version of Jaramillo’s story still available on Bloomberg mentions and credits (without qualification) Chavez’s criticism of US military plans for “training and counter-drug operations.” She does not mention the prodigious presence in Caracas of fresh Colombian imports. She does not mention the Swedish rocket launchers. She does not mention a Colombian TC network broadcast of video tape showing Venezuelan police crossing the river into Colombia with barrels of drug-making chemicals and saying that a purported agreement by the Venezuelan police to equip the FARC was not only true but “miraculous” because of the important work of the FARC.
I will leave further critical review of Nick Chamie to RBC’s clients.
My sources — top executives in Colombia’s food exporting companies — said, in private and in public, that all their shipments were getting through. True? One easy way to tell is if there were fresh cheeses or meats from Colombia in Caracas grocery stores. If so, it recently arrived from Colombia and there was no border shut-off. But did any of the stories focus on the food on the shelves of stores in Caracas?
Similarly, the major press reported on Venezuela’s agreement to buy cars from Argentina instead of Colombia. No actual cars or money changed hands, and it may not. Brazil’s President Lula sent a dunning notice to Chavez because promises to pay were apparently empty. And Lula is supposedly Chavez’s ally. This story was courageously reported by Venezuela’s El Universal. It was notreported by Romero, Forero, or Jaramillo.
How can business people and policy makers make sense of the situation with such reporting?
One Million Voices Against the FARC organized this march in Bogota last year, one of dozens in Colombia and more in the world’s capitals. These everyday Colombian citizens mobilized in peaceful demonstrations in an unprecedented outpouring against the FARC kidnappings. It was organized in only a couple of months. On Facebook.
This story reveals much more about the Colombia and Colombians today. It enables social justice, philanthropic, and commercial activities alike by encouraging investors, tourists, and others to see the possibilities now.
But you didn’t know that, did you?
The reporters mentioned above are invited to post a comment, or write in their own pages, to reply.
Why Look At Colombia? Has The Country Transformed?
When people hear “Colombia” they still think about drug-fueled violence. That stain is deep, but fading: data prove that Colombia is radically transforming, perhaps as extensively as Europe after the fall of the Berlin Wall or China after the advent of free markets.
Compelling statistics paint a story of social transformation through greatly reduced violence, increased economic activity, improved conditions for most (but not all) of the country. A frequently updated slide show Entitled “The Transformation of a Country” is well-named. Though prepared by ProExport, part of the Colombian Foreign Trade Ministry, the data are indisputable and explain why Colombia presents remarkable opportunities for business and social justice. Check out slides describing improvements in unemployment, poverty, wealth and income distribution, violent crime rates, and “business-friendly” reforms. Three main Colombian cities are all safer than Washington, D.C.
Comparative data shows that many common destinations are doing worse at doing business, or reducing crime and violence, than Colombia, including Mexico, Panama, and Brazil.
Current data is also available from the CIA World Factbook which says in part:
The Colombian Government has stepped up efforts to reassert government control throughout the country, and now has a presence in every one of its administrative departments.
***
Colombia has experienced accelerating growth between 2002 and 2007, with expansion above 7% in 2007, chiefly due to advancements in domestic security, to rising commodity prices, and to President URIBE’s pro-market economic policies. Colombia’s sustained growth helped reduce poverty by 20% and cut unemployment by 25% since 2002. Additionally, investor friendly reforms to Colombia’s hydrocarbon sector and the US-Colombia Trade Promotion Agreement (TPA, also known as the Free Trade Agreement or “TLC” by its Spanish acronym) negotiations have attracted record levels of foreign investment. Inequality, underemployment, and narco-trafficking remain significant challenges, and Colombia’s infrastructure requires significant updating in order to sustain expansion.
The World Bank annual assessment of the ease of doing business measures every country on earth, and Colombia rose substantially again in the 2010 Doing Business Report. The Colombia country report demonstrates the various ways in which the country has improved in protecting property, investors, ease of opening businesses and securing permits.
This is not new news. In a May 2007 article entitled, a bit extravagantly, “Extreme Investing: Inside Colombia,” BusinessWeek Magazine took a hard look at Colombia, spotting the emerging trend:
An improbable journey from crime capital to investment hot spot. Can this boom last?
That same year, the New York Times reported “Medellin Reborn: A Drug Runner’s Stronghold Finds New Life.” NBC News called it a “A Tale of Two Cities.” Amity Shlaes, Senior Fellow for Economic History at the Council on Foreign Relations published an op-ed piece on Bloomberg stating, bluntly, “Medellin Wonders What Pelosi, Sweeney are Smoking”:
Medellín contributed by choosing a reforming mayor, a mathematician with a doctorate from the University of Wisconsin named Sergio Fajardo. Fajardo worked hour by hour with police to recapture the city. He built libraries to show that gangs weren’t the only ones who could help communities. Fajardo also found an ingenious way to transport the stranded hill-side citizens — by ski lift. Today gondolas carrying eight passengers each sway up and down the hill on a wire — a commuter hypotenuse that changes the urban profile.
Fajardo says funding the concrete-and-wire Metrocable wasn’t so hard: “It’s remarkable how much money there is to spend when you don’t keep it for yourself and your friends.”
The result of it all is that murders in Medellín dropped. At 29 per 100,000, the city’s homicide rate is lower than Baltimore’s. New peace allowed legitimate businesses, such as fresh flowers and textiles, to expand in Medellín.
That was all two years ago. Maybe the emerging trend then was not sufficiently convincing, but things have only improved since then, if the data on the ProExport slides is any indication. And these are some compelling indicators of change from 2002-2008:
- Unemployment is down 4.2% to 12.5%
- Population percentage under the poverty line down 13 points (from 57% to 44%) — that is, about an eighth of the entire nation’s population has moved out of poverty and into the lower middle class
- Income distribution on the GINI scale (1 is worst, 0 is best) improved from .58 to .54
- The homicide rate in Medellin (29.1), Cartagena (21.8), and Bogota (18.2) are all better than Washington, D.C. (34), Rio de Janeiro (48.3), and San Paolo (55). Mexico is 20.4. Panama is 24.
- Kidnappings have fallen a whopping 85% and the homicide rate has fallen 50%
- 214% increase in exports, 397% in foreign direct investment, and a lagging 120% increase in tourism
- Colombia had the best performance in Latin America in the horrible first quarter of 2009, besting the others with tourism increases, and the smallest shrinkage in foreign direct investment and exports.
In my personal, decade-long experience, what I see and feel in Colombia’s cities today is excitement, productivity, peace, and optimism, tempered by the recognition that such gains are important to lock in through democratic institutions, and to share with the entire population. The same is true in the rural areas around the cities. Together that accounts for much of the population, but not all. One cannot ignore the somewhat-political display of the displaced persons camping out in a new park not far from the Presidential Palace — estimates range from 1.8M to 3.5M of internally displaced persons, the worst in most of the world. Still, from taxi-drivers to waiters and waitresses to unemployed actors to executives I have talked to, today’s generation is just plain sick of the drug and paramilitary mafias and FARC kidnappings. They are committed to development, to business and political policies that continue and expand the transformation. I base these observations on literally dozens of interviews with politicians of the right and left, family members, foreign investors, business executives, and journalists. Everywhere, I find courageous people — and very talented ones — are giving this their life’s work, people in and out of business, people on the left, the center, and the right.
Members of Colonel Martinez's Search Bloc celebrate over Pablo Escobar's body on December 2, 1993, in a photograph taken by DEA agent Steve Murphy. Escobar's death ended a fifteen-month effort that cost hundreds of millions of dollars. It was the deathblow to the Medellín cartel.
Still, some people can’t get Pablo Escobar out of their minds. He’s dead, okay? He was killed in 1993 by security forces hunting him after his escape from prison. Also dead are most of the leaders of the gruesome FARC’. I won’t post any more gruesome pictures unless you make me.
In the next installment, how much do you know about how things are now in Colombia? What could the press do to improve its original reporting?
I invite readers to confront and analyze the data and statistics in the ProExport slideshow, post comments here as to their accuracy, and links to more reliable and accurate information.
Legal Stability Contracts III: Why Do IFC-Backed Projects and Firms Not Use Legal Stability Contracts?
The list of companies that the IFC has backed resembles a “who’s who” list of leading Colombian businesses. Do firms of this caliber show interest in legal stability contracts? In other words, what does the list of IFC-backed Colombian firms tell us about legal stability contracts?
What do they have in common? Almost nothing, as it turns out. Only one of the firms with a published stability contract received IFC investment: Avianca, for its acquisition of a new fleet of aircraft.
The regime of stability contracts is touted as a way of attracting foreign investment on the ProExport site. Avianca is, in fact, foreign-owned (by a Brazilian firm). But foreign firms do not appear to be the main users of legal stability contracts. Colombia’s trade promotion authority, ProExport, reports that 42 stability contracts have been signed as of June 25, 2009 (see slide 15), though there are fewer than that listed on the ProExport website’s list of companies that have signed legal stability contracts.)
Certainly some of the projects conducted by IFC-backed Colombian firms were located outside of Colombia, and thus not available for stability contracting. But, there were many that appear to be eligible that have not been covered by stability contracts.
Bargaining power might be an explanation. After all, firms with IFC backing have a powerful multilateral organization as their “partner” and therefore may not need, at least in the IFC-funded projects, to purchase a stability guarantee, at least for rules that concern just the project. IFC’s bargaining power is perhaps strong enough to prevent most discriminatory treatment by an arm of the Colombian state. Even so, if stability contracts ensure future income streams, at an affordable premium, a knowledgeable and powerful investor like IFC would show an appetite for them at least out of concern for changes rules that are not limited to specific projects.
IFC-backed firms certainly have projects beyond those which directly receive IFC backing. Yet, even in those cases, no IFC-backed firm has signed a stability contract (other than Avianca).
One explanation is that at least half, in dollar terms, of the IFC’s investments were in the financial sector, and perhaps they are less suitable to the stability contract regime (which is driven by job-creating capital investments). Many others relate to acquisition of equipment and free trade zones. Perhaps those legal regimes explain the odd lack of IFC interest in stability contracts. (Representatives of the IFC are invited to contact me or post a comment if they can illuminate the subject of when stability contracts are viewed as useful in the their eyes.) I will take a closer look at the specific legal rules that are the subject of each legal stability contract in a future post.
There are significant financial implications if a regime such as free trade zones and their favorable taxation and trade regulations were to be discontinued. That might explain why the cement and concrete firm Cementos Argos signed a stability contract for its gigantic investment in its free trade zone manufacturing facility. According to the Argos contract, the investment was very significant in Colombian terms: COP$712,331,000,000 or roughly US$297,754,360 (at the October 31, 2008 exchange rate covering the first premium payment due), and paid a premium of COP$6,374,745 or $7,908,954. The premium cost was undoubtedly dwarfed by considerations of the more than 60% reduction in tax rates on goods manufactured in a free trade zone.
But many firms, both national and international, question why they should have to pay the government for what it should be doing — that is, ensuring a stable legal environment for the development of the country? What does that imply about the rule of law in Colombia? Does the risk of instability burden firms with deciding whether to a pay a steep, supplemental tax for this “special right,” and on others to factor in the risk when the economics do not support the premium? Does the regime create a more than subtle form of pressure on firms to sign and pay, or pay down the road with problematic regulatory changes or changes in interpretations?
