For several years now global investors have looked to the Southeast Asian archipelago of Indonesia as one of the great growth opportunities in Asia-Pacific, with its natural resources, its fast-growing economy and 250 million people to pay for Western soft drinks, laundry detergent and banking services.
After recently returning from four years in Asia, I now sense the same whiff of mystique and intrigue about Colombia as I did with Indonesia, with optimistic investors citing statistics about its growth potential and yet still huddling up to discuss concerns about illicit activity.
Many ask, why Colombia? After all, the name is still largely synonymous with the drug trade for many Americans who watched Hollywood flicks in the 90s. And a simple scan on Amazon for books about Colombia will return results primarily for travel guides, and one titled: Bang Colombia: Textbook On How To Sleep With Colombian Women. Another on the list is More Terrible Than Death: Drug, Violence and America’s War in Colombia.
While we can’t say coca fields have vanished from the Andean nation, its GDP grew at 4% in 2012 and ratings agencies have granted the country investment grade debt. It also has close to 46 million people, making it the third most populous country in Latin America after Brazil and Mexico. Its inhabitants are not concentrated in one big city, but in several, with Bogotá at more than 8 million people, Medellin with 3.5 million and Cali at 2.4 million.
And aside from the statistics, M&A advisors and executives say Colombia is a good place to do business. Robert DiCianni, senior vice president at Pan-American Life, a New Orleans-based insurance company, told Mergermarket that Colombia was one of its growth drivers, calling it a “top of the line economic country.” Pan-American’s operations grew in Colombia by 50% in 2012, he noted. Interestingly, and perhaps as a reflection of Colombia’s popular medical tourism industry, it is seeing strong sales in coverage for complications with plastic surgery.
As it turns out, closing deals in Indonesia can be challenging. Bribery and corruption are rampant, and investment bankers have relayed tales of reaching the final stages of a deal, only to be confronted with demands to pay off the owner’s uncle’s cousin. In the latest news, Singapore’s DBS Bank, which is in the process of acquiring a stake in Indonesia’s PT Bank Danamon, has hit a bump in the road after the Indonesian government placed new restrictions on ownership of local banks.
Luckily, limits on foreign direct investment are not a problem for those considering acquisitions or investments in Colombia. In fact, most sectors are entirely open to foreign investment. What Colombia does lack is infrastructure, with proper highways only recently beginning to replace two way roads. This, however, is also seen as an opportunity.
“While Colombia was nearly a failed state in 2002 due to its serious problems with drug-related violence, today it has become very viable and profitable,” noted Alejandro Pinzon, a senior associate at the law firm Pardo & Asociados in Bogotá. “Things have changed because violence fueled by drug money has been substantially reduced,” he said, attributing the improvements partly to the policies of Colombia’s former president Álvaro Uribe and to an increased police presence across the country.
For those convinced Colombia may be one place to drop some cash or hunt for a nice family owned business, some of the top sectors for foreign investment are in oil and gas, coal, gold, infrastructure development and retail. Or for those interested in jostling for some market share in its thriving financial services industry, expect tough competition from players like Bancolombia and Sura, both of which have outbound expansion plans of their own.
Looking further at the parallels between Indonesia and Colombia, it occurred to me that both make up part of the CIVETS, the next generation of promising emerging markets: Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa. And consider their figures for population under the age of 25: 43.7% for Indonesia, and 44% for Colombia. The two even share a parking spot on the equator.
It can’t be ruled out that Colombia is a space to watch.