When and Where to Invest in Colombia?

The snow falls in Strasbourg as the second day of session starts…
unemployment fund
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Plenary 13-16 February: employment, food aid and Syria

MEPs will during the February plenary session debate how to boost employment, especially among the young, vote on a food aid scheme for European citizens in need, and discuss the situation in Syria. Other topics include EP priorities for the European Council on 1-2 March, the upcoming elections in Russia and political developments in Hungary. In addition there will be a debate with Italy’s Prime Minister Mario Monti on Wednesday at 1500h CET.

One of the main issues during the plenary from 13-16 February will be how to tackle youth unemployment, which has reached an unprecedented level in Europe due to the economic crisis. On Monday MEPs will ask the Commission about its plan to use up to €82 billion in EU structural funds not yet allocated to specific projects to help small firms and combat youth unemployment. The Parliament will also vote on three resolutions on Wednesday calling for more efforts on growth, employment and poverty.


© European Union 2012 EP/Pietro Naj-Oleari

Colombia is fast attaining the label of being the NEO-Brazilon the Wall Street because of its local credit boom and heavy direct foreign investments. Last year its economy grew at a pace of 6% outshining its neighbours of the Andean region.International investments rose 26% in the first half of the fiscal year 2012. These companies have dispensed billions of dollars into the Andean nation’s oil and mining sector.According to the nations’ central bank, 82% of the foreign investments have gone into energy and commodities.

With Colombian Peso emerging as the world’s best performing currencies so far, growing almost 9% in contrast to the American dollar, analysts are more than willing to justify the +14% returns of the indigenous capital markets in 2012 and even better returns of 16.27 % derived from the selective FTSE listed Colombia ETFsand related local ADRs.

Colombia is the world’s fourth largest exporter of coal and the fourth biggest oil producer around the Andes,the tourism industry is being aggressively liberalised and the government is focussed on stabilizing the internal security and reforming the economy. Solid opportunities for financiers and investors are brewing through a rising entrepreneurial and educated middle class, enlargement of the business sector and expansion of the domestic consumption.Further the economy has had GDP growth of over 4% since the year 2003.

According to a report by the governor of the central bank the GDP growth for the 2012-13 year has been around 6% outperforming the International Monetary Fund guidance of 4.5%.

The economy is further stimulated by the falling unemployment figures, local companies expanding their operations and the government creating favourable trade conditions and creating transparent policies.Counter to this approach, the neighbouring countries such as Venezuela and Bolivia have shown resistance to foreign investment.

Colombia has signed Free Trade Agreements with the United States, Canada, Chile, Mexico, Switzerland, Turkey, South Korea, Japan, Israel and Venezuela. Economic risks are reduced with deregulation of the economy and legal reforms providing helpful business growth.

There are a number of risks one needs to ponder upon that arise when investing in a foreign country or company. In Colombia the security risks have been solved to an extent with de mobilization of the Para military groups, Timely military surge has secured infrastructure of towns and cities by pushing the FARC (Revolutionary Armed Forces of Colombia) away from populated areas. Another area is infrastructure and the government of this country is taking steps to improve roads and internal transportation and communication.Although a nationwide acceptance of corruption continues to mar the growth but extensive programmes are being implemented to reduce this menace.

How to invest in Colombia and its corporations? The natural route of direct equity investing on the local exchange Bolsa De Valores de Colombia (BVC) may require a lot of homework, and compliance issues hence most foreign investors dabble with the NASDAQ listed American Derivatives [ADRs] of some of the largest Colombian Company Equity like Eco Petrol and Ban Columbia, latter being the biggest bank of the country.

A very stable exposure can be achieved through equity traded products that focus on the nation’s financial growth.Products like Colombia Fund and ETFs track the FTSE Colombia 20 Indexwhich is designed to measure broad based equity market performance in the country by tracking the 20 most liquid and large cap Colombian stocks and delivers as per the performances of their American listed ADRs.

Global X Colombia ETF [GXG] is a true copy of its name sake benchmark in terms of asset allocation. The annual operational expenses are charged at 0.83% and along with Eco-Petrol and Ban-Colombia; PACIFIC RUBIALES ENERGY, GRUPO AVAL ACCIONES VALOR, CELSIA SA ESP and INTERCONEXION ELECTRICA are also among the top ten stocks with each accounting for about a 5% of the assets of GXG ETF.

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