Holland & Knight has named José Vicente Zapata executive partner of its Bogotá office, the firm announced on May 4, 2026. Zapata will oversee day-to-day management of the office while continuing to lead his energy practice, which focuses on corporate, contractual, and commercial matters, with an emphasis on spin-offs and mergers and acquisitions. He succeeds Enrique Gómez Pinzón, who has served as executive partner since the office opened in 2012 and will now take the title of executive partner emeritus while continuing his corporate, M&A, finance, and international arbitration practice.

Zapata has been with Holland & Knight for nearly 12 years and co-chairs the firm’s Venezuela Focus Team, a group of partners who advise clients with interests in that country. His regulatory work covers environmental, energy, and natural resources matters, as well as corporate compliance, including the design of ethics programs and compliance with Colombia’s Sistema de Autocontrol y Gestión del Riesgo Integral de Lavado de Activos y Financiación del Terrorismo (SAGRILAFT) anti-money-laundering and counter-terrorism financing regime. He also handles liability cases involving contractual and non-contractual damages.

“I look forward to continuing to strengthen our team’s offerings in advising Colombian companies and guiding international clients to navigate entry into the Colombian market.” — José Vicente Zapata, Executive Partner, Holland & Knight Bogotá

Zapata earned his LL.M. in Sustainable Development and International Business Law from McGill University in Montreal and his J.D. from the Pontificia Universidad Javeriana in Bogotá. He has been ranked in Energy & Natural Resources: Environment by Chambers Global and Chambers Latin America since 2014, was named to The Legal 500 Latin America Hall of Fame in Environment in 2025 and 2026, and is regularly listed in The Best Lawyers in Colombia.

“I look forward to continuing to strengthen our team’s offerings in advising Colombian companies and guiding international clients to navigate entry into the Colombian market,” Zapata said in a written statement.

Bob Grammig, Holland & Knight’s chair and chief executive officer, said Zapata’s appointment was intended to focus the office on growth in Colombia and across Latin America. Gómez Pinzón said he would continue to support the office in his emeritus role.

The Bogotá office now houses nearly 70 lawyers. Its practice covers cross-border deals and international trade; mergers, acquisitions, and joint ventures; oil, gas, and mining projects; environmental assessments, liability, and compliance; taxation; labor law; intellectual property, trademark, and patent registration; antitrust and consumer law; capital markets, venture capital, and private equity; international licensing and franchising; project finance and foreign investment; corporate reorganizations and financial restructurings; litigation and international arbitration; and private wealth services.

Holland & Knight’s Latin America Practice Group includes more than 200 attorneys working on cross-border M&A, joint ventures, private equity and financing transactions, and disputes involving Latin America. The firm overall counts approximately 2,200 lawyers and other professionals across 35 offices. Founded in 1889, it provides representation in litigation, corporate and finance, real estate, healthcare, and government matters.

The leadership transition comes as international firms continue to deepen their footprint in Bogotá to serve foreign investors entering Colombian energy, infrastructure, and natural resources markets, and to advise Colombian corporates pursuing transactions abroad.

Colombia’s Centro de Innovación, Productividad y Desarrollo Tecnológico (CINTEL) has announced that the European Union will serve as the guest of honor for the what is t technology congress. This 41st edition of the regional digital conference is scheduled to take place from September 2 to September 4, 2026, in Cartagena, with preliminary activities beginning on September 1 at the Hotel Faranda Collection.

The European Union currently stands as the largest foreign technology investor in Colombia. According to figures provided by CINTEL, the 27-member economic bloc accounts for 22% of the direct investment in the nation’s tech sector and has been responsible for the generation of approximately 120,000 jobs.

“ANDICOM is a strategic opportunity to strengthen cooperation, drive European investments in the region, and advance a joint agenda that promotes digital transformation.” — François Roudié, European Union Ambassador to Colombia.

“The participation of the European Union in ANDICOM 2026 reflects a shared vision regarding the importance of digital transformation as a driver of economic and social development,” said Manuel Martínez, Executive Director of CINTEL. “This alliance allows us to connect Colombia and Latin America with one of the most advanced ecosystems in the world in terms of innovation, investment, and technological development.”

The 2026 event will center on the theme “Unleashing the Power of AI.” The academic agenda is designed to explore the impact of artificial intelligence on business productivity, national competitiveness, and the digital transformation of public institutions. The primary sessions will be held at the Complejo Las Américas.

François Roudié, the European Union Ambassador to Colombia, noted that the partnership highlights the bilateral commitment to a digital economy that is secure and human-centric. The ambassador emphasized that the conference serves as a strategic platform to strengthen European investments in the region and advance a joint agenda for sustainable growth.

Founded in 1991, CINTEL was recently re-certified as a Centro de Innovación y Productividad by the Ministerio de Ciencia, Tecnología e Innovación (MinCiencias) through a resolution issued in February 2026. The center remains a key component of the Colombian Sistema Nacional de Ciencias, Tecnología e Innovación, focusing on the application of information and communication technologies to improve regional productivity.

