The magnitude 7.4 earthquake struck on August 10, centered near San José del Palmar, in Chocó, killing at least 111 people on its first day, according to Finance Colombia’s coverage of the disaster, which also drew $1.3 billion USD in international pledges in the weeks that followed, Finance Colombia reported at the time. Colombia’s disaster-management agency, UNGRD, put the toll at 331 deaths, 111 people still missing and 36,326 homes completely destroyed as of a September 7 update — the same day as the Chocó summit — according to Semana.

Officials are calling the new initiative Colombia’s own “Plan Marshall,” a reference to the US-funded program that rebuilt Western Europe after World War II. The goal, De La Espriella’s government said, is not simply to repair what the earthquake destroyed, but to use the reconstruction to close Chocó’s longstanding economic gaps and draw new investment to one of the country’s poorest departments.

“I don’t want 100 small, scattered initiatives, each going its own way, with every ministry announcing its own program,” De La Espriella told the assembled executives, according to Valora Analitik. “We are going to do proper planning, set clear priorities, secure the resources we need and, as a government, I am committing to stay on top of execution so that things actually happen.”

Among the projects announced is the Malecón Gastronómico de Quibdó (Quibdó Gastronomic Waterfront), a new promenade along the Atrato River in the departmental capital meant to revive tourism and commerce there. Chocó Governor Nubia Córdoba said financing for the project is guaranteed through contributions from the business sector, according to El Colombiano. A separate $1 trillion COP infrastructure and connectivity package will fund five road projects to improve Chocó’s links to the rest of the country, split evenly between Colombia’s works-for-taxes program and direct private investment, according to Valora Analitik.

The strategy contemplates new commercialization opportunities for Chocó producers, through direct-purchase mechanisms that will connect local production with large business chains. (Photo courtesy Presidencia de la República)

A $5 billion COP seed-capital fund, channeled through iNNpulsa Colombia with contributions from Colombina (BVC: COLOMBINA), Bancolombia, the banking arm of Grupo Cibest (NYSE: CIB; BVC: CIBEST), and Tecnoglass (NASDAQ: TGLS), is intended to benefit roughly 1,000 entrepreneurs affected by the earthquake, with about $5 million COP going to each business, Commerce Minister Gómez Amín said, according to El Colombiano.

The Ministerio de Comercio, Industria y Turismo (Ministry of Commerce, Industry and Tourism), known in Colombia as MinCIT, is leading several of the measures aimed at accelerating the region’s economic recovery. Nuquí and Bahía Solano, two Pacific coast municipalities in the earthquake-affected zone, were selected for a tourism-development push under what officials are calling a “Pueblos Milagro” strategy, backed by Fontur — the Fondo Nacional de Turismo (National Tourism Fund) — and the Fundación Santo Domingo.

Tourism is one of the strategic sectors of the agenda for Chocó, with the strengthening of tourist destinations such as Nuquí and Bahía Solano, selected among the municipalities in the affected zones that will be supported through Fontur. (Photo courtesy Presidencia de la República)

Companies including Olímpica, Grupo Nutresa (BVC: NUTRESA) and Colombina pledged to buy directly from Chocó producers, aiming to connect them with larger markets, the government said. Separately, officials said they will promote sales of biche, a traditional Pacific-coast spirit made by Chocó producers, through the Central Mayorista de Antioquia wholesale market in Itagüí, near Medellín.

The package also includes financial-inclusion measures, 100 scholarships for young Chocoanos — 50 of them pledged directly by Grupo Nutresa, according to Valora Analitik — solar-power generation for Pacific communities, a special regime meant to formalize small-scale mining, and a special tax and legal regime the government says is designed to attract private investment to the department. Officials also said they will study the feasibility of an interoceanic canal or a rail corridor linking the Urabá region with a deep-water port on Chocó’s Pacific coast.

De La Espriella framed the plan as a long-term commitment rather than a one-time relief effort.

