No organization works harder in this mission than ACI Medellín, the city’s public investment promotion agency, and Juan Camilo Mergesh is now leading the way. He recently took over as executive director in February after the previous director, Eleonora Betancur, left to join the the administration of Colombian President Gustavo Petro.

To learn more about how ACI Medellín is positioning itself and pursuing its goals, Finance Colombia Executive Editor Loren Moss recently sat down to talk with Mergesh about the organization’s focus on technology, ongoing international relationships, and cooperation with companies from across Latin America.

Finance Colombia: I know you have only been in your position for just a few months, and because the government changes every four years, you don’t have that much time to have an impact. But can you tell me about your goals? How will you measure if your time is successful?

Juan Camilo Mergesh: I’m not dogmatic at all. I like achieving my goals pragmatically, and I am focused on very punctual goals. I’m a manager. Time goes fast, and I set some specific goals that can be achieved in a short period of time, which is the seven months we have left.

On top of that, there are some goals set by the mayor related to a social and territorial approach, such as expanding cooperation to new places, to the districts, and to Medellín’s poorest neighborhoods.

And there is expanding cooperation along with the development plan and focusing on new 4.0 technologies, innovation, and science. We believe this administration is the industry of the future, and in this re-industrialization process that Colombia is going through, we believe one big goal of the cities is quitting coal and the extraction of the natural resources that we’ve always had. We would like to change from exporting those resources to exporting services — and those services export minds and knowledge.

These are the two priorities we have, and we must — and we will be able to — achieve these goals to boost the future of Medellín.

“We believe one big goal of the cities is quitting coal and the extraction of the natural resources that we’ve always had. We would like to change from exporting those resources to exporting services.”

– Juan Camilo Mergesh

Finance Colombia: For ACI Medellín, I know another goal is always to promote and attract investment to Medellín, including foreign companies and businesses. What are some achievements or projects you’ve participated in?

Juan Camilo Mergesh: Yes, we work to position Medellín in the international sphere and keep Medellín as a relevant global player in different dialogues with the most important cities in the world — like Phoenix and cities in Korea, Argentina, and Spain. We’ll keep taking care of that.

We also always have carefully programmed indicators already given to the development plan — almost $150 million USD for this year — and also for investment as well of almost $10 million USD ready for cooperation. These are just numbers. But we are giving them a human face and seeing the people this project will impact and how it will help the Medellín community have better living conditions and better salaries.

Finance Colombia: I know there has been a lot of work with Phoenix in the United States. Can you tell me more about that?

Juan Camilo Mergesh: Yes, we dialogue with communities that share our focus on the digital economy. The first, which I was in charge of, is the economy of the North American software valley in Phoenix, Arizona. I had to discuss and program the agenda to meet the Phoenix mayor to sign a memorandum of understanding. Within this, there is a clause that states that we are working together to develop Medellín’s digital economy from Arizona and with Arizona companies.

We also met with the president of the Chamber of Commerce of Phoenix about some flaws, or complaints, that they have identified, and we gave them solutions only we could provide. Basically, all of their issues are related to some local human talent they have had.

We are at a geopolitical crossroads with the production of microchips: 21st century gold. You couldn’t be recording this interview without microchips — or drive cars or fly planes. We couldn’t have cell phones or computers without these elements. These next-generation microchips are being produced in Taiwan, but there they have a geopolitical element that’s very unstable.

Taiwan is becoming one of the richest islands in the world because of chip production, but Taiwan Semiconductor Manufacturing Company (TSMC), one of the world’s biggest microchips manufacturers, chose to make a major investment in Phoenix with more than $40 billion USD to build an impressive plant.

Finance Colombia: Yes, I know they made a major investment!

Juan Camilo Mergesh: Then they built impressive hubs. They have a technology hub. They own an ecosystem where science is applied to medicine, transport, education, and AI — an entire ecosystem in which each one nurtures the other with the new use of microchips.

However, they have an issue in Arizona: they don’t have a workforce. That was the problem identified the president of the Chamber of Commerce. They told me the number of jobs is twice as high as the number of people. And I said, in Colombia, we have the opposite issue: For every three people, we have one job!

So, there, we found a win/win situation. Medellín has long has been focusing on creating human talent, promoting innovation, technology, and knowledge, especially with work from organizations such as Ruta N, an innovation center and an incubator of startups and digital innovators.

Here in Medellín, we’re creating strategies for innovation, technology, and new ways of designing 4.0 technology to reach citizens from the farthest, most depressed, and most violent districts. This goes along with an educational revolution in this administration, in which all the children from public schools — or most of them — have computers provided by the government. This way, they can start surfing the modern Mediterranean: the internet.

Here in Medellín, we’re creating strategies for innovation, technology, and new ways of designing 4.0 technology to reach citizens from the farthest, most depressed, and most violent districts.