Above photo: CINTEL’s Manuel Martinez (left)0 with the EU’s François Roudié.

The Asociación Colombiana de BPO (BPrO) has scheduled the 2026 CX Summit to take place in Cartagena, Colombia. The event, marking the 25th anniversary of the gremio, will gather more than 1,300 business executives and international specialists to analyze the evolution of the customer experience industry. The summit occurs as Colombia solidifies its position as a regional hub for knowledge-based services, a sector that currently represents approximately 3.5% of the national gross domestic product.

Scheduled for May 6 and 7, 2026, at the Hotel Hilton Cartagena, the conference will operate under the theme The Age of Intelligent CX. Discussions will focus on the integration of artificial intelligence, data analytics, and human empathy within digital economies. According to Ana Karina Quessep, executive president of BPrO, the integration of technology and human talent has become a critical factor for corporate and national competitiveness in demanding global markets.

“The organizations that manage to integrate intelligence, technology, and human talent are those making the difference in increasingly demanding markets.” — Ana Karina Quessep, Executive President of BPrO.

The speaker lineup includes Brad Cleveland, a strategist in customer experience; Tricia Wang, an ethnographer focusing on the intersection of data and human behavior; and Lisa X. Walden, an author specializing in workplace culture. Other confirmed participants include Efrén Martínez and Nicolás Uribe, who will address organizational well-being and digital transformation in Latin America.

On May 5, prior to the main summit, BPrO will host the GBS Experience. This session is designed to examine Colombia’s role as a strategic platform for Global Business Services and shared service centers. In collaboration with Chazey Partners, ProColombia, and Invest in Bogota, BPrO is developing a comprehensive study of the 2026 industry figures. This research aims to serve as the official reference for the Centros de Servicios Compartidos (CSC) and GBS sectors in the country, providing updated data on their economic impact and operational reach.

The event will include networking sessions and a commercial exhibition featuring representatives from the technology, financial, telecommunications, and retail sectors. Registration and the full agenda are available through the official event website. BPrO currently represents over 100 member companies specializing in customer relationship management and the broader service value chain in the US and Latin America.

In this exclusive interview, Loren Moss, Executive Editor of Finance Colombia, speaks with Cristina Zambrano Restrepo, the Executive Director of ACI Medellín. They discuss how the city nearly tripled its investment attraction over the past year, reaching over $400 million USD, and the strategies used to reassure international investors during a complex electoral landscape in Colombia.

Finance Colombia: I’m here with Cristina Zambrano Restrepo, the Executive Director of ACI Medellín. It’s always a pleasure to be with you. Thank you for the invitation. I know you’re extremely busy, so thank you for making the time to speak with Finance Colombia. How have you been?

Cristina Zambrano Restrepo: Very well, thank you very much. Truly happy to be here with you. Thank you for accepting this invitation. Without a doubt, we work to bring good and positive news to this city, and thank you for being here and for sharing and conveying all of these good things.

Finance Colombia: Yes, today you talked about the successes that ACI Medellín and the city have had this year in attracting investment. Tell us a bit about some of those successes. I think it’s going to be another large business hotel, and tell us a little about how you’ve kept busy.

Cristina Zambrano Restrepo: Of course. A major focus for us is job creation through investment attraction. So, what did we achieve this year? We went from USD 150 million generated last year to more than USD 400 million this year. As I’ve mentioned, this is reflected in the creation of more than 11,500 formal, high-quality jobs generated by this investment attraction. We have major allies and players here, such as Renault-Sofasa, Rivana Business Park, SoftServe, and POMA. A great deal of companies, some already established, others newly arriving in the region. TaskUs too, which is also extremely important and has made major commitments to us. These are the companies that manage to generate that employment.

Finance Colombia: Excellent, that’s fascinating. I have a history with Colombia of about 20 years, and here in Medellín of about 11 years, and it’s truly wonderful to see how the city has grown—not only in population, but in investment and innovation. However, we’re living in a time of high uncertainty around the world—not just in Colombia, not just in the United States, but globally. Especially when we talk about the sector, not in general terms, but politically and economically. Has this made attracting investment more difficult or more challenging over the past year? How has this affected efforts to attract FDI, like, foreign investment, and what strategies have you used to overcome this challenge?

Cristina Zambrano Restrepo: Here, clearly, the political landscape affects and directly impacts confidence, right? The stability of a region, how we present ourselves to the world and to those very large capital investments, showing that we are a stable region, that we believe in them, and that we will support them. So, what strategies do we have? Without a doubt, it has been very challenging. We would like, for example, to be able to offer a range of benefits, extensions, fast-track processes in permitting and such, but in that sense we depend heavily on the national government. But we don’t stop there. We work from the regional level and have a firm commitment locally, focusing on what we ourselves can support, contribute, and manage from this area, the private sector. Which also helped sustain the region during the previous administration, and the academic sector, all the universities, and that ecosystem, which have been fundamental. And now the public sector as well, we are all working together specifically from this region to demonstrate that we are a region that inspires confidence, offers stability, and has all the right conditions for investment to continue to arrive.