The table below identifies the IFC projects with stability contracts. Reader comment and criticism is invited.
| No. | Year | Proj. No. | Company Name | IFC Amt.- $USM | Notes | Stab. Contract- Company | Stab. Contract- Project? |
| 1 | 2007 | 26235 | Compania de Gerenciamiento de Activos Ltda.(CISA) NPLs | $275 | Purchase portfolio of Non-Performing Loans (NPLs) and other Non-Performing Assets (NPAs) a majority of which were accumulated by the government of Colombia post the financial crisis of 1999. | ||
| 2 | 2006 | 25520 | Banco Davivienda S.A. | $200 | Acquisition of Granbanco SA. | ||
| 3 | 2008 | 27396 | Termoflores | $157.5 | Construction of a 169 MW gas-fired combined cycle unit by the expansion/conversion of the existing gas turbines in Flores II and III | ||
| 4 | 2005 | 24282 | Banco Davivienda S.A. | $120 | Expansion and consolidation of the Bank’s retail business while maintaining a strong presence in the mortgage industry. | ||
| 5 | 2007 | 25795 | Org. Terpel SA | $100 | Capital expansion and recapitalization project | ||
| 6 | 2006 | 24463 | Petrotesting Colombia SA | $85 | Oil and gas exploration, distribution services, equity and debt investment for $85M to strengthen financial position adoption of best practice corporate systems | ||
| 7 | 2007 | 26520 | Grupo Bolivar | $75 | Recapitalization to separate cross-holdings of insurance companies | ||
| 8 | 2008 | 25930 | Cartagena PortTerminal de Contenedores Cartagena SA (Contecar) | $60 | Four year capital expansion program to develop Contecar into a world class container port terminal. | ||
| 9 | 2008 | 25899 | Avianca | $50 | Corporate loan to finance aircraft acquisition | Yes | Yes |
| 10 | 2007 | 26473 | Bogota Distrito Capital – Bogota Street Rehab-ilitation | $50 | Rehabilitation of the City’s urban streets network and incremental construction of sidewalks and walking/bike paths. | ||
| 11 | 2006 | 24811 | Fundacion Social | $50M | Socially responsible projects targeting lower income households | ||
| 12 | 2007 | 25599 | Sodimac | $50 | Home Improvement retailer recapitalization | ||
| 13 | 2008 | 25672 | Tecnoquimicas | $45 | $100M capital project for 8 existing chemical facilities mostly around Cali | ||
| 14 | 2008 | 26175 | Abocol (Abonos Colombianos) | $30 | A Loan for carbon credits; upgrading the technology of the current NPK plant, installing a nitric acid plant, an ammonium nitrate solution plant, a calcium nitrate plant | ||
| 15 | 2007 | 24680 | Interbolsa | $30 | Partial credit guarantee (“PCG”) local currency medium term bond to strengthen liquidity, diversify funding sources, and reduce market risk. | ||
| 16 | 2006 | 24934 | Kappa Resources Colombia SA | $30 | Oil and gas exploration in the Magdalena Valley and the Cerrito gas field in the Catatumbo Basin near the city of Cucuta. | ||
| 17 | 2009 | 27549 | Riopaila | $30 | Cost reduction and technological improvement program diversifying its agribusiness activities, adding co-generation capacity; replacing and modernizing equipment and machinery across production units; andrestructuring short- and medium-term debt that is maturing in 2008–2010. | ||
| 18 | 2007 | 25569 | Cartones America SA , Cartones II | $25 | Acquire Chilempack facilities in Chile, upgrade and expansion of CAME’s manufacturing facilities in Colombia, Venezuela, Ecuador, Chile and Peru; and – refinancing existing short-term debt | ||
| 19 | 2008 | 26567 | Crediservicios | $25 | Coinvestment with Crediservicios in a Fondo de Capital Privado [Private equity Fund] for payroll deductible loans to low and middle income employees. | ||
| 20 | 2009 | 27961 | Greystar | $20 | Exploration and pre-mine development phase of the Angostura project located 55 km by road from Bucaramanga (IFC’s first mining investment in Colombia) | ||
| 21 | 2007 | 25897 | Procafecol (Promotora de Café de Colombia) | $20 | Expansion of 150 Juan Valdez coffee shops in Colombia and select international markets | ||
| 22 | 2005 | 22588 | Women’s World Bank | $20 | Five entities’ investments tailored to expand lending activities, diversify funding sources and strengthen position in the market to serve an additional 70,000 micro-entrepreneurs. | ||
| 23 | 2008 | 26257 | Finandina (Financiera Andina S.A.) | $17 | To undertake investment projects needed to finance improved freight distribution capacity within Colombia through consumers, micro entrepreneurs and transport vehicle owners | ||
| 24 | 2009 | 27780 | Termo Rubiales | $16.5 | project is located in the Llanos Basin, 465 km from Bogotá in the Meta Department to support the development of Meta Petroleum, a promising player of the oil industry in Colombia | ||
| 25 | 2008 | 26399 | Century Energy Corp. | $15.5 | Development, construction and operation of two small run-of-river hydropower plants in the Guadalupe river basin, 95 kilometers (km) north of the city of Medellin: arms-length, fixed price engineering, procurement and construction (EPC) and operation and maintenance (O&M) agreements with HMV Ingenieros. | ||
| 26 | 2007 | 25895 | MEB Port (Terminal Maritimo Muelles El Bosque) | $15 | A loan for capital expansion program of Terminal Maritimo Muelles el Bosque S.A. (MEB) to develop and manage a new multipurpose port in the Bay of Cartagena, on Colombia’s Atlantic coast. Extension of the container terminal berths; expansion of the container yard; acquisition of an additional mobile crane and other container yard equipment; two additional warehouses/silos; the upgrade of the port’s IT systems. | ||
| 27 | 2007 | 25852 | Tribeca Partners SA | $15M | Tribeca Fund I investment, to help fund reach target, give comfort to local investors not familiar with FCPs | ||
| 28 | 2009 | 27689 | Uniminuto | $8 | Three projects in Cundinamarca, including expansion of two key facilities in Bogota and Soacha, as well as construction of a new (phase 1) facility in Girardot. For Increased Access to Tertiary Education Services. | ||
| 29 | 2009 | 27745 | Covinoc SA | $5 | Strengthening Covinoc’s ability to administer pools of non-performing assets. | ||
| 30 | 2009 | 27952 | Cartones | $.756 | Energy efficiency improvement project, as part of IFC’s Cleaner Production Lending Pilot initiative, at Cartones America’s Cali plant. | ||
| 31 | 2004 | 20932 | Carvajal | – | Expansion, rationalization and modernization of Paper Manufacturing/Conversion: School/Office Supplies facility in Brazil; Yellow Pages operations in Brazil; Book and Text Book Publishing/Editing operations in Mexico and Spain; Plastic Packaging modernizing Colombian facilities; environmental and social and health and safety improvements at some of the company’s facilities in and outside Colombia. | ||
| 32 | 2008 | 26538 | Giros y Finanzas Compania de Financiamiento Comercial SA | – | Microfinance and lending to low income households in Colombia | ||
| 33 | 2007 | 26520 | Grupo Bolivar | – | Recapitalize Insurance Companies and restore solvency margins in third largest local financial conglomerate in Colombia. | ||
| 34 | 2005 | 24514 | Promigas | – | Investments in additional gas transmission and distribution assets in Colombia as well as the acquisition of new assets throughout South America — additional gas transmission and distribution assets in Colombia as well as the acquisition of new assets throughout South America. |
The problem is clear enough: attracting foreign direct investment, particularly medium and long term capital and infrastructure investment, is more difficult in environments that do not have a long-term history of stability that diminishes real and perceived national risk, political risk, and regulatory risk, among others. Firms are justifiably concerned about sinking substantial capital into an environment in which there is or has been a history or manipulation or distortion of tax, labor, safety, environmental, property, financial institution, corporate, tax, and import/export regimes, among others.
An innovative solution seems attractive enough: provide for a means of creating a public-private contract protecting specific investments from adverse changes in specific laws.
But is the Colombian regime of legal stability contracts fulfilling its promise? What factors must be critically evaluated in considering their effectiveness? This post identifies several factors to consider, that will be explored in future posts, and invites your suggestions as to other factors to consider.
In my first post on legal stability contracts, we presented the then-current list of the Stability Contracts identified on the Commerce Ministry’s website. That list of 28 companies has not increased since earlier this year. The list of companies, as I said, consists of sophisticated, often multi-national concerns whose names are well-known and desirable.
This only raises questions like “who chooses stability contracts?” and “who does not?” For example, a large number of the Colombian firms in which the International Finance Corporation (IFC) has invested are not among those who have sought legal stability of their investments.
And, among those firms who are making use of the regime, what do these investors try to protect with stability contracts? Even among those IFC-financed firms which have signed a stability contract, there are other investment projects not covered. And what about infrastructure projects, like the Ruta del Sol three-phase concession and construction project or the Mountain Highways in Antioquia? How would legal stability contracts help, or or they too costly, or ineffective, or just unnecessary?
One thing is pretty clear, the contracts are almost uniformly used for protection on the tax side. Most of the legal provisions stabilized, by far, are in the Estatuto Tributario, or tax statute, or closely-related provisions on tax and tarriffs.
In examining these contracts, additional issues arise, including:
- Inequity issues for firms that do not sign stability contracts
- The premium cost, its reasonableness in relation to the protection provided, its scalability (or lack thereof), and structuring its payment.
- The legal regimes that may not be stabilized
- Drafting problems that favor the government
- Enforcement problems
Readers are invited to post a comment or submit ideas about other factors to be considered in evaluating stability contracts.
A big chunk of the almost $4Bn now of annual capital inflows to Colombia comes from the International Finance Corporation (IFC), the World Bank’s private sector lending arm.
IFC is a very sophisticated financial party, with significant market expertise in Latin America and the rest of the world, and tremendous resources for performing diligence. For these reasons, an IFC investment shines a light on firms and projects which meet its high standards. IFC activity in Colombia has increased very rapidly since 2004, and not only in one local sector but across a wide variety of industries. IFC’s intensive activity in Colombia shows strong confidence in the country’s economy. And, when the IFC invests, it is often not alone — many of its credit facilities included participating lenders.
So who are these companies, and what kinds of projects have been sustained by IFC investment? How active is the IFC? Overall, just the top ten IFC transactions from 2004 to present total a whopping US$1,172,500,000. More than half of that amount was committed in finance and insurance, with Banco Davivienda the single biggest recipient overall (and in the top ten) at $320M. (A chart ranking all the deals from largest to smallest follows, and more details about the transactions are available in our first post on IFC activity in Colombia.) Other sectors in the top ten are Transportation and Warehousing ($160M), Utilities ($157.5M), Chemical ($100M), and Oil, Gas & Mining ($85M).
Of all 35 IFC financing transactions in Colombia from 2004 to present, the two biggest years by far were 2007 and 2008. Six deals occurred in 2009, for a total of $80.25M, ten in 2008 worth $415.5M (not including the unspecified amount of the Giros y Finanzas micro-lending loan facility), eleven in 2007 worth $655M (not including “up to $75M” invested in Grupo Bolivar common shares of equity to recapitalize its insurance group), four in 2006 worth $365M, three in 2005 totaling $140M (not including the Promigas loan facility), and one in 2004 (Carvajal’s transaction of unspecified size for plant modernization).
The biggest IFC-backed project in Colombia is, however, not (yet) listed among the IFC’s projects on its website. The Ruta del Sol, which we covered in an earlier post, is an infrastructure mega-project to build highways, viaducts, and tunnels connecting Bogota, at almost 10,000 feet elevation, with the northern coast and port cities. It is said to be the largest in Latin America after the Panama Canal expansion. The IFC is the financial adviser to the Ruta del Sol, which was recently let out for bid in three separate geographic phases. The amount and extent of financing has not yet been set, nor have any bids been accepted (the bidding closes later this summer), but the IFC role in the Ruta del Sol project will be significant.
The largest deal already placed is also the most unusual. Corporate or project financing is the norm for IFC, even in the financial sector, but in 2007, IFC agreed to finance “the purchase of a portfolio of Non-Performing Loans (NPLs) and other Non-Performing Assets (NPAs), a majority of which were accumulated by the government of Colombia post the financial crisis of 1999.” The IFC called it a “unique opportunity to participate in the first NPA deal of this scale being placed to international bidders in Colombia. It also marks a turning point for the authorities as after this sale the government would have no further obligations pertaining to its intervention post financial crisis.” IFC is providing both debt and equity financing to a local Colombian entity, Compania de Gerenciamiento de Activos Ltda. (CISA), created by a consortium including affiliates of the Capital Recovery Group of AIG Global Investment Corp., Covinoc S.A. and CarVal Investors, LLC. IFC says that AIG Capital Recovery Group, on behalf of various American International Group, Inc. subsidiaries, has invested over $1.296M in non-performing loans through structures similar to that being proposed in Colombia.” The deal structure is briefly described in the chart below.
