colombia: macroeconomic strengths and investment opportunitiesn... · foreign direct investment...
TRANSCRIPT
Colombia: Macroeconomic
Strengths and Investment
Opportunities
June 2020
César Arias
General Director of Public Credit and National Treasury
Ministry of Finance
Agenda
2
A. Three anchors of macroeconomic stability
1. Dynamic and resilient growth
2. Prudent fiscal response to the emergency
3. Political stability and strong institutions
B. Investment opportunities Post-Covid
1. Internationalization on fixed income markets
2. Diversified foreign direct investment
3. Development of multimodal infrastructure
Agenda
3
A. Three anchors of macroeconomic stability
1. Dynamic and resilient growth
2. Prudent fiscal response to the emergency
3. Political stability and strong institutions
4
Colombia consolidates as the fastest and most resilient economy
among investment grade sovereigns in Latin America.
Growth outperforms regional peers
pre and post pandemic
High shock absorption capacity
only 1 recession in 40 years(1980-2019)
17
14
12
8
8
7
7
7
5
5
5
4
4
3
3
3
3
1
Venezuela
Argentina
Nicaragua
Uruguay
Paraguay
Mexico
Peru
Brazil
Ecuador
Honduras
Bolivia
El Salvador
Chile
Panama
Guatemala
Dominican Republic
Costa Rica
Colombia
Source :IMF-WEO, Calculations Ministry of Finance.Source: Calculations Ministry of Finance.
3,3
1,1
2,2
-3,4
1,1
0,4
1,1
-0,3
0,2
-3,0
-0,1
-2,4
-4,0
-2,0
0,0
2,0
4,0
2019
1Q
20
2019
1Q
20
2019
1Q
20
2019
1Q
20
2019
1Q
20
2019
1Q
20
Colombia Peru Chile Brazil Uruguay Mexico
BBB BBB+ A BB- BBB- BBB
%
5
Most Economic Activities Grew
Positively In 1Q20
The pandemic slowed down
the investment-led recovery
6,15,3
3,9
5,14,5
3,02,1
1,4
2,53,3
1,1
-5
0
5
10
201
0
201
1
201
2
201
3
201
4
201
5
201
6
201
7
201
8
201
9
1Q
20
%
Total Consumption Investment
Net Exports GDP ( Average)
Source: DANE. Calculations Ministry of Finance. Source: DANE. Calculations Ministry of Finance.
Investment-related sectors took the first hit during the pandemic,
but robust private consumption and government programs
cushioned the shock
Share 2020 2017 2018 2019 2020Q1
GDP 100% 1,4 2,5 3,3 1,1
Retail & transportation 17% 1,9 2,7 4,9 0,9
Public administration 14% 3,5 4,6 4,9 3,4
Manufacturing 12% -1,8 1,8 1,6 -0,6
Real estate services 10% 3,1 2,7 3,0 2,6
Taxes 9% 1,1 2,9 4,6 1,2
Agriculture 7% 5,6 2,4 2,0 6,8
Professional & business services 7% 1,5 3,8 3,7 2,7
Construction 5% -2,0 -0,4 -1,3 -9,2
Mining 5% -5,8 -1,9 2,1 -3,0
Finance & insurance 5% 5,4 3,6 5,7 2,1
Utilities 3% 2,9 2,5 2,8 3,4
Information & communications 3% -0,2 2,9 1,7 1,4
Arts, entertainment & recreation 3% 2,1 2,3 3,4 -3,2
8,0
7,0
6,0
5,0
4,0
3,0
2,0
1,0
0,0
-1,0
-2,0
-3,0
-4,0
-5,0
-6,0
-7,0
-8,0
6
Leading indicators are improving as lockdowns ease and more
economic sectors reopen
Production gradually returns to full capacity Energy demand recovers to pre-covid levels(Monthly change %)
69%71%
77%
89%91%
March 23th -April 13th
April 13th -April 27th
Arpil 27th -May 11th
May 11th -May 31st
June 1th -June 31st
0,0
-34,3
6,2
-40
-30
-20
-10
0
10
20
1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1
Febrero Marzo Abril Mayo Junio
March 11: WHO
declares
outbreak of
global pandemic
March 17:
First declaration
of State of
Emergency
April 6:
Extension of
confinement
until April 27
April 20:
Extension
of
confinement
until May 11
May 6:
Second
declaration of
State of
Emergency
May 28:
Extension of
confinement
until July 1
Source: Calculations Ministry of Finance – GDMP, considering government decree. Source: Estimations by Ministry of Finance and Public Credit based on data from XM.