Finance Colombia: One thing you’ve mentioned that’s very important, and something Medellín is known for, is the collaboration between the private and public sectors. In many other places, without naming names, it’s an endless war. But in Medellín it has always felt like it’s everybody. That’s why Medellín has always had the Metro and continues to have major projects here, because the private sector has a strong sense of civic ownership. People talk about the GEA, but from a foreign perspective, what I’ve seen is that companies like Grupo Argos, SURA, Bancolombia, and more recently Nutresa, and many smaller ones that aren’t international names, have a sense of belonging and work hand in hand with the government. Speaking of that, for example, Mayor Federico Gutiérrez has traveled to the United States and other places to maintain those good relationships, despite what may be happening in Bogotá or at the Casa de Nariño. What is the importance of the efforts made by the metropolitan government and the city government of Medellín, not only at the ACI level, but also at the level of Alpujarra? How important is this in maintaining a long-term course so that foreign investors continue to see Medellín as a destination, no matter how much may be happening 400 kilometers away?

“We went from USD 150 million generated last year to more than USD 400 million this year… reflected in the creation of more than 11,500 formal, high-quality jobs.” — Cristina Zambrano Restrepo

Cristina Zambrano Restrepo: I think what you’re pointing out is fundamental, and it’s specifically how we’ve achieved this model in Medellín. In a way, when we go out into the world and explain how we work hand in hand, as you said, there are cities and countries that react like, “Why do we need to sit at the same table? I’m very clear about my purpose, and you’re very clear about yours.” Here, the real history of what this city lived through 40 years ago made all of us sit at the same table, and we realized that the efforts of the three actors are always aligned toward the same goals. What always matters to us is citizens’ well-being, quality of life, economic and social development, many things. So when we were going through our hardest moments, we managed to set aside egos, agendas, and competing visions. We sat down, we talked, and we’ve continued to work under that model ever since.

As for what’s happening and what lies ahead in the future: clearly, having a political leader like Federico Gutiérrez, with those strategies and international connections, matters greatly. Countries trust leaders who have demonstrated stability and very clear commitments throughout their governing trajectory, and that’s what our mayor has done. Because of that, they continue to seek us out as a region and want to work with us as a region. As we were just discussing, the investment world is very accustomed to government cycles, more than people might think. They know how to manage political and public-sector issues and how to make bold bets at certain moments. We work on this, and together with the mayor we focus on those countries where we need them to keep believing in us and trusting us. The United States is Colombia’s partner par excellence, that is not going to change. It is the largest market in the world. So the mayor’s strategy of being very close to that government, of working with a binational chamber like AmCham Colombia, which always helps us continue attracting investment and fostering exchanges, is exactly how we work hand in hand.

Finance Colombia: Well, you’ve been very generous with your time. Just two more questions. One is that in the United States, we have a saying: “Nothing happens before the elections.” That big companies are always waiting to see what’s going to happen, what’s going to unfold. Is it the same here in Colombia? I know in Colombia, even more than in the U.S., there’s a law—well, speaking of public contracting, where nothing can really happen. But aside from that, not talking about selling food to a school or something like that—do investors or multinational companies see this as a challenge? Are they ready to sign contracts, or are they waiting to see what happens?

Cristina Zambrano Restrepo: Of course, without a doubt it’s a challenge. And it’s not a minor one. It’s a challenge that forces us to work even harder to demonstrate, from the regional level, just how stable we can continue to be so that investment keeps coming. There are many companies that make their decisions regardless of the electoral period we’re in, largely because, as I mentioned, they know how to manage political risk. But there are certainly many others that are on pause, waiting to see what happens in the upcoming elections. So yes, in that sense, it does present significant challenges. Even so, we are still projecting USD 400 million for next year despite the elections, and we continue to work toward and commit to that goal. And regarding what you mentioned about contracting, specifically public-sector contracting; a city cannot come to a halt just because there is a law on guarantees, right? All of that is already anticipated. Contracts need to be signed and put in motion ahead of time. Everyone here knows how to operate during a six-month guarantees-law period, so everything has to keep moving and functioning.

Finance Colombia: The last question, I’ve known ACI, even from before I was living in Colombia. I’ve now been in Colombia for 12 years, and I’ve known Juan since I was living in Miami. They were always calling me, saying, “Look, come see what we have in Medellín. Come, let us show you something beautiful we have, or an investment opportunity here.” And that was truly a big part of why, when I was living in Bogotá, I decided to move to Medellín. It was exactly like that, maybe not as a major investor, but that attitude, that paisa pride.

Cristina Zambrano Restrepo: Paisa pride, yes, I was just going to say.

Finance Colombia: Exactly, exactly. Like my wife, who’s paisa, when we’re abroad and someone asks her, “Are you Colombian?” she says, “I’m paisa.”