– Juan Camilo Mergesh

We have provided 180,000 computers to children from all public schools in Medellín. All that creates an ecosystem, along with companies that have entered the territory like MercadoLibre and Globant. All the software companies that compose this ecosystem are attracted by the commitment — and also tax matters. It becomes interesting for the investor when tax is reduced to 50% — I mean, local tax, which is not our industrial and commercial tax — but also when the property tax is reduced to 50%. Once they reduce that, it becomes attractive to investors.

On one hand, here in Medellín, they have a tax incentive that is almost 40% of what they charge in their country. They also find a human talent supplier, because of all these educational centers and the digital revolution that companies naturally nurture. But they also have the support of the government when installing here, low-price coworking organizations like Ruta N, and the whole ecosystem that has all the vitamins to grow up and become very productive.

That made Medellín attractive. It almost sells itself to societies that need these kinds of ecosystems because, at this moment, they are in a geopolitical crossroads, and Medellín is the best ally to overcome and grow together.

Finance Colombia: You have tackled a very important topic. When I talk to colleagues around the world — analysts and journalists — about the topic of supply chains there is a fear of hostile events between China and Taiwan, and just disruption in general, so they need to have another place. There are companies like Apple that are taking many operations out of China and moving them to India. I’m from Ohio, where Intel is building its new factory with “only” $20 billion USD, so I’m kind of jealous oh Phoenix!

How does Medellín — or, on a bigger scale, all of Colombia and Latin America — use this to take advantage of the opportunities that in the past always went to Asia? Medellín and Colombia have a history producing textiles. Why not manufacture the chips in Colombia?

Juan Camilo Mergesh: First, I would say Medellín — and Colombia and all of the Americas — has significant advantages around the world. For one, we have the same time zone as the United States and Canada. That is an advantage when providing long-distance services because we don’t have to answer communications at 4 am like they do in India or Taiwan. That’s very important.

Secondly, we have an exchange rate that is attractive to the investor. The Colombian minimum wage is around $275 USD monthly. That’s not even the minimum weekly wage in many place — or maybe daily since you’re an American!

Finance Colombia: I think it’s different in every state in the U.S., but they will pay more than the minimum wage to attract the right people. But, here in Colombia, you can hire great talent for a minimum wage.

Juan Camilo Mergesh: Talent that is committed to the implementation of new technologies. Talent that wants to learn in the global labor market how are value chains made and has new ideas to contribute to these value chains. We already showed this in Ruta N, the incubator of ideas for new technologies and startups in the world.

These are the three crucial elements that Medellín has, and it’s very different from what can happen in Taiwan or in other places of the world in terms of economies and digital services. It’s no secret that in Medellín there are many BPOs and services being provided to North America.

Another important point is that Medellín is the special district of science, technology, and innovation. It’s legally built as a district where the national budget will help cultivate and promote the startup sector. It won’t be in Pasto or Bogotá. No city in Latin America has this characteristic of being a district as focused on science, technology, and innovation as Medellín. Barranquilla is the port district, I think. Cartagena is a historical district. But we are an industrial district of science, technology, and innovation.

There are huge elements to exploit because we have that combination of human talent, universities, and companies already located and supported by the government with tax reduction, but also with taxes and cash remittances towards Ruta N and others. They fund many of these ideas that are built in the territory.

I believe that’s how this perfect ecosystem is created — and that can’t be compared to any Latin American city. We can brag about it, we have a very structured system. And ACI Medellín comes to make it even more dynamic it by globalizing this industry. They create these bonds and attract investors by exposing it to the world, and taking away that cliché that 30 years ago we were the most violent city in the world, but now we are transitioning to being the most innovative city in the region.

Finance Colombia: I would like to ask one final question: Why Medellín? Talking not to me, but to companies that are the global investors and may be looking to build a BPO, technology factory, an IT company, or something else. With all the places you have been around the world, why Medellín?

Juan Camilo Mergesh: Medellín has impressive systems at a Latin American-level, regarding public transport and public service. We are the most public city in Colombia and the region. The subway system, for example, is financed and operated completely by the city — by a utility company, which is completely public. We have EPM, a public services company that provides water, sanitation, energy, and gas. It builds quality living standards and mobility standards for the operators, which makes Medellín a great place to live for those who are located here.

Workers, digital nomads, come here to Medellín.

Then there’s the weather! We have the same season for the 12 months. It’s an attractive city from the point of view of weather, but also of business.

We are an industrial district of science, technology, and innovation. There are huge elements to exploit because we have that combination of human talent, universities, and companies already located and supported by the government.

– Juan Camilo Mergesh

We have Latin American brothers here already, and it’s also my goal to cooperate together with the region because we share the same language, religion, culture, the same sky — but also the same concerns. We have undeniable violence, social exclusion, and poverty in many cities of our territory. And we can show how, from a Latin American perspective, we have started to take action in those matters, and said, look, these are the problems and we haven’t solved them. But we are working with this huge group to combat them.

Those social and economic facilitators that sustain economic administrators end up being social facilitators that make Medellín a regional role model. And we are absolutely willing to show it in Guayaquil, Quito, Caracas, Montevideo, Buenos Aires.