February March April May Jun
-3.451
-2.712
-92 -277 278
830
CAD 4Q19 Services Transfers TradeDeficit
PrimaryIncome
CAD 1Q20
Annual growth
Imports = -6,8%
Exports = -9,2%
Tourism receipts= -16,5%
Profit repatriation = -32,8%
Remittances = 14,4%
CAD 4Q19 = 4,1% of GDP
CAD 1Q20= 3,7% of GDP
7
Orderly adjustment in the current account deficit V-shaped or U-shaped recovery
Source: DANE.Source: Central Bank.
-8
-6
-4
-2
0
2
4
6
T-4 T-3 T-2 T-1 T T+1 T+2 T+3 T+4
Y/Y
(%
)
1999 2002 2009 2017
A flexible exchange rate facilitates an orderly adjustment and smooths
the impact of economic cycles
Agenda
8
A. Three anchors of macroeconomic stability
1. Dynamic and resilient growth
2. Prudent fiscal response to the emergency
3. Political stability and strong institutions
9
Emergency response package nears
11% of GDPBudget deficit widens reflecting revenue and
expenditure shocks (% of GDP)
-2,50
-0,1
-1,4 -0,0
-1,5
-0,5
-6,1
To
tal
Bala
nc
e F
ina
ncia
lP
lan
Oil T
ax
In
co
me
No
n-O
il T
ax R
eve
nu
e
Inte
res
t E
xp
en
dit
ure
Em
erg
en
cy E
xp
en
dit
ure
Ad
dit
ion
al
fisc
al s
pa
ce
Cu
rre
nt
Fis
ca
l B
ala
nce
Source: Calculations Ministry of Finance – GDMP.
Emergency response package combines budget transfers, liquidity
provision and credit guarantees to maximize
assistance and mitigate fiscal impact
10
Deficit is covered through a diverse
funding mix
External bonds meet record demand
and low rates
Domestic Bonds
36%
International Bonds
16%
Multilaterals20%
Public Sector
Savings16%
Solidarity Bonds
12%
3,30%
2,32%
7,45%
6,16%
5,65%
5,06% 5,22%
4,20%
0%
2%
4%
6%
8%
0%
2%
4%
6%
8%
2037 2041 2044 2045 2049 2051
USD 1,000 USD 1,000 USD 2,000 USD 1,500 USD 1,500 USD 1,500
Sep-06 Oct-09 Jan-14 Jan-15 Jan-19 Jun-20
T Spread Avr yld 3.29Avr T+ 2.19 Yield
CO
VID
-19
Pa
nd
em
ic
30yr+ New Benchmark | Yield & Spread
| Since 2006
Source: Ministry of Finance. Source: Ministry of Finance.
