Organized by Corferias, the Colombian Association of Hospitals and Clinics (ACHC), and Messe Düsseldorf under the “Powered by MEDICA” brand, the ninth edition of Meditech will showcase the latest developments in medical and clinical technology while providing a platform for networking, business development, and knowledge sharing.

The exhibition will feature suppliers and service providers across a wide range of sectors, including medical and surgical equipment, rehabilitation and physiotherapy technology, clinical laboratories, hospital infrastructure, healthcare software and hardware, ambulances, waste management solutions, scientific research, hospital management consulting, banking and insurance services, and government and industry organizations.

The event also offers an extensive conference program, product launches, and opportunities for attendees to explore emerging trends shaping healthcare across Colombia, the Andean region, Central America, and South America.

Dates: July 28–31, 2026
Venue: Corferias, Bogotá, Colombia

For more information, visit www.feriameditech.com.

“We are thrilled to expand our footprint in Medellín, a city known for its innovation and talent,” said Rubén Orozco, Vice President of Operations at TaskUs Colombia.

“At TaskUs, we are deeply committed to the growth and development of our people. Our investment in learning goes beyond current roles—we equip both emerging and established leaders with the skills needed to advance in their careers. Additionally, we offer on-demand online learning resources, allowing employees to grow at their own pace, anytime and anywhere.”

“The opening of this new operations center by TaskUs reaffirms Colombia’s positioning as the Country of Beauty and a competitive destination for knowledge-based services,” stated Carmen Caballero, President of ProColombia.

“The high availability of bilingual, skilled, and adaptable talent has been key for global companies to choose Colombia as a strategic ally for growth.” María Fernanda Galeano, Secretary of Economic Development of Medellín, added,  “TaskUs’ new operations center is highly significant for Medellín. It reflects a multinational company’s trust in our city and its people. It also reinforces Medellín’s appeal as a destination for international investment and contributes to employment, economic growth, and strengthening our entrepreneurial ecosystem. We welcome TaskUs’ expansion.”

Luis Barreto, Vice President of Operations for TaskUs Latin America, shared, “Our purpose is to inspire, energize, and revitalize our teammates both at work and beyond—while having fun. We’re excited to welcome new team members and support their development, helping more ‘paisas’ discover what makes working at TaskUs truly ridiculously good.”

Cristina Zambrano, Executive Director of ACI Medellín, commented, “We celebrate TaskUs’ confidence in Medellín and their decision to grow their presence in our city. This expansion confirms that our district is ready to remain a competitive destination for foreign investment and a strategic partner for companies committed to innovation, talent, and sustainability. Every new job created is a chance to transform lives and strengthen our local economy.”

Since entering the Colombian market in 2021, TaskUs has established operations in Cali, Barranquilla, and Medellín, employing more than 4,000 highly skilled professionals who primarily support clients in the United States across industries such as healthcare, e-commerce, technology, tourism, and retail.

Currently, the company is hiring bilingual talent in Medellín. Interested candidates can explore open positions through TaskUs Colombia’s official social media accounts:@taskuscolombia, or via their careers website at https://www.taskus.com/careers/

Photos © Loren Moss

SALT VP has grown its team in Colombia to nearly 200 professionals, supporting a network of more than 90 universities and colleges throughout the United States and Latin America.

“This journey began five years ago with our acquisition of CompuMed Vocational Careers (CMVC),” said Robert Bonds, Head of Education Portfolio at SALT VP and CEO of CMVC. “Today, we have evolved into a dynamic network of companies dedicated to expanding access to quality education. This new Global Operations Center strengthens our ability to empower institutions, helping them provide affordable, career-focused training to students in the nursing and healthcare fields.”

The new facility will also advance the deployment of The SALT Plug & Scale Platform, an innovative framework designed to accelerate business growth through Strategic Capital, Growth Acceleration, Digital Transformation, and Business Optimization services. SALT says this platform enables educational institutions to expand their reach and impact quickly and precisely. The company claims that this new Bogotá center is poised to play a critical role in driving these initiatives forward, ensuring high-quality educational outcomes primarily for Latino students in the US, breaking language barriers, and enhancing workforce readiness.

“This new Global Operations Center represents far more than just a larger space-it signifies a leap toward the future of accessible, high-quality healthcare education across the Americas,” said Pete Pizarro, Managing Director of SALT Venture Partners. “With the integration of AI-driven technologies into The SALT Plug & Scale Platform, we are poised to significantly scale our efforts, ensuring that more individuals gain access to affordable and impactful healthcare education.”

Above photo: Antoine Zervudacki, Robert Bonds, Laura Alejandra Ballen, Christian Alvarez, credit: Salt Venture Partners.

Flora Growth (NASDAQ: FLGC) is one of the companies at the vanguard of formulating new products, but the company has also been financially innovative, listing on NASDAQ in the US rather than following most other sector companies with operations based in Colombia that list on Canada’s TSX.