We have had great cooperation and an ongoing link with Argentina, which is a very important Latin American brother. They are going to open a consulate in Medellín because many Argentines come here. A lot of Argentinian companies came here with their Argentinian workers. That creates a scenario in which almost 70,000 Argentines need IDs, passports, and paperwork. There are more Argentines per capita in Medellín than in Bogotá, and that creates a very special dynamic because it also brings cultural exchange. We have now 200 years of relationship with Argentina. We have the Festival de Tango. We have the Festival de la Filarmónica with Argentinian cultures. The Festival de Miradas, where almost all actors and movie directors come.

All that makes Medellín more dynamic and makes it a role model in the region, in terms of cooperation and cultural exchange. Look, we are operating the Quito subway. Metro de Medellín operates the Quito subway. That’s cooperation, that’s city diplomacy, that’s how we grow together.

Not only is Medellín becoming the most interesting city in the region, but it’s also taking the region out of the places we’ve fallen into as Latin American countries since a long time ago — poverty, exclusion, and lack of opportunities for the young. All that becomes the cover letter for Medellín.

Photo: Juan Camilo Mergesh of ACI Medellín. (Credit: ACI Medellín)

“I make available to ACI Medellín my knowledge and experience acquired within a law firm specialized in public procurement in Bogotá, as well as work experience in France, initially with the management of the company Tractebel-Engie, where I participated in the negotiation, drafting and legal monitoring of project management in France and non-French-speaking countries, and then within the firms GB2A lawyers and G4 lawyers, where I assisted in the structuring and legal closure of civil engineering projects in France,” said Mergesh of his background.

During the last year of Betancur’s tenure, ACI claimed $148 million USD in foreign direct investment, translating into 3,500 new jobs in the Aburrá valley of metropolitan Medellín.

“I am part of a common dream of making our city a pole of development and innovation that leads us to lead the Fourth Industrial Revolution in the region and internationally, always aiming to close inequality gaps by generating opportunities for employment, development and modernization. I am happy to put my knowledge and experience at the service of Medellín and the region,” said Mergesh.

Photo courtesy ACI Medellín

The event, organized by Mayor Daniel Quintero and the municipal investment promotion agency ACI Medellin hosted ambassadors from several countries, including The Dominican Republic, Haiti, El Salvador, Costa Rica, Spain, Denmark, Israel and Sweden, and mayors from throughout the Americas, including Peru, Ecuador, and Mexico.

Biosafety protocols were carefully enforced throughout the event.

Visitors were shown many of Medellín’s recent successes, along with ambitious plans such as the new 80^th Avenue light rail project, various initiatives from city agencies, and the Mayor’s controversial plan to close the city’s municipal airport, replacing it with an expansion of the international airport in nearby Rionegro, and a new airport to the north of the city.

Friday, dignitaries were taken on a walking tour through downtown Medellín, then rode the “Tranvia” light rail to the neighborhood of Buenos Aires, where they took the “Metrocable” cable car public transport system to a box lunch and neighborhood performance. The tour was designed to highlight the city’s decades-long efforts at social inclusion, and technological ambitions to create what Quintero calls the Software Valley.

“Now more than ever, we realize that many cities want to know our model and replicate it in their regions to advance in the way that Medellín has done. So this event makes it clear to us that Medellín is a model to the world and that people want to know what we are doing well and that allows us to position ourselves as an innovative territory in the world,” said ACI Medellín’s executive director, Eleonora Betancur.

“The image that the world has of Medellín is of a city that has taken an impressive step. I do not know another city that has changed so much in such a short time and it is a very tangible reality in all the streets and people,” said Hungary’s consul to Colombia, András Beck.

Here in Colombia, Cartagena has had a notoriously corrupt city administration. Newly elected Mayor William Dau was voted in on an anti-corruption platform and has quickly made some very powerful enemies taking on criminal structures. Bogotá’s political/civic culture can be described as “battle royale” where it is everyone against everyone: Private sector vs. public sector, north side vs. south side; each new administration seems to try to undo and reverse everything that was done before. Many remember former mayor and now Senator Gustavo Petro’s garbage fiasco where trash piled up on the streets of Bogotá in 2012 as Petro unilaterally canceled contracts with sanitation contractors—without a viable plan to replace them. Corrupt contractors are still in jail over the “Carrusel de Contratos” scandal where politicians and corporate thieves conspired to rob millions during the construction of Avenida El Dorado, the main thoroughfare leading to Bogotá’s international airport. Petro kept the fares on Bogotá’s Transmilenio bus system artificially low to buy popularity, creating an operating deficit and financial crisis that the following administration would have to fix, and automatically vilifying whoever would follow and have to make unpopular, drastic corrections.

On multiple occasions, Finance Colombia has reached out to Mayor Daniel Quintero for comment (on various issues), who through his press secretary has refused comment or reply.