The National Treasury has proactively diversified funding sources to
cover the increase in borrowing requirements at favorable market terms
Treasury
11
COP recovers amidst high volatility
Exchange rate depreciation (%)
Base 100 = Jan 1, 2020
COLTES appreciate to pre-pandemic levels
Yield Curve Colombia (COLTES)
90
100
110
120
130
140
150
en
e-2
0
en
e-2
0
ma
r-20
ma
r-20
ab
r-2
0
ma
y-2
0
Colombia Brazil Mexico
Chile Peru Uruguay
3,85
4,98
5,335,68 5,82
5,90
6,38 6,51 6,61
4,00
6,30
7,20
7,687,95
8,25 8,208,30 8,30 8,32
3,50
4,30
5,02
5,25
5,85
5,87
6,50 6,616,83
3,0
4,0
5,0
6,0
7,0
8,0
9,0
10,0
202
0
202
2
202
4
202
5
202
6
202
7
202
8
203
0
203
2
203
4
%
01-Jan-20 17-Mar-20 12-Jun-20
Ju
l 2020
Source: Bloomberg Source: Bloomberg
Local currency and fixed income assets are recovering and gradually
returning to pre-pandemic levels
12
-0,1
-2,4
-3,8
-0,5
1,8
0,6
-2,2 -2,1
2,4
3,2
4,7
1,0 0,8
3,0
0,9
15,4
-5,2
42,840,4
36,636,1
37,9
38,5
36,334,2
36,739,9
44,645,6
46,4 49,450,3
65,760,5
0
10
20
30
40
50
60
70
-12
-8
-4
0
4
8
12
16
200
5
200
6
200
7
200
8
200
9
201
0
201
1
201
2
201
3
201
4
201
5
201
6
201
7
201
8
201
9
202
0f
202
1f
% o
f G
DP
Decomposition of Central Government Debt Dynamics
Real interest rate Primary Balance
Real GDP Growth Exchange rate
Residual Inflation (UVR)
CG gross debt net change CG gross debt/GDP (right axe)
8,1
2,8
-6,9
7,6
1,22,3
15,2
-10
-5
0
5
10
15
20
25Cumulative changes
2012-2021
f. forecast
Source: Ministry of Finance.
The government is committed to reduce the debt burden after
surpassing the parametric limit of 60% of GDP due to the pandemic
Agenda
13
A. Three anchors of macroeconomic stability
1. Dynamic and resilient growth
2. Prudent fiscal response to the emergency
3. Political stability and strong institutions
14
Six economic laws passed in two years Stronger ruling coalition after cabinet reshuffle
86%79%
66%
82%
94% 93% 94%100%
82% 86%
69%
89%
14%21%
34%
18%
6% 7% 6%
18% 14%
31%
11%
Hou
se
of
Rep
resen
tatives
Se
na
te o
f th
e R
ep
ub
lic
Hou
se
of
Rep
resen
tatives
Se
na
te o
f th
e R
ep
ub
lic
Hou
se
of
Rep
resen
tatives
Se
na
te o
f th
e R
ep
ub
lic
Hou
se
of
Rep
resen
tatives
Se
na
te o
f th
e R
ep
ub
lic
Hou
se
of
Rep
resen
tatives
Se
na
te o
f th
e R
ep
ub
lic
Hou
se
of
Rep
resen
tatives
Se
na
te o
f th
e R
ep
ub
lic
NationalGeneral
Budget 2019
TheFinancing
Law
NationalDevelopmentPlan 2018-
2022
Royalty NationalGeneral
Budget 2020
LawEconomic
Growth
Yes No
19
15
143 16
14
10
5
5
4
Policymaking benefits from a proven track record and broad
consensus on incremental economic reforms
Government Independent Opposition
Agenda
15
B. Investment opportunities Post-Covid
1. Internationalization on fixed income markets
2. Diversified foreign direct investment
3. Development of multimodal infrastructure
9,9%
17,1% 18,1%
29,7%31,8% 31,6% 31,4%
50,8%55,7%
80,1%
BBB BB- BBB BBB- BBB- BBB+ BBB- BBB BB BB-
BBB- B+ BBB BBB- BBB BBB+ BBB- BBB BB BB-
Baa3 B1 Baa2 Baa2 Baa1 Baa1 Baa2 Baa3 Ba1 Ba2
Russia Turkey Indonesia Colombia Mexico Thailand India Hungary SouthAfrica
Brazil
16
Optimal size of fixed rate and linkers curves
Source: Bloomberg,IMF, WB.
Government bond markets are among the deepest and most liquid
across regional and rating peers
2,9%
2,4%
2,6%
3,0%
3,3% 3,4%3,5% 3,5%
3,7%
0%
1%
2%
3%
4%
0
5
10
15
20
25
30
Ma
r-21
Fe
b-2
3
Ma
y-2
5
Ma
r-27
Ap
r-2
029
Ma
r-33
Ap
r-2
035
Fe
b-3
7
Jun-4
9
Yie
ld
CO
P B
illio
n
Outstanding 12-jun-20
17
COP curve to be extended to 30 years Linkers curve to be more liquid
and standardized
Source: Infovalmer, Central Bank, Ministry of finance. Source: Infovalmer, Central Bank, Ministry of finance.