With legal headquarters in Fort Lauderdale and almost 500 acres for cannabis cultivation in Colombia, Flora Growth’s business model spans consumer goods and medical formulations. Finance Colombia’s Executive Editor Loren Moss caught up with Flora Growth CEO Luis Merchan to discuss some recent developments with the company, and the significance of the decision by Colombia’s health ministry to Flora Growth, and to the sector more broadly.

Finance Colombia: One of the things I wanted to start with is that I noticed that you signed a distribution agreement for some of your products, is that correct?

Luis Merchan: That is correct. There are several of them that have been signed over the last couple of months. My team continues to expand not only on the wholesale side of our operations but also on the CPG side of the operation in terms of distribution and revenues.

“The change by the Secretary of Health, by the Ministry of Health, puts Colombia at the vanguard in terms of regulatory and legal framework for medicinal cannabis in the world. “

Finance Colombia: Can you tell me a little bit about the distribution deals? I think I saw that some of your products are going to go into Mexico and some other markets.

Luis Merchan: Yes, as you know Loren, Mexico is a very active cannabis market. There’s a new law that is being evaluated as of today that would allow several categories of products with less than one percent THC to be sold as normal, non-regulated CPG products, which would be an incredible step towards the distribution of wellness products in the country. Our agreement was for distribution initially of our floral beauty products. Those products are actually being sold already in major retailers in Mexico like Walmart.com and Coppel, which is a massive store chain with over 300 distribution points across the entire country, so clearly we continue to make inroads, not only from a distribution and sales standpoint but also from the regulatory standpoint.

Finance Colombia: I saw that the stock took a nice bump when that news was announced. Now, here in Colombia, we recently published an article and we see where the Ministry of Health, they issued a…in the US, we call it something like a pharmacopeia, but they issued updated guidelines for what medicines and treatments are covered by the EPS, by Colombia’s publicly supported health insurance providers or healthcare providers that are known here locally as EPS (Entidad proveedor de salúd, or Healthcare provider entity), and it’s interesting because one of the things that caught our attention was that they added cannabis, both CBD and also THC products to their list of medicines that insurance companies not only can cover but actually must cover. So I wanted to get your input on how impactful that is and what that means for the industry, specifically for patients, but then also specifically for Flora Growth.

Luis Merchan: Yes, Loren. It’s a significant change. I think there’s three major topics to cover here. First, the change by the Secretary of Health, by the Ministry of Health, puts Colombia at the vanguard in terms of regulatory and legal framework for medicinal cannabis in the world. This move is very meaningful; it allows patients that are suffering from major ailments such as anxiety, depression, pain, insomnia, all these ailments, they have access now to cannabis molecules. The doctors also now have the ability to prescribe such cannabis formulations, which is a very meaningful step, and also of course puts Colombia in a very strong position in terms of how to approach the medicinal regulatory environment.

For the patients, it’s significant, and obviously patients today have for long talked about the empirical benefits of cannabis and they secure most of their cannabis formulations from the black market today, and they do it because they have to. And of course what happens with those types of formulations is that they do not have the quality standards that medical formulations should have, so they inadvertently are putting themselves at risk. Now they are not going to have to do that, they can go to their doctor, they can ask for the formulation and the doctor can give them a prescription, and so it makes it safer for patients to have access to medicinal cannabis.

And for companies such as mine, it’s a major step towards not only broadly distributing products and formulations that are already in existence, but also a significant economic revenue that can be guaranteed, almost guaranteed in an environment like Colombia where you can actually bill public entities for the formulations that are being given to patients.

Finance Colombia: I know that there are all kinds of different treatment options. There are traditional hospitals, there are doctors that are private practitioners, there are clinics that are also known as IPS down here, which are obviously different than the EPS, which are more of like what we would call a PPO back in the States. But then I see that there have also been, on a limited basis, treatment clinics that have opened up, kind of for palliative care and for treating other different things. Now, one of the interesting things about Flora, about your company, is that you guys have a really interesting distribution model because you have cannabis derived products, you have things like cosmetics, you have health foods, you have hemp textiles. One of the things I don’t remember us talking about is pharmaceutical products or medicines. How are you involved in this space when it comes to healthcare or prescription medication?

Luis Merchan: Actually, our laboratory has the ability to manufacture a wide array of products including phytotherapeutics, dietary supplements and capsules. We today manufacture skincare solutions for almost a thousand doctors that develop custom formulations for their patients and distribute them on a one-to-one prescription basis, so for us it’s a plug-and-play move. We are going to now be able to manufacture our cannabis formulations, what in Colombia’s called magistral custom formulas, and be able to plug in to that network of doctors that is already in existence. So, that would be the easier shorter route to gain access, to give access to patients and doctors to our products and formulations.

Luis Merchan, the CEO of Flora Growth.

But as you mentioned, I think the bigger play here is to plug into the broader EPS network; educate doctors on the benefits of each one of the formulators that we have available so then they are comfortable prescribing patients when they’re coming, to treat a number of ailments. So, this is going to be a campaign that is going to take some time, but our intent is to educate the medical community in Colombia with the many partnerships that we have, and we actually have developed this very robust cannabis education programs for doctors and ensure that then they in turn start prescribing these safe formulations for the treatment of the many elements that patients are looking for today.

