Mauro Sartori

Risk Vice-President (CRO)

Bancóldex S.A (Colombia)

INTERNATIONAL BANKING FORUM 2011

Brescia, 16 - 17 June 2011

Colombia: “On the radar”

22

Colombia: On the “radar”

AGENDA:

I. Introduction: why Colombia?

II. General overview of the country and the financial system

III. Opportunities: foreign trade and investment

IV. Conclusions

33

“Yet against all odds Colombia has become the country to watch in the

hemisphere.”

Newsweek, July 2010.

“While everybody’s been focused on the super hot Brazilian Economy to

the south, Colombia’s quietly gone and become amazingly investable”

Jim Cramer - 8 February 2011

Why Colombia?

Everybody is talking about Colombia…

“Whether on security, democratic stability, or vibrancy, the strength of

Colombia’s democracy is there for all to see”

Eric Farnsworth, vice president of the Council of the

Americas.

“Colombia has increasingly become a bright star in the Latin American

constellation,”

Walter Molano, Emerging-market analyst of BCP

Securities

Source: Proexport Colombia

44

Why Colombia?

A country with Investment Grade (S&P)

"The recent gains in public

confidence resulting from an

improved security

environment are likely to

persist."

Colombia's economy has

displayed resilience against

external shocks, and the

country's favorable medium-

term growth prospects

should contain the public-

sector debt burden

Source: Proexport Colombia, Standard & Poor’s

55

Country Moody's S&P Fitch Ratings

China Aa3 AA- A+

Chile Aa3 A+ A+

South Africa A3 BBB+ BBB+

Thailand Baa1 BBB+ BBB

Russia Baa1 BBB BBB

Mexico Baa1 BBB BBB

Ireland Baa3 BBB+ BBB+

Portugal Baa1 BBB- BBB-

Hungary Baa3 BBB- BBB

Bulgary Baa3 BBB BBB-

India Baa3 BBB- BBB-

Brazil Baa3 BBB- BBB-

Peru Baa3 BBB- BBB-

Panama Baa3 BBB- BBB-

Colombia Baa3 BBB- BB+

Costa Rica Baa3 BB BB+

Indonesia Ba2 BB BB+

Turkey Ba2 BB BB+

El Salvador Ba2 BB BB

Philippines Ba3 BB BB

Uruguay Ba3 BB+ BB

Vietnam B1 BB- B+

Greece B1 B BB+

Argentina B3 B B

(…)The rating reflects the

political consensus in

Colombia on

market-oriented economic

policies that have

contributed to economic

growth and

growing investor confidence

in recent years”

Why Colombia?

A country with Investment Grade (S&P)

Source: Bancóldex

66

0

5

10

15

20

-2

0

2

4

6

8

Eco

no

my G

row

th

Colombian Economy Growth Vs Security Perception, 2001 – 2010 (%)

Economy Growth Security Problem

Secu

rity Percep

tion

Source: Proexport - ANDI (Asociación Nacional de Industriales)

World

Crisis

Why Colombia?

economic performance “hand in hand” with improved security

77Michael Geoghegan, CEO HSBC

April 26, 2010 in his speech to AmCham Hong Kong

Why Colombia?

Colombia, The C in the CIVETS

Source: Proexport Colombia

88

Colombia: On the “radar”

AGENDA:

I. Introduction: why Colombia?

II. General overview of the country and the financial system

III. Opportunities: foreign trade and investment

IV. Conclusions

99

GDP

US$ Thousand Millions – 2010*

Colombian Economy: Bigger than Chile, Ireland, Malaysia, Egypt,

Singapore and New Zeland

Source: Proexport Colombia

1010

The third largest population in LATAM and the second

largest Spanish speaking population in the world

Population

(Millions of People) - 2010*

Source: Proexport Colombia

1111

GDP Per-Capita has doubled since 2004

Source: Proexport Colombia

1212Source: Dane, Forecast : Fedesarrollo

After de world crisis all sectors are recovering

GDP Demand (%yoy) GDP Supply (%yoy)

20

10

20

11

f

4,3%

4,7%

11,1%

2,2%

14,7%

Household

consumption

Goverment

consumption

Investment

Exports

Imports

5,0%

4,5%

7,3%

8,6%

9,5%

Household

consumption

Goverment

consumption

Investment

Exports

Imports

0,0%

11,1%

4,9%

1,9%

6,0%

3,5%

Agricul/ farming

Mining

Manufacturing

Ind.

