BANK ON IT

Colombia 2017 | FINANCE | VIP INTERVIEW

TBY talks to Jorge Valderrama, Country Head of Colombia & CAC of BNP Paribas, on 4G projects, M&A prospects, and the outlook for the year ahead.

What opportunities does BNP Paribas see in Colombia? What is the strategic importance of this market for its strategy in Latin America?

In terms of opportunities, there are many in construction and infrastructure. The 4G infrastructure projects are humongous and comparable to Mexico's energy projects, which suffered from the decline in oil prices. In the region, this is still the main group of projects where we see lots of opportunities because firstly, BNP Paribas is a bank that likes infrastructure. Being a European bank, BNP Paribas knows and likes product financing. What is more, the knowledge of international banks that we bring to the different products is important. We need to have international standards in developing our different toll roads for 4G. The same applies to the Bogotá metro, a project I hope moves forward. There you need international banks with experience developing metros in other parts of the world; since BNP Paribas has done metros throughout Latin America, we have the expertise and knowledge. The other opportunity is related to capital markets and global markets. There are many opportunities in the development of Colombia's capital markets. We think there are several initiatives in order to have asset managers be more sophisticated. That goes along with the product offering that a bank like BNP Paribas can provide those clients. These clients are mainly institutional investors, such as pension funds, banks, and insurance companies.

What role should international banks play in financing the 4G projects?

The international financial community is definitely playing an important and necessary one. The overall USD20 billion budget needs funding from every available kind of pool in the world. We are also demonstrating the extent to which domestic banks can support projects with international standards. As international banks, we are also helping develop the financial industry in Colombia. I can tell you that before 4G, the Bogotá Airport was the only project under a project finance structure. Before that, the runways independent of the airport had a different project finance structure. Other than those examples, project-financing structures of this size did not exist. Therefore, there is still a lot of learning involved, but best practices are being transmitted to the local financial community.

What do you see as the main challenges for the international finance sector to get involved in these projects?

The corruption and scandals that arose at the beginning of 2017 were definitely challenging. We began 2017 with a lot of optimism, which has unfortunately now receded. By March 2017, things began to slow down. One of the main challenges is to get past the corruption scandals we have seen. The other is to get financial closing for each project: the competitiveness of Colombia depends on it. Therefore, securing USD20 billion in funding is no walk in the park.

How have outside perceptions of Colombia changed over the last several years?

BNP Paribas is a kind of house where international investors come to see and learn about the country. We hear from three to four companies each quarter looking at Colombia and seeing what they can do. The perception of Colombia has undergone a major change. Sometimes it is sad because Colombians probably have an image of their country that is not so good in comparison to the one that foreigners now have. I do think that investment will continue to grow in Colombia. There are lots of opportunities in the country, and people from abroad are looking at them seriously. We track our reputation digitally, and one of the analytics tools we use has shown that this year we have seen a dramatic increase in the number of people and investors taking an interest in us from abroad.

What do you expect in the future M&A market, especially involving foreign players?

There is a lot of interest in the financial sector, and we will see interesting developments in the health sector. Again, we have to talk about infrastructure. This is something, at least in the 4G projects, where Colombians have a very important role, as sponsors, especially partnering with international institutions, be these constructors or pension funds. As for the other business segments of the bank, it is still a work in progress. We also see opportunities in developing consumer finance in the country. That is something in which we are seeing a lot of interest. BNP Paribas is an institution that tends to have agreements and joint ventures with other institutions. The Colombian market is excellent for developing consumer finance and bringing best practices to that aspect of banking.

What is your outlook for the rest of the year?

The end of 2017 will be better than the beginning of the year, but we are not expecting that much growth, probably around two percent. I do expect the low levels of confidence to rise by the year's end. Economically speaking, this is absolutely necessary for us to have growth. The Central Bank has got the message and said they are concerned with growth. That is why they have been cutting down interest rates. The message is there, and everybody is concerned with the way it should end. I do expect a ramp up in the second half of 2017.