Finance Colombia: Like you mentioned, you have your laboratory. You guys have your INVIMA registration…INVIMA, for those who don’t know, is kind of like the Colombian version of the FDA, the Food and Drug Administration back in the States. You mentioned the magistral, the custom formulas. Now, I noticed that you have on your website, which is floralgrowth.com, where it talks about the laboratory, there’s a place for people that are interested in becoming Flora Lab distributors. What kind of companies are the good candidates for distribution? Pharmacies? CPG (Consumer Packaged Goods)? Are there maybe other companies that use the ingredients? How does your distribution model work in that respect?

Luis Merchan: When it comes to Flora Lab, we offer a broad array of products. There are branded products, over 65 of them that are INVIMA registered that we distribute worldwide, and any company that is a major distributor, that has access to points of sales in Latin America, in Central America, or all over the world can reach out to us and can become a distributor for those products. But there are other categories of products that are manufactured and sold at Flora. One of those is, of course, a prescription medication. We have a number of molecules that we plug into pharmacies and drug stores. We have, as I mentioned, phytotherapeutics, which is a very specialized area of therapy and treatment, and doctors and pharmaceutical distributors can reach out to us to plug into those categories of products. And then, lastly, we also have wholesale ingredients that we sell, and distributors that are interested in the wholesale side of distribution can also reach out to us and can become a part of the Flora distribution network.

“In North America we’re selling some of our products in 48 out of the 50 states, in Mexico, in Costa Rica. We are already selling some products into Canada. When you’re in Europe our footprint expands into Portugal, Malta, England…”

Finance Colombia: What markets, what countries have you guys expanded to so far? Where do you have a presence? I know you have different brands in different locations, but obviously you’re here in Colombia. But what other countries, obviously I think Mexico, I think Spain, but let me understand now what countries have Flora Growth products across your CPG and the pharmaceutical brands. Where can your products be found?

Luis Merchan: The list is exceptional, continues to grow, Loren, from a CPG perspective. We’re in the majority of Latin America as of today and at least the markets that are the most meaningful. I think the one market that is not there…It’s probably easier to tell you what market that we haven’t penetrated yet but we’re looking to, in South America is Brazil, because of the strict rules that they have in terms of distribution, but for the rest, in North America we’re selling some of our products in 48 out of the 50 states, in Mexico, in Costa Rica. We are already selling some products into Canada. When you’re in Europe our footprint expands into Portugal, Malta, England. We have now activated these distribution agreements in several countries across the globe, like Israel, like South Africa, Germany and Australia. Those contracts will activate this year so that the flag has been planted but the revenue generation will not start until 2022, and the good news here is that our team is a global team in terms of distribution, sales and regulatory, so we’ll continue to evaluate which opportunities are opening up in terms of the regulatory framework and when those do, then we are ready to very quickly enter the market, and that’s what happened for example in Mexico, and that’s what will probably continue to happen in other countries around the world, so look forward to more countries being added to this list.

Finance Colombia: That’s great to hear. Obviously, we want you to keep us posted as we continue to cover, not just obviously the stock from a financial perspective, but also your growth as a company and your product line. It’s really good to see Colombian companies becoming true multinationals and becoming companies that are expanding into markets, not just here in Latin America, but in North America and in Europe and beyond, so it’s really impressive what you’ve been able to do in such a short time.

Gross profit increased by 14.5 million, or 30%, to $62.3 million (yielding a gross margin of 58%) for the three months ended September 30, 2021, compared to $47.8 million (yielding a gross margin of 60%) for the three months ended September 30, 2020. Net loss for the three months ended September 30, 2021 was $36.9 million, compared to a net loss of $1.0 million for the three months ended September 30, 2020. Procaps says the increase in net loss was primarily attributable to a one-time, non-cash adjustment of $44 million to reflect the termination, on the closing of the business combination, of put options previously granted to certain shareholders.

“The third quarter of 2021 was highlighted by the achievement of a successful business combination with Union Acquisition Corp. II (“LATN”) and the listing of our ordinary shares on  NASDAQ, along with continued financial and operational momentum,” said Ruben Minski, Procaps Group’s Founder, Chairman and CEO. “The resurgence in the market with the re-opening of the economy, rapid ramp-up of new product launches, continued roll-out of products into new geographic areas and measured improvements to our inventory rotations combined to deliver 35% revenue growth during the quarter, including double-digit increases in four out of five of our business units.

Adjusted EBITDA increased by 27% to $24.5 million for the three months ended September 30, 2021, compared to $19.3 million for the three months ended September 30, 2020. Adjusted EBITDA margin decreased to 22.9% for the three months ended September 30, 2021, compared to 24.3% for the three months ended September 30,2020.