The second largest deal provided financing for Banco Davivienda’s 2006 acquisition of Granbanco S.A., with $75M in equity and $125M of subordinated debt, of which $65M is for IFC’s own account. In 2005, IFC also financed Banco Davivienda “to support the expansion and consolidation of the Bank’s operations in Colombia… to expand its retail business while maintaining a strong presence in the mortgage industry.” The all-debt facility was comprised of a Colombian peso subordinated loan of up to $60 million (with a conversion option to be negotiated), and a “senior loan comprised of an IFCA loan of up to $20 million and a parallel loan of up to $40 million for the account of participant banks.”
The third largest project is a $278.2 million gas turbine construction by Termoflores S.A. E.S.P. in which the IFC approved loans in 2008 of $65 million in an A Loan for IFC’s own account and $92.5 million in a B loan from participants. The project will add a fourth turbine in a “combined cycle facility” designed to generate 169MW of new energy without significant additional gas using waste heat from two of the other turbines.
The fifth transaction, approved in 2007, provided $100M overall lending through a $60M A loan and $40M B loan to Org. Terpel S.A., or Terpel, the widely-recognized (in Colombia) fuel distribution company for capital expansion and recapitalization project costing $280M.
The sixth place deal, approved in 2006, furnished $85M to Petrotesting S.A., an oil and gas exploration, distribution services company. The transaction involved both equity and debt in a project to “strengthen the company’s financial through adoption of best practice corporate systems (such as those related to governance, environmental, social, community programs and accounting).”
The seventh largest transaction was the 2007 $75M paid for equity shares in Grupo Bolivar to recapitalize holdings in insurance companies Sociedades Bolivar S.A., Compañía de Seguros Bolivar S.A., Seguros Comerciales Bolivar S.A. and Capitalizadora Bolivar S.A..
The eighth largest transaction was approved in 2008 for a $60M A Loan for IFC’s own account to Terminal de Contenedores Cartagena SA (Contecar). The IFC’s funds finance part of a $210M four year capital expansion program to develop Contecar into a world class container port terminal. The project will increase the port’s container volume capacity almost six-fold.
The ninth largest transaction, approved in 2008, provided Avianca with $50M to help finance the Brazililan owners of the Colombian national air carrier in the acquisition of a new fleet of Boeing and Airbus aircraft, as part of a continuing modernization program after emerging from bankruptcy.
The top ten rounds out with a $50M loan approved in 2007 for the Bogota federal district to finance construction of sidewalks and bike paths. Bogota is home to the renowned “cyclovia” or “bike-way,” a visionary series of projects involving closing roads on Sundays to permit easy bike and pedestrian recreation across much of the city.
After the top ten are 25 more transactions. This table sorts all 35 IFC transactions listed on its projects website by the size of the IFC investment (where ascertainable. Some of the IFC’s project materials do not specify the transaction amount, such as a 2005 Promigas loan facility to fund an unstated portion of gas transmission and distribution projects totaling $319M, and the 2008 financing of Giros y Finanzas Compania de Financiamiento Comercial SA, for micro-financing to low-income households.)
IFC Loans and Transactions, Ranked By Size of IFC Investment, 2004 to present
Source Information: IFC Project Descriptions (see Project Search Page)
| Rank | Year | Proj. No. | Company Name | Sector | IFC Amt. ($USM) | Notes |
| 1 | 2007 | 26235 | Compania de Gerenciamiento de Activos Ltda.(CISA) NPLs | Finance and Insurance | $275 | A1 and A2 loans and equity of up to 15% at SPV level, and syndication of B1 and B2 loans as part of $306M project to finance the purchase of a portfolio of Non-Performing Loans (NPLs) and other Non-Performing Assets (NPAs) a majority of which were accumulated by the government of Colombia post the financial crisis of 1999. IFCwould provide both debt and equity financing to a local Colombian SRL established by the Consortium. |
| 2 | 2006 | 25520 | Banco Davivienda S.A. | Finance and Insurance | $200 | Financing for acquisition of Granbanco SA. $75 million of direct equity investment into Davivienda and $125 million ($65 million expected for IFC’s own account) of subordinated debt. |
| 3 | 2008 | 27396 | Termoflores | Utilities | $157.5 | The total project cost is estimated at about $278.2 million. The proposed IFCinvestment is a $65 million A Loan for IFC’s own account and $92.5 million B loan from participants. The project (Flores IV) is located in Barranquilla, Colombia, 948 kilometers north of Bogotá and 2 kilometers west of the Magdalena river. The Flores IV project consists of the construction of a 169 MW gas-fired combined cycle unit by the expansion/conversion of the existing gas turbines in Flores II and III from open cycle to a combined cycle facility. Flores IV will utilize the waste heat from Flores II and III to provide 169 MW of additional capacity without using significant additional gas. |
| 4 | 2005 | 24282 | Banco Davivienda S.A. | Finance and Insurance | $120 | The project consists of a financing package of up to $120 million to support the expansion and consolidation of the Bank’s operations in Colombia. The project will help Davivienda continue to expand its retail business while maintaining a strong presence in the mortgage industry. |
| 5 | 2007 | 25795 | Org. Terpel SA | Chemicals | $100 | $60M A loan and $40M B loan to fuel distribution company for capital expansion and recapitalization project cost of $280M |
| 6 | 2006 | 24463 | Petrotesting Colombia SA | Oil, Gas, Mining | $85 | Oil and gas exploration, distribution services, equity and debt investment for $85M to strengthen financial position project over two years adoption of best practice corporate systems (such as those related to governance, environmental, social, community programs and accounting) |
| 7 | 2007 | 26520 | Grupo Bolivar | Finance and Insurance | $75 | Equity shares for recapitalization to separate cross-holdings of insurance companies Sociedades Bolivar S.A., Compañía de Seguros Bolivar S.A., Seguros Comerciales Bolivar S.A. and Capitalizadora Bolivar S.A., which hold a number of the Group’s operating companies. |
| 8 | 2008 | 25930 | Cartagena Port Terminal de Contenedores Cartagena SA (Contecar) | Transportation and Warehousing | $60 | A Loan for IFC’s own account in $210M four year capital expansion program to develop Contecar into a world class container port terminal. The capital expenditure program is expected to increase Contecar’s annual capacity from 144 thousand TEUs to 850 thousand |
| 9 | 2008 | 25899 | Avianca | Transportation and Warehousinng | $50 | Corporate loan to finance aircraft acquisition Aerovias del Continente Americano S.A. (Aviancaor the company) is planning to renew its fleet over the period 2008-2012 to reduce costs, improve efficiency and safety as well as providebetter passenger service (the “UpgradeProgram”). The company has negotiated the purchase of 42 aircraft over the next 5 years (including at least 12 Boeing-787s and a number of Airbus-319/320s) to replace its MD-83 and Boeing-757/767 aircraft. The proposed project is to provide financing of up to $50 million to Avianca and its subsidiaries to help finance the implementation of the company’s fleet renewal program. |
| 10 | 2007 | 26473 | Bogota Distrito Capital – Bogota Street Rehab-ilitation | Transportation | $50 | Senior Loan million senior loan to the metropolitan municipality of Bogota Distrito Capital, to finance part of its 2007-2008 capital expenditures program for and rehabilitation of the City’s urban streets network as well as incremental construction of sidewalks and walking/bike paths. |
| 11 | 2006 | 24811 | Fundacion Social | Finance and Insurance | $50M | IFC is considering providing Fundación Social (the “Fundacion”) a long term loan of up to $50 million part of which may be exchanged into equity in any of the Fundacion’s investee companies. Following the appraisal the management team at Fundacion and IFC will jointly agree on the specific terms for this investment. This investment will allow IFC to support the activities of an entity which has an impressive track record of investing in socially responsible projects and targeting lower income households as its core clientele. |
| 12 | 2007 | 25599 | Sodimac | Wholesale and Retail Trade | $50 | Home Improvement retailer recapitalization The specific locations of the new stores have not been determined yet. However, the Company’s store expansion will be focused in the main cities in Colombia where the company is already located and might also include some other smaller city in the country. |
| 13 | 2008 | 25672 | Tecnoquimicas | Chemicals | $45 | $25M equity and up to $20M standby loan for $100M capital project for 8 existing chemical facilities mostly around Cali |
| 14 | 2008 | 26175 | Abocol (Abonos Colombianos) | Chemicals | $30 | A Loan for carbon credits. The first project involves upgrading the technology of the current NPK plant, through the ODDA process maintaining its production capacity at 300,000 MTY of NPK solid granulated, producing the raw material for the production of 100,000 MTY of solid granulated calcium nitrate as by-product, and replacing 85% of mono ammonium phosphate usage with phosphate rock as raw material. The second project involves: – installing a nitric acid plant, with capacity to produce about 80,000 MTY,- installing an ammonium nitrate solution plant with capacity to produce about 82,000 MTY, and- building a calcium nitrate plant, with capacity to produce about 100,000 MTY of calcium nitrate solid granulated and 25.000 MTY of calcium nitrate liquid 100% concentration by 2009. |
| 15 | 2007 | 24680 | Interbolsa | Finance and Insurance | $30 | The project consists of a “PCG” for up to $30 million equivalent to Interbolsa. The facility will comprise of: – a PCG in local currency for up to $30 million with a final maturity of up to six years and- a warrants of up to $10 million to be negotiated. Interbolsa is seeking to issue the first local currency medium term bond by a securities broker in the Colombian market to strengthen its liquidity, diversify funding sources, and reduce market risk. The project consists of a partial credit guarantee, “PCG” of up to $30 million that would enhance the rating of the bond up to two notches from local rating agencies. The project will also help Interbolsa continue to strengthen it liquidity and strengthen its proprietary trading business as well as consolidate retail brokerage activities in Colombia. |
| 16 | 2006 | 24934 | Kappa Resources Colombia SA | Oil, Gas, Mining | $30 | $30M of $90M project Kappa Energy Limited SA, Kappa has requested the IFCto provide a corporate revolving credit facility and the IFC is also considering an equity investment, oil and gas exploration in the Magdalena Valley and the Cerrito gas field in the Catatumbo Basin near the city of Cucuta. |
| 17 | 2009 | 27549 | Riopaila | Agriculture and Forestry | $30 | Riopaila Castilla is implementing a cost reduction and technological improvement program from 2008–2012 while diversifying its agribusiness activities. Specifically, Riopaila Castilla’s Investment Program entails: adding co-generation capacity with the objective of selling excess energy to the national grid;replacing and modernizing equipment and machinery across production units; andrestructuring short- and medium-term debt that is maturing in 2008–2010. With this Investment Program, Riopaila Castilla expects to: – further integrate the sugar-cane value chain;- improve efficiencies and cut costs by reducing the consumption of steam and energy per ton of cane milled;- carry out needed maintenance investments and equipment upgrades to firm up its competitive position in Colombia; and- strengthen its balance sheet by extending maturity of short- and medium-term debt. |
| 18 | 2007 | 25569 | Cartones America SA Cartones II | Pulp and Paper | $25 | Up to $5M in equity and total $20M investment to acquire facilities in Chile, upgrade Colombian facilities Cartones America’s (CAME, the Group, or the Company) 2006-2008 investment program and includes: – acquisition of a 60% stake in Chilempack, (Chile);- upgrade and expansion of CAME’s manufacturing facilities in Colombia, Venezuela, Ecuador, Chile and Peru; and- refinancing existing short-term debt. Earlier project approved: 20721 (2003) |
| 19 | 2008 | 26567 | Crediservicios | Finance and Insurance | $25 | coinvestment with Crediservicios in a Fondo de Capital Privado [Private equity Fund] for payroll deductible loans to low and middle income employees. The project involves supporting Crediservicios (Crediservicios or the company), a locally established, mid-sized company, in offering pay-roll deductible loans to clients spread across Colombia. The company’s core clientele are low to middle income employees who traditionally do not have access to the banking system. According to a survey conducted by USAID on September 2007, only 26.1% of the low-income households in Colombia (socio-economic groups 1, 2 and 3) have access to credit with banks, cooperatives or NGOs, while 35% obtain short-term resources from friends or informal lenders at interest rates as high as 280% per annum. Crediservicios plays an important role in reducing this gap as it actively provides financing solutions for this underserved segment. |