“Chocó was not born to be poor. We are not simply going to rebuild what was lost — we are going to connect the department, attract investment, generate jobs and open opportunities. Government and business are united so that this time, promises become facts.”

— President Abelardo De La Espriella

Commerce, Industry and Tourism Minister Mauricio Gómez Amín said the government wants the reconstruction to leave a lasting economic footprint: “We have a historic opportunity to turn reconstruction into development. The challenge now is to translate these commitments into investment, jobs, new markets and concrete results for the people of Chocó.”

According to Valora Analitik, the business leaders who met with De La Espriella included Alejandro Santo Domingo of Valorem; brothers Jaime and Gabriel Gilinski of Grupo Gilinski; a representative of the Organización Ardila Lülle; David Vélez, founder of Nubank‘s parent, Nu Holdings (NYSE: NU); Bancolombia chief executive Juan Carlos Mora; Fuad Char of Olímpica; Colombina’s César Caicedo; Tecnoglass’s Christian Daes; and Miguel Cortés Kotal of Grupo Bolívar (BVC: GRUBOLIVAR).

Headline photo:Commerce, Industry and Tourism Minister Mauricio Gómez Amín speaks on the Chocó reconstruction plan.

• Issuance of Ordinary Bonds for COP $640,000 million
• Program for the Issuance of Ordinary Bonds and Commercial Papers for up to COP $3.0 trillion
• Program for the Issuance of Ordinary Bonds and Commercial Papers for up to COP $2.0 trillion

The Long-Term Rating Outlook is Stable. The short-term national rating for the Ordinary Bond and Commercial Paper Issuance Programs was affirmed at ‘F1+(col)’.

The upgrade reflects the anticipated strengthening of Cementos Argos’ capital structure and enhanced financial flexibility due to the use of USD1.2 billion from a transaction with Summit Materials for debt repayment. Fitch projects the company’s gross and net leverage to approach 2x by 2024. Despite reduced geographic diversification from deconsolidating its U.S. operations, Cementos Argos’ profitability, reduced financial expenses, and reallocation of capital to more profitable operations are expected to support operating cash flow generation. The company’s non-controlling investment in Summit Materials provides exposure to the U.S. market, contributing to its financial flexibility.

Key Rating Factors:

Strengthened Capital Structure: Cementos Argos received approximately USD$1.2 billion from its transaction with Summit Materials (NYSE: SUM), earmarked for debt repayment. By 2024, debt payments are expected to total COP4.7 trillion, reducing the company’s debt from COP6.9 trillion at the end of 2023. The reduction in debt is expected to lower short-term debt maturities, spread out long-term amortizations, and maintain leverage near 2x.

Lower Leverage: Cementos Argos’ net leverage was 2.4x at the end of 2023, supported by favorable operating results. The transaction with Summit Materials allowed for U.S. asset monetization and debt repayment. Fitch forecasts that leverage will remain close to 2x through 2024, supported by stable EBITDA and moderate debt requirements.

Geographic Concentration: The deconsolidation of U.S. operations has reduced the company’s geographic diversification, concentrating operations in Colombia and Central America and the Caribbean (CAC). These regions are expected to account for approximately 58% and 42% of EBITDA, respectively. While this increases exposure to regional economic cycles, the expected improvement in profitability, stable EBITDA, and stronger capital structure should offset the risks.

Financial Flexibility: The non-controlling 31% stake in Summit Materials provides exposure to the U.S. market and supports financial flexibility. Cementos Argos has implemented cost and productivity efficiency programs, which are expected to improve its cost structure and profitability.

Negative Free Cash Flow: Fitch projects that operating cash flow (FCO) will remain stable, averaging COP730,000 million annually from 2025. However, due to demanding dividend payments and share buybacks, free cash flow (FFL) is expected to remain negative, with a margin of approximately -4%.

Competitive Position: Cementos Argos remains a leading producer of cement and concrete in Colombia and Central America. The company holds significant market shares in Colombia, the Dominican Republic, Panama, and Honduras.