Construction

Retail

Services

3,0%

9,0%

5,8%

7,2%

5,9%

3,8%

Agricul/ farming

Mining

Manufacturing

Ind.

Construction

Retail

Services

1313Source: Dane, Fedesarrollo

Industrial Production (%yoy) Retail Sales (%yoy)

Industry and sales are gaining momentum (Actualizar)

5,2

-20

-15

-10

-5

0

5

10

15

20

ma

r-06

ma

r-07

ma

r-08

ma

r-09

ma

r-10

ma

r-11

14,6

-10

-5

0

5

10

15

20

25

ma

r-06

ma

r-07

ma

r-08

ma

r-09

ma

r-10

ma

r-11

-20

-10

0

10

20

30

40

50

ap

r-08

ott

-08

ap

r-09

ott

-09

ap

r-10

ott

-10

ap

r-11

Consumer Confidence Index

1414

An effective monetary policy led to control inflation

* Survey expectations. Banco de la República

Source: Banco de la República, Dane

Commercial Interest Rates (%)Inflation (%yoy)

10

4,94,5

5,7

7,7

2,0

3,22,8

0,0

1,0

2,0

3,0

4,0

5,0

6,0

7,0

8,0

9,0

2005 2006 2007 2008 2009 2010 apr-11

Inflation Lower band Target Upper band

25,53

17,85

15,56

15,65

9,50

17,64

9,99

6,94

6,10

3,8

0 5 10 15 20 25 30

Consumption

Ordinary

Preferential

Treasury

Central Bank April-11

Dec-08

1515

Fiscal Balance (% GDP) External Debt (% GDP)

Source: Ministerio de Hacienda y Crédito Público

Government is taking measures to tightened public spending and keep

fiscal deficit at low levels

-2,4

-1,2

0,0

-0,7-0,6

-0,1

-2,8

-3,0

-3,5

-4,4 -4,6

-4,0

-3,4

-2,7-2,3

-4,2-3,9

-4,1

-5,0

-4,0

-3,0

-2,0

-1,0

0,0

2003 2004 2005 2006 2007 2008 2009 2010 2011f

Cosolidate Central Government

24,6

21,5

19,1

22,9

20,5 20,0

2006 2007 2008 2009 2010 2011

1616

United States

• US$ 16.879 M

• Share 42,5%

China

• US$ 1.967 M

• Share 4,9%

Netherlands

• US$ 1.617 M

• Share 4,1%

Ecuador

• US$ 1,825 M

• Share 4,5%

Exports have tripled in nine years

Variation 2008 - 2009: -12,7%

Variation 2009 - 2010: 21,2% Source: Proexport, DANE (Departamento Nacional de Estadísticas) ( National Department of Statistics)

Colombia Exports by Country

2010

1717

Colombian Foreign trade

by country (share)

USA

41,20%

EU

13,60%CAN

6,30%

Panama

3,30%

Aruba

3,10%

Chile

3,00%

Venezuela

2,60%

Brazil

2,50%

Others

24,40%

Coffee

6,6%

Oil &

Derivates

47,0%

Coal

14,2%

Ferronickel

1,7%

Non-

Traditional

30,6%

by product (share)

USA

28,10%

China

12,80%

Mexico

9,50%Brazil

5,30%

France

4,30%

Germany

3,40%

Japan

3,00%

Others

33,60%

Consumption

Goods

19,6%

Raw

Materials

and

Intermediate

Products

42,2%

Capital

Goods and

Construction

Materials

38,1%

Others

0,1%

Ex

po

rts

Imp

ort

s

Source: Bancóldex, DANE Colombia

1818

Non Traditional exports

(USD MM)