Cristina Zambrano Restrepo: More than Colombian, I’m paisa.

Finance Colombia: What is the “secret hogao” of ACI Medellín? Because regardless of the government in power, regardless of what happens under your leadership, and even looking at the long term, what is the secret sauce behind the success ACI has had as an investment promotion agency? You have a strong global reputation in the FDI space, Foreign Direct Investment. You, as director, as someone who knows how the internal plumbing works, what is the key to the success ACI has achieved?

Cristina Zambrano Restrepo: Well, I think without a doubt it’s our long-term planning. It’s a vision we have for the city, a vision for the territory—a clearly defined commitment. Every time we come in, there’s no need to reinvent things; we need to keep working on what already works. We have a technical team, and this is something I really want to highlight: this is a highly technical organization. While it does, of course, depend on electoral and government cycles, it has a well-trained staff that has been working in these areas for many years, and thanks to them we’ve been able to maintain the stability this institution has. So I would emphasize that, in addition to what you mentioned about paisa pride—which is an identity that characterizes all of us from Medellín. We truly like to see our city doing well; we fight for it, we defend it, we work for it. That paisa pride ensures that everyone who passes through this institution clearly understands the vision and works toward it, regardless of how long they remain here.

Finance Colombia: Yes, it’s true—you have a world-class team, so I know they make your job much easier. Thank you very much for your time; it’s always an honor to see you and to speak with you, and know you can always count on Finance Colombia for anything.

Cristina Zambrano Restrepo: Thank you as well, truly, for being here and for always supporting ACI Medellín. Indeed, you and Finance Colombia have been great partners for us in continuing to share and convey all the news that’s happening.

Finance Colombia: We will, thank you.

Banking Sector Statement on the Update of the OFAC Designated Parties List

Bogotá, D.C., October 24, 2025 (@Asobancaria). The Colombian financial system has been a global benchmark in the fight against money laundering and terrorist financing for more than three decades. In fact, Colombia was the first country in the Americas to have an anti-money laundering system, following the 1992 Interbank Agreement for the Detection, Prevention, and Suppression of Illicit Capital Movements.

Since then, the country has maintained strict compliance with standards in this area, with collaboration and communication with both U.S. authorities and correspondent banks being essential.

In light of the recent decision by the United States government to include the President of the Republic, members of his family, and the Minister of the Interior on the OFAC list, the sector reiterates its commitment to compliance with international standards. At the same time, it will continue to act in accordance with financial consumer rights, local regulations, and the jurisprudence of the Constitutional Court.

The Colombian financial system will begin working in coordination with national and international authorities to preserve its stability and integrity, as well as the trust of its citizens.

In other words, the banks, through their trade organization, as not to expose any individual bank, have stated that they intend to comply with sanctions, subject to “financial consumer rights, local regulations, and the jurisprudence of the Constitutional Court.”

Analysis

It is hard to imagine a local bank freezing President Gustavo Petro’s personal accounts during the remaining 10 months of his presidency. The President directly controls Colombia’s financial regulation agency, Superfinanciera, and also influences, Banco De La República, the country’s central bank. Once the president leaves office, unless replaced by an ally (somewhat unlikely), there is no love lost between the current leftist president and the financial sector. Aside from this, the local banks would have more to lose being cut off from the international financial system than from facing the ire of Petro’s remaining supporters, post-presidency. The banking sector and its shareholders have faced constant attacks from Petro during his presidency, with him calling them “oligarchs” and “controllers of capital.”

Should a Petro ally actually win next year’s presidential election, all bets are off, as the banks will face pressure to be sympathetic to Petro at the cost of losing access to the international financial system in an environment of accelerating capital flight and diminishing foreign direct investment (FDI).

In the short term, expect local banks to play a waiting game, It is not immediately apparent that Petro or his family has any great wealth to lose abroad, though the designation may seriously retard his apparent ambitions of being some sort of international revolutionary statesman on the global stage post-presidency, with travel and financial restrictions in OFAC compliant jurisdictions, almost everywhere except bastions of liberty such as Iran, Russia, North Korea, Cuba, and Nicaragua.

I remain steadfast in believing the election of an alternative to those who did little to improve poverty, failed in education, and oversaw wanton corruption was a good thing – unfortunately, Gustavo Petro failed to learn his lesson as Mayor of Bogotá that you cannot change the world in four years. He over-promised during his election campaign and has disappointed too many people – and there are still 17 months until he hands over the keys to his office.

This week saw the resignation of his third Ministerio de Hacienda Diego Guevara who will be replaced by German Avila – one wonders if the outgoing minister even had time to unpack his boxes – clumsy in the least, damaging confidence and probably impacting the Peso ($4134) which has weakened this week.

Petro declared a public holiday this week so people could protest in favor of his reform process. Numbers were far from biblical, and regardless, they won’t have an impact. He will only harden the attitude in Congress against the reforms, as politicians rail against perceived anti-democratic behavior.

