On June 17 2009 the Colombian Congress approved a bill that reforms Colombia's financial system, which in turn was made into Law 1328 on July 15 2009. The reform focuses primarily on three topics: the protection of financial consumers; the rules of investment of pension funds to account for the contributor's different ages and ability to take on risk; and how foreign entities can offer financial products and services in Colombia.
Having suffered its own financial crisis in 2000, Colombia's banking system was better prepared to cope with the global meltdown than many of its neighbours. Still, this is little consolation to a corporate sector that depends heavily on foreign investment and credit markets (both seriously constricted in the wake of the credit crisis) to finance operations....
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Having suffered its own financial crisis in 2000, Colombia's banking system was better prepared to cope with the global meltdown than many of its neighbours. Still, this is little consolation to a corporate sector that depends heavily on foreign investment and credit markets (both seriously constricted in the wake of the credit crisis) to finance operations. The aggregate effect on Colombia will be close to 0% GDP growth for 2009. In the words of one lawyer: "The economy is not shrinking, but it is going through a bit of a rainy day."
Colombian companies are hungry for financing and, in lieu of private banks, multilateral agencies like the IIC (Inter-American Investment Corporation) and CAF (the Andean Development Corporation) have increased their investments into the country. The Venezuelan CAF recently announced $6 billion to fund projects in Colombia through to 2011 – a step up from commitments of $5.7 billion over the past five years.
Projects earmarked for CAF funding include the construction of public transportation systems in four of Colombia's medium-sized cities, and the expansion of Bogotá's bus operations. Last March the IIC joined with Spanish bank BBVA in an agreement targeting the development of small and medium-sized businesses in Colombia.
In the continual ebb and flow of privatisation/nationalisation movements in Latin America, Colombia is currently mid-tide. The state was anticipated to be offering its utility provider Interconexión Eléctrica to the market in the latter half of 2009, but is expected to table the offer if it does not find competitive interest. The 2007 sale of a 10% interest in state-owned energy company Ecopetrol raised $2.8 billion, the biggest IPO in Colombia's history. The public/private hybrid model is the second in the region following Brazil's Petrobras.
One area of industry that may see growth in the coming years is Colombia's burgeoning film industry. Spotting an opportunity, the culture ministry is keen to develop Colombia's reputation not just as an exotic movie backdrop but also as a centre for film production akin to Mumbai, India and Nairobi, Kenya. A 2003 law that established tax incentives and a $3 million annual film development fund is beginning to show results, with private investment doubling between 2007 and 2008. Local lawyers are already seeing an upswing in mergers, affiliations and partnerships between local companies and major film producers, and they expect the trend to continue.
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