| 20 | 2009 | 27961 | Greystar | Oil, Gas, Mining | $20 | The total project cost of the exploration and pre-mine development phase of the project is estimated at C$131 million, and the company is seeking to raise up to US$20 million from IFC. It is proposed that IFC will initially contribute approximately C$12.04 million in equity with a right to invest approximately up to an additional C$12.19 million on the exercise of warrants to be issued as part of the equity subscription (these estimated proceeds are based on current exchange rates). IFC’s investment would be used to fund completion of the BFS, ESIA, and other needed ground works to prepare for the project development stage. For the period from 2001 to the present, the company raised C$122 million in equity financing, including the exercise of warrants related to the financings. The Angostura project is located 55 km by road from Bucaramanga, the capital of the SantanderRegion. The deposit elevation ranges from 2,600 to 3,400 meters above sea level. The project is in a traditional mining area; it enjoys access to the existing power grid, water and materials, and a skilled local work force. There are three villages which are located within 15 km of the project site. Development Impact: Colombia has substantial mineral resources, but the country still suffers from country risk perceptions among many potential foreign investors. A successful project of this size would likely spur significant additional global mining interest in Colombia, particularly valuable at a time when Colombia has demonstrated considerable progress in addressing security issues and political risk and is well positioned for continued economic success. IFC has identified Colombia as a primary target for mining investment because of the potential for substantial development impact from the mining sector. This would be IFC’s first mining investment in Colombia. A mine development of the expected size could have substantial impact on the local communities, not only through direct employment and services, but also from government royalties and taxes that flow back directly to local municipalities. It is estimated that 97% of the royalties will flow back directly to the region, with 87% of total royalties flowing to the municipality level. The Government of Colombia and oil and gas companies have been working with IFCon a pilot municipal level royalty management and capacity building program in the petroleum sector. The Government of Colombia, the Ministry of Mines, and mining associations have expressed interest in expanding this program to the mining sector. The two municipalities where the project is located could be part of any second pilot program, further ensuring greater development benefits to the local communities. |
| 21 | 2007 | 25897 | Procafecol (Promotora de Café de Colombia) | Agriculture and Forestry | $20 | $20M in equity for expansion of 150 Juan Valdez coffee shops in Colombia and select international markets |
| 22 | 2005 | 22588 | Women’s World Bank | Finance and Insurance | $20 | The total project cost is estimated at $20.0 million. IFC’s proposed investment consists of five separate local currency loans, reflecting the independent nature of the WWB affiliates. The five entities will be individually appraised and the investments will be tailored to the specific needs and circumstances of each entity. IFC’s financing will allow the affiliates to further expand their lending activities, diversify their funding sources and strengthen their position in the market. IFC’s financing will enable these entities to serve an additional 70,000 microentrepreneurs and thereby generate exceptional development impact in terms of employment generation and poverty reduction. |
| 23 | 2008 | 26257 | Finandina (Financiera Andina S.A.) | Finance and Insurance | $17 | The company’s core clientele are consumers, micro entrepreneurs and transport vehicle owners who use the credit offered by Finandina to undertake investment projects needed to improve the freight distribution capacity within Colombia.Colombia’s banking penetration of 23% as of December 2006 is still low in relation to international standards and accordingly there is an unmet demand for credit from local SMEs active in the transport arena. Finandina plays an important role in reducing this gap as its financing solutions are tailored to suit the needs of this underservedsegment. 10% equity stake to help provide car and vehicle financing to consumers, micro enterprises and transport owners |
| 24 | 2009 | 27780 | Termo Rubiales | Utilities | $16.5 | The total project cost is estimated at about $68.5 million. The proposed IFC investment is a $16.5 million loan. The project is located in the Llanos Basin, 465 km from Bogotá in the Meta Department. Development Impact: IFC is investing in Termo Rubiales to support the development of Meta Petroleum, a promising player of the oil industry in Colombia that has embarked in an ambitious plan to increase the production of the Rubiales field. The investment in Termo Rubiales would be directly supportive of Government policies to increase local production and private investment in the oil sector. |
| 25 | 2008 | 26399 | Century Energy Corp. | Utilities | $15.5 | $13M A loan, $2.5M C loan, for IFC account, in $43.7M project for development, construction and operation of two small run-of-river hydropower plants in the Guadalupe river basin, 95 kilometers (km) north of the city of Medellin, in the Antioquia Department in western Colombia. Arms-length, fixed price engineering, procurement and construction (EPC) and operation and maintenance (O&M) agreements with HMV Ingenieros. |
| 26 | 2008 | 26399 | Century Energy Corp. (Century Hydros) | Utilities | $15.5 | Development, construction and operation of two small run-of-river hydropower plants in the Guadalupe river basin, 95 kilometers (km) north of the city of Medellin, in the Antioquia Department in western Colombia. The two plants, Caruquia S.A. (9.5MW) and Guanaquitas S.A. (9.8MW) are expected to begin commercial operations in late 2009 and early 2010, respectively. The project companies will enter into arms-length, fixed price engineering, procurement and construction (EPC) and operation and maintenance (O&M) agreements with HMV Ingenieros which is also wholly owned by the Helm Group. HMV Ingenieros is one of the largest engineering consulting firms and the leading consultant for the power sector in Colombia. Total project cost is estimated at $43.7 million ($21.5 million for Caruquia and $22.2 million for Guanaquitas). The project will be financed with $31.0 million of debt and $12.7 million of equity contribution from Century. The proposed IFC investment includes a $13.0 million A loan and a $2.5 million C loan, for IFC’s account. |
| 27 | 2007 | 25895 | MEB Port (Terminal Maritimo Muelles El Bosque) | Transportation and Warehousing | $15 | A loan for capital expansion program of $27.1M In 1992 Terminal Maritimo Muelles el Bosque S.A. (MEB) began executing a 20-year concession (extended in 2005 for another 20 years until 2032) to develop and manage a new multipurpose port in the Bay of Cartagena, on Colombia’s Atlantic coast. Muelles el Bosque Operadores Portuarios S.A. (MBO and together with MEB the company), a sister company to MEB, is the operator of the port facility. The port occupies and area of 13 hectares and is the second largest in the city of Cartagenaand the fifth largest in Colombia. In 2006 it received 438 ships and handled 46,278 containers, 253,179 tons of general cargo, 412,714 tons of grains and 52,760 tons of coke (fuel). The proposed project includes: – the extension of the south container terminal berth by 180 meters;- the expansion of the container yard by 3.2 hectares and the paving of the existing container yard;- the acquisition of an additional mobile crane and other container yard equipment;- the extension of the north berth by 50 meters;- the building of two additional warehouses/silos;- purchase of land to increase container storage space; and- the upgrade of the port’s IT systems. |
| 28 | 2007 | 25852 | Tribeca Partners SA | Collective Investment Vehicles | $15M | Tribeca Fund I investment, to help fund reach target, give comfort to local investors not familiar with FCPs, and ensure fund is structured to international standards to ensure best practices in particular in back office |
| 29 | 2009 | 27689 | Uniminuto | Education Services | $8 | The total project cost over the 2009-2010 period is estimated at $18 million. The proposed IFC investment is a $8 million A loan for IFC’s own account. The physical infrastructure component of the investment program consists of three projects in Cundinamarca, including expansion of two key facilities in Bogota and Soacha, as well as construction of a new (phase 1) facility in Girardot. Land has been secured in all cases, and project planning is at advanced stages. Development impact: Increased Access to Tertiary Education Services – Colombia has made significant advances in gross enrollment ratios at all education levels over the past 5 years yet access and coverage for certain segments of the population remain weak. While average gross enrollment ratios for tertiary education are estimated at 29%, government data indicates that coverage in Bogota may exceed 50%, yet remain below 10% in various departments. Additionally, schooling has traditionally been less accessible to students of lower socioeconomic backgrounds. Through its network approach, commitment to distance learning technologies and presence in more than 11 departments, Uniminuto is expected to contribute to increased coverage for students in more remote areas of the country. |
| 30 | 2009 | 27745 | Covinoc SA | Finance and Insurance | $5 | The proposed investment consists of an equity investment in common shares for up to US$5 million earmarked at strengthening Covinoc’s ability to administer pools of non-performing assets. This investment is expected to assist the Company in the implementation of the growth plan put forth by its management and shareholders. |
| 31 | 2009 | 27952 | Cartones | Pulp and Paper | $.756 | Cartones America is planning to reduce their use of energy at their plant in Cali, Colombia. The energy efficiency improvement project planned by Cartones consist several sub-projects which will help it to reduce its energy consumption and thus reduce the operating cost for energy by almost 17% annually. This project is an overall energy systems improvement which will consist of improving the electrical system, such as lowering the voltage setting on the transformers, improving the transmission efficiency of motor by using poly V-belts instead of ordinary V-belts, increase the efficiency of the electric motor by replacing largestandard efficiency motors with high efficiency motors and also down-sizing motors so that they operate at optimal loading, the plant will also install variable speed drives on some application so that the supplied power to the machines matches the demand and also improve its lighting and refrigeration systems. On the thermal sidethe plant will be improving the efficiency of its boilers by installing automatic air-fuel regulators, improving its insulation on its steam pipes, valves and flanges and most importantly it will be improving the steam/ condensate management system at its Paper machine 3 so that its specific steam consumption will be reduced. Together, these “Cleaner Production” investment for energy efficiency qualify for funding via IFC’s Board approved Cleaner Production Lending Pilot, a $20 million Facility via which IFCcan provide Cleaner Production sub-loans to its existing portfolio clients. The estimated total project cost is $755,814 and the proposed IFC investment is an A Loan (Cleaner Production Loan) of $756,000 equivalent for IFC’s account. This investment in Cartones America will be a sub-loan for the above mentioned dedicated lending facility established as part of IFC’s Cleaner Production Lending Pilot initiative. The Cleaner Production Investment will be implemented at Cartones America’s Cali plant, which is located about 190 miles South-West of Bogota. |
| 32 | 2004 | 20932 | Carvajal | Pulp and Paper | TBD Project cost for modernization program The company’s expansion, rationalization and modernization plans in the 2003-2007 period, to help its Project Core Businesses to grow (organically and through acquisitions), to become leaders in their sectors, and to achieve international competitiveness. In particular, the project includes the following components: – Paper Manufacturing/Conversion:Modernizing and rationalizing its existing plants; – School/Office Supplies:Modernizing its facility in Brazil, and expanding its operations, mainly in Mexico and Brazil; – Yellow Pages:Rationalizing and growing its operations in Brazil; – Book and Text Book Publishing/Editing:Growing its operations in Mexico and Spain; and – Plastic Packaging:Modernizing its Colombian facilities, and expanding its operations there and in Mexico.In addition, the project will also contemplate environmental and social and health and safety improvements at some of the company’s facilities in and outside Colombia. | |
| 33 | 2008 | 26538 | Giros y Finanzas Compania de Financiamiento Comercial SA | Finance and Insurance | microfinance and lending to low income households in Colombia | |
| 34 | 2007 | 26520 | Grupo Bolivar | Equity investment in common shares for up to $75 million to recapitalize the Insurance Companies and restore its solvency margins to levels before elimination of non-insurance related investments). Grupo Bolivar is the third largest local financial conglomerate in Colombia. The Group is a strong player in the insurance industry, with second largest market share through the Insurance Companies, and in the banking industry, with the third largest bank in Colombia, Banco Davivienda. | ||
| 35 | 2005 | 24514 | Promigas | Utilities | Promigas has requested IFCto consider providing a corporate loan facility that would support a number of initiatives for the 2005-2007 period. These include potential investments in additional gas transmission and distribution assets in Colombia as well as the acquisition of new assets throughout South America. The proposed IFC facility would support a number of initiatives currently pursued by Promigas during 2005-2007, including potential investments in additional gas transmission and distribution assets in Colombia as well as the acquisition of new assets throughout South America. The total investment program is estimated at a maximum of $319.0 million if all projects are carried out concurrently. The proposed IFC investment in discussion with Promigas, comprised of an A and B Loan, would fund part of this program. |
Which Colombian Companies Has The IFC Financed?
The private sector lending and investing arm of the World Bank, the International Finance Corporation (IFC), has been financing projects in Colombia at an increasing pace that reveals a lot about Colombia’s business sector.
