Why I’m Bullish on Colombia
Sidenote for those who aren’t economics nerds, A ‘bull‘ or ‘bull market’ refers to optimistic investments or expressing confidence. A ‘bear‘ or ‘bear market’ refers to economic pessimism or lacking confidence.
As I outlined in the first post to this blog, a major reason in my moving to Latin America is to make a career in an emerging market. Globalization is a product of two worldwide trends: the fall of socialism and the rise of the internet.
20 years ago, 60% of the world lived under some form of socialism. With the fall of the Berlin Wall, capitalism triumphed and East Germans poured across the border to go to McDonald’s. Countries from Eastern Europe to Africa to Asia to Latin America implemented market reforms. Protectionist policies and barriers came down in favor of free trade. Manufacturing in China, in all its glory and criticism, is the poster child of this historic development.
The internet represents another leap in human productivity by eliminating the need for service-oriented jobs to be performed locally. The world got wired and the textbook example of this change would be the call centers and IT industry in India. Where in the world we are doesn’t matter anymore, for many jobs.
Globalization got a bad rep in America and industrialized economies because it moved jobs to countries with more attractive costs of labor. Developing countries, on the other hand, saw the emergence of a middle class. Goldman Sachs coined the term BRIC (Brazil, Russia, India, China) for those countries that would grow to eclipse traditionally rich countries. Then the investment bank identified the Next 11 countries that could possibly join the economic ranks of the BRIC. GDP growth in emerging markets, sometimes upward of 10%, is simply impossible to achieve in developed economies where 4% growth is considered rapid expansion.
So enough context on the world economy, why Colombia? Because I believe the best opportunity lies in the greatest unrealized potential. Emerging markets see so much growth because of their vast unrealized potential – mostly due to limiting economic policies. For example, China had so much unrealized potential because its 1.3 billion people lived under the inefficiency of a government-planned economy. Allowing all those people to produce for a profit motive is why China is now the world’s second largest economy, and set to become the largest in my lifetime.
Brazil is the Latin American emerging market most economists drool over because of its size. But if we look at unrealized potential, Colombia may be the most attractive. Where does Colombia’s unrealized potential come from? Security. I’ve written extensively about the crime here. I’ve complained more than it deserves because Colombia’s undergoing a historic turnaround.
Current president Alvaro Uribe was elected on a campaign of hard-line security measures after the soft policy of previous president Andres Pastrana, who granted FARC a safe haven the size of Switzerland. FARC bombed the capital in Bogota as Uribe was being inaugurated in 2002, missing Parliament and the presidential palace but killing a dozen poor people. Kidnappings for politics and profit were so rampant that any Colombian with money stayed in the city. Domestic and international tourism was nil.
The 80s and 90s were marked by the cocaine cartels’ contribution to instability, most notably Pablo Escobar’s Medellin Cartel. Aside from bribing government officials, the cartels kidnapped or assassinated politicians and policemen. In his last years, Escobar paid a set bounty on any police officer killed. Medellin was considered the most dangerous city in the world. Right-wing paramilitaries also contributed to the chaos and human rights atrocities.
For decades, the climate of violence and insecurity repelled foreign investment. Who in their right mind would build a business in a country which could be taken over by Marxists, where management professionals are at high risk of being kidnapped, or where common street violence prevents people from going outside? In addition to tourism, foreign investment was also nil.
Times have changed. The New York Times ran an article last month on the attractive real estate market in Bogota. From the article:
Once a byword for kidnappings, bombs and chaos, Bogotá has become one of South America’s most attractive cities for foreigners to live and invest in … Álvaro Uribe, Colombia’s president since 2002, has taken a hard line on security issues and scored notable successes against left-wing guerilla groups in recent years.
Love him or hate him, Uribe’s government has kicked the collective ass of FARC - enticing mass desertions, killing high profile leaders, and remarkably rescuing Ingrid Betancourt and three American defense contractors.
Crime’s still a challenge but nowhere near levels of the 80s and 90s. Tourism is exploding behind the industry’s campaign slogan, “The only risk is wanting to stay,” which proved 100% accurate for me after my 2008 visit.
Check out this slideshow from Colombia’s Proexport:
A few highlights:
- Homicides cut in half in last six years
- Kidnappings down to a fifth of the level six years ago
- Foreign investment five times higher than five years ago
- International visitors doubled in five years
- In 2010 the World Bank named Colombia the most “business friendly” nation in Latin America
Uribe recently signed an agreement to allow four US bases on Colombian soil. Regardless of how much you hate America, you can reasonably assume a resurgence of FARC or invasion from Hugo Chavez in Venezuela is quite unlikely with US boots on the ground. Colombia is America’s closest ally in Latin America. Again, regardless of how you feel toward the USA, and I know this statement will piss off a lot of people, but a look at the nations which allied with the US / “the West” over the years shows it’s not a bad choice economically: Taiwan, South Korea, Japan, Egypt, Poland, Israel, etc. Not bad company.