Rating Derivation:

Cementos Argos has a more robust business and credit profile compared to Ultracem, S.A.S. (rated A(col) with a Negative Outlook) due to its broader geographic presence and lower leverage. However, compared to Colombina S.A. (rated AA+(col) with a Positive Outlook), Cementos Argos’ business profile is more vulnerable to economic cycles, although this is partially offset by its stronger capital structure.

Key Assumptions:

• Deconsolidation of the U.S. operation in 2024 and investment registration via the equity method.
• Debt repayment totaling USD1.2 trillion, with USD700 million for U.S. debt and USD500 million for Colombia.
• Annual cement sales volume growth in the low single digits between 2024 and 2027.
• EBITDA margin near 22%.
• Average exchange rate of COP4,152 per USD1 for the projection period.
• Capex and dividend distribution aligned with management projections.
• Share buybacks between 2024 and 2026 totaling approximately COP450,000 million.

Rating Sensitivity:

Negative/Downgrade Factors:

• Net debt-to-EBITDA leverage exceeding 2.5x on a sustained basis.
• Liquidity levels below 1x.
• Equity investments or debt-financed acquisitions that weaken the credit profile.
• Dividend distributions or value extraction mechanisms that increase leverage and pressure FFL.

Positive/Upgrade Factors:

• Greater geographic diversification of EBITDA generation.
• Sustained net debt-to-EBITDA leverage below 2x.
• Liquidity consistently above 1.5x.
• Interest coverage above 6.5x.
• Positive FFL generation throughout the cycle.

Liquidity:

The transaction with Summit Materials has improved Cementos Argos’ liquidity by reducing short-term debt concentrations. The remaining debt is primarily in long-term bonds with amortizations spread over time. The company’s stake in Summit Materials, a New York Stock Exchange-listed company, also supports financial flexibility. Cementos Argos maintains uncommitted credit quotas of COP2.5 trillion.

Issuer Profile:

Cementos Argos is a nearly 90-year-old company specializing in cement, concrete, and aggregates production in Colombia and CAC. Following the integration with Summit Materials in 2024, the company deconsolidated its U.S. operations, which accounted for 55% of EBITDA in 2023.

Criteria Applied:

• Corporate Finance Rating Methodology (December 22, 2023)
• National Scale Grading Methodology (December 22, 2020)
• Parent-Subsidiary Rating Link Methodology (July 13, 2023)

Published annually by the Madrid-based research organization Merco, the 2018 edition published today ranks Grupo Nutresa as the top Colombian company when it comes to attracting talent. The Medellín food processing firm — best known for consumer brands including Cafe Sello Rojo, Jet, Crem Helado, Saltín Noel, Tosh, and Zenú — operates two dozen plants in Colombia and has a presence in the United States, Mexico, Chile, and several other Latin American nations.

Merco, which has been publishing corporate-reputation-focused reports since 2000, downgraded Colombia’s biggest bank, Bancolombia, one spot to second place. It topped the rankings in 2017.

State-controlled oil company Ecopetrol, milk producer Alpina, and top domestic airline Avianca round out the top five.

The full top 100 list can be viewed on the company’s website, with the top 25 listed below including Colombian insurance giant Sura and bank Davivienda.

1. Grupo Nutresa
2. Bancolombia
3. Ecopetrol
4. Alpina
5. Avianca
6. Grupo EPM
7. Sura
8. Bavaria
9. Cementos Argos
10. Nestlé
11. Universidad Nacional de Colombia
12. Johnson and Johnson
13. Coca-Cola Femsa
14. Organización Corona
15. Universidad de los Andes
16. Pontificia Universidad Javeriana
17. Bayer
18. Davivienda
19. Colombina
20. Compensar
21. Universidad de la Sabana
22. Celsia
23. Cemex
24. Universidad del Rosario
25. Pepsico

(Photo credit: amtec.us.com)