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Bogota 2015 Blog: Colombia in the Eyes of Wall Street

Standard and Poor’s Sebastian Briozzo (Image: Pablo Salgado).

Thursday, June 11, 2015

Speakers:

  • Sebastián Briozzo, Senior Director and Analytical Manager, Sovereign Ratings, Standard & Poor’s (Download his presentation)
  • Javier Murcio, Director of Emerging Markets, Portfolio Manager and Senior Sovereign Analyst, Standish Mellon Asset Management (Download his presentation)
  • Ernesto Viola, CFO, Colpatria Multibanca Grupo Scotiabank  (Download his presentation)
  • Ragnhild Melzi, Senior Director, Public Policy Programs and Corporate Relations, Americas Society/Council of the Americas (moderator)

The titular panel for the Bogota conference started with Standard & Poor’s Sebastián Briozzo placing the country’s economy in the scope of the larger context of Latin America and explaining what the region needs to do to advance countries’ sovereign ratings, growth rates, and, as a result, their respective standards of living.

Briozzo said that after the last decade, during which the region benefited from positive terms of trade and commodities prices, a key question regarding Latin America today is how to transition from economies with well-established macroeconomic policies and a certain stability into economies that grow. His presentation outlined the challenges Latin American countries, specifically Colombia, face going forward.

The region has important macroeconomic policies in place, Briozzo said, creating moderate volatility and more conditions for countries to deal with external factors. However, internal factors such as slowing growth and public debts lead investors to ask themselves, “How many more decades will it take for the region to reach the living standards of developed countries?”

Next, Javier Murcio from Standish Mellon Asset Management spoke about the considerations when investing in a more complex economic environment such as Colombia's. Murcio said investors need a tradeoff to balance the risk of investing in Colombia. The country’s financial assets depend heavily on international factors such as exchange rates, interest rates set by the U.S. Federal Reserve, and oil prices.

He highlighted for the audience a mood change he's seen among investors, noting that the country faces a slowdown in oil production, the worsening of government account balances, and operational risks—all factors influencing investors' decisions.

Offering a different perspective, Colpatria's Ernesto Viola stressed the potential for the Colombian economy in his remarks that followed. His presentation examined the short-term challenges Colombia faces, such as low oil prices and insufficient industry growth, and how the country’s free-trade agreements with the United States and the Pacific Alliance have not yet borne fruit.

Viola said he is optimistic about Colombia’s investment potential in the energy sector and that the country’s middle class surpasses most others in the region. He pointed out that if the government manages to pass tax reforms that lay out the rules for the next five years and take advantage of free-trade agreements, growth could surpass 4 percent a year.

Watch the full panel: