Welcome to Colombia!


“Would you invest in Brazil 15 years ago if you had the chance?” our Colombian host asked me one night, in an effort to frame the opportunity here.

“Of course, that would’ve been a home run,” I said.

“Welcome to Colombia.”

We were sitting in a comfortable restaurant in Medellin’s downtown area. Medellin is a pretty city that spills out across a river valley and creeps up the walls of the surrounding mountains. Medellin’s nickname is the City of Eternal Spring, thanks to its temperate weather. If you have an image of Medellin (and Colombia) as a violent place, a visit here would change your opinion. We could have been in any number of cities around the world. I never felt unsafe. (As with any city, there are good and bad areas.) The bars and restaurants were full at night. The skyline was lit with tall buildings. The sidewalks busy with people. It was not always so, as Medellin was once a notoriously dangerous city.

Security issues have been a huge problem in Colombia’s past, but it is much improved, and most of the remaining issues are deep in the jungles, near the porous borders with Venezuela or Ecuador. (In fact, while we were here, rebels snatched 23 Talisman workers doing seismic work near the Venezuelan border. Even these occurrences, however, are now rare.)

Today, Colombia is a young and growing emerging market that has a lot of catching up to do – and that is the core of the investment opportunity here.

For example, one day, we visited Cementos Argos, the largest cement company in Colombia, with a 51% market share. It is an asset-rich company. In addition to its cement operations, Argos owns a huge land bank of 5,000 hectares and a portfolio with stakes in three other listed Colombian companies worth $3.3 billion and 600 million tons of coal reserves.

We met with Ricardo Andres Sierra, the CFO, who told us in the bad old days, plants could work only from 6 a.m. to 6 p.m. And there were parts of the country where the company simply did not go. But today, the plants run 24/7. “We can go wherever we want,” he said.

Argos has a huge opportunity in Colombia. As is often the case when a boom arrives, the building of the infrastructure to support the boom comes later. Colombia is way behind in infrastructure. It needs miles and miles of roads. It needs bigger ports, expanded airports and railroads. This has been a recurring theme on our trip, something we heard everyone mention.

Sierra gave us an arresting statistic. He said Colombia consumes about 220 kilograms of cement per capita annually, compared to 500 kilograms for Vietnam. The point being that Colombia is well below the consumption rates of comparable developing economies. There is lots of room to grow.

We talked about new road projects, such as Ruta del Sol, which will connect Bogota, the capital in the Andes, with Santa Marta, a port city on the Caribbean Sea. We talked about the Cartagena Refinery expansion. Both are huge projects, “as big as the Panama Canal expansion,” Sierra said. There is also a tunnel project that will connect Bogota to the Pacific port at Buenaventura. There are projects for hydropower plants, bus systems, pipelines and much more.

“Infrastructure is the key to growth in Colombia, that’s for sure,” Sierra ventured.

This has also been one of the surprises of the trip. We had heard and read, of course, about the relative lack of good infrastructure in Colombia. But it is another thing to be down here and see it firsthand.

Traffic in Bogota, for example, is impossible – or nearly so. The roads are choked with small cars that go nowhere fast. It seems to take forever to go even short distances. One of our contacts here told us that Colombia has only 300 kilometers of two-lane two-way roads.

The government knows this, and there is a lot of money slotted for infrastructure development in the coming years. Argos is in a great position to profit from the build-out of Colombia’s infrastructure.

So infrastructure is one of the big investment themes we’ve found here.

Another is oil, which is not surprising, as oil makes up 40% of Colombia’s exports and is one of the headline-grabbing investment stories in Colombia. The years of violence in the country hampered exploration and development of Colombia’s oil assets. The easing of security issues has brought back the oil companies in a big way. Also, Hugo Chavez has chased out a lot of the talented oilmen from Venezuela. Many came to Colombia and used their expertise in heavy oil to tap Colombia’s rich Llanos Basin, in the east, which shares a similar geology with Venezuela’s prolific fields.