In a written statement, Minski added: “In our B2B segment, we expect to see growth from both our existing portfolio and product pipeline and in our B2C segment, we anticipate growth initiatives from our existing portfolio and from new products focused on current therapeutic areas in chronic diseases such as pain relief, immunology, cardiology, respiratory and dermatology, and the internationalization of our existing portfolio, with on-going efforts to expand our footprint of successful products outside of Colombia. Our internationalization strategy and on-going efforts to expand our footprint of successful products outside of Colombia continues to be one of our primary focuses, with a return to trade fairs and over 67 products internationalized during the quarter. We believe our company-wide product pipeline, with an estimate of over 600 product launches in the next three years, will provide the support for our growth in the next few years.

Year to date, net revenues increased by $69.9 million, or 33%, to $283.2 million for the nine months ended September 30, 2021, compared to $213.3 million for the nine months ended September 30, 2020. Net loss for the nine months ended September 2021 was $54.6 million, compared to a net loss of $19.9 million for the nine months ended September 30, 2020. The increase in net loss was primarily attributable to a one-time, non-cash adjustment of $59 million to reflect the termination, on the closing of the business combination, of the put options previously granted to certain shareholders and the valuation of such put options.

Chief Financial Officer Patricio Vargas explained: “As a result of our business combination, there were a number of one-time charges that affected our bottom line, and we are happy to report that they are extinguished and now reflect positive total equity on the balance sheet. For the nine months ended September 30, 2021, finance expenses totaled $79 million, of which $23 million was related to finance expenses accrued for the put options held by certain shareholders and $36 million represented a one-time expense for the termination of put options held by certain shareholders in connection with the recently closed business combination. Moreover, classifying and extinguishing these derivatives enables the company to articulate a cleaner financial profile in subsequent quarters as we move closer toward positive net income operations. Considering the favorable demand conditions that we have observed in the different markets we operate, we have decided to increase our investments in marketing and R&D, which we believe will result in further growth in 2022.”

“The quarter’s accomplishments and strong financial results are helping to accelerate the delivery of our innovative pharmaceutical solutions and drive new expansion initiatives that we believe will enable us to increase our market share of the approximately $58 billion pharmaceutical market in Latin America,” concluded Minski.

The affirmation reflects Fitch’s expectations that Medellin will maintain an adequate operating performance and manageable debt levels in spite of the economic impact of the coronavirus pandemic. The payback ratio (net adjusted debt/operating balance) is expected to be around 9x over a five-year rating horizon. Secondary metrics are actual debt service coverage ratio (ADSCR) and the fiscal debt burden, which are expected to be below 1x and close to 90% in 2024, respectively. Medellin’s ratings reflect the combination of a ‘Midrange’ risk profile and a debt sustainability score of ‘a’ under Fitch’s rating case.

• Long-Term Foreign-Currency Issuer Default Rating (IDR) at ‘BBB-‘; Outlook Negative;
• Long-Term Local-Currency IDR at ‘BBB-‘; Outlook Negative;
• National Long-Term Rating (NLTR) at ‘AAA(col)’; Outlook Stable;
• NLTR of the senior unsecured notes for COP248,560 million issued in 2014 at ‘AAA(col)’.
• National Short-Term (NSTR) Rating at ‘F1+(col)’.

While Medellin’s most recently available data may not have indicated performance impairment, material changes in the central government’s debt, revenue and costs are occurring across the sector and likely to worsen in the coming weeks and months as economic activity suffers and government restrictions are maintained or broadened. Fitch’s ratings are forward-looking in nature, and the ratings firm indicates that it will monitor developments in the sector for their severity and duration and incorporate revised base- and rating-case qualitative and quantitative inputs based on performance expectations and assessment of key risks.

Risk Profile: ‘Midrange’

Fitch has assessed Medellin’s risk profile at ‘Midrange’, reflecting that all six key risk factors are assessed as midrange: revenue robustness and adjustability, expenditure sustainability and adjustability, liabilities and liquidity robustness and flexibility. In other words, Medellin’s risk profile is assessed as ‘Midrange’ because the municipality has presented a solid operating performance, a moderate level of indebtedness and high levels of capex, mainly financed with tax revenues, a significant amount of resources stemmed from Empresas Públicas de Medellín E.S.P. (EPM) and long-term debt. Furthermore, this risk profile is in line with that of the Colombian territorial entities rated highest by Fitch.

Revenue Robustness: ‘Midrange’

Medellin’s operating revenue is mostly made up of predictable and growing tax items (notably property tax and tax on industry and commerce) and stable transfers from the Colombian state (BBB-/Negative). Tax revenue rose at a nominal CAGR of 6.2% in the period 2015-2019, similar to the nominal GDP growth of 6.8% in the same period. Medellin’s tax revenues accounted for 45.9% of operating revenue on average in the last five years (2015-2019). According to their contribution to tax revenue, the most important taxes are property tax (IPU, its Spanish acronym) and tax on industry and commerce (ICA, its Spanish acronym), which accounted for 41.1% and 35.8%, respectively, in 2019. Fitch foresees a slower growth pace in Medellin’s operating revenues in 2020 and 2021, due to the effect of the coronavirus, but also considers recovery prospects afterwards due to the municipality’s economic strength. As of September 2020, the tax revenue of the municipality has fallen close to 10% year over year (yoy), in accordance with Fitch’s expectations for the sector. ICA has been the most affected tax revenue, decreasing by nearly 17% as this tax is closely linked to the economic cycle.