FDI dropped 22% in February to $759 million USD according to Banco de la República – Colombia – again, confidence is being impacted by the perceived lack of political and economic direction.

Domestic demand remains in rude health with imports according to Departamento Administrativo Nacional de Estadística – DANE Colombia rising 8.5% in January with a 15.5% rise in consumer goods. This, as expected, led to a lumpy deficit of $1.28 billion USD as exports remain under pressure.

This is very much in line with the January ISE (economic activity) report, which saw a higher-than-expected rise of 2.65%. So we continue very much in the same vein, the economy moving steadily ahead, but the politicians, who are already positioning themselves for May 2026, are doing their best to derail confidence in the country.

An uninspiring week.

See you all soon.

Roops.

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Photo credit: Gustavo Petro/X.

President Petro stated that the drug traffickers have acquired two missiles with the intent to “bring down” the presidential plane. He attributed this threat to his administration’s intensified actions against narcotics organizations involved in cocaine production and trafficking. However, he did not provide specific evidence or identify the groups responsible for the alleged plot.

The wild claim came during the appointment ceremony of new National Police head, Brigadier General Carlos Fernando Triana.

Petro insists his administration is taking action against narcotraffickers, though cocaine production is at an all time high under his administration, and armed rebel groups such as the ELN and dissidents of the former FARC who rejected the 2016 peace accords are regrouping and reinvigorated under Petro’s administration. Petro, an ex rebel himself, ran on a platform of “Total Peace,” promising to negotiate with these groups, but instead, they have stepped up attacks, leading to a humanitarian crisis in the northeast region of Catatumbo, and this week, an armed curfew in the Pacific department of Chocó was imposed by communist rebel group ELN, where guerillas have forced all businesses to shut down, demonstrating the dominance of the guerillas over the impotent presence of the national government in the region.

Colombia remains the world’s leading producer of cocaine, with various guerrilla groups, criminal bands, and both national and international cartels engaged in the drug trade. This illicit industry has fueled a six-decade-long internal conflict, resulting in over 450,000 deaths and millions of displaced individuals. In 2024, Colombian security forces seized a record 883.8 metric tons of cocaine, surpassing the previous year’s figure of 746.3 tons. The United Nations reported that coca cultivation covered 253,000 hectares in the country during the same period.

This is not the first time President Petro has reported threats against his life. Since his election in 2022, he has mentioned multiple assassination plots, including a supposed plan involving explosives at a public event, as informed by the U.S. Drug Enforcement Administration (DEA). Additionally, he has accused groups such as the National Liberation Army (ELN) and dissident factions of the Revolutionary Armed Forces of Colombia (FARC) of attempting to kill him. These allegations have been met with skepticism by opposition figures, who describe them as incendiary, lacking in evidence, and perhaps an attempt to one-up the attack on the presidential helicopter during the term of previous President Ivan Duque, by small arms fire from a criminal group in Cúcuta, the nearest city to the troubled Catatumbo region,

The recent claim adds to a series of challenges faced by President Petro’s administration, including internal disputes and controversies involving close associates. These issues have exposed fractures within the government, raising concerns about its stability and effectiveness, negatively affecting foreign direct investment (FDI).

The appointment of General Triana

Petro’s comments overshadowed the theme of the gathering, the appointment of Brigadier General Carlos Fernando Triana as the new director of Colombia’s National Police, succeeding General William René Salamanca. The transition occurred amid ongoing security challenges in the country, including a notable increase in homicides, particularly in Bogotá.

General Triana has over 30 years of experience within the National Police, having held various administrative and strategic positions. Notably, he served as the director of the Retirement Pay Fund (Caja de Sueldos de Retiro) and has been recognized for his commitment to institutional integrity and public service.

The change in leadership aligns with a series of adjustments within the upper echelons of the government, as directed by President Petro. General Salamanca, who had returned from retirement to assume directorship in April 2023, departs amidst these strategic shifts.

During the ceremony, President Petro highlighted the critical role of the National Police in addressing the nation’s security issues, and emphasized the importance of leadership in implementing effective strategies to combat crime and ensure public safety.

General Triana’s appointment comes at a time when the National Police are intensifying efforts to tackle various security concerns, including operations targeting extortion schemes orchestrated from within the prison system. In December 2024, a significant operation led to the arrest of eight individuals, among them six guards from the National Penitentiary and Prison Institute (INPEC), underscoring the ongoing challenges within Colombia’s correctional facilities.

As General Triana assumes his new role, the focus remains on enhancing the effectiveness of the National Police in safeguarding citizens and upholding the rule of law across Colombia.

Headline photo: Presidency of The Republic

Of that total, US$6,311 million, or 88.1%, corresponded to investments in non-mining energy sectors, which grew 32.6%.

These numbers come from the balance of payments report reported by the Bank of the Republic, which states that the sectors that received the most foreign capital in that period were financial services, transport, storage and communications, as well as the manufacturing industry.

