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Colombia 2016 | FINANCE | FOCUS: FIDUCIARY TRUSTS

One of the fastest-growing forms of financial services entities, fiduciary trusts in Colombia are playing a growing role in financing the country's ongoing development.

Fiduciary trusts in Colombia are some of the most important legal entities and have been key in the country's economy for the last few years. Colombia, after Chile, is the second most important market for the fiduciary business in Latin America, as there are nearly 30 fiduciary trusts that manage around 36% of the COP550 trillion ($188 billion) that the Colombian financial system has invested in different assets, according to Asofiduciarias, the association that unites the entire sector in the country. Fiduciary trusts provide a variety of asset management services throughout the Colombian economy, such as payment administration, real estate, bursarial, and guaranty fiduciary. However, the sector that has shined the brightest for fiduciary trusts is construction and real estate. Trusts have created a business that has given a new level of confidence to developers to carry out their projects.

Trusts have existed in Colombia since 1924; however, they skyrocketed in the late 1990s after the domestic construction industry surfed a buoyant economic wave, which eventually broke and left the industry in shambles. Following that period, developers began to work with fiduciary trusts to ensure the viability of projects before laying the first brick. “Trusts are tools that have given the business more confidence, which is important because the buyer knows their money is secure and the construction company knows the buyer cannot cancel partway through the project," Antonio Perez, General Manager of high-end developer Lambda, told TBY in an interview.

Colombia is now witnessing a huge growth in roads and infrastructure. Thus, trusts are approaching their businesses to remain a relevant tool among the procedures and mechanisms available lead financing activities for the country's massive 4G road projects. The country is set to experience a great development in road infrastructure, though as of now fiduciary trusts will be limited to participating only in the financial leverage of those projects. Nevertheless, trusts are moving to other segments of Colombia's economy where they have identified new opportunities for growth. In an exclusive interview with TBY, General Manager of Accion Fiduciaria Pablo Trujillo explained that his company is strengthening its presence in agriculture. “The agriculture sector in Colombia is complicated, but we have to invest in infrastructure in that area," explained Trujillo, who is one of the pioneers of the wave of expanding trusts in Colombia.

International financial companies that have started operations in Colombia are quickly recognizing the importance of having a legal entity that provides fiduciary services. Chilean Corpbanca, Spanish bank BBVA, and even Citibank all have trusts in the country. Brazil's BTG Pactual, which recently opened offices in Colombia, has announced that it will follow suit and establish an affiliate company that will offer fiduciary services.

The trust with the best performance through the first half of 2015 was Fiducor. According to rankings published by the magazine Dinero, Fiducor had a profitability of 49% between January and June and also was the company with the lowest debt level. Accion Fiduciaria was the second-most profitable company in the sector, as its profits grew 23% in the same period and it maintained itself as one the leading companies in this sector. The third, fourth, and fifth companies were Cititrust, Allianza, and Fiducolombia, respectively.
Despite the economic slowdown that Colombia experienced in 2015, the amount of assets managed by trusts increased by approximately 15% YoY. Asofiduciaria explained that the factors spurring that growth are the agility of the sector and the stable demand for fiduciary trusts even in times of economic downturn thanks to the established reputation among corporate clients of trusts as an important development tool.