Nominals and linkers yield curves have liquid benchmarks across
short, middle, and long duration
3,5%
4,3%
5,0% 5,3%
5,9% 5,9%
6,5% 6,6%6,8%
0%
2%
4%
6%
8%
0
5
10
15
20
25
30
35
Ma
y-2
2
Jul-
24
No
v-2
5
Au
g-2
02
6
No
v-2
7
Ap
r-2
028
Se
p-3
0
Jun
-32
Oct-
34
Yie
ld
CO
P B
illio
n
Outstanding 12-jun-20
18
A competitive market,
with no dominant holders
High diversification by geography
and type of investor
24
33
46
55
75
98
Rest of the PrivateSector
Rest of the FinancialSector
Public Sector
Banks
Foreign Funds
Pension Funds
Total Outstanding TES May 31/2020
30%
23%
17%
14%
10%
7%
Source: Ministry of Finance.
4,1%
15,0%45,9%
2,0%
4,7%
2020
2018
29,8%
37,2%
0,9%
0,4%
39,8%
1,7%
16,2%
1,6%
0,6%
COP$74,5 TrillionTotal to may-20
Source: Ministry of Finance.
A diversified domestic and international investor base favors
competition and price discovery
(Cop Bn)
19
Decomposition of returns years
to date-TES COP
Increased number of
non-government issuers
Source: Ministry of Finance
Effective rates up to 12 of June of 2020
-1,6%-3,0%
-0,5% -1,1%0,1% -0,7% -0,2%
-0,3%
5,0% 5,6% 5,9%4,7%
2,5%
-1,9% -2,9%
-5,4%
0,4%
1,9%0,6%
0,9%
0,0%
-0,2%
-0,2%
-0,3%
6,6%
8,4%
6,2% 6,9%
5,9%
7,1% 6,6% 6,9%
10,7%13,2% 12,6% 11,7%
8,7%
4,2% 3,2%0,8%
-60%
-50%
-40%
-30%
-20%
-10%
0%
10%
-10%
-5%
0%
5%
10%
15%
20%
TE
S C
OP
22
TE
S C
OP
24
TE
S C
OP
25
TE
S C
OP
26
TE
S C
OP
28
TE
S C
OP
30
TE
S C
OP
32
TE
S C
OP
34
Pull to Par Yield Income Roll Down
Coupon Return Efective Return
Source: BVC. Thousands of millions- COP
71.8
300.0
495.0
700.0
150.0
250.0
470.0
500.0
150.0
200.0
61.3
600.0
161.5
339.6
1.109.2
1.472.2
563.3
473.7
996.4
1.096.2
365.0
544.2
101.393
1.200.0
Titularizadora de Colombia
Carvajal
Banco Popular
Banco Davivienda
Banco Mundo Mujer
Banco Serfinanza
Organización Terpel
Banco Itau
UNE EPM
Celsia
Credifamilia
Distrito Capital
Amount Placed Demand
3 y
7
15
10 y
20
Issuer Years
5
5 y
10
3,5
y 7
5, 7
y 12
3
5 y
7
5,15
y 25
5 y
10
10
Government bonds have yielded positive returns and there is
increasing issuance activity among corporates,
banks and subnationals
Agenda
20
B. Investment opportunities Post-Covid
1. Internationalization on fixed income markets
2. Diversified foreign direct investment
3. Development of multimodal infrastructure
21% 19% 15% 12% 11% 9% 5%
Financial and Business Services Oil Retail, Restaurants and HotelsMines and Quarries (includes coal) Manufacture Transportation, Storage and CommunicationsConstrution Community Services Agricultute Hunting ,Forsttry and FishingElectricity,Gas and Water
Oil Retail, Restaurants
and Hotels
Finance & Business Mines and
QuarriesManufacture Trans. Constr.