“We are making progress in the safe economic reactivation and the result of the arrival of foreign investment shows the confidence in the recovery of the economy. Foreign investors continue to bet on Colombia. We have the tools to attract, facilitate and retain investment to enhance the arrival of foreign capital and our goal is to preserve and create jobs, as well as keep the engines of the economy running,” said the Minister of Commerce, Industry and Tourism, María Ximena Lombana Villalba (above photo).

The manufacturing sector received $1.13 billion USD, which positions it as the sector with the third highest flows of this type of capital in the analysis period and with the second highest growth, of 43.6%.

Colombia has not defaulted on sovereign debt since before World War 2, though public finances have worsened steadily, due both to the COVID-19 Pandemic and the public’s vehement rejection of President Ivan Duque’s (above) fiscal reform package presented earlier this year. When Duque’s finance minister Alberto Carrasquilla took to national media to sell the fiscal package, he was soundly ridiculed after having no idea how much a dozen eggs (that he sought to tax) cost in Colombia. Carrasquilla had to resign while Colombians took to the streets to reject the tax reform proposal, but also to express broader dissatisfaction with the Duque administration via nationwide protests and major strikes.

“On the issue of eggs, it depends on its quality. Let’s say $1,800 COP (48 cents, US) a dozen or something like that.”

This led to a, by many accounts, disproportionate reaction by Colombia’s ESMAD riot police, which further fed popular outrage, leading to almost daily unrest throughout the country over the past two months. Duque seems to have lost control of the National Police, with them now attacking protesters and noncombatants, all while intensive care units throughout the country are at 100% capacity, some hospitals closing to new patients or treatment.

Colombia now needs to fix its troubled finances more urgently than before, though politically crippled Duque has little political capital to push through a significant tax package, and presidential elections are almost exactly a year away. Duque is now so unpopular, and the social situation has deteriorated so much that his presidential helicopter came under fire as he approached the border city of Cúcuta. With this uncertainty, Fitch issued the downgrade, dropping Colombia out of an investment grade credit rating for the first time in a decade. Fitch’s edited analysis follows:

KEY RATING DRIVERS

The downgrade reflects the deterioration of the public finances with large fiscal deficits in 2020-2022, a rising government debt level, and reduced confidence around the capacity of the government to credibly place debt on a downward path in the coming years. Colombia’s gross general government debt (GGGD) to GDP is forecast to reach 60.8% in 2021, more than double the 30% level when Fitch upgraded Colombia back to the ‘BBB’ category in 2011. Fitch expects debt to continue to rise through 2022 and does not expect significant debt reduction over the medium term, leaving Colombia vulnerable to shocks. Furthermore, Fitch sees significant risks to the government’s fiscal consolidation plan, given the reliance on tax administration efforts and divestments, as well as the uncertainty of the impact of the pending tax reform.

The impact of the Covid-19 pandemic, reflecting the 6.8% GDP contraction in 2020, led to a sharp rise in general government debt to GDP, reaching 58.3% of GDP in 2020 (versus 54.2% for ‘BBB’ median and 59.1% for the ‘BB’ median), up from 44.7% in 2019. Fitch’s debt dynamics forecasts have weakened further since Fitch’s last review. Fitch now expects GGGD to GDP to continue to rise over the forecast period to 64.4% of GDP by 2023. Debt could stabilize around 64% by 2024 but, in Fitch’s view, further fiscal consolidation initiatives beyond those already identified would likely be necessary to begin to reduce the debt level in a meaningful way thereafter.

The passage of any reforms will be difficult to achieve given the growing social pressures, the government’s low popularity and the upcoming elections.

The pandemic has had a significant impact on Colombia’s population and its macroeconomic outcomes. Despite numerous lockdowns, deaths have reached over 100,000 and the country is currently experiencing a severe third wave of infections. The economic impact of the coronavirus and the lockdown responses included a sharp rise in the unemployment rate (to over 20% in May 2020) as well as in rates of poverty. However, the pace of vaccinations is now picking up (with around 23% of the population receiving a least one jab according to Our World in Data) and unemployment has fallen to 15% as some of the hardest hit parts of the economy begin to reopen.

Against this backdrop, the president’s approval rating remains low (27% in late June according to a poll done for Semana magazine), hindering the government’s reform agenda. At end-April 2021, the government introduced a tax reform that included extending the base for personal income taxes and broadening the VAT base in order to begin a fiscal adjustment as well as to extend social programs such as cash transfers to the vulnerable and unemployment benefits. This proposal caused a backlash among the population that resulted in protests and a national strike. As a result, the government withdrew the reform proposal, reflecting insufficient support in the Congress.

Fitch expects the government to reintroduce a revised tax reform package in July 2021 when the new session of Congress commences and is targeting a benefit of around 1.2% of GDP on a net basis. However, Fitch believes that the majority of the fiscal benefit will be obtained only in 2023 (given reliance on corporate income tax measures) while the government extends some pandemic related spending such as cash transfers into 2022. There is a risk that the new tax reform could be watered down. Additionally, the passage of any reforms will be difficult to achieve given the growing social pressures, the government’s low popularity and the upcoming elections (congressional and presidential elections scheduled for March 2022 and May 2022 respectively).

