ProExport Colombia: Colombian Financial Markets

Colombian Financial Markets

Ministerio de Comercio, Industria y TurismoRepública de Colombia

Contents

I. Colombia at a glanceII. Macroeconomic figuresIII. Financial Sector overviewIV. Private Equity Funds in ColombiaV. Conclusions

General Information• Official name: Republic of Colombia

• Capital: Bogota, 7 Million

• GDP (2007) USD 172,000 Million

• Population (2007): 43.9 Million (77% urban, 23% rural) • GDP per capita (2007): USD 3,918

• GDP per capita at PPP (2007): USD 9,300

• GDP Growth (2007): 7.52%• Inflation (2007): 5.69%

• Exports (2007): USD 29,991 Million

• Imports (2007): USD 32,899 Million

• FDI (2007): USD 9,028 Million• Literacy rate: 92.1%• Currency: Colombian Peso (COP)GDP: Current pricesSource: Central Bank, Proexport and Presidency of ColombiaExchange Rate: USD 1 = COP $2014 (2007 Average rate)

Colombia at a glance

Colombia’s economic growth has outpaced the region's in the last few years

GDP Growth: Colombia vs. Latin America (1999 – 2007) %

Source: Economic Commission for Latin America and the Caribbean (ECLAC), DANE, Forecasts ECLAC and National Planning Department, and World Economic Forum for Latin America in 2007

2,92

1,471,93

3,864,87 4,72

6,807,52

-1012345678

2000 2001 2002 2003 2004 2005 2006 2007Colombia Latin America

Macroeconomic figures

Inflation Rate

16,7%

9,2% 8,8%7,7% 7,0% 6,5%

5,5% 4,9% 4,5%5,7%

0,0%

2,0%

4,0%

6,0%

8,0%

10,0%

12,0%

14,0%

16,0%

18,0%

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Source: DANE

Inflation Rate (1998 – 2007)


Colombia’s significant market potential

GDP in Latin America (2007) Current Prices, USD Billion

Population in Latin America (2007) Million of inhabitants

Source: International Monetary Fund and World Bank 2007


COLOMBIA: Economic Growth by sector %

Sector 2006 I Trim 2007 II Trim 2007 III Trim 2007 2007Agriculture 2.3 1.9 2.8 2.2 2.55

Mining 0.1 -0.5 4.8 3.5 4.5Electricity, gas, water 3.0 3.8 1.8 1.9 2.34

Manufacturing 10.8 14.5 12.1 8.9 10.62Construction 14.6 27.1 6.2 2.6 13.31

Housing & Commercial 12.9 17.8 -1.7 -8.4 3.2

Public Works 17.2 39.9 18.2 19.6 28.2Retail, rest, hotels 11.1 11.6 10.8 9.9 10.4

Transportation 9.8 10.3 12.1 10.9 12.4Financial services 1.4 5.0 15.7 3.5 8.26

Social services 2.2 0.4 1.8 5.0 3.0Total GDP 6.8 8.1 6.9 6.7 7.52

Source: DANE


Foreign Direct Investment vs. GDP

0

2.000

4.000

6.000

8.000

10.000

12.000

2000 2001 2002 2003 2004 2005 2006 2007

US$

billi

ons

0,00%

1,00%

2,00%

3,00%

4,00%

5,00%

6,00%

7,00%

8,00%

FDI GDP

*

*2005 includes SAAB Miller´s acquisition of Bavaria for US$5.525 billSource: Central Bank, DANE


FDI by Sector 2008Total FDI for the year was US$9.028 billion

Petroleum Sector 38%

Others10%

Manufacturing; 17%

Comm, rest & hotels 10%

Mines & Quarries 12%

Financial Est. 13%

Foreign Direct Investment by sector

Source: Central Bank

Financial establishmentswas the third sectorwith the most growthin 2007


Financial Sector establishments

The finance superintendence monitors the following financial establishments:

Insurance Companies & Insurance Brokers Credit establishments (Banks) Securities brokerage & agents Pension funds & fiduciaries Portfolio Investments

Private equity funds

Financial sector overview

Financial Sector returns

Source: Finance Superintendence, results to Nov 2007


Financial System Depth Up until September 2007, the levels of bancarization in Colombia were 36.6%, meaning that 36.6% of

the population has access to at least one financial service. With only 36.6% of the population having access to some level of banking service, it leaves an

enormous opportunity for new & existing players to conquer the rest of this market.

34,0

22,0

26,0

30,0

34,0

38,0

42,0

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Financial Depth (Accts.Rec/GDP)

Source: Asobancaria, Central Bank


Advances in Corporate Regulation There are no restrictions to invest in the financial sector in Colombia.