On the other hand, Medellín’s professionally managed metro runs on-time, is clean and safe, and used by riders of almost every socioeconomic stratum. Medellín has continued to win international accolades throughout the years, hosting the World Economic Forum’s Latin America event in 2016, several UN events, and many delegations from foreign municipal governments to learn best practices. Many visit the city’s Ruta-N business and entrepreneurship incubator that can be credited, along with ACI (Agencia de Cooperación Internacionál), the city’s investment promotion agency with bringing countless jobs and investment to the Aburrá Valley; home to Medellin and its immediate suburbs like Envigado, Sabaneta, Itaguí, and Bello.

The city is home to several multinationals: Bancolombia, Colombia’s largest Bank; Grupo Sura, an insurance, investment & health care giant; Cementos Argos, which as a cement producer is the 4^th largest in the United States and exports to 27 countries; Nutresa, which is like a Latin American Unilever or Nestle, and newer companies like Viva Air. More precisely in the Medellín Suburb of Rionegro, the low-cost airline operates routes throughout Colombia & Peru, to and from the US, and is currently in expansion mode despite the COVID-19 Pandemic.

EPM Headquarters Building in Medellín’s Plaza Mayor

Another multinational with a very unusual business model is EPM, Empresas Públicas de Medellín. The public utility is responsible for sanitation, sewers, water, electricity, and natural gas in Medellín and much of the surrounding suburbs and rural areas. In a joint venture with global telecommunications provider Millicom called Tigo Une, it provides faster residential internet service than is available in many US cities. Earlier this year, they purchased the formerly insolvent utility networks of much of Colombia’s Caribbean coastal region. EPM already owns utility operations outside of Colombia, with assets of the multibillion-dollar company stretching from Chile to Mexico. EPM, though it does issue debt on international markets is not a publicly traded company. Neither is it a municipal utility. It is a separate company with professional management and (up until now) a board of directors to provide corporate governance, but with the city of Medellín as the sole shareholder. In the form of dividends, EPM provides almost 30% of Medellín’s municipal budget, but the key to this arrangement has been that it operates as a separate entity, expressly not part of the municipal administration, but of course with the city’s input. The mayor by statute is the chairman of EPM’s board of directors and has prerogative to appoint the CEO. As shareholder, the city also appoints board members.

A breath of fresh air?

Many in Medellín were pleased to see Daniel Quintero elected last year as a “breath of fresh air” and change from the traditional power families that have controlled politics, especially as he defeated Alfredo Ramos, son of a former governor and member of Centro Democrático, the party of “Uribistas,” personal acolytes of former President (now under house arrest for witness-tampering charges) Alvaro Uribe. With Medellín & surrounding Antioquia Uribe’s home turf (he was both mayor of Medellín & governor of Antioquia before becoming president of Colombia), it was something of a surprise that this local who was raised by a single mother who died when he was just 14 in a mostly poor neighborhood (Tricentenario) won the election. As a youth, Quintero worked as a street vendor struggling to put himself through college. No one knew quite what to make of him.

Quintero had politicked at different times as a member of Colombia’s Liberal Party, Conservative Party, and Green Party before establishing the “Tomato Party” as a publicity stunt to get himself noticed (see the headline photo). He gained attention by throwing tomatoes at pictures of politicians and people he didn’t like, such as Alvaro Uribe and then President Juan Manuel Santos, though he decided to support Santos’ re-election in 2014. He was then rewarded with the political appointment of running InnPulsa, Colombia’s national entrepreneurship promotion agency, then becoming vice-minister for ICT (Information & Communication Technologies) under Santos. In the last presidential election, Quintero initially supported mainstream liberal candidate & peace negotiator Humberto De La Calle, before switching his support to controversial former mayor of Bogotá Gustavo Petro’s (mentioned above) candidacy.

So no one knew what to expect, though it is clear they wanted more of the vice-minister of technology or InnPulsa director than the tomato throwing stunt man who once handed former EPM general manager Jorge Londoño a chunk of cheese (nonverbally calling him a rat).

A whiff of Limburger—stinky cheese.

Finance Colombia being primarily a business and finance publication rather than a political journal, heard some low intensity criticism of appointments that Quintero had been making in the city administration and the way he was making them, but did not actively pursue the stories at the time. Quintero made some other moves that seemed politically silly, such as writing the Cuban government to ask for doctors to help with the COVID-19 pandemic. Regardless of the merits of Cuban medical missions (which are very dubious), it is inconceivable that the current national government would permit such activity, and the action could only embarrass the mayor, which it did. Finance Colombia chalked it up to benign political inexperience.

The mayor also fought back a scandal where he was accused on social media of inappropriate sexual conduct before he was mayor, but even more ominous was his reaction to the press, which brought condemnation from Colombia’s Foundation for Press Liberty, FLIP:

“FLIP was able to document that Quintero personally pressured media executives and pointed out journalists as being opponents of his administration as a way to avoid questions about matters on which he must be held accountable…In events related to this situation, administration officials tried to force national and local media to improve the image of the mayor in exchange for advertising. Telemedellín (City government’s official TV channel) officials asked W Radio to rectify a truthful publication and also that the media agree to subscribe and publish a joint statement with Telemedellín to disseminate as true a situation that did not correspond to reality,” said the journalism rights defense group.

