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Colombia’s Leaders Speak Out!

Interview: Colombia comes out of the shadows .President Álvaro Urbie remarks.
Interview: Colombia Vice-president Francisco Santos.
Interview: Sigfredo Valle Courtade: UNILEVER IN COLOMBIA

Colombia comes out of the shadows

Note: Courtney Fingar  is a reporter for fDI (Foreign Direct Investment-magazine).  The Three articles shown below were produced by the renowned Financial Times group, fDi s the premier publication for business of globalisation, and is published on a bi-monthly basis with an ABC-certified circulation of nearly 15,000.

December 05, 2006

Colombia has been fighting to prove that it is a safe and worthwhile investment destination and has now put itself firmly back onto the investment map. Courtney Fingar reports from Bogotá and Medellín.

Colombia is a country where beauty is pervasive. The world’s second largest exporter of flowers, its stunning roses add a touch of glamour and flashes of brilliant colour to local hotel receptions, restaurants and office buildings as well as dispersing their beauty to appreciative international recipients. Its natural areas – mountains, jungles, beaches and much else in between – are breathtaking. Yet when local men and male visitors speak of the gorgeous scenery, with a sly wink, they are more likely to be referring to the renowned beauty of Colombian women.

For decades, Colombia’s ugly side overshadowed the beautiful, and the ugly face was the one most often shown to the outside world, courtesy of a steady stream of news reports of kidnapping, murder and drug trafficking. Still today, even though the news trickling out is more positive, tell people you are going to Colombia and they will look at you as if you have a death wish.

Dangers remain; backsliding is certainly possible; a series of car bombs in Bogotá in late October and early November rattled nerves. But the darker forces have retreated into the shadows and the warm light of hope now flickers across what was until recently the Western world’s most violent country. In much of Colombia, for the first time in recent memory, life is beautiful again. The country is safer and more optimistic than it has been in many people’s lifetimes.

Security programme

The ’democratic security’ programme of president Álvaro Uribe, re-elected in May after the constitution was amended to allow him to run for a second term, has succeeded in restoring government authority over patches of the country formerly threatened by guerrilla and paramilitary groups. On the strength of security improvements, the economy is growing, purchasing power is rising, unemployment is declining, exiles are returning and capital is flowing in.

"My message to international investors is that Colombia deserves all their confidence. International investors can trust in Colombia," said the president "We are making great efforts to create stable and transparent rules and to create the conditions for our country to have sustainable economic growth that will not be less than 6%. We are totally open to international investors and we consider them necessary partners to create social cohesion in Colombia."

Mr Uribe is the man behind Colombia’s dramatic about-face. "He is doing real things for Colombia – there has been no one like him," says one security analyst familiar with Colombia. "The risk factors have certainly been reduced in Colombia because of his fingerprints."

Another, Daniel Linsker of Control Risks, says there have been "exponential" improvements in security under the Uribe government. The administration’s single biggest achievement "has been to return trust to Colombia", says vice-president Francisco Santos (see page 23).

Mr Uribe’s political skills were on full display at an international mining show in Medellín in September, where he took questions from the audience, routinely calling cabinet officials to account and pressing them for answers and results. He spent nearly three hours on stage at the event, presiding over discussions like a judge in a civil dispute or – more accurately – a CEO at a board meeting, listening to grievances, admonishing when necessary, delegating action and seeking prompt resolution. "There are some things we need not for tomorrow but for yesterday … so let’s do it," he urged the mining ministry in reference to a local complaint.

"I don’t like to discuss good ideas but implement them," he said at another point. "An administration that has been re-elected has no excuse not to solve problems."

Finding solutions

There is certainly no shortage of problems for Mr Uribe to try to solve, above and beyond the security issue. Nearly half the population lives under the poverty level; he wants to bring the percentage down to 35% by 2010. Rapid GDP growth presents its own problems, such as pressure on inadequate and outdated infrastructure. "We had in mind for the country to grow at 2%-3% but when it began to grow at 5%, and looking at 6% next year, [roads, ports, etc] overflow and everything is too small," Mr Uribe told the audience in Medellín. "The government has to get on step."

The business and regulatory environment, while decent, still needs fine-tuning. The corporate tax rate is among the highest in Latin America, although some relief is on the way: a bill working its way through Congress would reduce the rate from 38.5% to 32% and simplify the tax code. "Colombia has been reluctant to use tax as a driver for growth," the president admitted. "But experience has shown that the tax element plays an important role in investment."