On the other hand, national transfers come from a sovereign counterparty rated at ‘BBB-‘/Outlook Negative. Fitch considers that the transfers framework and its evolution are stable and predictable. However, the fiscal pressures national government faces may lead to stagnation or even a reduction of transfers and could worsen in the current scenario of economic downturn caused by the coronavirus lockdown. Nonetheless, the city’s operating revenue structure presents a low dependence on transfers, so the exposure to this risk is lower for Medellin than for municipalities with lower fiscal autonomy.

Moreover, the total ownership of EPM has been a key factor in the municipality’s financial performance and an outstanding source of resources, as the significant amount of common and special financial surpluses transferred to the entity have increased its flexibility to finance capex and social investment (around 55% of EPM’s net income). This gives the city an incomparable position with respect to other Colombian entities during the pandemic. Financial surpluses transferred from EPM to Medellin in 2019 totaled COP1.3 trillion. For 2020, Medellin will receive COP1.5 trillion. If EPM’s financial transfers decrease, Medellin might eventually delay its capex plan or decrease social transfers. It is worth mentioning that EPM’s transfers are not used to pay debt service and liabilities with financial institutions.

Revenue Adjustability: ‘Midrange’

Given the relatively high proportion of local collection of total revenues, Medellin’s ability to cover a reasonably expected revenue decline is estimated to be above 50%. Medellin can set the rates for most of its taxes within the limits established by National Law. Besides, it has property tax rates that are far below the legal limit and its taxpayers can relatively easily afford potential rate hikes.

During the last five years, Medellin’s tax collection has shown a positive trend. This is because of good management of the fiscal model, the payment culture of taxpayers and the region’s economic performance. The economic base and activity are diverse, limiting risks of concentration in taxpayers. The municipality has implemented important fiscal strategies in order to continue its strong revenue collection using technology, in addition to new payment methods and regulatory and monitoring actions. In 2020 the municipality implemented specific fiscal stimuli or tax benefits to ease the impact of the coronavirus pandemic on taxpayers such as deferral of tax payments, discounts on taxes and reductions in interest and charges (Decree 678 of 2020).

Expenditure Sustainability: ‘Midrange’

Medellin’s main responsibilities are the provision of basic services such as education (payroll of both teachers and administrative personnel), healthcare (insurance and subsidies to low-income people), water supply, sanitation and transportation, among others; all of which are mainly addressed with transfers. In 2015-2019, even though operating expenditure growth has been superior to that of operating revenue in real terms (3.3% vis a vis 1.8%), Medellin’s operating margin, as per Fitch calculations, has been adequate and averaged 16.7% in the reference period. Fitch believes these responsibilities are moderately countercyclical and expects stable growth in the mid-term.

Despite extraordinary expenses related to health, Fitch expects that operating expenses will remain under control for the rest of the current administration. To tackle health contingencies, Medellín has allocated resources of COP236.5 billion (equivalent to 4.2% of total revenue in 2019). As of September 2020, total expenditure has decreased by 4.2% yoy despite a 37.5% yoy rise in health expenditure due to the pandemic.

Expenditure (Adjustability): ‘Midrange’

Medellin’s expenditure structure is relatively flexible despite the limited ability to cut some transfers earmarked for health and education as policies are decided at the national level. Medellin has moderate expenditure adjustability, given that operating expenditure for the central administration as well as for investment sectors was slightly above 58.3% of total expenditure from 2015 to 2019; while capex accounted for 40.1% of total expenditure in the same period. The observed expenditure composition includes adequate capex, financed with operating balances and EPM’s resources, which in Fitch’s view denotes a moderate margin to cut expenditure.

Medellin is about to sign a co-financing agreement with the national government in order to finance an important transport infrastructure project, Metro de la Via 80. Medellin has assumed Future Budget Allocations (FBA, authorizations against tax revenues in future budgets for paying certain expenses) for up to COP1.3 trillion for this project between 2020 and 2034, which adds some inflexibility to the expenditure structure. The current administration is planning to increase capex, as a countercyclical measure to boost the local economy amid the coronavirus pandemic.

Liabilities and Liquidity (Robustness): ‘Midrange’

Although the local framework imposes debt limits, rules and restrictions on some debt instruments, some loopholes exist for treating off-balance-sheet risks, since prudential limits only consider the direct debt of local and regional governments (LRGs). As a response to the coronavirus pandemic, decree No. 678 eased the solvency (interest payment to operating balance) and sustainability (outstanding debt to current revenue) limits during 2020 and 2021. Thus, the municipality will surpass the limit of 80% of the sustainability metric only in 2021 with the aim of reactivating local economy. For 2021, Medellin will take COP344.3 billion.