The unrealized potential in Colombia stems from how little was being produced due to insecurity, as wells as how business-friendly the country is now. Capitalizing on this kind of unrealized potential is called “extreme investing” in this 2007 BusinessWeek article, in which the author calls Colombia an “extreme emerging market.” Here’s a selection from that article:
Colombia’s stock market has soared fourteenfold since October, 2001 … Colombia’s strong fundamentals stand out. Its $130 billion economy, a world leader in the production of coffee, petroleum, textiles, and flowers, is growing at 6.8% a year, two full points faster than the Latin American average. In the past 10 years, Colombia has slashed its inflation rate from 18% to 5%, and since Uribe was elected, unemployment has dipped from 16% to 13%. The nation has never defaulted on its debt or experienced hyperinflation. And entrepreneurial thinking is spreading. Run a Google geographical-hit query, and you’ll see that, per capita, nowhere in the world are there more searches for the words “Peter Drucker,” the late management guru, than in Bogotá. No. 2? Medellín.
I’m also bullish on Colombia because of the people. Bogota is known as the “Athens of Latin America” for its high student population. You can’t walk far without passing a university. It’s an educated populace, which is why many multinationals decide to build their Latin American headquarters here. When companies decide to build such an office to manage Latin American operations, it seems to follow a pattern. Of course, they build an office in Brazil to manage Brazil. Another in Mexico City for Mexico, the Caribbean, and Central America. And they often choose Bogota for at least the Andean countries (they sometimes separate the more developed Argentina and Chile from the rest of South America), over Lima or Caracas.
The professionalism and education of Colombians puts them at an advantage in other ways. Medical tourism is major growth industry projected in Latin America. Soaring healthcare costs in developed countries is causing those citizens to look for operations abroad, cosmetic surgery being no small part of that business.
*** UPDATE ***
USA Today came out with this excellent article about tourism growth in Bogota. From that piece:
A boom in international hotel chains (as well as budget lodgings) is beefing up a once-anemic tourism infrastructure. And an exuberant cultural, nightlife and dining scene is luring foreign visitors who previously considered a trip here as tantamount to scheduling their own kidnapping …What a difference a decade makes …Nationally, Colombia is touting eco-adventures, such as birding and whale-watching, and forays into its coffee-growing regions, along with beach and cultural tourism. (Cartagena, the Caribbean jet-set paradise of the ’50s and ’60s, has undergone a renaissance after years of neglect.) …“There’s a tourism boom going on. New restaurants. New hotels. It’s not Denmark or Sweden, but it’s coming,” says developer Abdon Espinosa, walking along a northern street lined with Dolce & Gabbana, Bulgari and other international luxury brands …In the past five years, 25 shopping malls have gone up, he says. Sidewalk tables fill a pedestrian-only area called the Zona T that by night is jammed with youthful throngs strutting to pulsing club music. In its colonial center, artists and others are moving into once-derelict buildings …[A] creative culinary scene has emerged, led by talented chefs such as Leonor Espinosa, owner of Leo Cocina y Cava, where native ingredients fuse Spanish, Indian and African influences. The inventive chef pairs lobster tail with sweet red pepper sauce; whitefish ceviche with coconut milk vinaigrette and mango puree; and blends corozo, a tropical palm fruit, into her signature martinis …The city also boasts a vibrant performing-arts scene. This year’s just-ended Ibero-American Theater Festival (held every two years and catalyst for the grand parade) attracted about 80 theater companies from 40 countries, the largest contingent in its history …La Candelaria, which, despite its status as Bogotá’s colonial heart, had become a seedy backwater, is re-emerging with new boutique hotels and budget hostels in rehabbed historic buildings along its warren of cobbled streets. (Though locals still warn you to watch your belongings by day and take cabs by night.) It’s a youthful district populated by several universities. It’s also home to a fine collection of 12 museums, including the stellar Botero Museum, featuring Colombia’s premier artist, Fernando Botero, along with works by Picasso, Miró, Degas and others …Also here are Bogotá’s 19th-century cathedral and important government buildings, including the Colombian Congress, where earlier this year, local artist Rafael Gomezbarros affixed hundreds of giant fiberglass ants to its monumental façade. It’s a curious sight. But for many, no more unexpected than the metamorphosis of the city itself …
Also check out USA Today’s photo essay, The Bogota boom.
Natural and organic consumer products are another growing trend in developed countries. With a sizable chunk of the Amazon rain forest, Andes Mountains, two long coastlines, and a tropical climate, Colombia is one of the most botanically diverse countries in the world. See this New York Times article about the growth of HPC products from the Amazon.
Colombia has coastlines along both the Pacific Ocean and Caribbean Sea for convenient shipping (and receiving) to Australia, Asia, North America (east and west coasts), Europe, and Africa. Buenaventura is the major port on the Pacific; Barranquilla on the Caribbean.