Information about Colombian firms and transactions in general is scattered around the web. With one search on its very helpful website, by contrast, all IFC projects in Colombia can be listed, each with its own write-up describing the ownership of the Colombian firm and the purpose of the project, among other information. But nowhere on the site has all this information been compiled and analyzed. What does the IFC’s investment teach about firms in Colombia?
The IFC has been investing very actively of late in Colombia, in a number of sectors, not just with the major syndicates and families but also foreign investors, infrastructure, and non-profits. The pace of of investment activity has increased in number of deals and value and is well-diversified. In each of 2003 and 2004, IFC did only one deal in Colombia, and only three in 2005. From 2005 through the end of Q209, IFC has completed 35 deals, including its biggest.
Reportedly, IFC investing positively affects the general conditions of investment activity in Colombia, for example, by setting a standard for minority investors rights. Bogota lawyer Claudia Barrero, of Prieto & Carrizosa, indicated in a recent conversation about private equity investing in Colombia that shareholder agreements protecting financial investors are common and satisfactorily enforceable. To illustrate, she referred to the fact that the IFC invests actively as a passive investor or lender as an example of a very sophisticated institution that is confident enough with its treatment in Colombian firms to keep coming back for more. (Colombia Law & Business Post is on the lookout for an example of an IFC shareholder agreement if anyone can post one.)
Firms that have IFC relationships may therefore be suitable candidates to attract other financial investors. A review of the list of companies and projects IFC has funded indicates a number of circumstances where there are participants alongside the IFC, but the information developed so far is insufficient to indicate whether, foreign minority investors have been attracted to the same firms after the IFC investment.
Colombia Law & Business Post has aggregated and indexed the publicly available, if dispersed, information about IFC-financed firms and projects. The following alphabetically-organized list and information is culled from dozens of separate entries on the IFC website.
Companies Financed By IFC, Ownership, and Project Information
Source Information:
IFC = International Finance Corp. project descriptions posted at IFC website (see Project Search Page)
| Year | Proj. No. | Company Name | Company and Ownership Info. | Notes |
| 2008 | 26175 | Abocol (Abonos Colombianos) | Abonos Colombianos S.A. (Abocol or the company) main production facilities are concentrated in the industrial area of Mamonal, Cartagena, Colombia. In addition, Abocol has bulk blending plants in two cities in central Colombia – Villavicencio and Espinal.The company also has four subsidiaries, as follows: FLIQ, a liquid and solubles facility in Bogota, Sociedad Portuaria Mamonal S.A. a private port adapted for 8,000 ton vessels in Cartagena, and two products distributors, one in Villavicencio –Fertillanos – and a second one in Costa Rica –Abocol Costa Rica.Abocol operations in Cartagena, which include:- the South Plant which consist of an NPK (Nitrogen-Phosphorus-Potassium) Plant, two ammonium nitrate plants, and a calcium nitrate plant, and- the North Plant which is conformed by two nitric acid plants NAN1 and NAN2, an ammonia plant, and the utilities complex, and- a terminal designed to receive ships up to 8,000 tons of capacity used to received raw materials and dispatch products.Abocol produces fertilizers (NPK, calcium nitrate, straights, blends, and foliars –liquid fertilizers) and industrial products (ammonia, nitric acid, and ammonium nitrate 83%) and commercialize straights fertilizers. | A Loan for carbon credits. The first project involves upgrading the technology of the current NPK plant, through the ODDA process maintaining its production capacity at 300,000 MTY of NPK solid granulated, producing the raw material for the production of 100,000 MTY of solid granulated calcium nitrate as by-product, and replacing 85% of mono ammonium phosphate usage with phosphate rock as raw material.The second project involves:- installing a nitric acid plant, with capacity to produce about 80,000 MTY,- installing an ammonium nitrate solution plant with capacity to produce about 82,000 MTY, and- building a calcium nitrate plant, with capacity to produce about 100,000 MTY of calcium nitrate solid granulated and 25.000 MTY of calcium nitrate liquid 100% concentration by 2009. |
| 2008 | 25899 | Avianca | Avianca is wholly owned by Synergy Aerospace Inc., through its Colombian subsidiaries, Synergy Ocean Air Colombia S.A. (94.95% ownership) and Synergy Ocean Air Colombia 2 S.A. (5.03% ownership).Synergy Aerospace Inc. is owned by Synergy Aerospace Corp. which is owned by the Synergy Group (Synergy). Synergy is incorporated in Panama and is part of a major Latin American conglomerate (with operations in Brazil, Colombia, Ecuador, the United States and Peru) that was founded in 1982. The group is active in the following sectors: power generation, aerospace, shipyard, oil and gas (provision of services and production) and telecom. The consolidated revenue of the group in 2007 is estimated to exceed $2.4 billion. In addition to Avianca, Synergy owns the following airlines: Ocean Air in Brazil and VIP in Ecuador. | Corporate loan to finance aircraft acquisitionAerovias del Continente Americano S.A. (Avianca or the company) is planning to renew its fleet over the period 2008-2012 to reduce costs, improve efficiency and safety as well as provide better passenger service (the “Upgrade Program”). The company has negotiated the purchase of 42 aircraft over the next 5 years (including at least 12 Boeing-787s and a number of Airbus-319/320s) to replace its MD-83 and Boeing-757/767 aircraft. The proposed project is to provide financing of up to $50 million to Avianca and its subsidiaries to help finance the implementation of the company’s fleet renewal program. |
| 2005 | 24282 | Banco Davivienda S.A. | Banco Davivienda S.A. (Davivienda or the bank) is a longstanding IFC client and the fourth largest financial institution in Colombia, with approximately $3 billion of assets and $390 million of equity as of August 2005. Originally specialized in mortgage lending, Davivienda has since diversified its product offering to become a full service commercial bank in Colombia. Having consistently delivered strong financial results, Davivienda has currently a local long-term credit rating of “AAA” by Fitch Ratings.The project sponsor is Davivienda, which is majority owned (66.25%) by Grupo Bolivar. Founded in 1938, Grupo Bolívar is the fifth largest economic conglomerate in Colombia and focuses on the financial sector. The Group is a strong player in the insurance industry, with the second largest insurance company in Colombia, including life and general insurance. Grupo Bolívar’s companies include strong players such as Davivienda itself, Seguros Bolívar, Leasing Bolívar, Constructora Bolívar and a host of smaller entities such as a mutual fund, trust company, stock broker and beach resort. Furthermore, Davivienda recently acquired a controlling stake in Banco Superior (“Bansuperior”), a successful commercial bank in Colombia with a strong position on retail banking, especially on the credit card business. | The Bank is seeking to raise subordinated and medium-term senior debt to strengthen its balance sheet, diversify funding sources, maintain its strong liquidity position and improve the Bank’s capitalization levels. The project consists of a financing package of up to $120 million to support the expansion and consolidation of the Bank’s operations in Colombia. The project will help Davivienda continue to expand its retail business while maintaining a strong presence in the mortgage industry. The project consists of a financing package of up to $120 million equivalent to Davivienda. The Facility will comprise of:- a Colombian peso subordinated loan of up to $60 million equivalent with a final maturity of up to ten years and a conversion option to be negotiated, and- a senior loan comprised of an IFC A loan of up to $20 million and a parallel loan of up to $40 million for the account of participant banks, both with a final maturity of up to five years. |
| 2006 | 25520 | Banco Davivienda S.A. | Financing for acquisition of Granbanco SA. $75 million of direct equity investment into Davivienda and $125 million ($65 million expected for IFC’s own account) of subordinated debt. | |
| 2007 | 26473 | Bogota Distrito Capital – Bogota Street Rehab-ilitation | Bogota, the capital and main economic center of Colombia, has a population of 7.3 million and contributes about a quarter of the country’s GDP. GDP per capita, estimated at $4,300 in 2006, is well above the country’s average of $3,255. The economy is diversified and no single sector is dominant.Bogota is divided into 20 local wards, which focus on neighborhood-level infrastructure and community consultation. City-wide services, including the core street network, are administered by Bogota Distrito Capital, which also collects local taxes. BDC is governed by a legislative District Council, with an elected Mayor leading the executive branch.BDC has steadily improved its performance since it emerged from a financial and service delivery crisis in the early 90s. The local issuer rating assigned by Duff and Phelps de Colombia is AAA, while the international foreign currency issuer ratings assigned by Fitch, S&P and Moody’s are the same as Colombia’s sovereign (BB+ / BB+ / Ba1, respectively). | Senior Loan million senior loan to the metropolitan municipality of Bogota Distrito Capital, to finance part of its 2007-2008 capital expenditures program for and rehabilitation of the City’s urban streets network as well as incremental construction of sidewalks and walking/bike paths. |
| 2008 | 25930 | Cartagena Port Terminal de Contenedores Cartagena SA (Contecar) | Contecar, a 22 hectare private port facility is located near to the harbor entrance and industrial area of Cartagena. In February of 2005, with the vision of becoming the leading port in the Caribbean basin and looking for a way of addressing the expected capacity constraints at Sociedad Portuaria Regional de Cartagena (SPRC), the shareholders of SPRC acquired Contecar with the idea of developing the new port and integrating both companies’ operations.SPRC is a privately owned company constituted under Colombian law on June 25, 1993. In December 1993, the Government of Colombia awarded SPRC with the concession to develop and operate a container and multipurpose terminal at the Port of Manga in Cartagena, Colombia. The 20-year concession, originally awarded in 1993, was extended in 1998 and is scheduled to expire in 2033. Under SPRC’s management, the Port of Manga has become Colombia’s largest and most important container port terminal. The project sponsors are SPRC and Cartagena II, sister companies with common shareholders. Cartagena II currently owns 85% of Contecar, with the remaining 15% owned by SPRC. Cartagena II, constituted in 2006, is the result of the spin off of SPRC assets (primarily investments in assets and in ancillary businesses) that do not have to revert back to the government at the end of the SPRC concession term.SPRC’s and Cartagena II major shareholders are:- Dimarco Enterprises Ltd. (16.69%)- Inversiones Salas Araujo & Cia S en C. (10.81%)- Rosales S.A. (9.67%)- Compañía Transportadora S.A (8.74%)No other shareholder holds more than a 9% ownership stake. The Municipality of Cartagena and the Government of Colombia holds 2.11% and 1.82% respectively. | A Loan for IFC’s own account in $210M four year capital expansion program to develop Contecar into a world class container port terminal. The capital expenditure program is expected to increase Contecar’s annual capacity from 144 thousand TEUs to 850 thousand |
| 2009 | 27952 | Cartones | Cartones America S.A. is a leading privately-owned, Andean Region manufacturer of containerboard, corrugated boxes, clay-coated paperboard, spiral tube board and specialty board packaging products. The Group traces its roots back to the 1950s in Cali, Colombia. In recent years, the Company has grown steadily, investing in operations in Venezuela, Ecuador, Peru and Chile. CAME is in an important phase of its development and the project is aimed at helping CAME consolidate recent investments and realize the synergies to be achieved in its operations across the Andean Region.Cartones América S.A. (incorporated in Cali, Colombia) is the holding company of the Group and holds directly or indirectly 100% of the operating subsidiaries in Peru, Venezuela and Ecuador and 60% of its subsidiary in Chile.It is majority owned by the Pacini family (the sponsor) and CAOBA Capital. | Cartones America is planning to reduce their use of energy at their plant in Cali, Colombia. The energy efficiency improvement project planned by Cartones consist several sub-projects which will help it to reduce its energy consumption and thus reduce the operating cost for energy by almost 17% annually. This project is an overall energy systems improvement which will consist of improving the electrical system, such as lowering the voltage setting on the transformers, improving the transmission efficiency of motor by using poly V-belts instead of ordinary V-belts, increase the efficiency of the electric motor by replacing large standard efficiency motors with high efficiency motors and also down-sizing motors so that they operate at optimal loading, the plant will also install variable speed drives on some application so that the supplied power to the machines matches the demand and also improve its lighting and refrigeration systems. On the thermal side the plant will be improving the efficiency of its boilers by installing automatic air-fuel regulators, improving its insulation on its steam pipes, valves and flanges and most importantly it will be improving the steam/ condensate management system at its Paper machine 3 so that its specific steam consumption will be reduced. Together, these “Cleaner Production” investment for energy efficiency qualify for funding via IFC’s Board approved Cleaner Production Lending Pilot, a $20 million Facility via which IFC can provide Cleaner Production sub-loans to its existing portfolio clients.The estimated total project cost is $755,814 and the proposed IFC investment is an A Loan (Cleaner Production Loan) of $756,000 equivalent for IFC’s account. This investment in Cartones America will be a sub-loan for the above mentioned dedicated lending facility established as part of IFC’s Cleaner Production Lending Pilot initiative.The Cleaner Production Investment will be implemented at Cartones America’s Cali plant, which is located about 190 miles South-West of Bogota. |
| 2007 | 25569 | Cartones America SA Cartones II | Up to $5M in equity and total $20M investment to acquire facilities in Chile, upgrade Colombian facilitiesCartones America’s (CAME, the Group, or the Company) 2006-2008 investment program and includes:- acquisition of a 60% stake in Chilempack, (Chile);- upgrade and expansion of CAME’s manufacturing facilities in Colombia, Venezuela, Ecuador, Chile and Peru; and- refinancing existing short-term debt.Earlier project approved: 20721 (2003) | |
| 2004 | 20932 | Carvajal | Carvajal S.A. is 64.2% owned by members of the Carvajal family of Colombia, and 35.8% by the Fundacion Carvajal and the Fundación Hernando Carvajal B, foundations set up by the Carvajal family in 1961 to do philanthropic / charitable work in Cali, Colombia. Carvajal Internacional S.A. is wholly owned by the Carvajal family. | The company’s expansion, rationalization and modernization plans in the 2003-2007 period, to help its Project Core Businesses to grow (organically and through acquisitions), to become leaders in their sectors, and to achieve international competitiveness. In particular, the project includes the following components:- Paper Manufacturing/Conversion:Modernizing and rationalizing its existing plants;- School/Office Supplies:Modernizing its facility in Brazil, and expanding its operations, mainly in Mexico and Brazil;- Yellow Pages:Rationalizing and growing its operations in Brazil;- Book and Text Book Publishing/Editing:Growing its operations in Mexico and Spain; and- Plastic Packaging:Modernizing its Colombian facilities, and expanding its operations there and in Mexico.