A more dramatic rate reduction might catch more international investor attention, however, and some existing investors grumble that the reform is not ambitious enough. But Mr Uribe is only willing to go so far. Tax reform, he argued, should stimulate growth but also be structured in such as a way as to create sustainable growth for the long term. The tax-cutting policies of former US president Ronald Reagan and former UK prime minister Margaret Thatcher "had short-term benefits but did not guarantee sustained increases in growth", he said.

Before wrapping up the session, the president asked for the minutes to be transcribed so he could follow up on all the issues raised. He summed up what had been discussed and stated the action points. One gets the impression that he will check that they have been resolved.

Irrevocable change

One valid point of concern is, if Colombia’s resurgence is in such large part down to one man, what will happen when he leaves office? Yet many foreign observers believe that the country has changed irrevocably and, now that people have had a taste of security and stability, and got a glimpse of a brighter future, there is no turning back.

"Colombians have confidence in themselves, they have taken charge of their destiny," says Frederick Felder, executive vice-president of Greystar Resources, citing 2003 as the tipping point. Canada-based Greystar halted a drilling project in Bucaramanga, in north-east Colombia, in 1999 because of security threats but resumed work in 2003. The company now employs 400 people in Colombia, 35 of them professionals.

Political dynamic

The political dynamic has also changed, and not only at the federal level. A younger, more idealistic and yet pragmatic breed of politicians has emerged, such as Antioquia governor Anibal Gaviria Correa and Medellín’s charismatic jeans-wearing mayor, Sergio Fajardo. Both enjoy astronomical approval ratings and neither are career politicians: the governor came from the private sector and the mayor was a mathematician before entering office.

Medellín is a sterling example of Colombia’s turnaround. Not all that long ago its murder rate was among the highest in the world, but Mr Fajardo says the city has undergone a "beautiful transformation": crime has been reduced, public spaces refurbished, schools improved and innovation encouraged. "Medellín has a completely new perspective with regard to itself," he says.

Resilience is a national trait, it seems. Having learned to laugh in the face of danger and to look on the bright side of life during the dark days of the past, Colombians have a naturally sunny disposition coupled with a strong sense of self-reliance – characteristics that serve them well in business.

The ’people are our greatest asset’ line is usually more tired than true, but in the case of Colombia, it is backed up by testimonial after testimonial. Each of the several multinational CEOs and managing directors that were interviewed in Bogotá and Medellín agreed unequivocally that human capital is Colombia’s greatest advantage. Colombians make excellent employees, and the country is seen as fertile breeding ground for international management talent.

"I have worked in many places around the world and have never had employees as educated, smart, professional, hardworking, passionate and loyal as in Colombia," says Karl Lippert, president of Bavaria, a subsidiary of beverages giant SAB Miller and Colombia’s largest foreign investor.

Tourism promotion

If efforts to promote tourism pay off, more foreigners will get to know Colombians’ positive attributes. It has been a struggle, says Juan Salazar, director of ProExport Colombia in London, just to get Colombia included in travel agency brochures. But minds are being changed and the tourists are starting to come.

Patrick Vaysse, director of operations for Colombia, Ecuador, Venezuela and Central America for French hotel group Accor, says Colombia will be one of Latin America’s biggest growth markets for tourism over the next few years. Accor has been in Colombia for a decade and has four high-end hotels under the Sofitel brand, but is looking to add 10 economy hotels under its Ibis brand to capitalise on increased tourist visits and convention traffic.

Of course, for hotel and other investors, the size of the opportunity must always be weighed against the level of risk. This interesting but long-ignored market holds the promise of more than 40 million consumers with burgeoning spending power, an abundance of clever workers, and a flair for business and entrepreneur ism. The opportunity is undeniable. What, then, of the risk?

Safety issues

Control Risk’s Mr Linsker says there are still parts of the country that he would not recommend to his corporate clients, but "the general feeling of security has improved", especially in the cities. Bogotá and Medellín are safer these days than Caracas, the Venezuelan capital, and Mexico City, he says.

"Security should not put off companies, because the political environment offers all the safeguards foreign investors need." Security, in any case, is a fixed cost and security-related risks are manageable, in contrast to political risks elsewhere on the continent. "The cost of the risk of expropriation in Venezuela, for example, is much higher than the cost of kidnap precautions in Colombia," he says.

Crucially, Colombia lacks the anti-capitalism, anti-gringo fervour and populist proclivities of some of its neighbours, and has stronger, more stable institutions, he says.

Overall, Mr Linsker reckons "Colombia is a good bet" and, despite perception, a safer bet than many other Latin American countries. "With appropriate risk mitigation strategies in place, Colombia is a very good place to do business," he says.