In other words, “I will buy advertising with your paper if you help me bury this scandal.” FLIP also denounced the mayor for pressuring newspaper El Espectador to block coverage of the scandal. According to FLIP, and El Espectador’s own account of the misdeeds, the publisher, Fidel Cano, responded by sending the questions to the mayor that his reporters had been trying to ask. “The mayor of Medellín assured the director of the newspaper that he would take legal action if the publication affected his reputation” (he never did).

All this so far and the mayor has served only his first 8 months of a 4-year term.

The mayor’s official press conference, canceled at the last minute, crowing “Why Medellin is the world’s standard in the assertive management of Covid-19” as cases in the city began to skyrocket

On June 27, the Quintero administration scheduled a press conference titled “Why Medellín has one of the lowest contagion and mortality rates in Latin America?” scheduled for July 2^nd, and led by Daniel Quintero himself, backed by Andree Uribe, Medellin’s Secretary of Health, Alejandro Arias, Medellín’s Secretary of Economic Development, and Eleonora Betancur, the director of ACI Medellin. The day before the press conference, it was abruptly canceled. It seemed the mayor wanted to take credit for good news but avoid bad news. The headlines that day in El Colombiano, Medellín’s largest daily? “100,000 cases of Coronavirus in Colombia, Where are we going?” and with 40% of ICU units full, “Doctors of Antioqua appeal for total & obligatory quarantine.”  The last weekend of August the ICUs are now 70.79% full. The day the press conference was to be held, a headline in El Colombiano announced a coronavirus outbreak with 36 infected in the La Paz prison in Medellín’s southern suburb of Itaguí.

The cases—and deaths were just beginning to skyrocket and two months later Colombia has one of the world’s worst mortality rates on a trailing 7 day average. According to the Colombian government, Antioquia department (Medellín is the only large city in Antioquia) alone has had 77,709 cases so far. Colombia now has over 18,000 deaths from COVID-19, most within the past two months. 1,603 in Medellín & surrounding Antioquia.

Last month, EPM general manager Álvaro Guillermo Rendón announced a memorandum of understanding with InnPulsa, the same national government agency formerly run by Quintero himself, that would, if more than just talk, “convert EPM into a laboratory of smart cities, the 4^th industrial revolution, and the orange economy.” All well and good (maybe, but that doesn’t sound like the function of a utility), but what the public did not know was that this fundamental change in corporate strategy and negotiations with the national government were worked out without the knowledge, discussion or approval of the company’s board of directors. EPM was being treated not as a separate entity but part of the municipal administration.

OFFICIAL STATISTICS: As of August 28th, Antioquia had 77,709 total COVID-19 cases, 1.603 deaths and hospital intensive care wards were over 70% of capacity over 80% of Antioquia’s cases are from metro Medellín.

The $2.7 billion dollar WTF

On August 10, EPM sent out a press release (and the mayor tweeted) that EPM would be initiating legal proceedings in the amount of  approximately $2,7 billion US dollars against the consortiums responsible for construction of EPM’s troubled Hidroituango dam that suffered catastrophic setbacks due to unexpected flooding in 2018 and design flaws that were thus revealed. Whether such legal action is a good idea is debatable: On one hand there certainly were defects that have cost the company millions and delayed the project by over a year. On the other hand, litigation could potentially bring the project to a halt, as EPM is still depending upon the parties it is suing to complete the project before certain deadlines, or it faces economic penalties in power generation commitments of over $150 million USD. It is also far from certain that EPM would prevail in its legal crusade against all the parties named, some of which have nothing to do with the construction defects that led to a tunnel blockage during construction.

The shocking thing is that Mayor Quintero along with Rendon and Alexander Sánchez Pérez, EPM’s vice president for legal affairs, declared this multibillion dollar action without discussion, input or even knowledge of the company’s board of directors!

The next day, the entire board of directors, except for Quintero himself, resigned.

Soon Quintero tried to justify his actions saying “there was no time” and he had to act, but he had already been mayor for 8 months and ran on a campaign of rectifying the Hidroituango situation (remember his cheese stunt with the former general manager?) and so was aware of the situation. If not, he had 8 months to be brought up to speed. At any rate, without board ratification, such actions have dubious legal force, and as bad or worse, prove a lack of corporate governance at EPM and direct political control. CEO Rendón clearly answers not to the board of directors but to a politician.