In addition, the project will also contemplate environmental and social and health and safety improvements at some of the company’s facilities in and outside Colombia. |
| 2009 | 24696 | Carvajal II | The cost for ERP implementation is estimated at $78 million. The proposed IFC investment is a $50 million A loan for IFC’s own account. | |
| 2008 | 26399 | Century Energy Corp. | Century Energy Corporation (Century), a Panamanian company wholly owned by the Helm Group. The Helm Group is a foreign-owned Colombian conglomerate, operating in a range of businesses with most of its companies located in Colombia but also with presence in other Latin American countries and the U.S. | $13M A loan, $2.5M C loan, for IFC account, in $43.7M project for development, construction and operation of two small run-of-river hydropower plants in the Guadalupe river basin, 95 kilometers (km) north of the city of Medellin, in the Antioquia Department in western Colombia. Arms-length, fixed price engineering, procurement and construction (EPC) and operation and maintenance (O&M) agreements with HMV Ingenieros. |
| 2008 | 26399 | Century Energy Corp. (Century Hydros) | Development, construction and operation of two small run-of-river hydropower plants in the Guadalupe river basin, 95 kilometers (km) north of the city of Medellin, in the Antioquia Department in western Colombia. The two plants, Caruquia S.A. (9.5MW) and Guanaquitas S.A. (9.8MW) are expected to begin commercial operations in late 2009 and early 2010, respectively.The project companies will enter into arms-length, fixed price engineering, procurement and construction (EPC) and operation and maintenance (O&M) agreements with HMV Ingenieros which is also wholly owned by the Helm Group. HMV Ingenieros is one of the largest engineering consulting firms and the leading consultant for the power sector in Colombia.Total project cost is estimated at $43.7 million ($21.5 million for Caruquia and $22.2 million for Guanaquitas). The project will be financed with $31.0 million of debt and $12.7 million of equity contribution from Century. The proposed IFC investment includes a $13.0 million A loan and a $2.5 million C loan, for IFC’s account. | |
| 2007 | 26235 | Compania de Gerenciamiento de Activos Ltda.(CISA) NPLs | CISA is a ‘Consortium’ including affiliates of the Capital Recovery Group of AIG Global Investment Corp., Covinoc S.A. and CarVal Investors, LLC to finance the purchase of a portfolio of Non-Performing Loans (NPLs) and other Non-Performing Assets (NPAs) a majority of which were accumulated by the government of Colombia post the financial crisis of 1999.AIG Capital Recovery Group is a division of AIG Global Investment Group (AIGGIG), which is headquartered in New York. To date the AIG Capital Recovery Group, on behalf of various American International Group, Inc. subsidiaries, has invested over $1.296m in non-performing loans, through structures similar to that being proposed in Colombia. The team’s impressive track record on closed transactions is collectively more than $732m or almost 56% of invested capital.AIG Global Investment Group is a worldwide leader in asset management, with extensive capabilities in equity, fixed income, multi-manager hedge funds, private equity, and real estate. AIGGIG manages more than $687 billion in assets, and employs over 2,000 professionals in 44 offices around the world as of March 31, 2007. AIGGIG comprises a group of international companies which provide investment advice and market asset management products and services to clients around the world. The member companies of AIGGIG are subsidiaries of American International Group, Inc. (NYSE:AIG).CarVal Investors was founded in 1987 by Cargill and has acquired over $19 billion in assets in 2,900 transactions in 35 countries. Today, CarVal Investors has over $12 billion in assets under management. CarVal Investors has an experienced team of 299 employees in 15 offices and a global platform focused on investing in management- and credit-intensive assets and market inefficiencies.Covinoc S.A. is a local servicer specialized in management of distressed assets across different sectors. Covinoc has national penetration through 12 branches across the main cities in Colombia. In December of 2006 the company began operations in Guatemala. | A1 and A2 loans and equity of up to 15% at SPV level, and syndication of B1 and B2 loans as part of $306M project to finance the purchase of a portfolio of Non-Performing Loans (NPLs) and other Non-Performing Assets (NPAs) a majority of which were accumulated by the government of Colombia post the financial crisis of 1999. IFC would provide both debt and equity financing to a local Colombian SRL established by the Consortium.The proposed project presents IFC a unique opportunity to participate in the first NPA deal of this scale being placed to international bidders in Colombia. It also marks a turning point for the authorities as after this sale the government would have no further obligations pertaining to its intervention post financial crisis. |
| 2009 | 27745 | Covinoc SA | Covinoc has, for more than 50 years, provided recovery and portfolio management services to financial intermediaries in Colombia. Covinoc is headquartered in Bogota, Colombia. The company has offices in 14 cities of the country, allowing it to have a national operational coverage.Shareholder Composition:Inversiones La Costa: 21.78%Delta Asociates J.C.: 11.60%Lantro S.A.: 22.31%Ircanda S.A.: 22.31%ARIGU y Cia. C.S.A.: 20.00%Nicolas Gomez y Compañia: 1.00 | The proposed investment consists of an equity investment in common shares for up to US$5 million earmarked at strengthening Covinoc’s ability to administer pools of non-performing assets. This investment is expected to assist the Company in the implementation of the growth plan put forth by its management and shareholders. |
| 2008 | 26567 | Crediservicios | Crediservicios was established in 2003 and has since then experienced healthy growth rates. As of December 2007, the company had over $65 million equivalent in assets and an equity base of approximately $2 million equivalent.Shareholders:Desarrollos Industriales del Cauca S.A. 42.00%Crediholding S.A. 27.95%Hector Aguiar 15.00%Labor Financiera S.A. 15.00%Agropecuaria la Esmeralda Ltda. 0.025%Agrocorcega S.A. 0.025% | Coinvestment with Crediservicios in a Fondo de Capital Privado [Private equity Fund] for payroll deductible loans to low and middle income employees.The project involves supporting Crediservicios (Crediservicios or the company), a locally established, mid-sized company, in offering pay-roll deductible loans to clients spread across Colombia. The company’s core clientele are low to middle income employees who traditionally do not have access to the banking system.According to a survey conducted by USAID on September 2007, only 26.1% of the low-income households in Colombia (socio-economic groups 1, 2 and 3) have access to credit with banks, cooperatives or NGOs, while 35% obtain short-term resources from friends or informal lenders at interest rates as high as 280% per annum. Crediservicios plays an important role in reducing this gap as it actively provides financing solutions for this underserved segment. |
| 2008 | 26257 | Finandina (Financiera Andina S.A.) | Finandina is a finance institution established in 1977. The company maintains strong ties to vehicle dealerships and others within the transport sector. Finandina has over $314 million equivalent in assets, $174 millions equivalent in deposits and an equity base of $35 million equivalent as of January 31, 2008. Currently Finandina has a long-term credit rating of AA+ (national scale) by BRC Investor Services (Moodys). Comerciales Intergrados Sociedad Anonima – Cintesa: 75.820 %Finanzauto Factoring S.A.: 7.620 %Comercial Automotriz de los Andes Ltda. Comandes Ctda: 6.085 %Comercial Automotora S.A. Comauto S.A.: 4.498 %Motores y Maquinas S.A. Motorysa: 3.068 %Casa Toro S.A.: 2.909 % | The company’s core clientele are consumers, micro entrepreneurs and transport vehicle owners who use the credit offered by Finandina to undertake investment projects needed to improve the freight distribution capacity within Colombia. Colombia’s banking penetration of 23% as of December 2006 is still low in relation to international standards and accordingly there is an unmet demand for credit from local SMEs active in the transport arena. Finandina plays an important role in reducing this gap as its financing solutions are tailored to suit the needs of this underserved segment. 10% equity stake to help provide car and vehicle financing to consumers, micro enterprises and transport owners |
| 2006 | 24811 | Fundacion Social | Founded in 1911, by Father Jose María Campoamor, a Spanish Jesuit priest, Fundación Social is legally established as a not for profit entity. The mission of the Fundación is “to work to better the livelihood of low income households by making investments aimed at removing the structural causes of poverty in Colombia”. As such, the Fundacion has promoted itself as an organization catering to the needs of the middle and lower income segment of Colombian society and operates in all 6 geographical regions of Colombia. Managed as a private sector entity, over the last 85 years the Fundacion has invested in a number of ventures ranging from insurance, leasing, construction companies, television stations, savings institutions and banks. All companies within the group operate under the guidelines given by the Fundación which contributes to the coordination of their business activities. In order to maximize their potential. | IFC is considering providing Fundación Social (the “Fundacion”) a long term loan of up to $50 million part of which may be exchanged into equity in any of the Fundacion’s investee companies. Following the appraisal the management team at Fundacion and IFC will jointly agree on the specific terms for this investment. This investment will allow IFC to support the activities of an entity which has an impressive track record of investing in socially responsible projects and targeting lower income households as its core clientele. |
| 2008 | 26538 | Giros y Finanzas Compania de Financiamiento Comercial SA | Giros y Finanzas (GyF or the company) is a Colombian financial institution based in Cali, Colombia. The company offers financial services under five business lines:- distribution of remittances as agents of Western Union (with an 13% market share in Colombia);- foreign exchange operations;- deposits;- maintaining a trading desk (investing excess cash to give liquidity to the institution); and- lending.In the latter, the company grants car loans, leasing, factoring, and other type of consumer loans to money remittance beneficiaries. The majority of this lending is directed to its own clientele, taking advantage of cross-selling opportunities.GyF’s shareholding structure is as follows: Banvivienda S.A. (Grupo Mundial) 51.00%Lome S.A. 15.31%
Quinque S.A 14.04% Procoa Ltda. 10.00% Rodrigo Otoya Domínguez 4.31% Diana Casasfranco de Otoya 4.31% Carlos Eduardo Lora Rengifo 1.03% Grupo Mundial is an emerging financial conglomerate with insurance and banking operations throughout Central America and Colombia. The Group’s main subsidiaries are Aseguradora Mundial S.A., which is Grupo Mundial’s main asset and core entity and Banco Panameño de la Vivienda S.A. The rest of the shareholding structure is formed by local Colombian companies and individuals related to the Otoya and Lora families. They are entrepreneurs focused on projects in gasoline service stations, agribusiness, construction, real state and cattle among other private investments. Before Grupo Mundial’s acquisition they were GyF’s major shareholders. |
microfinance and lending to low income households in ColombiaThe purpose of the proposed IFC investment is to support and expand GyF’s lending program focused on microfinance and lending to low income households in Colombia.The proposed project involves a $6,000,000 loan (or equivalent peso-linked loan). |