What may surprise you is just how quickly it’s all happened. Much of the acreage is already locked up. When new blocks come up for bid, they are heavily contested. We met with Charles Gamba, president and CEO of Canacol Energy. He told us there were 67 bidders on their latest block. This industry is developing very, very quickly.

In 2003, Colombia licensed only 4% of its available acreage. Today, that’s 60%. So there are several companies here that have stocked up an enviable portfolio of prospects to explore. And oil and gas will be an important driver of Colombia’s economy for years to come as it develops further.

In any case, there are, as in any market at any time, opportunities. And there are certainly opportunities here.

Stay tuned!


Chris Mayer
For Daily Reckoning Australia

Chris Mayer
Chris Mayer is a veteran of the banking industry, specifically in the area of corporate lending. A financial writer since 1998, Mr. Mayer's essays have appeared in a wide variety of publications, from the Mises.org Daily Article series to here in The Daily Reckoning. He is the editor of Mayer's Special Situations and Capital and Crisis - formerly the Fleet Street Letter.


  1. Walid Makeld Extradition- A Test Of Colombias Ties With US., Venezuela
    Months of rapprochement between Colombia and Venezuela hand on the fate of a suspected Venezuelan drug kingpin being held in a maximum security prison in Columbia
    Colombia’s Supreme Court announced recently that Walid Makled (sound like a Venezuelan name?) can be extradited. But the question of whether he should be sent to the US or to Venezuela now lies with Colombian President Santos, forcing the recently elected leader to choose between satisfying an unpredictable threatening neighbor (who is supported by China, Cuba, Russia, Iran) or satisfying its most important military ally, who has recently been a negligent supporter.
    The US consider Makled a “Significant Foreign Narcotics Trafficker” per a report in May 2009 and he is wanted in New York for allegedly smuggling tons of cocaine into the US.
    Upon his arrest in Colombia last August, he quickly made it clear he was not going down without taking others, accusing high-level government and military officials in Venezuela of direct ties with the drug trade.
    “With what I have, I have enough for them [the US] to intervene [in] Venezuela … immediately,” Makled told a Colombian news station, making it clear he would reveal “all he knows” to American officials if he is extradited to the US.
    US drug officials have in the past accused the Venezuelan government of being complicit with the regional drug trade. UN Office on Drugs and Crime says Venezuela is becoming a major transit point for cocaine being smuggled from Colombia to West Africa, and then trafficked into Europe.
    In Venezuela, Makled stands accused of ordering the murder of a journalist that was investigating his family’s ties to the drug trade and has been wanted since 2008 when cocaine was seized at 1 of his ranches.
    Venezuelan President Hugo Chávez insists Makled should be tried in Venezuela but international and domestic critics say the case won’t get a full airing here and would deny the US Drug Enforcement Administration crucial information toward fighting the regional drug trade.
    Santos is sure to get slammed no matter what he decides. Sworn in last August, he immediately adopted a conciliatory approach with his testy neighbor, resuscitating billions of dollars worth of trade and calming simmering military tensions. With No Obama support and stiff arm tactics by Obama at best, he seemed to have little choice but to work with Chavez.
    If Obama had pushed forward the Colombia trade deal rather than appeasing domestic unions, the extradition would probably already have occurred. In fact in his recent visit to Latin America Obama pointedly avoided Colombia altogether when a brief visit and show of support could have helped
    There is a real opportunity here to internationally embarrass Chavez, perhaps to gather intel on the drug trade in his country, damage drug trade to America & Europe and some say find out about even some Latin America terror ties, in addition to supporting the Colombia people, our strongest allies in Latin America and a country that have made great strides in combating the drug trade.
    The ball is now in Obamas court. Will he protect the unions from a key but tiny trade deal with a small latin American neighbor or will he do whats in the best interests of America and reach out to Colombia to:
    -strike a blow against the drug trade
    -support a key ally and send a message to others in the region who are wavering on Venezuela
    – perhaps even uncover workable intel on Venezuelan drug & terror ties helping to bring down Chavez or at least undermine his power base.

    April 1, 2011

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