Colombia’s central government deficit widened to 7.8% of GDP in 2020 as a result of the severe economic downturn, which led to a fall in revenues and an increase in government spending, reflecting measures implemented to combat the pandemic and reactivate the economy. The government announced an extension of some pandemic related measures through 2022. As a result, Fitch forecasts central government deficits of 8.2% in 2021 and 6.9% of GDP in 2022 (general government deficits are about 1.0% of GDP lower on average in last decade). Fitch has included government-targeted divestment proceeds in its revenue figures, totaling 1.2% of GDP in 2021 and 0.6% of GDP in 2022, with the latter figure subject to some uncertainty. Without these proceeds, the fiscal deficits would even be higher.

The government outlined a fiscal consolidation strategy in its Medium-Term Fiscal Framework published in mid-June 2021 that would unwind pandemic related spending and increase revenues through an increase in taxes and tax administration. The fiscal adjustment targets a five-year transition period to reach a deficit of around 2.5% of GDP (versus previous projection of 1% of GDP). The government has outlined an updated fiscal rule to be presented with its new tax reform proposal that will include a debt anchor of 55% of GDP with a limit of around 70% of GDP.

Near-term growth prospects have brightened given the reopening of the economy as well as the significant monetary and fiscal stimulus measures implemented by the government. Fitch has raised its GDP growth forecast to 6.3% in 2021, up from Fitch’s previous forecast of 4.9%. Fitch sees some upside to even the revised forecast if the coronavirus pandemic outlook improves and social protests remain subdued, albeit there is a greater than usual degree of uncertainty surrounding forecasts.

Colombia’s gross general government debt (GGGD) to GDP is forecast to reach 60.8% in 2021, more than double the 30% level when Fitch upgraded Colombia back to the ‘BBB’ category in 2011.

Fitch expects growth of 3.8% in 2022, somewhat above potential. While Fitch believes that there has likely been some permanent economic scarring from the pandemic, the large influx of Venezuelan immigrants will likely provide a boost to medium-term growth prospects. Currently favorable terms of trade should also provide tailwinds to growth prospects.

Inflation and inflation expectations have been contained, with inflation at the lower end of the target. The central bank cut rates by 250 basis points to 1.75% between February 2020 and September 2020. Expectations are for the central bank to begin to tighten by 4Q21 as the output gap closes.

The current account deficit narrowed significantly in 2020 due to import contraction and reduced outbound profit remittances as well as an increase in inbound remittances. Fitch expects the deficit to widen to 4.4% of GDP in 2021 as a result of higher imports as the economy recovers. FDI historically has covered around 70% of the current account deficit (CAD) and Fitch expects the favorable financing of the CAD to continue during the forecast period.

Net external debt to GDP has risen over the last decade and is expected to continue to rise over the forecast period to 21.5% of GDP by 2023 from 16.4% in 2020 due partly to sovereign external borrowing to finance large deficits. Colombia’s external liquidity has improved markedly over the last three years as a result of the central bank’s international reserve accumulation policy. International reserves rose to USD58.5 billion at year-end 2020, up significantly from USD52.7 billion in 2019. As a result, Fitch’s external liquidity ratio rose to 108% in 2021 from 89% in 2019. Additionally, Colombia maintains access to a flexible credit line with the IMF for USD12.2 billion (out of a total program of USD17.6 billion).

RATING SENSITIVITIES

FACTORS THAT COULD, INDIVIDUALLY OR COLLECTIVELY, LEAD TO NEGATIVE RATING ACTION/DOWNGRADE:

• Public Finances: A failure to achieve fiscal consolidation that leads to a significant deterioration in Colombia’s general government debt to GDP ratio relative to the ‘BB’ peer median;
• Macro: Diminished medium-term growth prospects well below Colombia’s historical potential of 3.5%, leading to continued high unemployment and poverty levels with social ramifications;
• External Finances: Sharp further increase in net external debt to GDP, raising external vulnerabilities.

FACTORS THAT COULD, INDIVIDUALLY OR COLLECTIVELY, LEAD TO POSITIVE RATING ACTION/UPGRADE:

• Public Finances: Achieving sustained primary fiscal balances consistent with a steadily declining GGGD to GDP ratio that enhances fiscal policy credibility;
• Macro: Higher sustained medium-term economic growth above Colombia’s historical averages of about 3.5%;
• Structural: Steady improvement in governance indicators that leads to improved social cohesion and reform momentum, improving Colombia’s structural fiscal position as well as medium term growth prospects.

SOVEREIGN RATING MODEL (SRM) AND QUALITATIVE OVERLAY (QO)

Fitch’s proprietary SRM assigns Colombia a score equivalent to a rating of ‘BB+’ on the LT FC IDR scale.