| 2009 | 27961 | Greystar | Greystar Resources is a junior mining company listed on the TSX and AIM exchanges, and it has a market capitalization of approximately C$121 million. The company’s principal office is in Vancouver, Canada with its operational office in Bucaramanga, Colombia.The company’s ownership includes both institutional and individual investors. The company’s largest shareholders are currentlyJP Morgan Asset Management UK Limited (13.1%) and Mr. George Milton (12.9%).Greystar Resources Ltd. (“the Company” or “Greystar”) is a TSX and AIM listed junior mining company that owns 100% of the Angostura gold and silver exploration project (the Project”) near Bucaramanga, in the Santander region of Colombia. Greystar has acquired concessions covering approximately 30,000 hectares over a 15-year timeline and during this time has spent approximately C$95 million in exploration and concession acquisition/maintenance costs.As of December, 2008, the company had completed an intensive drilling program yielding a resource estimate of 11.6 million ounces of measured and indicated gold in 330.9 million tonnes of material grading 1.09 grams gold per tonne and 3.47 million ounces of inferred gold in 90.8 million tonnes grading 1.11 grams gold per tonne, making it one of the world’s largest undeveloped gold resources.The company is now commencing with a bankable feasibility study (“BFS”), environmental and social impact assessment (“ESIA”), and other associated work, with the goal of developing the mine in late 2009/early 2010. | The total project cost of the exploration and pre-mine development phase of the project is estimated at C$131 million, and the company is seeking to raise up to US$20 million from IFC. It is proposed that IFC will initially contribute approximately C$12.04 million in equity with a right to invest approximately up to an additional C$12.19 million on the exercise of warrants to be issued as part of the equity subscription (these estimated proceeds are based on current exchange rates). IFC’s investment would be used to fund completion of the BFS, ESIA, and other needed ground works to prepare for the project development stage. For the period from 2001 to the present, the company raised C$122 million in equity financing, including the exercise of warrants related to the financings.The Angostura project is located 55 km by road from Bucaramanga, the capital of the Santander Region. The deposit elevation ranges from 2,600 to 3,400 meters above sea level. The project is in a traditional mining area; it enjoys access to the existing power grid, water and materials, and a skilled local work force. There are three villages which are located within 15 km of the project site.Development Impact: Colombia has substantial mineral resources, but the country still suffers from country risk perceptions among many potential foreign investors. A successful project of this size would likely spur significant additional global mining interest in Colombia, particularly valuable at a time when Colombia has demonstrated considerable progress in addressing security issues and political risk and is well positioned for continued economic success.IFC has identified Colombia as a primary target for mining investment because of the potential for substantial development impact from the mining sector. This would be IFC’s first mining investment in Colombia.A mine development of the expected size could have substantial impact on the local communities, not only through direct employment and services, but also from government royalties and taxes that flow back directly to local municipalities. It is estimated that 97% of the royalties will flow back directly to the region, with 87% of total royalties flowing to the municipality level. The Government of Colombia and oil and gas companies have been working with IFC on a pilot municipal level royalty management and capacity building program in the petroleum sector. The Government of Colombia, the Ministry of Mines, and mining associations have expressed interest in expanding this program to the mining sector. The two municipalities where the project is located could be part of any second pilot program, further ensuring greater development benefits to the local communities. |
| 2007 | 26520 | Grupo Bolivar | Grupo Bolivar is the third largest local financial conglomerate in Colombia. The Group is a strong player in the insurance industry, with second largest market share through the Insurance Companies, and in the banking industry, with the third largest bank in Colombia, Banco Davivienda.Grupo Bolivar’s companies include strong players such as Davivienda, the Insurance Companies, Constructora Bolivar and a host of smaller entities including a mutual fund, a trust company, a stock broker and a beach resort. | Equity shares for recapitalization to separate cross-holdings of insurance companies Sociedades Bolivar S.A., Compañía de Seguros Bolivar S.A., Seguros Comerciales Bolivar S.A. and Capitalizadora Bolivar S.A., which hold a number of the Group’s operating companies. |
| 2007 | 26520 | Grupo Bolivar | Equity investment in common shares for up to $75 million to recapitalize the Insurance Companies and restore its solvency margins to levels before elimination of non-insurance related investments). Grupo Bolivar is the third largest local financial conglomerate in Colombia. The Group is a strong player in the insurance industry, with second largest market share through the Insurance Companies, and in the banking industry, with the third largest bank in Colombia, Banco Davivienda. | |
| 2007 | 24680 | Interbolsa | Interbolsa S.A. (Interbolsa or the company) is the largest securities broker in Colombia, with approximately $396 million of assets and $58 million of equity as of December 2005.Incorporated in 1990 Interbolsa is the first independent brokerage company in Colombia with a leading expertise in proprietary trading and government debt market making. Interbolsa is listed in the Colombian stock exchange under Interbolsa, “AIC” and currently has an estimated 800 shareholders. The company has recently expanded its operations into asset management through an equity participation in Fondo NaciónOriginally dedicated to securities trading in Medellín, Interbolsa is currently the second largest proprietary trader in the Colombian market and has slowly diversified into asset management, retail brokerage and investment banking. Having consistently delivered strong financial results, Interbolsa has currently a local long-term credit rating of AA with a positive outlook by Bankwatch Ratings Colombia, “BRC”.Interbolsa is owned (62%) by major shareholders including the Jaramillo, Maldonado and Ortiz families through indirect participations through holding companies. | The project consists of a “PCG” for up to $30 million equivalent to Interbolsa. The facility will comprise of:- a PCG in local currency for up to $30 million with a final maturity of up to six years and- a warrants of up to $10 million to be negotiated.Interbolsa is seeking to issue the first local currency medium term bond by a securities broker in the Colombian market to strengthen its liquidity, diversify funding sources, and reduce market risk. The project consists of a partial credit guarantee, “PCG” of up to $30 million that would enhance the rating of the bond up to two notches from local rating agencies. The project will also help Interbolsa continue to strengthen it liquidity and strengthen its proprietary trading business as well as consolidate retail brokerage activities in Colombia. |
| 2006 | 24934 | Kappa Resources Colombia SA | Kappa Energy Holdings (BVI) Limitied (Kappa), a holding company registered in the British Virgin Islands, holds oil and gas exploration companies, one of which is Kappa Energy Colombia Limited S.A. This company has been operating in Colombia since 1997 and holds exploration and production licenses. Its main production assets are the Abanico oil field in the Upper Magdalena Valley and the Cerrito gas field in the Catatumbo Basin near the city of Cucuta. | $30M of $90M project Kappa Energy Limited SA, Kappa has requested the IFC to provide a corporate revolving credit facility and the IFC is also considering an equity investment, oil and gas exploration in the Magdalena Valley and the Cerrito gas field in the Catatumbo Basin near the city of Cucuta. |
| 2007 | 25895 | MEB Port (Terminal Maritimo Muelles El Bosque) | In 1992 Terminal Maritimo Muelles el Bosque S.A. (MEB) began executing a 20-year concession (extended in 2005 for another 20 years until 2032) to develop and manage a new multipurpose port in the Bay of Cartagena, on Colombia’s Atlantic coast. Muelles el Bosque Operadores Portuarios S.A. (MBO and together with MEB the company), a sister company to MEB, is the operator of the port facility. The port occupies and area of 13 hectares and is the second largest in the city of Cartagena and the fifth largest in Colombia.MEB and MBO are controlled by entities owned by the Echavarria Obregon Family. This is a well respected economic group in Colombia that holds an important stake (amongst other investments) in Grupo Corona, the leading producer of construction materials, home improvements products, ceramic tiles and sanitary ware in Colombia. The Echavarria Obregon Family controls 72.65% of MEB and MBO.Other large shareholders of the company are:Ership International S.A. (9.50% shareholder), a Spanish company which is wholly-owned by the Alvarogonzalez family and operates in the field of transport, warehousing, and handling of solid bulk commodities; andInversiones Valores y Logistica. (7.01% shareholder) a company owned by Bancolombia, the largest financial institution in Colombia.The remaining shareholders are individuals who own less than 3.5% of the company. | A loan for capital expansion program of $27.1M In 1992 Terminal Maritimo Muelles el Bosque S.A. (MEB) began executing a 20-year concession (extended in 2005 for another 20 years until 2032) to develop and manage a new multipurpose port in the Bay of Cartagena, on Colombia’s Atlantic coast. Muelles el Bosque Operadores Portuarios S.A. (MBO and together with MEB the company), a sister company to MEB, is the operator of the port facility. The port occupies and area of 13 hectares and is the second largest in the city of Cartagena and the fifth largest in Colombia. In 2006 it received 438 ships and handled 46,278 containers, 253,179 tons of general cargo, 412,714 tons of grains and 52,760 tons of coke (fuel).The proposed project includes:- the extension of the south container terminal berth by 180 meters;- the expansion of the container yard by 3.2 hectares and the paving of the existing container yard;- the acquisition of an additional mobile crane and other container yard equipment;- the extension of the north berth by 50 meters;- the building of two additional warehouses/silos;- purchase of land to increase container storage space; and- the upgrade of the port’s IT systems. |
| 2007 | 25795 | Org. Terpel SA | Organizacion Terpel S.A. (Terpel or the company) is the leading fuel distribution company in Colombia, with sales of $2 billion in 2006. In 2005, the company began an international expansion in Latin America through the acquisition of 65 service stations in Ecuador and a wholesale and retail fuel distributor in Panama acquired in early 2007. Promigas S.A., Terpel’s largest shareholder holding 34% of its shares, is a private gas transmission company headquartered in Barranquilla and controlled by Ashmore Energy International (US). Promigas has interests in gas transmission, gas distribution, fuels and lubricants and the telecommunications sector. Promigas has been an IFC client since 1976.Promigas, GNC (G.N.C de Colombia S.A.) and Terpel group are finalizing a strategic reorganization that integrates fuel and natural gas retail business. As a result, Promigas will be gaining control of Terpel by increasing its participation in the company to 54%.Terpel’s second largest shareholder (11%), Corporacion Financiera Colombiana – Corficolombiana, was established in 1959 as the first Development Finance Corporation, servicing the central region of Colombia. Today, Corficolombiana is a private company which offers three specialized services: Credit, Investments and Financial Intermediation. Corficolombiana S.A. belongs to Grupo Aval, one of the four most important economic organizations in Colombia. | $60M A loan and $40M B loan to fuel distribution company for capital expansion and recapitalization project cost of $2880M |
| 2006 | 24463 | Petrotesting Colombia SA | Petrotesting Holding Limited is a holding company registered in the British Virgin Islands (“BVI”). Petrotesting Holding is comprised of five companies: Petrotesting Colombia S.A. (oil and gas exploration and production company), Colregistros Ltda. (oil services company), Sumprocol Ltda. (distribution company, predominantly of lubricants), Petrotesting Drilling S.A. (oil and gas drilling services company) and Petrofood Services Ltda (food supply company for petroleum industry workers). Collectively these companies are known as the Petrotesting Group. Additionally, there is Petrotesting Carbon Ltda (coal mining company), which is not held by Petrotesting Holding Limited, but part of the Petrotesting Group. The dominant company is Petrotesting Colombia S.A (“PTC”), founded September 2, 1985, which is where IFC resources will be focused.PTC is a local Colombian company which defines it business niche as small and medium fields. Since inception PTC has grown into a highly regarded company with 14 E&P assets spread throughout Colombia’s main hydrocarbon basins. | Oil and gas exploration, distribution services, equity and debt investment for $85M to strengthen financial position project over two years adoption of best practice corporate systems (such as those related to governance, environmental, social, community programs and accounting) |
| 2007 | 25897 | Procafecol (Promotora de Café de Colombia) | Procafecol (Procafecol or the company) is a coffee retailer with a total of 58 coffee shops (cafés): 46 in Colombia, 10 in the U.S., and 2 in Spain. The company operates under the “Juan Valdez” brand and sells primarily fresh-brewed coffees, beverages and coffee beans through its company operated cafés (about 85% of revenues), and coffee beans through third party retailers (supermarket chains in Colombia, the U.S., Mexico and Canada) and institutional clients.The company intends to position itself as the leading coffee retailer in Colombia and plans to continue expansion of its retail operations primarily in Colombia and South America.Procafecol was founded in 2002 by Fedecafe, the National Federation of Coffee Growers of Colombia (Fedecafe, the sponsor). Fedecafe is a private not for profit organization established to support the development of Colombia’s coffee sector.Fedecafe owns about 83 % of the company with individual coffee growers accounting for the rest. | $20M in equity for expansion of 150 Juan Valdez coffee shops in Colombia and select international markets |