21
FDI volumes surge and diversify in 2019(USD $ Millions)
Colombia remains a top investment destination in
emerging markets (% GDP 2019)
Source: Central Bank.
FDI composition by sector (2019)
Source: Central Bank. S&P
11.535
3.941
7.594
14.493
4.621
9.873
Total Oil & Mining Other Sectors
2018 2019
17.2%
25,6%
30,0%
Dynamism of capital inflows point to investment
opportunities across economic sectors
1,2%
3,2%
1,3%
0,0%
4,5%
1,4%
2,6%
Thailand Peru Hungary Philippines Colombia India Mexico
BBB+ BBB BBB-
22
Source: Central Bank. Source: Central Bank.
Gross FDI
(USD $ Millions- 1Q 2020)
Gross FDI in Other sectors
(USD $ Millions- 1Q 2020)
174150
668
339
Electricity, gas & water Community, Social &Personal Services
Q1-2019 Q1-2020
125%
283%
3.385
1.359
2.026
3.589
1.103
2.486
Total Oil & Mining Other Sectors
1Q 2019 1Q20206,0%
22,7%
-18,8%
Foreign direct investment maintains dynamism and shows
resilience during the early stage of the pandemic
Capital inflows to new sectors offset fall in mining FDI
23
Landmark investment transactions in 2019-2020
Source: Ministry of Industry and Commerce
Foreign direct investment maintains dynamism and shows
resilience during the early stage of the pandemic
247
247
250
260
272
342,5
800
1000
0 500 1000
Financial
Telecommunications
Retail
Infraestructure
Oil & Gas
Health Care
Utilities
Tech 2.500
270
n.a
n.a
350
1.950
9.675
500
Undisclosed
Undisclosed Undisclosed
Metro Bogotá
Investors Receiver Sector EmployeesUS$mm
24
Electricity, gas & water Sector Gross FDI vs sector GDP growth
AgricultureSector Gross FDI vs sector GDP growth
Source: Central Bank.
*Seasonally adjusted annual rate
-1%
0%
1%
2%
3%
4%
5%
0
1.000
2.000
3.000
4.000
20
15
20
16
20
17
20
18
20
19
20
20-Q
1
Ele
ctr
icity,
gas &
wáte
rG
DP
gro
wth
*
US
D m
illio
ns
Gross FDI (Left axis) GDP growth (Right axis)
0%
2%
4%
6%
8%
10%
0
100
200
300
400
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
20
19
20
20-Q
1
Agriculture
GD
P g
row
th*
US
D m
illio
ns
Gross FDI (Left axis) GDP growth (Right Axis)
Source: Central Bank.
*Seasonally adjusted annual rate
Foreign direct investment usually
serves as a catalyst for economic growth
Agenda
25
B. Investment opportunities Post-Covid
1. Internationalization on fixed income markets
2. Diversified foreign direct investment
3. Development of multimodal infrastructure
26
General
Average
Per year
2009 2010 2012 2014 2017 2019
Legal Framework 6 6 5 4 1 1
Financing 7 7 5 6 4 2
Maturity 6 5 4 4 1 3
Institutions 4 5 5 5 4 5
Investment Framework 10 3 3 4 10 17
0
1
2
3
4
5
6
7
8
0
3
6
9
12
15
2009 2010 2012 2014 2017 2019
Rankin
g S
core
Legal Framework
Financing
Maturity
Institutions
Colombia stands out in the development of the infrastructure rules,
institutions and markets in Latin America
Commissioned by:Infrascope Raking – Latin America
6 39 5 53 5 59 5 61 174 277
27
1 PPP Law 1508 of 2012 (including
20th article)
Standardized contract
Contingency Law (448 of 1998)
2
3
Debt/ equity
Funds
Senior Debt
Fund for
Infrastructure in
Colombia (CAF
– Ashmore)
Debt Fund for
Infrastructure in
Colombia
Debt Private Capital
Fund for
Infrastructure in
Colombia.