Source: Dane

1919

United States

• 345.158 Visitors

• Share 23,4%

Venezuela

• 197.173 Visitors

• Share 13,4%

Ecuador

• 122.076 Visitors

• Share 8,3%

Argentina

• 83.674 Visitors

• Share 5,7%

Tourism has also grown (8.9%) compared to the rest of the world (6,7%)*

Variation 2008–2009: 17,2% (includes cruise)

Variation 2009 - 2010: 10,3% (includes cruise)

*It doesn't Include cruise

**Includes cruise

Source: Proexport - Colombia DAS (Departamento Administrativo de Seguridad) (National Department of Security)

International visitors in Colombia by Country –

2010*

In nine years

international visitors

in Colombia doubled

2020

Variation 2008 - 2009: -32%

Variation 2009 – 2010: -5%

*FDI by Exchange Balance

**Participation by country positive accumulated inflows, it doesn´t includes investment or reinvestment of profits in the oil sector, Value 2009: US$ 36,364 million (so far there is not data for countries at

first semester of the year)

Source: Banco de la República (Balance of Payments) (Central Bank)

United States

• Stock US$ 11,919 M

• Share 30.5%

Great Britain

• Stock US$ 4,658 M

• Share 11.9%

Spain

• Stock US$ 2,820 M

• Share 7.2%

Mexico

• Stock US$ 2,213 M

• Share 5,7%

Main investors in Colombia

Stock 2000 – September 2010**

Annual FDI net inflows have multiplied by four

2121

Investment activity in 2010

BP&O, Software, Services, Telecom Tourism

Personal careFinancial services

Source: Proexport Colombia

2222

Unemployment

Interest rates

Cities Total

Other indicators

Source: Bancóldex - Superintendencia Financiera de Colombia (Financial Superintendency)

2323

40 40,5 42,7 44,5 47,2 48,8

dec-05 dec-06 dec-07 dec-08 dec-09 dec-10

Size: Assets / GDP (%)*

Financial system sizeTotal assets of the banking

system

Other

Loans

Investment Portfolio

Cash

CO

P B

n

232200

325,4

267230

375,9

277

239

381,0

Assets Liabilities Equity Profits

dec-09 dec-10 feb -11

Main data (COP Bn)

91%

4% 2%3%

Distribution of assets by type of FI

Banks Leasing Financial Corp. Other Corp.

20 6 17 3

Source: Bancóldex - Superintendencia Financiera de Colombia (Financial Superintendency)

2424

Asset quality indicatorsNet Loans & Non Performing Loans Growth (%yoy)

13

Credit risk indicators

-60,0%

-40,0%

-20,0%

0,0%

20,0%

40,0%

60,0%

80,0%

ma

r-03

ma

r-04

ma

r-05

ma

r-06

ma

r-07

ma

r-08

ma

r-09

ma

r-10

ma

r-11

Net Loans Non performing loans

167,6%

3,0%

0,0%

2,0%

4,0%

6,0%

8,0%

10,0%

12,0%

0%

20%

40%

60%

80%

100%

120%

140%

160%

180%

200%

ma

r-0

2

ma

r-0

3

ma

r-0

4

ma

r-0

5

ma

r-0

6

ma

r-0

7

ma

r-0

8

ma

r-0

9

ma

r-1

0

ma

r-1

1

Provisions/ Past due loans Past due loans / Total loans

Source: Bancóldex - Superintendencia Financiera de Colombia (Financial Superintendency)

2525

8,2%

4,0%

6,0%

8,0%

10,0%

12,0%

ma

r-07

ma

r-08

ma

r-09

ma

r-10

ma

r-11

Crisis did not affected significantly the banking system

Solvency index (%)

Liquidity ratio

14

Profitability (%)

15,4

12

13

14

15

16

17

18

mar-07 mar-08 mar-09 mar-10 mar-11

2,4%

18,7%

4,4%2,4%

17,2%

4,4%3,2%

23,2%

4,3%

ROAA ROAE Admon expenses/

assetsDec-09 Dec-10 Mar-11

Source: Bancóldex - Superintendencia Financiera de Colombia (Financial Superintendency)

2626

Colombia: On the “radar” of investors

AGENDA:

I. Introduction: why Colombia?

II. General overview of the country and the financial system

III. Opportunities: foreign trade and investment

IV. Conclusions

2727

172

149

130

127

124

115

106

43

39

36

35

0 50 100 150 200

Venezuela

Bolivia

Ecuador

Brasil

Uruguay

Argentina

Paraguay

Chile

Colombia

Peru

México

121

94

78

65

39

34

0 20 40 60 80 100 120 140

Indonesia

Egypt

Viet Nam

Turkey

Colombia

South Africa

Source: Proexport, Top Reformers Report, World Bank

One of the most “Business Friendly” countries in LATAM

Doing Business Ranking -2011

2828

Source: Proexport Colombia, Top Reformers Report, World Bank

*Positive figures show improvements in business environment

Doing Business Ranking Variation, 2007-2011*

(Change in positions)

A “top reformer” in the region

2929

Ranking made up by 183 countries

Source: Proexport Colombia, Doing Business, 2011 (World Bank)

World

RankingCountry

5 Colombia

20 Peru

28 Chile

44 Mexico

74 Brazil

109 Argentina

109 Panama

179 Venezuela

Strength of Investor Protection, 2011

Rating

Ranked among the top countries on investor protection

3030

Encourage and improve production of competitive

products and services ESTABLISHED SECTORS

Promote development of NEW & EMERGING

SECTORS

Business ProcessOutsourcing and Off shoringBPO&O

Promote value added, innovation & development in

AGRIBUSINESS SECTOR

Chocolate Confectionery

Palm and vegetableOil

Shrimp Farming Cattle

Productive Transformation Program: A Public - Private Partnership to strengthen and build “world class sectors”

Health Services Exportation

Source: Proexport Colombia, Ministy of Trade, Industry and Tourism

3131

IN FORCE

•CAN (Peru, Ecuador y Bolivia)

•MERCOSUR (Argentina, Paraguay, Uruguay and Brazil)

•Chile

•G2-Mexico

•North Triangle (Honduras, Guatemala y El Salvador)

SIGNED

•United Stated

•EFTA (Iceland, Liechtenstein, Norway and Switzerland)

•Canada

•European Union (Signature)

IN NEGOTIATION

•South Korea

•Panama

•Turkey

FUTURE

•Japan

•Australia

•New Zealand

•Costa Rica

•Dominican Republic

•Gulf Community

11 free trade agreements (FTA) with 48 countries allowing preferential

access to over 1,500 million consumers

Source: Proexport Colombia, Ministy of Trade, Industry and Tourism

3232

IN FORCE

•Peru (Agreement)

•Mexico (Agreement)

•Spain (Agreement)

•Switzerland (Agreement)

•CAN (Ecuador and Bolivia) (Chapter)

•Chile (Chapter)

•North Triangle (Honduras, Guatemala and El Salvador) (Chapter)

SIGNED

•China (Agreement)

•Peru (Deeper agreement)

• India (Agreement)

•United Kingdom (Agreement)

•South Korea (Agreement)

•EFTA (Iceland, Liechtenstein and Norway) (Chapter)

•United States (Chapter)

•Canada (Chapter)

IN NEGOTIATION

•Kuwait and Japan

In 2011, Colombia will be negotiating 18 international investment

agreements

Source: Proexport Colombia, Ministy of Trade, Industry and Tourism

3333

IN FORCE

• CAN – Peru, Ecuador and Bolivia

• Spain

• Chile

SIGNED

• Switzerland

• Canada

• Mexico

• South Korea

• Portugal

IN NEGOTIATION

• United States, Germany, Czech Republic, Holland, Belgium, India, Japan, France

In 2011, Colombia will be negotiating 16 double taxation

agreements (DTA)

Source: Proexport Colombia, Ministy of Trade, Industry and Tourism

3434

MILA will become the biggest stock exchange market by number of issuers

It is expected a foreign investment growth, multiplying dealings by 5 in forthcoming

years

Over 500

Companies

46 dealing over

US$ 1 million daily

58 dealing between

US$500 thousand and

US$ 1 million

In 2011, MILA (Integrated Latin-American Market): another opportunity

(Colombia, Chile and Peru)

3535

Colombia: On the “radar” of investors

AGENDA:

I. Introduction: why Colombia?

II. General overview of the country and the financial system

III. Opportunities: foreign trade and investment

IV. Conclusions

3636

Conclusions

• Colombia is certainly on the radar of investors

• A moment of optimism and good climate for business

• Sound fundamentals, investment grade and positive prospects

• Strong financial system and strict supervision

• Opportunities for investment and foreign trade

• But there are things to do:

Maintain the security and risk perception

Deepen social policies and reforms to tacle poverty

Keep working on the productive transformation

Continue stimulating FDI, trade and tourism

Mauro Sartori

Risk Vice-President (CRO)

Bancóldex S.A (Colombia)

INTERNATIONAL BANKING FORUM 2011

Brescia, 16 - 17 June 2011

Colombia: “On the radar”

Thank you

3838

Annex

3939

0

100

200

300

400

500

600

700

800e

ne

-07

jul-

07

en

e-0

8

jul-

08

en

e-0

9

jul-

09

en

e-1

0

jul-

10

en

e-1

1

Colombia

Indonesia

Vietnam

Egypt

Turkey

South Africa

147

196

305

347

195

176

0 100 200 300 400

Colombia

Indonesia

Viet Nam

Egypt

Turkey

South Africa

0

1000

2000

3000

4000

5000

6000

en

e-0

8

ma

y-0

8

sep

-08

en

e-0

9

ma

y-0

9

sep

-09

en

e-1

0

ma

y-1

0

sep

-10

en

e-1

1

Colombia

Ecuador

Brazil

Peru

Venezuela

Mexico

Argentina

484

166

142

836

125

139

1.039

Argentina

Brazil

Colombia

Ecuador

Mexico

Peru

Venezuela

Risk indicators

CDS EMBI INDEX

Civ

ets

Lata

m

Source: Bancóldex

4040Source: Ministerio de Hacienda y Crédito Público Banco de la República, Consensus Forecast, Dane , Bancoldex

2007 2008 2009 2010 2011f

GDP (USD bn) 207 245 236 288 318

Real GDP growth (%) 6,9 3,5 1,5 4,3 4,9

Annual Inflation (%) 5,7 7,7 2,0 3,2 3,5

Fiscal Balance (% GDP) -1,0 0,0 -2,6 -3,0 -3,1

Current Account (%GDP -2,9 -2,8 -2,2 -3,1 -2,6

Exports f.o.b. (USD bn) 30,0 37,6 32,9 39,8 45,8

Imports f.o.b. (USD bn) 32,9 39,7 32,9 40,7 44,1

External Debt (USD bn) 44,6 46,4 53,7 68,4 76,0

External Debt (% GDP) 21,5 19,1 22,9 22,5 20,2

International Reserves

(USD bn) 20,9 23,7 25,4 28,5 31,2

General overview - fundamentals

4141

Foreign trade shows a better performance

Traditional exports

Jan – march 2010 (% yoy)

8

9,14

5,64

3,50

12,63

8,77

3,86

Total Traditional Non traditional

2010

2011

Exports

Jan – March (usd billion)

38,2

55,5

103,3

62,4

29,8

8,8

10,4

Total

Traditional

Coffee

Oil & Derivates

Coal

Ferronickel

Non- Traditional

Source: Bancóldex, DANE