| 2005 | 24514 | Promigas | Promigas was established in 1976 to construct a gas pipeline to link natural gas fields on Colombia’s Atlantic coast to distribution networks in the cities of Barranquilla and Cartagena. Promigas is currently Colombia’s largest private gas transmission and distribution company, accounting for approximately 51% of the total gas transported in the country. The company transports and operates gas pipelines of more than 2,286 kilometers with a transport capacity of 480 MMPCD. Promigas also operates 1,000 kilometers of gas pipelines owned by third parties. Through its pipelines, the company distributes gas to more than 1.3 million end users (approximately 7 million people) in 174 towns. Promigas also has an extensive portfolio of natural gas transmission and distribution companies, together with fuel and lubricant distribution and telecommunication interests.Promigas’ major shareholders include:Prisma Energy (42.9%)Grupo Amalfi (15.9%)Corporacion Financiera del Valle (14%)Corporación Financiera Colombiana (10.3%)Fondo de Pensiones Obligatorias Proteccion (5.4%)Inversiones Harivalle (5%). | Promigas has requested IFC to consider providing a corporate loan facility that would support a number of initiatives for the 2005-2007 period. These include potential investments in additional gas transmission and distribution assets in Colombia as well as the acquisition of new assets throughout South America. The proposed IFC facility would support a number of initiatives currently pursued by Promigas during 2005-2007, including potential investments in additional gas transmission and distribution assets in Colombia as well as the acquisition of new assets throughout South America. The total investment program is estimated at a maximum of $319.0 million if all projects are carried out concurrently. The proposed IFC investment in discussion with Promigas, comprised of an A and B Loan, would fund part of this program. |
| 2009 | 27549 | Riopaila | Riopaila Castilla S.A. is the largest sugar company in Colombia comprising ~20% of the country’s total production. The company has two production plants with total sugarcane crushing production capacity of 4.2 million mt/year and more than 1,327 of its full time employees and 5200 sub contracted staff. | Riopaila Castilla is implementing a cost reduction and technological improvement program from 2008–2012 while diversifying its agribusiness activities. Specifically, Riopaila Castilla’s Investment Program entails:adding co-generation capacity with the objective of selling excess energy to the national grid;replacing and modernizing equipment and machinery across production units; andrestructuring short- and medium-term debt that is maturing in 2008–2010.With this Investment Program, Riopaila Castilla expects to:- further integrate the sugar-cane value chain;- improve efficiencies and cut costs by reducing the consumption of steam and energy per ton of cane milled;- carry out needed maintenance investments and equipment upgrades to firm up its competitive position in Colombia; and- strengthen its balance sheet by extending maturity of short- and medium-term debt. |
| 2007 | 25599 | Sodimac | Sodimac is the result of a 51:49 joint venture amongst Grupo Corona (Corona), the leading building materials and ceramics conglomerate in Colombia, and S.A.C.I. Falabella (Falabella), the second largest retail chain in Latin America (and the largest in Chile). Sodimac is headquartered in Bogotá, Colombia and operates 10 stores in five cities (Bogota, Cali, Medellin, Barranquilla and Pereira).Major Shareholders are Corona and Falabella.Corona is a blue chip, Colombian corporate with over 125 years of operations in Colombia. Its core activity is the production and distribution of construction materials and home-improvement products. The group exports its building material products to more than 25 countries with Colombia and the United States being its main markets.Falabella is one of Chile’s largest companies and the largest department store retailer in Latin America with over 50 stores. | Home Improvement retailer recapitalizationThe specific locations of the new stores have not been determined yet. However, the Company’s store expansion will be focused in the main cities in Colombia where the company is already located and might also include some other smaller city in the country. |
| 2008 | 25672 | Tecnoquimicas | Tecnoquimicas S.A. (Tecnoquimicas or the company), with its subsidiaries and affiliates, is a local pharmaceutical manufacturer in Colombia. The company and its subsidiaries are involved in the production and distribution of generic pharmaceutical drugs, baby care products, personal care products and animal/veterinary health products. While the company sells majority of its products in Colombia, it also has exports to Ecuador and other countries in Latin America.This company is owned by several companies, in which members of the Barberi family hold shares. Mr. Francisco José Barberi Ospina and Mr. Juan Manuel Barberi Ospina, who will act as sponsors for this project, lead the management team of the company. Tecnoquimicas started operations in 1934, and is based in Cali, Colombia. | $25M equity and up to $20M standby loan for $100M capital project for 8 existing chemical facilities mostly around Cali |
| 2009 | 27780 | Termo Rubiales | The project sponsor is Energy International (“EI” or the “Company”), a company specialized in the power sector in Latin America. EI was created in 1998 as a sales division selling power modules, but also focusing on operations, maintenance, engineering and construction of thermal plants. EI has a fleet of power modules and turbines of nearly 300 MW. EI’s business units include: leasing of power modules and turbines, sale of turn-key medium speed engines, provision of EPC and O&M services, and investments in power projects in the LAC region. EI owns beneficially 100% of the shares of Termo Rubiales. | The total project cost is estimated at about $68.5 million. The proposed IFC investment is a $16.5 million loan. The project is located in the Llanos Basin, 465 km from Bogotá in the Meta Department.Development Impact: IFC is investing in Termo Rubiales to support the development of Meta Petroleum, a promising player of the oil industry in Colombia that has embarked in an ambitious plan to increase the production of the Rubiales field. The investment in Termo Rubiales would be directly supportive of Government policies to increase local production and private investment in the oil sector. |
| 2008 | 27396 | Termoflores | The company is indirectly owned by Companía Colombiana de Inversiones S.A. (“CCI” or the “Sponsor”), a diversified privately owned Colombian company duly incorporated under the Colombian Law. CCI is a Colombian holding company with focus on energy and portfolio investments that is traded in the Colombian Stock Exchange, with a market Cap of approximately $750 million. As of June 2008, CCI’s total assets totaled $1.5 billion and net income was approximately $8.3 million.Colinversiones is mainly owned byGrupo Argos 28%pension funds 24%Suramericana 5% | The total project cost is estimated at about $278.2 million. The proposed IFC investment is a $65 million A Loan for IFC’s own account and $92.5 million B loan from participants. The project is located in Barranquilla, Colombia, 948 kilometers north of Bogotá and 2 kilometers west of the Magdalena river.The project consists of the construction of a 169 MW gas-fired combined cycle unit by Termoflores S.A. E.S.P. (“Termoflores” or “the Company”), a generation company whose operations are located in Barranquilla, Colombia. Currently, Termoflores has three natural gas-fired units in operation, (the Flores I combined-cycle and the Flores II and III open-cycle) with a total installed capacity of 441 MW. Flores IV includes the expansion/conversion of the existing gas turbines in Flores II and III from open cycle to a combined cycle facility, by adding a new steam turbine generator, heat recovery steam generator and balance of plant equipment. Flores IV will utilize the waste heat from Flores II and III to provide 169 MW of additional capacity without using significant additional gas. After the project is completed, Termoflores will have two operating units (Flores I and Flores IV) with a generation capacity of 610 MW. The estimated construction time is 25 months and project completion must be attained before December 1, 2010. The project was granted a fixed 10-year period reliability charge payable over the firm capacity provided by the project. |
| 2007 | 25852 | Tribeca Partners SA | Tribeca Fund I (Tribeca or the Fund) is a new private equity fund planning to invest in majority stakes in medium-size growth companies based in Colombia and neighboring Latin American countries (Central America and Andean Region). The Fund plans to raise total capital commitments of $150-200 million.The Fund will be managed by Tribeca Capital Partners, a Bogota-based emerging manager, seeking to establish itself as one of the pioneering private equity groups in Colombia and as a future recognized regional private equity player. The team has an attractive mix of local knowledge and ability to originate and execute private equity transactions. The main sponsor of Tribeca is Interbolsa.Interbolsa is controlled by the Jaramillo, Maldonado and Sanint Families and is the first independent brokerage company in Colombia with $624 million in assets, $139 million equity as of July/07. IFC has recently closed an investment in Interbolsa, in which invested $10 million, for a 4.05% stake. | Tribeca Fund I investment, to help fund reach target, give comfort to local investors not familiar with FCPs, and ensure fund is structured to international standards to ensure best practices in particular in back office |
| 2009 | 27689 | Uniminuto | Faith-based organization belonging to the global Congregation of Jesus and Mary (“CJM”), a mainstream and well-respected Catholic group, with activities throughout Latin America, including Colombia and Brazil. The group’s activities in Colombia are organized under Corporación El Minuto de Dios, a private not-for-profit company that focuses on underserved populations and delivers services relating to microfinance, housing, rural development, health, and education. Regarding shareholders, educational institutions in Colombia must be established as non-for-profit institutions, with the aim of reinvesting all of their net earnings. They do not have shareholders, do not distribute dividends and are tax exempt from income and equity taxes. | The total project cost over the 2009-2010 period is estimated at $18 million. The proposed IFC investment is a $8 million A loan for IFC’s own account.The physical infrastructure component of the investment program consists of three projects in Cundinamarca, including expansion of two key facilities in Bogota and Soacha, as well as construction of a new (phase 1) facility in Girardot. Land has been secured in all cases, and project planning is at advanced stages.Development impact: Increased Access to Tertiary Education Services – Colombia has made significant advances in gross enrollment ratios at all education levels over the past 5 years yet access and coverage for certain segments of the population remain weak. While average gross enrollment ratios for tertiary education are estimated at 29%, government data indicates that coverage in Bogota may exceed 50%, yet remain below 10% in various departments. Additionally, schooling has traditionally been less accessible to students of lower socioeconomic backgrounds. Through its network approach, commitment to distance learning technologies and presence in more than 11 departments, Uniminuto is expected to contribute to increased coverage for students in more remote areas of the country. |
| 2005 | 22588 | Women’s World Bank | Women’s World Banking (WWB) network in Colombia: WWB Bogota, WWB Cali, WWB Bucaramanga, WWB Medellin and WWB Popayán. | The total project cost is estimated at $20.0 million. IFC’s proposed investment consists of five separate local currency loans, reflecting the independent nature of the WWB affiliates. The five entities will be individually appraised and the investments will be tailored to the specific needs and circumstances of each entity. IFC’s financing will allow the affiliates to further expand their lending activities, diversify their funding sources and strengthen their position in the market. IFC’s financing will enable these entities to serve an additional 70,000 microentrepreneurs and thereby generate exceptional development impact in terms of employment generation and poverty reduction. |
Mountain Highway System in Antioquia
Coming down the pike…
The Mountain Highway System in Antioquia is a significant highway infrastructure plan. Portafolio is reporting, and as I have learned through sources in Medellin’s Alcaldia (City Hall), that the plans are advancing.
Specifically, the Colombian national electricity transmission utility company, Interconnection Electrica SA (ISA), is planning to fund much of the initial planning for the Mountain Highway System’s double-lane construction project. ISA has formed ISA Autopistas (ISA Highways) to operate independently with a budget of 5.6 billion pesos (~$US2.5M) over 15 years. ISA will fund 3.6 billion pesos (~$US1.6M), while the national government, the department government of Antioquia, and the Municipality of Medellin will fund the balance. The roads are set for the Antioquia region around Medellin, one of the most mountainous areas, from Urabá to El Tigre, from the Caucasus to the Caribbean coast, to Puerto Berrio and into the Coffee Zone.
The president of ISA, Luis Fernando Alarcon, issued a planning stage work schedule, that calls for initial planning contracts, concession planning, and roadways mapping. ISA’s intention is to achieve this work in 2010. Bidding has not yet been announced.
Hunter T. Carter 