Co-
investmen
t platform
Mini - Perm
Term: Between 5-8 years
(construction + start
operation)
Amount: US$ 666 m
Debt in dollars + hedge
strategies
Lender: FDN
Issues BondsFunding Local
Currency COP
Loan in local
currency and long
term for
international
financing entities
and multilateral
Banks.
Public Private Partnerships Strengths
280,00%
0,00%
0,00%
0,00%
2,86%
5,20%
5,66%
12,09%
13,22%
15,12%
16,95%
31,20%
40,32%
42,36%
43,00%
47,20%
49,34%
52,72%
53,25%
55,44%
61,24%
62,55%
63,49%
66,71%
70,92%
73,23%
84,24%
97,40%
99,84%
Loboguerrero - Mulaló
Santander de Quilichao -…
Malla Vial del Meta
Cambao-Manizales
Tercer Carril Bogotá-Girardot
Santana - Mocoa - Neiva
Bucaramanga Pamplona
Magdalena II
Villavicencio - Yopal
Pamplona - Cúcuta
Autopistas al Mar 2
Accesos Norte a Bogotá Fase I
Autopista Conexión Pacifico 1
Perimetral de Oriente de…
Girardot - Ibagué - Cajamarca
Neiva-Girardot
Rumichaca - Pasto
Antioquia-Bolivar
Bucaramanga - Barranca -…
Autopistas Conexión Norte
Vias del Nus
Transversal del Sisga
Autopistas al Mar 1
Puerta de Hierro - Cruz del Viso
Chirajara Villavicencio
Autopista Conexión Pacifico 3
Autopista Conexión Pacifico 2
Cartagena - Barranquilla
Girardot - Honda - Puerto…
Investmen
t = US$ 15
billion /
4,5% of
GDP
Construction progress in
4G infrastructure projects
Financing projects with bond Issuance
Diversified Financial
Sources2016
8 Financial closings
47%
22%
16%
9%6%
USD
4.2 bn
26%
35%
14%
10%
9%
6%
USD 7.8
bn
2020
21 cumulative financial
closings
8 financial
closings
were made
during this
government
USD$ 3.1 bn
Colombia 4G Infrastructure Program
New Opportunities in Multimodal Infrastructure
5G – Multimodal Infrastructure
RoadsAlo Sur USD$ 188 mill.
Accesos Norte II USD$ 363 mill.
Accesos Cali - Palmira USD$ 331 mill.
Buga – Buenaventura USD$ 700 mill.
Pto Salgar - Barrancabermeja USD$ 560 mill.
Barrancabermeja – San Roque USD$ 466 mill.
USD$ 2.6
bill.
Airports
USD$ 1.4
bill.
Suroccidente USD$ 337 mill.
Cartagena USD$ 134 mill.
El Dorado I USD$ 157 mill.
Cartagena II USD$ 834 mill.
FluvialUSD$
0,79 bill.
Magdalena River USD$ 166 mill.
Dique Channel USD$ 557 mill.
Buenaventura channel USD$ 68 mill.
RailUSD$
0,51 bill.
Freight Rail – Dorada
Chiriguana
USD$ 514 mill.
4G – Secondary Market
52,72%
53,25%
55,44%
61,24%
62,55%
63,49%
66,71%
70,92%
73,23%
84,24%
97,40%
99,84%
Antioquia-Bolivar
Bucaramanga - Barranca- Yondó
Autopistas ConexiónNorte
Vias del Nus
Transversal del Sisga
Autopistas al Mar 1
Puerta de Hierro - Cruzdel Viso
Chirajara Villavicencio
Autopista ConexiónPacifico 3
Autopista ConexiónPacifico 2
Cartagena - Barranquilla
Girardot - Honda - PuertoSalgar
$ 313 mill
$ 351 mill
$ 321 mill
$ 460 mill
$ 683 mill
$ 161 mill
$ 533 mill
$ 190 mill
$ 345 mill
$ 348 mill
$ 604 mill
$ 404 mill
Total: USD$ 4,7 Bill. / %PIB 1,49%Total: USD$ 5,3 Bill. / %PIB 1,67%
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