One day after the board of directors of EPM resigned, the entire board of directors of Medellín’s storied Ruta-N also resigned, along with its executive director, Juan Andrés Vásquez. Ruta N was already under its third executive director in Quintero’s 8 month old administration. Vásquez learned that Quintero was replacing him after Quintero announced Trump-style, in the media, saying he “had drifted away from the administration.” Like EPM, Ruta-N is not a city agency directly under the administration, but a public-private partnership with professionalized management and governance, and internal merit-based personnel policies.  Sources inside Ruta-N say that Quintero had been trying to circumvent the qualifications-based hiring of the business incubator to install friends and supporters into sinecures. People inside both organizations indicate that morale is at bottom.

Beverage giant Postobón rescinded its financial support of a health initiative spearheaded by Ruta-N saying it no longer had confidence in the entity’s governance. Postobón had already spent $4 billion pesos on the initiative to build respirators for coronavirus patients but said it would continue to donate, just elsewhere after the board resignation.

That same week, in reaction to what it called “a deterioration of corporate governance controls at the company,” global ratings firm Fitch downgraded EPM’s credit as a bond issuer to one notch above junk bond status. In a statement, the foreign, independent agency stated:

“Fitch believes recent actions taken by the company are contrary to the Governability Agreement, signed on April 23, 2007, between the City of Medellin and EPM’s management, in which the municipality agreed to respect the autonomy of EPM as an industrial and commercial enterprise of the state and to act exclusively through the board of directors.”

Flailing about

The mayor scrambled to assemble a new board of directors for EPM, which as an issuer of debt in the international capital markets, must answer to institutional bondholders. Over the ensuing days, Quintero variously announced that Claro Colombia CEO Juan Carlos Archila would join EPM’s board (creating a conflict since Claro competes with Tigo Une), Grupo Santo Domingo’s Alberto Preciado,  Luis Fernando Rico, formerly of Isagen, another Colombian utility, and Sandra Suarez, the former general manager of newsweekly Semana all rejected Quintero’s oddly public nominations. Did he not confirm with them beforehand if they would accept the appointments, or did they publicly reject the nominations as a rebuke to the mayor?

Meanwhile, EPM’s board representative to Tigo Une, Federico Arango Toro also resigned in a public letter saying he wanted no part of Quintero’s administration.

Banks and insurers are already turning their back on EPM, citing a lack of control at the organization. EPM had to admit that certain loans and lines of credit had been shut off after the board resignations. An internal document seen by Finance Colombia stated that the firm may have difficulty finding or renewing certain insurance coverages.

In the midst of all this, Colombia’s human rights tribunal set up as part of the 2016 Peace Accords, the JEP (Special Jurisdiction for Peace) has subpoenaed general manager Rendón under threat of arrest for ignoring during his 8 months as the utility’s legal representative, a year old subpoena for documents regarding possible obstruction of the search for the remains of victims of violence during the construction of Hidroituango, before Rendón’s appointment.

Medellín’s city council is on scheduled recess, but they have publicly asked the mayor to reconvene a session to discuss the governance crisis. Under law, (article 23, law 136 of 1994), they can only formally convene during a recess at the mayor’s request.

Labor unions & business community united

EPM’s largest labor union, SINPRO has called for a protest on Wednesday, September 2nd, for everyone in the city to turn out their lights for 30 minutes at 8pm, and for workers and the public to gather outside of the company’s headquarters in Plaza Mayor at that time for a rally in defense of EPM.

“When Medellín turns off, we hope that our leaders will understand that this is everyone’s problem, and that a city shut down doesn’t serve anyone. If EPM is in crisis, it doesn’t just shut down the city, it shuts down the country,” said union President Olga Lucia Arango.

The union is also demanding explanation of EPM general manager Rendon’s alleged private gym and luxury remodel during a time the company is under self-imposed austerity orders.

Civic leaders, executives, and nonprofits from across the region have begun to organize in reaction to the mayor, forming on August 25, a veeduría, or citizen’s oversight group ”made up of people with no particular economic interests in either EPM or the mayoralty that will work to take care of the heritage of the city and the interests of all Medellinenses.”

The initiative, called “Todos por Medellín” (Everyone for Medellín) is backed by over 40 groups, including the Chamber of Commerce of Medellin (in Colombia, chambers of commerce perform a quasigovernmental function, for example, as the registry of corporate and nonprofit organizations, and their articles of incorporation), the Intergremial committee (a grémio is a trade group or business association), and Proantioquia, the region’s primary civic benevolent foundation.

The mayor gets combative

Last Thursday, Mayor Quintero showed no contrition, but tried to dismiss the concerns as political machinations. “The oversight is fine, but we need oversight agencies to see everything. They didn’t see a lot of things, for example, $17 trillion of debt in the last 15 years. How come they didn’t see Orbitel, UNE, Antofagasta, Porce III and Hidroituango? A mayor appears to them who responds, has character, then a lot of politicians come out to do oversight. The veeduría is welcome but we are going to review everything. That the mayor is the one who manages the networks and they govern? No!” he said in a press conference.

Taking a page from the playbook of his preferred presidential candidate and apparent ally Gustavo Petro, who had a disastrous term as mayor of Bogotá and was temporarily removed from office by the national government, Quintero frames it all as a nefarious plot against him (does he think international ratings firm Fitch is in on the plot?)