As of August 2020, Medellin’s outstanding long-term debt balance was COP1.92 trillion. Around 35.9% of Medellin’s long-term debt was denominated in foreign currency (taken with AFD) and close to 73% was tied to a floating interest rate. In addition, the balance of bonds outstanding reached COP248.6 billion, accounting for 13% of total direct debt. The interest rate on the floating rate tranche of Medellin’s external debt (six-month Libor + 1.7%) will be changed to a fixed interest rate, hence, the municipality would save in interest expenditure and eliminate the exposure to interest rate risk. In December 2020 Medellin will take COP120.0 billion of additional debt. Metro de Medellin, project manager, will take on debt due in 2034 in order to finance Metro de la Via 80. This debt will be covered 70% by the national government and 30% by Medellin with FBAs. At this moment, the financing mechanism that will be used and the debt amount are uncertain. Fitch will monitor the final characteristics of the project in order to assess debt sustainability metrics in a timely manner.

Liabilities and Liquidity (Flexibility): ‘Midrange’

Fitch believes Medellin has better liquidity management, as it has both a larger liquidity position and better access to short/long-term loans with local banks whose counterparty is rated in the ‘BBB-‘ category. In addition, in the short term, the city may borrow up to 1/12th of its current revenue and must repay these loans before the end of the fiscal year. Finally, the Colombian government does not provide emergency liquidity support when LRGs are under pressure. At the end of the year, the city has a high proportion of restricted cash, which moderates its liquidity position. This is offset by adequate guidelines in terms of excess liquidity management.

It is worth mentioning that Decree 678 of 2020 allows territorial entities to contract short-term debt in 2020 and 2021 the purpose of which is exclusively to deal with temporary cash shortages in both operating and capital expenses. These loans may not exceed 15% of current revenue and must be repaid before next fiscal year end and will not be included in calculations of legal limits.

Debt Sustainability: ‘a’ Rating Category

Under Fitch´s rating case the debt payback ratio (net adjusted debt/operating balance), the primary metric of debt sustainability for Type B LRGs, is expected to be around 9x over a five-year rating horizon with a score of ‘a’. Secondary metrics are actual debt service coverage ratio (ADSCR) and the fiscal debt burden, which are expected to be below 1x and close to 90% in 2024, respectively. Fitch includes in its analysis Medellin’s recognition of the obligation with the national government for Medellin’s metro infrastructure financing and considers it an intergovernmental obligation. Thus, the enhanced synthetic coverage ratio, which does not include Metro’s financial obligation, is roughly 2x.

Additional Rating Factors: Fitch calculates enhanced debt sustainability metrics that exclude the metro obligation from debt sustainability metrics to assess a subsequent improvement in the SCP. At present, Medellin’s SCP is strong enough to support current ratings, so this improvement is not used. However, if there were a moderate deterioration in the SCP, an uplift could be considered by using the enhanced payback ratio. According to Fitch’s rating case, the enhanced payback ratio would be below 5.0x.

The City of Medellin is considered Colombia’s second-most important city, after Bogota, contributing approximately 7.3% of GDP, according to the National Administrative Department of Statistics (DANE). The local economy is mainly based on services and commerce, although Medellin is a hub for many industries relevant to national and international trade. The city sustains strong socioeconomic indicators with higher coverage of public services, education and health than national standards. Due to inward migration, Fitch has observed the need for infrastructure in various social sectors. Fitch classifies Medellin, as for all Colombian LRGs, as type B as it covers debt service from its cash flow on an annual basis.

Derivation Summary

Medellin’s ‘bbb+’ SCP is derived from a combination of a ‘Midrange’ risk profile and adequate debt metrics, which result in a debt sustainability score of ‘a’ under Fitch’s rating case. The SCP also factors in a comparison of Medellin with peers, particularly with Barranquilla, Colombia whose SCP is ‘bbb’. Medellin’s IDR is not affected by any asymmetric risk or extraordinary support from the Colombian government. Finally, Fitch applied a rating cap on Colombia’s sovereign rating of ‘BBB-‘/Outlook Negative in recognition of a certain degree of interdependence between subnational finances; given the fairly centralized framework. Hence, the municipality’s IDRs are ‘BBB-‘/Outlook Negative. The NLTR of ‘AAA(col)’ was derived from the ‘BBB-‘ IDR, while the NSTR of ‘F1+(col)’ was derived from the NLTR.

