Interview: Juan Pablo Córdoba
As local companies diversify their sources of funding, how can capital markets be better utilised?
JUAN PABLO CÓRDOBA: The investment focus in Colombia is shifting from extractive industries to the manufacturing and agricultural sectors. As a result, we need to channel resources into those sectors, and provide positive conditions for local businesses to grow and expand. The country’s capital markets can play a role in providing financing opportunities for these companies. The problem we see is that companies are not used to this sort of financing. Different players in the financial industry are diligently working together to welcome companies that require funding by providing assistance in the admissions processes, simplifying of procedures and offering better conditions to incentivise players to rely on capital markets.
The challenge we are facing is that the capital markets usually look for large amounts of financing – in the range of COP100bn-150bn ($30m-45m) – while companies seek financing in the order of COP20bn-30bn ($6m-9m). We must focus on building bridges between the amounts of financing that companies require and the market’s appetite. We need to give small and medium-sized enterprises greater access to these markets. There is eagerness from both sides, and it is an issue that is global. The discussion currently going on in Europe with the Capital Markets Union is the same – business expansion is not being adequately funded through banking. This is a challenge for 21st-century economies, and nobody has the formula. Nevertheless, the ongoing process of financial integration in the region is helping to achieve this goal. The Pacific Alliance’s commitment to integration will increase the competitiveness of the financial industry.
What can be done to attract more institutional investors to the markets?
CÓRDOBA: Foreign investors have been an important growth engine for the capital markets. They have not gone away, despite the national economy slowing and global uncertainty. For the BVC, 2016 was a good year as we saw an increase in volumes and rising equity prices as well as the arrival of new investors.
When seeking new institutional investors, we need to establish long-term relations, credibility and a proven track record. Currently Colombia is doing well given the policy and regulatory ad justments that have been made in recent years, making the country much more financially integrated into the world economy. We need to be faster, however. The peace theme in Colombia will attract new investors, as a country without conflict has the potential to grow much faster than it did in the past. The country also has a 30-year backlog of transport infrastructure. Many projects are now being worked on, which will improve the productivity of the country among other positive implications.
How has the government’s fourth generation road concession programme impacted the growth of capital markets?
CÓRDOBA: The impact so far has been small, because the projects thus far have mainly had national and international bank financing. Looking ahead, we think that as investors and consortiums become more familiar with different structures and models, many of these projects will be brought to the country’s capital markets, which will become a prime source of funding. Colombia has been innovative in creating infrastructure funds that specialise in collecting resources from investors and channelling them into projects. Therefore, the country is creating vehicles that once implemented can speed up the flow of resources to infrastructure projects. The size and ambitions of the infrastructure programme are very large, and it will require financing through local and international capital markets. Colombia has made efforts to make life easier for international financiers, so that investors can better understand the requirements, products and entities that they are working with.