“There are some groups full of politicians who want to carry out processes to revoke the mayor, that have been moving for a long time, we are ready, we have no problems in showing results and what we have done. They are worried because a long time ago they did not meet an independent mayor, a mayor who is not beholden to politicians or businessmen, but to the people,” said Quintero.

Navegamos entre fuerzas oscuras que se resisten al cambio. Con fe y sin miedo seguiremos adelante con transparencia, honestidad y contra la corrupción y la politiquería.

— Daniel Quintero Calle (@QuinteroCalle) August 26, 2020

CAPED CRUSADER? Quintero seems to fancy himself a hero navigating “between dark forces that resist change. With faith and without fear we will continue forward with transparency, honesty, and against the corruption and politicking” he tweeted last week after learning of the group Todos por Medellín.

Analysis

Quintero’s plan seems to be to blame his woes not on his own actions, but on former President Alvaro Uribe. Uribe’s reputation has steadily declined since his presidency, and where he was once seen as the man who rescued Colombia from communist rebels and drug cartels, his legacy has steadily soured as an avalanche of allegations and evidence piles up that tie him directly to paramilitary death squads during his time as governor, and indirectly to narcotraffickers and civilian massacres committed during his presidency. As if that were not enough, he is currently under arrest and confined to his northern Colombia ranch on charges of witness tampering, attempting to frame leftist senator Ivan Cépeda, a nemesis of Uribe in the Colombian senate.

Quintero wants to blame Uribe & his Centro Democrático for his woes, but since Uribe founded the party in 2013 it has never won a mayoral election in Medellín. The last Uribe supporter to hold the office was Luis Pérez from 2001-2004. Perez later abandoned Uribe for President Santos, working in 2015 as his regional campaign coordinator to defeat Uribe’s chosen presidential candidate Ivan Zuluaga.

Blaming the Uribe bogeyman may be a good tactic after the damage that has been done, but those aghast at recent developments extend far outside Uribe’s sphere of influence. Uribe did tweet support for the citizens movement, and Petro in support of Quintero, but opponents of Uribismo are also speaking out against Quintero. Former mayor of Medellín (2004-2008) and governor of Antioquia Sergio Fajardo immediately wrote a letter of concern, on August 12, admonishing Quintero’s actions.

Medellín’s previous mayor, Federico Gutierrez, nicknamed Fico, surprisingly upset Uribe’s candidate Juan Carlos Vélez to win the mayoralty in 2016. His letter, also dated August 12 is even more blunt. “EPM & Medellin are in danger.”

Letter from former Medellín Mayor Federico Gutierrez: “EPM & Medellín Are In Danger”

“The discourse of Quintero is based on lies. He talks of social struggle, of a class struggle, the same ideas of Gustavo Petro, who furthermore was the first to celebrate and support the mayor’s decision to deinstitutionalize EPM, which obliged the board’s renunciation. But look at the contradictions: What kind of social struggle destroys the motors of progress? EPM is that very thing, an incalculable help for the most vulnerable communities, a tool to breach social divides.” – excerpt from Federico Gutierrez’s letter.

Paisas, as people from Medellín & Antioquia call themselves tend center to right on the political spectrum and have less appetite for the far-left adventurism much more popular in Bogotá. Marxist talk like “class struggle” doesn’t go over so well here. Before this editor started Finance Colombia or even moved to Colombia, representatives from the city (going back to before 2013) would call and extend invitations: “Come to Medellín, let us show you what we are doing” with genuine pride. At the time, this editor was an analyst covering the Latin American services sector for a Connecticut-based research firm. “Look, we want to show you the good things we are doing!” Apparently with no other motivation beyond civic pride and attracting investment and positive attention. “We are building the Metrocable system” a network of cable cars extending far up into low income hillside neighborhoods on the valley walls. “We are building it so everyone can participate in our economic growth,” they said, beaming with pride. Not politicians or political appointees, but entry-to mid-level civil servants.

After moving to Colombia, first to Bogotá and launching Finance Colombia, the outreach didn’t stop. Medellín kept calling. “Come see what we are doing!” In 2015, Finance Colombia published “Social Inclusion: The Secret Sauce To Medellín’s Incredible Renaissance.”

They were going about it pragmatically, person to person, neighborhood to neighborhood, but without any ideological polemics or Marxist-Leninist babbling. There was no talk of class struggle, no attack on the city’s beloved institutions, whether well-established like EPM or new innovations like Ruta-N. Generally, each succeeding administration handed the keys over to the next politely, and with decorum.

One thing that unites Paisas, especially those in Medellín is the progress the city has made, going in less than 3 decades from one of the most dangerous on earth to an international showcase. Startups and international businesses have entered Colombia by first setting up operations in Ruta-N then moving out into larger spaces as they gain a foothold in the country. Get in a taxi and instead of trying to rip you off like in some parts of the country, if the driver realizes you are a foreigner, they will inevitably ask “What do you think of Medellín?” and beam with pride like you just presented them their firstborn child if you have something nice to say.