Key Assumptions

Fitch’s rating case scenario is a “through-the-cycle” scenario, which incorporates a combination of revenue, cost and financial risk stresses. It is based on the 2015-2019 figures and 2020-2024 projected ratios. The key assumptions for the scenario include:

• Growth in taxes and other operating revenues (fees, fines and others) in real terms is similar to the national GDP in the long term, with a drop in 2020 followed by a full recovery in 2022.
• 6% nominal growth of transfers, according to the national budget. From 2021, growth is a four-year moving average of nominal national GDP growth;
• Real operating expenditure growth of 3% in the long run, with a temporary real growth rate of 6% in 2020.
• Capital revenue will perform as EPM’s financial surpluses do, hence it will be COP1.5 trillion in 2020 and as from 2021 it will increase linked to inflation rate.
• Capex is adjusted according to the decrease in the operating margin, capital revenue and new borrowing with a five-year moving average floor.
• Debt level considers Medellin’s projections.
• Fitch’s adjusted debt includes an estimate of Medellin’s obligations with the national government for the financing of the original infrastructure of the city’s metro system.
• Interest expenditure does not include that related to intergovernmental debt.
• Apparent cost of debt at 9%.
• All cash is considered restricted.

Rating Sensitivities

Factors that could, individually or collectively, lead to positive rating action/upgrade:

• Medellin’s IDR is capped by the sovereign rating. A stabilization of the outlook would be possible only if the sovereign outlook is stabilized.

Factors that could, individually or collectively, lead to negative rating action/downgrade:

• Medellin’s Long-Term IDRs could be downgraded if the sovereign rating is downgraded. If the enhanced payback ratio exceeds 9.0x steadily under Fitch’s rating case coupled with an actual debt service coverage ratio below 1.5x and assuming no changes in the risk profile Fitch could consider a downgrade. This could happen if the entity incurs long-term debt in addition to that considered by Fitch or an important deterioration in the operating balances.
• A prolonged pandemic impact and a much slower economic recovery lasting until 2025 would pressure municipality tax receipts. Should Medellin be unable to proactively reduce expenditure or supplement weaker receipts from increased central government transfers, this may lead to a downgrade.

 Best & Worst Case Rating Scenarios

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].

Summary of Financial Adjustments

• Net adjusted debt considers other Fitch classified debt.
• Adjusted debt considers the difference between net adjusted debt and unrestricted cash.
• All cash is considered restricted.
• Operating revenues do not include a fiscal surplus from previous years and expenditure does not include fiscal deficits from previous years.
• Fitch does not consider cash proceeds from Fondo Nacional de Pensiones de las Entidades Territoriales (Fonpet) used for pension payments or other expenditure made with these resources.
• Fitch’s adjusted debt includes an estimate of Medellin’s obligation with the national government for the financing of the original infrastructure of the city’s metro system.
• Fitch classifies as capex some operating expenses linked to investment expenditure and financed with EPM’s surpluses.

Fitch now expects real GDP in Chile to contract by 3.9% in 2020 compared with their previous forecast of negative 1.9%. For Colombia, the ratings firm forecasts a contraction of 4.5%, compared with negative 2% previously. Both revisions reflect the extension of domestic lockdown measures with a large impact on consumption and investment as well as the coronavirus pandemic’s broader effects on lower commodity prices, higher funding costs and capital outflows for emerging markets overall. In Colombia, the likely fall in oil production will also hit growth.

Deep recessions are magnifying fiscal deterioration. Fitch forecasts Chile’s 2020 deficit to widen to nearly 10% of GDP and Colombia’s central government deficit to rise to 7% compared with their previous forecasts of 9.3% and 5.5%, respectively. Chile’s debt-to-GDP will rise to 36% and Colombia’s to 55%, up more than 8 pp and 10 pp, respectively, from 2019.

As with other sovereigns, Fitch’s forecasts are subject to higher than normal uncertainty around the pandemic’s duration and intensity, creating further downside risks to growth. Both countries’ governments look to stimulate economic activity. Chile has announced an additional fiscal package to provide cash transfers to the most vulnerable, while the Colombian government recently announced further support measures including wage subsidies for some companies and deferring income tax payments until December, as well as increasing fiscal stimulus spending to 2.4% of GDP from 1.4%. Both countries’ central banks have lowered policy rates and provided liquidity to credit markets through bond-buying programs among other measures.

Lack of fiscal consolidation that allows government debt to continue rising is a negative rating sensitivity for both sovereigns (for Chile, the erosion of fiscal buffers provided by sizable sovereign assets is also a sensitivity). Deficits were under pressured heading into the crisis, partly due to Chile’s increased social spending and Colombia’s expected fall in tax revenues. Colombia’s finance minister has mentioned possible tax reform next year, and Chile passed tax reform in early 2020 to fund new social spending and created commissions to provide proposals to reduce tax exemptions and rationalize spending. However, continuing deterioration in near-term economic and fiscal prospects increases the importance of formulating credible medium-term plans, including fiscal reforms on the revenue or expenditure side, to sustainably restore growth and stabilize debt.

Chile’s debt ratio would remain lower than the ‘A’ rating category median in 2020 under Fitch’s revised forecasts, but social pressures may test the authorities’ resolve to maintain planned structural fiscal consolidation. Although the ratings firm expect a significant bounce in growth in 2021 as both countries’ domestic and external demand revives, failure to address the risk of lasting economic damage stemming from the current crisis would intensify pressure on the rating. The possibility of a longer-term hit was highlighted by Chile’s Experts Advisory Council, which recently reduced its annual trend growth forecasts by nearly 1pp through 2024. Weaker growth prospects would adversely affect debt dynamics and could exacerbate social tensions, in Fitch’s view.

Colombia faces challenges raising tax revenues over the medium term, especially given the expected loss of oil-related revenues worth over 1% of GDP in 2021 and reduced tax revenues due to the 2019 Economic Growth Law. Both countries face social and political pressures to increase pension, healthcare and education spending, highlighted by protests between October and November 2019.

Elections in October 2021 in Chile and May 2022 in Colombia may narrow the window of opportunity for reforms. A referendum on Chile’s constitution scheduled for October 2020 could add to political uncertainty.

Colombia’s Tatacoa Desert image by Makalu from Pixabay

Despite the drop — from 57th in 2017 to 60th this year — the Andean nation’s overall score in the Global Competitiveness Report was largely unchanged, actually increasing by 0.1 points, to 61.6, on a scale that rated 140 different economies on a point scale of 1 to 100.

This was slightly above the average score of 60.0 but well behind the top five economies, which were the United States (85.6), Singapore (83.5), Germany (82.8), Switzerland (82.6), and Japan (82.5)

Moreover, despite the slight dip in the rankings following its best-ever position last year, Colombia’s ranking of 60th overall still represents an improvement compared to its historical standing. In 2009, for example, Colombia ranked 74th, and it sat at 69th as recently as 2014.

In Latin America, Colombia ranked fifth this year, following Chile (ranked 33rd), Mexico (46th), Uruguay (53rd), and Costa Rica (56th). It outpaced peers including Peru (63rd), Panama (64th), Brazil (72nd), Argentina (82nd), and Ecuador (86th).

Looking at the wider breakdown of the economy, Colombia continues to lag in technological areas, including “innovation capability” and “ICT adoption,” where it ranked 73rd and 84th overall, respectively. Poor results in these categories position the country in a particularly undesirable place for the future, according to a study that is increasingly touting the need for digital progress.

“The index integrates well-established aspects with new and emerging levers that drive productivity and growth,” stated the World Economic Forum. “It emphasizes the role of human capital, innovation, resilience, and agility as not only drivers but also defining features of economic success in the Fourth Industrial Revolution.”

Other trouble ares holding back the country’s competitiveness are its institutions (89th overall), infrastructure (843rd), labor market (80th), and “skills” (80th). “Weak institutions — defined as including security, property rights, social capital, checks and balances, transparency and ethics, public-sector performance, and corporate governance — continue to hinder competitiveness, development, and well-being in many countries,” stated the report.

In line with its international reputation, security remains one of the other largest hurdles for Colombia as well, according to the study. While the global average score in this category is 72 — with half of all nations scoring 75 or higher — Colombia came in at just 43.5. This was comparable, but still worse, than the two other larger countries in the region, Brazil (which scored 45.8) and Mexico (46.0).

“Across all countries, the relationship between the prevalence of organized crime and the perceived reliability of the police is strikingly close,” states the study.

On the positive side, Colombia ranks very well in terms of health (35th) and market size (37th). Both business dynamism (49th) and macro-economic stability (58th) also come in as strengths.

When it comes to sub-categories, the nation also stands out for its budget transparency (4th), conflict of interest regulation (11th), airport connectivity (31st), internal labor mobility (33rd), and the soundness of its banks (35th).

By contrast, there needs to be improvement made when it comes to organized crime (135th), judicial independence (112th), hiring and firing practices (109th), buyer sophistication (95th), and property rights (94th), according to the World Economic Forum.

(Image credit: mohamed_hassan / Pixabay)

The new plants are a THC-dominant variety, which due to the properties of tetrahydrocannabinols trigger a psychoactive response when smoked or ingested, whereas the earlier crop were cannabidiol, or CBD, dominant.

PharmaCielo Colombia, a subsidiary of Canadian medical marijuana firm PharmaCielo Ltd. with operations in Rionegro, expects the flowering CBD crop it previously planted in late 2017 to begin to be ready for harvest within a matter of weeks.

The company also plans to add an additional hectare of cultivation per month, as allowable under Colombian law, which PharmaCielo Colombia CEO Federico Cock-Correa categorized as representing “rigorous regulatory structures that must be complied with.”

The company’s operations in Rionegro currently span nearly 28 hectares, including 12 hectares of open-air greenhouses used for cultivation of cannabis plants.

The firm is bullish on the long-term potential for a cannabis oil market amid expectations of rising international market demand.

READ MORE: PharmaCielo Begins Planting Medicinal Marijuana in Rionegro, Colombia

“As demand for medicinal cannabis oils continues to grow on an international level, the ability to have a secure source of supply, consistently high quality and purity of the product is essential,” said Anthony Wile, CEO of PharmaCielo Ltd. of Toronto. “From speaking with global healthcare clients, we know that they need to be assured of the company’s ability to consistently provide necessary volumes as well as product quality of the highest level.”

(Photo credit: SeaweedJeezus / Pixabay)