Interview: Colombia’s vice-president Francisco Santos

December 05, 2006

Francisco Santos, vice-president of Colombia and president Álvaro Uribe’s right-hand man, is reputed to be outgoing and informal, and on this score he does not disappoint.

Rather than stuffy handshakes, visitors to his Bogotá offices adjacent to the presidential palace – female visitors, at least – receive a kiss on the cheek and a good dose of Latin charm. A graduate of the University of Texas and former editor of El Tiempo newspaper, he chats amiably about American football and southern US rock music and gives local restaurant recommendations.
His mood is jovial and confident, reflecting the national mood. "We have got the upper hand on criminality and these criminal groups," he says. Like most other Colombians, he is conscious of international perception and eager to disavow lingering stereotypes.

"Colombia is a little jewel that is hidden. People come here and think they will see shoot-outs in the street and kidnappings on the next block. Then they realise we actually live pretty normal lives." For those who dare to discover this jewel, he points out, "there is a lot of money to be made".

While some of its Latin neighbours become less stable and as their institutions come under threat, Colombia – long considered the riskiest – has come out the other side, Mr Santos says. "We have been there, done that. We are now seeing an inverse curve."

This presents a rare chance for Colombia, which has been under invested because of security problems, to re-engage with the global business community. "We are not ashamed to say we are pro-business. We are reducing red tape, pursuing sound macroeconomic policies and are very aggressively searching for new markets," Mr Santos says. "We have completed free trade agreements with Central America and the US, are negotiating one with Chile, and after four years of knocking on the door of the EU, the Andean Community has signed an association agreement."

He says all levels of government are working hard to improve Colombia’s image and to promote inward investment. As a result, companies "are looking at a country they had totally discarded before". He cites the example of General Electric, which had given up on Colombia after one of the company’s executives was kidnapped and killed in the 1990s, but which has now returned after vigorous wooing.

"From the president all the way down, we have become sellers of Colombia," says Mr Santos. What they have to sell is "a country with the third largest population in Latin America, with a stable democracy, stable rules, strong institutions and a drastically improved security situation, and which offers huge opportunities for foreign investors".

The size and scope of these opportunities will expand as security continues to improve, with which the government is pressing ahead, Mr Santos says, despite the major gains already achieved in a relatively short amount of time. "We are pretty excited about the results of the past four years but there is still a long way to go. We need to consolidate the security situation and improve security in remote, rural areas and diminish the areas where [the criminal] groups operate. And second, we need to improve security in urban areas. Most of our cities have homicide rates that are lower than others in Latin America but we still have problems with common delinquency crimes."

The focus on individual street crimes is itself a positive indication of how far Colombia has come. If he had been told four years ago that the government would have the luxury of worrying about such low-level crime, Mr Santos says, he never would have believed it. "We underestimated the capability of the police and army, and overestimated the capability of the bad guys. The criminal groups are on the defensive. They are seeing diminishing returns, to use an economic term."

But now Mr Santos has an important question for his interviewer: "Have you had any empanadas since you have been in Colombia?" he wants to know. An answer in the negative elicits an impromptu invitation. "Come on," he says. "Let’s go for a snack. I know a good place."

Unilever in Colombia

While some foreign companies are rediscovering Colombia, or discovering it for the first time, Unilever has been around all along. "We’ve been here for more than 40 years so we are obviously believers in the country," says Sigfredo Valle Courtade, president of Unilever Andina, in an interview at the Bogotá offices that serve as the company’s Andean region headquarters. "Colombia may have its difficulties, but there are difficulties anywhere."

Security is not a major concern, he says. "We take the usual security measures you would take in any large or congested city – less even than in other places," he says.
Colombia, where Unilever employs 1500 people, is the company’s largest market in the Andean region.
"When one thinks of investing in Latin America, Colombia comes at the top of the list," says Mr Valle.  

In addition to the Bogotá corporate office, the UK-based consumer goods company has manufacturing facilities in Bogotá and Cali (producing such products as toilet and laundry soaps, shampoos and food items), and a national distribution centre in Cali. Most of Unilever’s brands sold in Colombia are market leaders, and those that are not are "fighting number twos", Mr Valle says. But rising purchasing power among Colombian consumers means there is still scope for higher revenues and business expansion.

A free trade agreement with the US may entice competitors into the Colombian market, but Mr Valle says that is fine with Unilever. In the long run, more investment will create more employment, which will further boost purchasing power and therefore consumption. “We just try to be the best,” he says. “If you are the best, it doesn’t matter if there is a free trade agreement or not.”

Article taken from FDI Magazine, December 05, 2006.

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