Category: Colombia

Colombia has opened in 2007 financing by selling $1 billion of dollar-denominated 10-year bonds. The bonds were sold to yield 7.45%, a spread of 240 basis points above comparable US treasuries. The spread on Colombian dollar-denominated paper has widened from around 152 basis points in March, before emerging markets tanked. According to the finance ministry, this latest issue was three times oversubscribed. The deal was led by JP Morgan Chase & Co and UBS.

Colombia’s government will send its tax bill to Congress this week, seeking to reform and streamline taxes and promote investment. One of the main pillars of the bill is the reduction of Colombia’s corporate income tax rate – currently one of the highest in South America – from 38.5% down to 32% by 2009. It also seeks changes to value-added tax (VAT) by introducing an additional level of VAT, rated at 10%, on staple foods. The VAT change is likely to meet resistance in Congress as it will affect all levels of society. The financial transaction tax of 0.04% looks set to remain, despite talk of it being reduced or even scrapped. There is also likely to be a new assets tax, perhaps at around 0.3%, for assets above the $0.5 million mark. The tax reforms, which overall will help to simplify and streamline the tax system in Colombia, is seen as a positive step forward by the markets.

Colombia may issue dollar-denominated bonds later this year, should market conditions improve, as part of its 2007 financing plans. The bonds are likely to have 10-year maturities or more. The spread on Colombian government US dollar debt is currently around 244 basis points above US treasuries, as measured by JP Morgan’s emerging market bond index.

The Colombian government has started the privatization of its last remaining financial asset, Granbanco-Bancafé. The bank, the country’s seventh-largest in terms of assets, is expected to bring to the country’s coffers around $450 million and will give the successful buyer around 6% of the country’s banking assets. In this initial phase of privatization, and according to national law, the assets of the bank will be offered to the country’s pension funds, unions, cooperatives and other sectors of the so-called “solidarity” public sector. After this initial two-month phase, the bank will be offered up to other buyers. Of the local bidders, Grupo Colpatria, Grupo Bolívar, the mayor shareholder of Davivienda, and Bancolombia are all expected to participate in the sale. Foreign bidders may well include Spain’s Grupo Santander, Citibank and HSBC.

Colombia has delayed the privatization of state-run Ecopetrol’s Cartagena refinery, slated for mid-July, after some of the pre-qualified bidders requested more time. Ecopetrol, which has so far maintained a monopoly on oil refining in the country, is selling off control of the Cartagena refinery, the second-largest in Colombia, because private money is required to finance the much-needed $800 million expansion project. Pre-qualified bidders include: Brazil’s Petrobras, BP of the UK, Japan’s Marubeni Corp and Switzerland’s Glencore International. Ecopetrol will now pick a winner in August.

The Inter-American Development Bank (IADB) has approved a $200 million loan for Colombia to help improve its competitiveness. The 20-year loan is to be spent improving the business environment and help break down legal, regulatory and institutional barriers to foreign trade.

JP Morgan Chase & Co, the world’s fourth-largest bank, in terms of assets, has been given the go-ahead by Colombia’s banking regulator to set up a subsidiary in that country. The bank has been authorized to carry out investment banking and debt but not equity trading in the local market. JPMorgan Chase is thought to be planning to open at the end of this year or the beginning of next.

Colombia has appointed its foreign minister, Carolina Barco, to serve as the new ambassador to the United States in Washington. It follows the resignation on Tuesday of former president, Andrés Pastrana (1998-2002), who had held the post since last year but who resigned in protest at the appointment of former president Ernesto Samper (1994-1998) as envoy to France. Pastrana, a high-profile figure in the fight against the drugs trade, had previously accused Samper of links to drugs money. In the end, the row prompted Samper to turn down the diplomatic post. María Consuelo Araujo, former culture minister, becomes head at the foreign ministry.

Colombian home improvement chain Sodimac is planning to issue bonds into the local market worth $31.8 million. The money from the sale will be used to finance the company’s domestic expansion plans in the face of growing competition. Duff & Phelps rated the bonds AA+.

Colombia’s financial watchdog, Superfinanciera, has given the go-ahead to the securities market to establish its own market regulator, the AMV. The entity, the first of its kind in Latin America, will monitor and prevent market misconduct among its members. The supervision commission has elected Mauricio Rosillo Rojas – former head of regulation at the ministry of finance – as its president.