When protesters rioted in Bogotá last November, partially destroying their own transportation infrastructure and battling with police, Paisas marched peacefully. A few vandals were quickly confronted by peaceful protesters, and students came to undo the defacing they caused.

Medellín has built a strong credit rating in international markets for municipal debt, and EPM has enjoyed an investment grade credit and risk profile. There has been a level of peace between labor and employer, business and government rarely seen elsewhere in Latin America. Is it run by saints? Of course not. But that is precisely why the checks and balances of good governance are important, and Quintero seems to either not understand this, or have other priorities. EPM provides the city with more than electricity, water, and natural gas services. The international corporation provides almost 30% of the city’s revenue by way of operating profits. The fortunes of every residence and business in the Aburrá Valley (where Medellín is the largest city) are tied to EPM. The vitality of the city’s foreign investment attraction is tied to Ruta-N. Investors, both institutional and global-minded individuals are attracted by collaboration and progress, and repelled by scandal, conflict and controversy.

Being a crusader is easy. Throwing tomatoes at pictures is easy. A child can do it. Governing is complex and requires accountability. Medellín Mayor Daniel Quintero is sawing at the very foundations of Medellín’s success, by attacking its governance and institutionalism. It may very well be a good idea to take legal action against the consortiums that are (still) building the Hidroituango dam. But to launch a multibillion-dollar lawsuit behind the back of your own board of directors? No deliberation by the body designed to deliberate such fundamental issues? Are we seeing dictatorial tendencies, the likes of which one would expect from a Banana-Republic Caudillo?

When criticized, the new mayor goes into attack mode. Seeing everyone from the labor unions to civic leaders as a cabal “out to get him.” This editor remembers seeing such behavior at the beginnings of Chavismo in Venezuela. It is also Donald Trump’s style. Attack someone who is offering constructive criticism and they often will instinctively get sidetracked trying to defend the legitimacy of their criticism, allowing attention to be shifted from the original critique, no matter how legitimate.

“Ah, he’s going after the elites,” one more populist journalist friend said to this editor, when the conflict between former directors and the mayor became public. “Who the hell do you want running a multibillion-dollar international energy company?” this editor replied. “They had damn sure better be elite and know what they are doing!”

The former EPM board had directors like Javier Gutiérrez, who was former president of oil giant Ecopetrol, and general manager of energy company ISA; Manuel Mejia, former general manager of Colombiana de Comercio (distributor or manufacturer of brands in Colombia such as AKT motorcycles, Foton trucks, Castrol lubricants, Royal Enfield motorcycles, and Kalley appliances); Andrés Correa, formerly part of the insurance multinational SURA; and one of EPM’s own retired executives: Jesús Aristizábal Guevara, a civil engineer.

The new EPM board of directors is notable for having a preschool teacher, community activists, former politicians, lawyers, but no large company leadership experience. The mayor did nominate a few, but they all refused. Now, the mayor’s new board will have to navigate the $2 billion USD litigation that he unilaterally launched, and the war he has started with what seems the entire political, business, civic, and even labor community of Medellín. What do they know about international capital markets and the mechanics of bond pricing and currency risk? This editor wishes them luck. We want to see EPM succeed and Medellín do well. The only way this will happen is if they make drastic course corrections. It is not too late for the mayor.

On the other hand, we are only 8 months into a four-year mayoral term. This editor has never seen so many disparate people and institutions unite since the 9/11 attacks in the US. There, the population at least temporarily united behind then President Bush. In August, 2020, sectors from labor to enterprise are all uniting against Quintero. He is at a juncture in his mayoralty. He can attempt to reconcile, or he can take Gustavo Petro’s style book and fancy himself the martyr and class-struggler that everyone is out to get.

Mayor Quintero talks about making Medellín what he calls “software valley,” but foreign investors will not locate to a destination mired in conflict that can’t keep its lights on. He was elected without a power base, to some degree a rejection of the Uribista alternative. He clearly views the civic dissatisfactions with his moves as an Uribista plot. Surely they are included in his menagerie of new opponents, but they weren’t the ones who led to a loss of $30 million USD in EPM’s outstanding bond value in the space of 3 days. There were no Uribistas behind Wall Street firm Fitch deciding to lower the utility’s credit ratings. The only “forces of darkness” Fitch cited was Quintero’s “deterioration of corporate governance controls at the company.”

In this editorial, Finance Colombia calls on the mayor to rectify his course and work in a more collaborative, professional and transparent spirit with all the city’s stakeholders, or alternatively on Paisas to democratically and civilly protect the trajectory of amazing progress the city has made in the last two decades. Choose quiet progress over loud and bombastic stagnation. Cooperation over tomato-throwing confrontation.

Medellín Mayor Daniel Quintero (Photo courtesy Alcaldia de Medellín)