The formation of private equity funds (carteras colectivas) in Colombia was established by Decree 2175 in 2007. These will basically be any collection of funds or other assets of two or more people that will be invested collectively and will give collective economic results

Establishment of private equity funds that invest in unlisted companies or in mixed portfolios. This was allowed when Resolution 470 of June 2005 entered into effect in 2006. One fund was established in 2006 under the framework, administered by the Finance Superintendence, another was close to becoming registered at end-2006 and another five were seeking registration.

Pension funds may invest up to 20% of their portfolios in private equity funds. Under Resolution 275 of 2001 and modifications made to it in more recent years, this restriction was lifted.


Capital markets in Colombia are very young, and for the moment only a few entities are the main players in it. The government along with private companies is making an effort to promote the use of equity, and other capital tools as well as the growth of the stock exchange and derivatives market, and benefit the economy from their development.

Colombian capital markets

Market Cap US$ Millions Dec-07

Brasil 1.389.065 Mexico 398.100 Chile 212.953 Colombia 102.381 Peru 67.719 Argentina 57.047 Venezuela 10.159 Ecuador 4.373

Source: Valores Bancolombia & BVC


Colombian capital markets- Market Cap

61,9

34

56,2

04

50,6

87

24,5

88

14,1

43

11,0

95

40,5

78

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

2002 2003 2004 2005 2006 2007*

Mill

ones

de

USDMarket Capitalization (2002 – 2007)

ECOPETROLIPO

Source: Valores Bancolombia & BVC


Top Banks in Colombia

Bank NameAssets

(COP $ millions)Assets (US$

millions) Market ShareBancolombia 33.195.831 16.481 20,8%

Bogotá 22.196.430 11.020 13,9%

Davivienda 19.254.951 9.560 12,1%

BBVA 17.442.833 8.660 10,9%

Occidente 10.866.593 5.395 6,8%

Banco Agrario 9.965.042 4.948 6,2%

Popular 8.259.748 4.101 5,2%

BCSC 6.272.608 3.114 3,9%

Colpatria 5.771.992 2.866 3,6%

Citibank 5.382.921 2.673 3,4%

GNB Sudameris 4.878.900 2.422 3,1%

Crédito 4.674.967 2.321 2,9%

Santander 4.623.372 2.295 2,9%

Av Villas 4.541.192 2.255 2,8%

HSBC 1.848.621 918 1,2%

ABN Amro 611.911 304 0,4%

Total 159.787.916 79.333 100,0%


Following several years of good economic performance, PE funds are now looking to invest their capital in Colombia

EMPEA’s 2007 fundraising statistics show that private equity funds investing in emerging markets raised US$59 billion in fresh capital in 2007, which represented a 78% increase over the amount raised in 2006 (US$33 billion)

Emerging markets have become a primary focus for PE funds looking for new opportunities and greater returns.

Private Equity Funds looking at Colombia

Private Equity Funds in Colombia

Where are PE funds looking to invest?Latin American countries where investors are willing to focus investments in

the next 2 years:

Source: 2008 Annual Latin America Private Equity Survey by KPMG, February 2008

Colombia ranks third, after Brazil and Mexico, which have traditionally been at the top...


Private Equity Funds in ColombiaPrivate Equity Funds in Colombia

LAEFM

ALTRA

Andes Capital

http://www.tribeca.com.co/

http://www.conduitcap.com/index.htm

http://www.brookfield.com/

Branch of SEAF in Washington D.C, manages Private Equity Funds throughout the world. Specializes in investing in small and medium sized private companies in emerging markets In Colombia, SEAF manages the following fund:

Fondo Transandino Colombia FCP

Created in Dec ’05: First diversified PE fund in Colombia. Manages approx. US$ 17 million and invests in companies in various industries:, such as:

Financial services. The company has doubled in size since SEAF`s investment.

Sport & Medical center with over 25 locations in Colombia. With SEAF`s support, the company will create 60 locations in the country, and expand regionally.

SEAF Colombia


http://www.refinancia.com.co/

http://www.bodytech.com.co/

LAEFM

Private equity fund that started operations in 1995. Managed by Latin America Enterprise Fund Managers, L.L.C. (“LAEFM”), a Delaware

company based in Miami Committed resources of US$ 410 million which are fully invested in the largest Latin

American countries (Mexico, Brazil, Colombia, Chile, Peru, Venezuela and Argentina).

LAEFM Colombia Ltda is a subsidiary of LAEFM, and has made investments in:

Colombian Hydrocarbons Fund (US$ 62 million) Invests in exploration and production of minor fields in Colombia. The fund started operations in 2005 and already has two oil discoveries. Its main investors are local pension funds, ECOPETROL and local oil companies.