Fitch’s sovereign rating committee adjusted the output from the SRM to arrive at the final LT FC IDR by applying its QO, relative to SRM data and output, as follows:

• Macroeconomic: +1 notch added to compensate for the disproportionate negative impact of the GDP volatility variable on the SRM score driven by the impact of the pandemic shock, which we believe will be temporary, and would otherwise add excess volatility to the rating. Colombia has a long track record of stable positive growth with only one year of negative growth in the last 30 years.
• Fiscal: Fitch has introduced a -1 notch to reflect Colombia’s rigid spending profile and limited ability to achieve a structural fiscal consolidation consistent with debt reduction over the medium-term. This is evidenced by reliance on one-off divestments and the increasing political impediments to reducing spending or passing comprehensive structural tax reform measures, as well as a high degree of uncertainty about the impact on revenues from improved tax administration both in terms of size and timing.

BEST/WORST CASE RATING SCENARIO

International scale credit ratings of Sovereigns, Public Finance and Infrastructure issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of three notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from ‘AAA’ to ‘D’. Best- and worst-case scenario credit ratings are based on historical performance. For more information about the methodology used to determine sector-specific best- and worst-case scenario credit ratings, visit https://www.fitchratings.com/site/re/10111579.

KEY ASSUMPTIONS

Fitch’s oil price assumptions for 2021 are USD63/barrel and USD55/barrel for 2022.

REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING

The principal sources of information used in the analysis are described in the Applicable Criteria.

ESG CONSIDERATIONS

Colombia has an ESG Relevance Score of ‘5’ for Political Stability and Rights as World Bank Governance Indicators have the highest weight in Fitch’s SRM and are therefore highly relevant to the rating and a key rating driver with a high weight. As Colombia has a percentile rank below 50 for the respective Governance Indicator, this has a negative impact on the credit profile.

Colombia has an ESG Relevance Score of ‘5[+]’ for Rule of Law, Institutional & Regulatory Quality and Control of Corruption as World Bank Governance Indicators have the highest weight in Fitch’s SRM and are therefore highly relevant to the rating and are a key rating driver with a high weight. As Colombia has a percentile rank above 50 for the respective Governance Indicators, this has a positive impact on the credit profile.

Colombia has an ESG Relevance Score of ”4[+] for Human Rights and Political Freedoms as the Voice and Accountability pillar of the World Bank Governance Indicators is relevant to the rating and a rating driver. As Colombia has a percentile rank above 50 for the respective Governance Indicator, this has a positive impact on the credit profile.

Colombia has an ESG Relevance Score of ‘4[+]’ for Creditor Rights as willingness to service and repay debt is relevant to the rating and is a rating driver for Colombia, as for all sovereigns. As Colombia has track record of 20+ years without a restructuring of public debt and captured in Fitch’s SRM variable, this has a positive impact on the credit profile.

Except for the matters discussed above, the highest level of ESG credit relevance, if present, is a score of ‘3’. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity(ies), either due to their nature or to the way in which they are being managed by the entity(ies). For more information on Fitch’s ESG Relevance Scores, visit www.fitchratings.com/esg.

Cover Image by vkingxl from Pixabay

Overall, IIB supported the arrival of investment from 25 countries in 2019. Investors from the United States were the most numerous with 10 projects, Canada, the second, with four projects, and Germany, Spain, Mexico and France, with three projects each, were tied in the third place.

In addition to receiving investment from countries such as the United States, Spain or France, IIB supported projects from Japan, South Korea, Saudi Arabia and Australia, among other countries. This indicates, according to the agency that the city is developing interest from regions of the world that were not  inclined to Invest in Bogota in previous years.

According to Invest in Bogota’s Executive Director, Juan Gabriel Pérez, the FDI projects  “surpassed $600 million USD and generated more than 7,700 direct Jobs in 2019″. According to Pérez, these are quality jobs for local citizens and proof of the positive effects of FDI.

Bogota continues to create an infrastructure that promotes the city as an attractive destination for Information Technology (IT) companies, Business Process Outsourcing (BPO) and Shared Service Centers (SCS). These sectors received the largest number of investment projects for the city in 2019. Bogota attracted 14 IT and BPO projects, which brought an estimate of 4,000 direct jobs.

Some of the IT and BPO companies that invested with the assistance of IIB in the city during 2019 were: Ixerv LAC (United Arab Emirates), Nub8 (US), Grupo ARS (Ecuador), the British software development firm Endava, and Switzerland’s Amaris Consulting, which opened a global robotic process automation center.

The second sector in which IIB supported the largest number of investment projects was life sciences, which includes industries as medical devices, pharmaceuticals, cosmetics and health services, with 10 new and reinvestment projects. The city also received 10 investment projects for the value-added manufacturing sectors, 8 in creative industries and 4 in infrastructure.

Since 2006, Invest in Bogota has accompanied 384 projects which correspond to an estimate of $3 billion USD and has created over more than 45,000 direct jobs.