Aside from import/export, those two coastlines draw tourism because they feature some of the most beautiful beaches in the world. Tourists will love Colombia for its beaches, mountains, rain forest, ethnically diverse culture, and WOMEN. I’ll never hear the end of gringos’ drooling over Medellin and the paisa women. Latin men seem to drool more over the women from Cali, which proclaims to be the salsa capital of the world. Colombian women are among the most seductive in the world, which is why the country’s also a major destination for sex tourism. Colombian tourism in general is a major growth sector.
For an indepth look at Colombia’s economy, see this Harvard researcher’s 2008 report Revisiting Economic Growth in Colombia – A Microeconomic Perspective. Unfortunately, it reads like only a Harvard researcher could’ve written it. The main argument is that, for Colombia to maintain its strong performance, it must make a priority easy access to financing (low interest rates).
Threats:
Venezuela – While Hugo Chavez is Alvaro Uribe’s political nemesis, Venezuela is Colombia’s biggest trading partner and the countries have a long, shared history. The economic disaster that is modern Venezuela primarily hurts Venezuelans (many of whom face water and power rationing at the time of this writing), but Colombians will also take a hit from their plight, as detailed in Bloomberg’s December article, Colombia Growth in 2010 May Be Cut by Venezuela Trade.
Crime – Security is improved but it’s still not the safest place. The low cost and widespread availability of drugs produce tens of thousands of addicts roaming the streets, which doesn’t create the best atmosphere to shop.
Insurgents – FARC has suffered crippling losses during Uribe’s tenure, but they’re still 10,000 strong. That’s ten thousand trained guerillas aiming to overthrow the government.
comments
9 Responses to “Why I’m Bullish on Colombia”
Leave a Reply
Very interesting. I think you’re in a great place. One’s got to take some chances to find opportunities and I’m sure you’ll find the opportunity.
I remember one of my Colombian friends in the 90s saying that the biggest advantage the US has with Colombia is Colombian’s lack of planning ability. The flip side was that Colombians are amazingly responsive and creative dealing with things that come up. Have you seen this?
Hopefully the good times continue and some of the benefits accrue to you.
Wishing you all the best,
Andy
Hey Colin,
This is definitely one of your best posts. I found it really informative — nice overview of what’s going on in Colombia; it helped me put a lot of things in context that had been scattered in my head.
As I was reading this I was thinking you should work for their tourism board. You do a great job of selling the country’s positive aspects.
@DennisDemori
Make a point to check out Barranquilla when you get a chance. I’m here for Carnaval and in 30 years of global travel I’ve not found nicer people. Great fish and cold beer – tropical paradise on a beer budget. There is a large middle eastern immigrant community here – lots of chicas with a latina/arab mix. Think Shakira. I think I might drop anchor here.
Anders
Hey Collin, excellent post!!! after reading it I felt very proud of being Colombian
. I noticed that you are very-well informed about a number of national issues. It’s not really common that foreing people gets involved in these kind of topics. Also, it’s so nice to know that there are people like you, that have chosen Colombia as new home.
I reckon that at this stage you know more of my own country than me… hehehe. Probably, I’ll hire you as tourist guide next time I visit Bta.
Keep writing… PAOLA.
Colin,
Ok, that’s it. I finished all of your posts this week-end. Great read, start to finish. It’s neat to see your experiences change and your writing along with it.
I don’t think this is book material, I think you should write this as a screen play.
I’ll be in Bogota in March on business, maybe I’ll see you around.
Again, thanks for the read.
Tony Z.
Goodness, amazing article my friend!
Hey Colin,
Great post, keep up the good work. Thanks for including the links to the articles.
Glad to see that not all your posts are related to the seedy aspects of life in Colombia.
Don’t get me wrong, I appreciate your candor in talking about all the different aspects (whether good or bad), but
it’s just nice to hear a positive post from you. Kind of have gotten used to only reading about the bad stuff, since I started reading
your blog.
Hey, you know how you seem to always stumble into bad situations where you’ll feel uncomfortable by the “zombie basureros”.
You know, it is possible to avoid the parts of Bogota where the “basurero” concentration is the highest.
That’s what I do, and for the most part it is possible to avoid them….except for the ones that sneak up on you.
I mean, likewise I’m not gonna go walk around the worst part of the Harlem projects in NYC.
Anyways, not crticizing, but although the seedy posts are interesting, I wanna hear more about the positive from you as well…so keep it up.
Finally, I found Dennis Demori’s comment above about about you working for the tourism board funny…….guess he hasn’t read the rest of your posts.
But, I do sort of agree with him that this post does merit business magazine / travel magazine / “tourism board” positiveness.
Andy
THANKS EVERYBODY!
@ Andy – I realize, more and more every day, that my earlier writing is biased by the area I live in. Chapinero south of Lourdes near Carrera 13 is not a fair representative of the entire city. Then again, I love it around here and wouldn’t live anywhere else!
Cholado Pastuso Rico en proteinas!!