Cine Colombia: investment of US$20.8 million in 1997. Sold to current owners in 2005


Tribeca invests in companies with high growth potential, by acquiring all or part of the company`s shares. Tribeca has concentrated its investments in Colombia for its strong economic performance, improvement

in security levels, and stability of institutions It has also established a local PE fund called Tribeca Fund I that currently manages approx. US$115

million. The fund is in its closing stage and minimum investment was US$ 1 million Some of Tribeca`s investments include:

Home pre- and post-hospital care, medical consultations, and emergency services.

Designs, manufactures, and sells high-end swimwear to international markets. Medical homecare service that offers technology and modern mobile intensive care units for house calls and medical emergencies in Bogotá.

Tribeca Partners


Private equity investment firm focused in the electric power industry in Latin America and the Caribbean.

Created in 2003. Manages the funds formerly known as Scudder Latin American Power Funds which were launched by Scudder, Stevens & Clark in 1993.

Conduit has three funds: Latin Power I, II, & III

Conduit invested in three Colombian thermoelectric plants during the 90´s. It liquidated these investments during 2006 and 2007 with total proceeds from sales of more than US$200 million, and quarterly IRR returns of above 15%.

Conduit Capital Partners


Global Emerging Markets ("GEM") was founded in 1991. The firm is a $2.7 billion alternative investment group that manages a diverse set of investment vehicles focused on emerging markets across the world.

GEM and Banco Colpatria are currently structuring a deal to jointly create a $220 million private equity fund.

The fund will make capital placements by acquiring either control or minority interests in small/medium sized companies in Colombia in different sectors.

Its estimated close is June 2008

GEM- Global Emerging Markets


Leading global private equity fund manager focused in investments in small to mid-cap enterprises Invests in businesses with proven track records and helps them reach their full potential Aureos has 3 funds that invest in Latin America (including Colombia):

Fund Name Aureos Central American Fund Aureos Latin America Fund Emerge Central America Growth Fund

Geography Panama, Nicaragua, El Salvador, Guatemala, Honduras, Costa Rica & Dom.Rep

Panama, Nicaragua, El Salvador, Guatemala, Honduras, Costa Rica, Mexico, Peru, Bolivia, Colombia & Dom.Rep

Panama, Nicaragua, El Salvador, Guatemala, Honduras, Costa Rica, Belize & Dom.Rep

Vintage Year 2002 2007 2006

Target Capital US$36.3 MM US$300 MM US$21 MM

Commited Capital US$140 MM US$21 MM

Status Divesting Investing & fundraising Investing

Aureos Capital


Global asset manager with approx. US$95 billion of assets

Focused on Property, Power, Timber, Infrastructure, Equities & Fixed Income assets.

The Fund has offices in New York, London, Toronto, Brazil, and recently opened a representative office in Colombia to handle investments in the Andean Region

Brookfield


Inverlink Specializes in M&A, but recently started a PE fund in Colombia

that invests in infrastructure

The fund is in its closing stage, and will be approximately US$500-$600 million in size. Minimum investment of US$5 million

The fun manager will be constituted by Inverlink and an international funds manager (being selected right now)

The fund will focus its investments in the following areas: Electric generation Energy transmission Road infrastructure Ports Airports Transport

Altra Establishing new PE fund, currently in fund raising

stage. The fund size will be approximately US$150 million.

Minimum investment of US$500,000 Oportunistic focus in the following sectors:

Cosmetics & beauty products Services Consumption Outsourcing, BPO Biofuels Hotels

Andes Capital The fund will invest in small to medium size

companies with growth potential The size of the fund is expected to be approximately

US$50 million Minimum investment is US$250,000 The fund will focus on the following sectors:

Technology and telecommunications Tourism Food and franchise Helath and wellness Renewable Energy Cold chain, logistics

Conclusions

For many years Colombia hadn't been at the top of investor's plans for investing in Latin America…

The current situation has changed due to a stronger economic performance, considerable improvements in safety and global perception.

Nowadays, Colombia is the third most desirable destination for foreign investors bringing new capital

Colombia offers many industries in which this capital could be invested, some of which are: Agribusiness, technology, tourism, renewable energy sources, financial services, among others

Conclusions

Proexport´s services to investors

The Colombian government focuses in generating favorable conditions and offering the best support to investors. Proexport, the Government´s Investment Promotion Agency offers services to foreign investors that range from:

Information requests (economic, sector specific information, legal, procedural, etc) Contacts with public and private sectors Set up of agendas when investors decide to visit Colombia Aftercare services for investors that are already established in the country Assessment and improvement of business climate

All services are free of charge. The main goal is to make the development of new businesses an efficient and friendly process. All information provided in the process is handled as confidential

Proexport´s offices overseas

ProExport Colombia: Colombian Financial Markets

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