Tuesday, January 16, 2018

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Roberto Peckham

Medellin-based multinational power giant EPM announced December 29 that it won a US$1 billion credit from the Interamerican Development Bank (IDB) “Invest” funding subsidiary for debt finance of its 2.4-gigawatt, US$5 billion “Hidroituango” hydroelectric project in Antioquia.

The credit package includes payback terms of eight-to-12 years. Draws would take place during a four-year period, virtually completing 100% of Hidroituango project finance, according to EPM.

Commenting on the deal, EPM general manager Jorge Londoño de la Cuesta said the finance package is of “profound significance” for the company as it ensures broader funding diversity.

As a result of the latest deal, 36% of Hidroituango finance will come from EPM’s own resources with the other 64% from debt sources.

Winning IDB backing not only represents debt diversification but also means that major international lenders fully recognize EPM’s technical, social, environmental and financial capacity, he added.

The US$1 billion package includes US$50 million from the Chinese government, US$300 million from IDB and US$650 million from private international banks including Sumitomo Mitsui, BNP Paribas, BBVA, Banco Santander, CDPB, KFW PEX and ICBC, according to EPM.

The Hidroituango project is now 80% complete with the first 300 megawatts of power output scheduled to start at year-end 2018, according to the company.

EPM is 100% owned by the city of Medellin and now operates throughout Colombia, Guatemala, El Salvador, Panamá, Chile and México, providing electric power, natural gas, drinking water and sewage treatment systems.


 

Medellin Mayor Federico Gutierrez and Antioquia Governor Luis Perez jointly announced December 18 that the 9.8-kilometers-long “Toyo” tunnel project has now won required environmental licenses, paving the way for construction start-up in January 2018.

The “Toyo” tunnel project – estimated to cost COP$1.83 trillion (US$617 million) in 2012 pesos -- would link the new “Mar 1” and “Mar 2” highway projects together, dramatically improving Medellin’s highway connections to current and future Atlantic freight ports.

Colombia’s environmental licensing agency (Autoridad Nacional de Licencias Ambientales, ANLA) had demanded several changes to the project prior to giving final approval, according to the joint press statement.

The Antioquia department is putting-up COP$780 billion (US$263 million), while the city of Medellin is adding COP$520 billion (US$175 million) and the “INVIAS” national highway agency adds another COP$530 billion (US$174 million) to the project.

The project also includes 18 smaller tunnels of 18 kilometers total, 30 bridges totaling 3 kilometers in length, and 16.9 kilometers of surface highway.

INVIAS has already contracted to the Antioquia government the first section (“Tramo I”) of the project, expected to last six years and cost COP$1.045 trillion (US$352 million) in 2015 pesos. This section includes road works between Santa Fe de Antioquia and Cañasgordas, passing underneath the municipality of Giraldo.

INVIAS aims to award the second section (“Tramo II”) in 2018, according to the joint press statement.

Mayor Gutiérrez added that the project not only will make Medellin industries more competitive, but also will contribute to development of the long-neglected Uraba región of Antioquia.

Environmental licenses include special protective measures for highway sections between Cañasgordas and Buenos Aires; between Pinguro and Las Habas; between Buenos Aires and El Madero; and between Manglar and Giraldo, according to the agency.

Licenses also include provisions for 17 other bridges not authorized earlier; permits for air pollutant emissions; and permits for proper disposal of extracted rocks and dirt.


In a December 21 press conference at Mayor Federico Gutierrez's office, Medellin’s top business-development agency leaders revealed a host of initiatives that promise to bring millions of dollars in new investments and re-investments starting in 2018 and subsequent years.

One example: At least three of the world’s top hotel chains are mulling a proposal to build a 180-room executive hotel adjacent to Medellin’s Plaza Mayor convention center, as Agencia de Cooperación e Inversión (ACI) director Sergio Escobar revealed in a post-presentation interview with Medellín Herald.

If a deal is struck in 2018, then it’s possible that construction would start soon afterward -- and the hotel could open for business as soon as 2020, he added.

In his presentation here, Escobar revealed that foreign direct investment (FDI) in Medellin soared to US$372.7 million this year, up from US$211.6 million in 2016.

Among the biggest 2017 investors in Medellin include airport concessionaire Airplan SA (US$34 million), Hotel Marriott/Grupo Roble (US$40 million), and French multinational Almacentes Exito (US$200 million), he said.

Source countries for FDI in Medellin this year include USA (four companies), France (three companies), Canada (two), and one each from Argentina, Brazil, Denmark (a brand-new entrant), El Salvador, Holland, Panama, the UK, Switzerland and Uruguay, he explained.

Tourism Growing

In a separate presentation here, Maria Fernanda Galeano -- Medellin’s Secretary of Economic Development -- revealed that as of December 10 this year, Medellin has hosted 254,541 foreign visitors, up 4.21% year-on-year, with the USA (49%), Panama (18%) and Mexico (15%) accounting for the most visitors. Over the past five years, foreign visitors to Medellin have more than doubled -- and business tourism is especially emphasized, as such tourists spend far more on average than typical pleasure tourists, she added.

So far this year, Medellin has captured 92 major events, up from only 15 events 10 years ago, Medellin Convention & Visitors Bureau director Ana Maria Gallego added here.

Besides well-known annual events for the textile, fashion, electric power and transport industries, Medellin also this year nabbed the prestigious “Smart City Business” convention, Gallego explained.

In 2018, Medellin will host the pioneering “IPBES” biodiversity conference; the South American Hotel & Tourism Investment Conference; and the 74th annual Sociedad Interamericana de Prensa (SIP) conference of journalists, she said.

Plaza Mayor Strengthens Events, Finance

Meanwhile, Plaza Mayor director Juan Santiago Escobar cited in his presentation a drastically improved financial situation for the convention center (which posted several yearly losses prior to 2016, blamed on prior-administration mismanagement) as well as continuing improvements and expansions of facilities.

Through November 2017, Plaza Mayor realized sales growth of 30% year-on-year, while 2017 earnings before interest, taxes, depreciation and amortization rose to more-than COP$3 billion (US$1 million), he said.

Total events at Plaza Mayor grew from 482 in 2016 to 496 in 2017, including big conventions such as ExpoAgrofuturo, World of Business Ideas (WOBI) and the “Feria de las 2 Ruedas” motorcycle show.

Total visitors to Plaza Mayor events so far this year hit 837,584 up 10% year-on-year, he said.

In 2018, major shows coming to Plaza Mayor include Colombiatex, Expofitness, Expoinmobiliaria, Congreso Nacional de Enfermeria, Feria de las Dos Ruedas, Exposolar, Colombiamoda, Expocamacol, Feria Internacional Minera, Congreso Colombiano de Pediatria, Congreso Panamericano de Transporte, Smart City Business Congress and the “INCUBATOUR” tourism conference, Escobar added.

Ruta N/Innovation District Advances

Meanwhile, Medellin’s “Innovation District” high-tech business-development center director Paulina Villa explained in her presentation that Medellin and its “Ruta N” tech center have attracted 49 new businesses this year, including the “Grupo Konekta” multinational software development factory.

In addition, global package-delivery giant UPS has recently added 200 high-tech back-office specialists at Ruta N, while another 108 high-tech companies are now exporting services from Medellin for the first time, Villa revealed.

Additionally, another 86 more companies are expected to join the “Innovation District” in 2018 – joining 204 companies from 30 countries already here, Villa said.


Colombia’s national infrastructure agency (Agencia Nacional de Infraestructura, ANI) and the Financiera de Desarrollo Nacional (FDN) national financing organization jointly announced December 14 that a new deal ensures COP$1.47 trillion (US$490 million) financing for the “Ruta al Mar” highway project linking northern Antioquia to Atlantic coastal ports.

The new financing package is a first-of-its-kind for Colombian public-private infrastructure projects, involving a combination of bonds and other investors and featuring investment-grade rankings from Wall Street bond raters Fitch and Moody’s, according to ANI.

Medellin-based Construcciones El Cóndor is the highway project developer and builder.

Commenting on the deal, FDN director Clemente del Valle stated that the financing consortium includes local banks, the FDN, debt-finance specialist Ashmore CAF, and international financiers.

FDN will provide COP$400 billion (US$133 million) or 27.17% of the total loan funds, while local banks will put-up 19.02%. Ashmore CAF assumes 18.74% and another 35.46% comes from international capital markets via purchase of Colombia’s UVR bonds.

For the deal, U.S.-based Goldman Sachs organized a COP$520 billion (US$173 million) float of bonds carrying a 26-year term and a 6.75% coupon, according to ANI.

The “Ruta al Mar” Project – linking Antioquia, Cordoba, Sucre and Bolivar departments -- is part of a series of “fourth generation” (4G) highway projects around Colombia. The latest project also would smooth commerce between Valle del Cauca, the coffee regions and Atlantic ports.

The project will create bypasses around congested municipalities along the route, as well as connect to other major highways including the “Conexion Norte” and “Mar 2” highways, according to ANI.

In all, “Ruta al Mar” includes construction of 112 kilometers of new highway, rehabilitation and upgrades to another 226 kilometers of existing highway, and operations-and-maintenance of another 154 kilometers of existing highway, according to the agency.

FDN’s investors including Japan-based Sumitomo Mitsui, the U.S.-based International Finance Corporation (a division of the World Bank), and Latin America’s “CAF” multilateral investment bank.

Construcciones El Condor president Luz María Correa hailed the new financing deal, describing it as “a great milestone in financing of public-private [infrastructure] partnerships without government funds -- and this validates the strength of 4G concession contracts.”


Colombia’s top economic think-tank -- Fundación para la Educación Superior y el Desarrollo (Fedesarollo) -- on December 13 unveiled a report which finds that mining and energy projects will continue to be crucial to restoration of slumping national government finances.

Antioquia is Colombia’s biggest gold-mining department -- and hence figures into the equation.

“The future of the mining and energy sector is key for the stability of foreign currency reserves and government finance for the coming years -- and for social well-being,” according to the latest Tendencia Economica (economic trends) report from Fedesarollo.

“Nevertheless, the panorama for the [mining and energy] sector looks uncertain. Therefore it’s indispensable to create the necessary conditions to increase production of petroleum and other minerals in the mid-term," according to Fedesarollo.

“While petroleum prices have recovered in the short term, there are various factors that could affect crude production in the future.The decline in [national crude] reserves is paired with relatively low rates of return in the sector. This provides little incentive to stimulate private investment in secondary recovery [at existing crude production sites] or for projects to exploit unconventional reserves through practices such as hydraulic fracturing [fracking],” the report adds.

However, fracking “faces hostility from many sectors of society as well as environmental authorities,” Fedesarollo’s report notes.

“On the other hand, production of petroleum, coal and other minerals confront important obstacles associated with institutional weakness and unstable rules [involving] government environmental licenses and community consultations” that could spell “grave economic and fiscal consequences for the nation,” the report warns.


Antioquia’s development agency (Instituto para el Desarrollo de Antioquia, IDEA) announced December 13 that it’s extending a COP$132.5 billion (US$44 million) credit for the 157-kilometers-long “Vias del Nus” fourth-generation (4G) highway project in northern Antioquia.

The credit will help support financing, design, environmental studies, purchase of adjacent properties, construction, rehabilitation and operations along the new route, which will pass through the municipalities of Donmatías, Cisneros, San Roque and Maceo.

The new route will connect Medellin and central Antioquia northward to other major highways including “Magdalena 2” and the Northeast Trunk routes, as well as smoothing connections to southern Colombia, according to IDEA.

Project director Ricardo López Lombana added that “this is the first time that an institution such as IDEA – which isn’t a comercial bank – has entered into competition with national and international banks . . . marking an important moment for financing [infrastructure] projects in our country.”

The project – estimated to cost COP$1.5 trillion (US$498 million) and due for completion in 2021-- also includes construction of two, 4.1-kilometers-long parallel tunnels through the “Quiebra” mountain pass.

That pass is the principal obstacle linking Medellin to northeast Colombia. The existing “Quiebra” tunnel – far too small for highway vehicles -- was built for narrow-gauge railroads that no longer operate commercially.

The first phase of construction involves rehabilitation of 35.6 kilometers of highway between Cisneros and Alto Dolores. Then -- over the next four years -- 24.3 kilometers of four-lane, divided highway between Pradera and Porcesito will be built.

By 2021, the project will form part of 97.5 kilometers of four-lane divided highway including the section between the Medellin suburbs of Bello and Hatillo, according to Colombia’s national infrastructure agency (see Medellin Herald on March 09, 2017).

The “Vías del Nus” concessionaires include Mincivil S.A. (51.85%), Construcciones El Cóndor S.A. (22.22%), SP Explanaciones S.A.S. (21.10%), EDL S.A.S. (3.72%) and Latinoamericana de Construcciones S.A. (1.11%), according to IDEA.


Medellin-based Inexmoda – the trade association for Colombia’s textile and fashion industry – announced December 5 that the 30th annual “Colombiatex” trade show will bring-together some 550 companies, 125 exhibitors and about 15,800 buyers from 60 countries.

The show -- running January 23-25, 2018, at Medellin’s Plaza Mayor convention center – will feature displays and demonstrations of textile manufacturing, novel materials, chemicals, new technologies, emerging fashion trends and business analysis.

Medellin’s Universidad Pontificia Bolivariana (UPB) will offer 17 expert presentations at the adjacent Teatro Metropolitano, while the main Plaza Mayor will host another 15 workshops on business models, communications, brand marketing, technologies and sustainable practices, according to Inexmoda.

The Medellín metro area (including Bello, Marinilla, Don Matias and Santa Rosa de Osos) is home to 38% of Colombia’s national textile production, specializing in cotton, polyester mixtures, specialty wools, flat panels and stitching, the trade group noted.

Key markets for Medellin textile products include the USA, Ecuador, Mexico, Peru, Brasil and Costa Rica. (The formerly robust export market to Venezuela has collapsed in recent years thanks to that country’s disastrous “socialist” economic policies).

“Colombiatex has established itself as a reference space for the Latin American market, in addition to presenting a very good image for the sector,” said Ana Marcela García, chief executive at Artextil, exhibiting at Colombiatex for 25 years now. “It is the perfect opportunity to generate synergies that strengthen us as a world-class sector,” she added.

On a similar note, Enka-Colombia president Álvaro Hincapié Vélez noted that his company has participated in every Colombiatex fair since its launch in 1987.

“The history of Enka can be described as a story of transformation in which we’ve succeeded in making [materials] recyling a sustainable business,” Hincapie explained.

“Today, more than 45% of our products are derived from recycled materials -- and in this edition of Colombiatex we’re launching our new ‘EKO’ filaments made from recycled PET [polyethylene terephthalate] plastic bottles,” he said.

This year’s special invitee is Brazil, sponsored by ABIT, Apex-Brasil, Abimaq and Assintecal. The new free-trade agreement between Colombia and Brazil “enables Colombian clothing and textiles to enter Brazil without tariffs,” Inexmoda noted.

For Colombiatex 2018, a new section will be dedicated to high-tech graphic arts in clothing manufacture, the trade group added.


Colombia’s national planning agency -- Departamento Nacional de Planeacion (DNP) -- on December 5 announced that the city of Medellin ranks best among Colombia’s 13 biggest cities for government planning and execution.

While Medellín took the top spot in the ranking of Colombia’s biggest cities, Bogotá came in second, followed by Barranquilla, Cali, Pereira, Manizales, Pasto, Ibague, Cartagena, Bucaramanga, Villavicencio, Monteria and Cucuta (see chart, above).

Three of the top-five mid-sized cities in the DNP study also are in Antioquia: Rionegro, Envigado and La Estrella, along with Girardot and Mosquera (the latter two both in Cundinamarca).

“The report highlights those municipalities that, starting from similar initial capacities, achieve good management and better development results -- that is, increasing the quality of life of the population is the ultimate goal of public management at the local level,” according to DNP.

“After 10 years of measuring ‘Integral Performance,’ the DNP has updated this indicator and launches the ‘New Municipal Performance’ measurement, an index that evaluates the new challenges of local administrations and for the first time measures results-oriented management.”

“This new measurement seeks to be a useful instrument for the design of policies aimed at strengthening the capacities of territorial entities, in such a way that results-oriented investment is encouraged and we achieve the closing of gaps at the territorial level,” added DNP acting director Juan Felipe Quintero Villa.

The ranking system grouped “homogeneous” municipalities, “taking into account the existing differences in their capacity levels with the resources they have, as well as their level of rurality,” according to DNP.

The agency measured capacities of 1,101 municipalities, classified into six groups: Large cities (13 main cities); Group 1 (high level of capabilities); Group 2 (medium high); Group 3 (middle level); Group 4 (medium low) and Group 5 (low level).

“The measurement takes into account variables such as the effort of the municipalities to generate their own resources, quality in the execution of resources by different sources, conditions of open government and transparency, as well as the use of territorial ordering instruments in the collection,” according to DNP.

The study also analyzed city planning and management of education, health, access to public services, security and citizen coexistence.

Mobilization of resources and land management instruments “are the main management challenges of the municipalities,” according to the agency.

City managers could improve their rankings via updating of real-estate cadastre and land use planning, “as well as using other instruments such as surplus value, urban delineation and valorization,” said Quintero Villa.

“At the national level, only 4% of the municipalities of the country make use of three or four land management instruments to increase [property tax] collection, while almost 96% of the country uses two or less,” according to DNP.

Meanwhile, “big gaps are seen in education and public services. While on average the net [public education] coverage of the 13 main cities is 50%, the average coverage in the municipalities of ‘Group 5’ is 28%. Investments in educational infrastructure and teacher training are essential,” according to DNP.

For the biggest cities, the bigger challenge is “security and coexistence," DNP added.


New York-based Institute for Robotic Process Automation and Artificial Intelligence (IRPA-AI) announced November 29 that Medellin’s “Ruta N” information-technology development center inked a deal whereby IRPA-AI will help launch a “Digital Americas Pipeline Initiative” (DAPI).

“The initiative will provide companies with direct access to trained, experienced, and certified robotics process automation [RPA] and artificial intelligence [AI] professionals on-demand and at-scale,” according to IRPA-AI.

The partners expect that the new deal will create “thousands of RPA and AI jobs in Medellín,” according to the Institute.

“DAPI will leverage IRPA-AI's membership network, trusted relationships, training and certification capabilities, as well as the cost-effective technology talent pool in Medellín to provide North and South American enterprises, service providers, startups and advisory firms with trained, experienced and certified RPA and AI professionals,” according to the Institute.

The deal will include IRPA-AI apprenticeships, training and certification programs, business networks “to promote market engagement and sales for new AI/machine learning, RPA, and digital powered services,” according to the Institute.

DAPI also aims to trigger more research and development in automation and AI “to enable analytics, Internet of Things [IoT] and cloud computing,” while generating more economic growth and jobs in Medellin.

“The greatest challenge in the rapidly expanding RPA and AI space is not technology, it’s talent, and proximity to that talent,” said Frank Casale, founder of IRPA-AI.

“This is the first initiative of its kind to address this challenge, while creating scalable and affordable talent from a trusted, time-zone-friendly source. DAPI has full support from the Colombian government, businesses and academic research communities,” he added.

“DAPI is a direct and bi-directional conduit, connecting RPA and AI technology, talent, intellectual property and funding between North and South America,” said Alejandro Franco, executive director of Ruta N.

“It provides us with economic fuel, creating highly sought-after employment opportunities that will positively and significantly impact our city's future business development. Frank Casale’s vision, and IRPA-AI’s expansive global network and technology expertise will help anchor Medellín as the RPA and AI hub of Latin America,” Franco added.

Companies around the world “have woken-up to the transformational effect that RPA and AI bring to their businesses [but] are hard-pressed to find the right digital talent from a relatively small pool,” according to the institute.

“A global study from IDT found that 80% of businesses cite digital transformation as a priority, but only 17% of respondents had enough employees with the right skills to embark on a smooth digital transformation.

“The serious shortage of experienced and qualified people who can meet the demand has U.S. and Canadian corporations looking outside traditional sources for geographically close and cost-effective talent,” the Institute added.


Medellin-based textile giant Fabricato SA announced November 28 that it has begun the process of moving the entire operations of its “Riotex” factory in Rionegro to its Bello factory – both of which are nearby Medellin.

Transfer of dry production units will be completed by January 2018, while the wet production units will move to Bello by July 2018, according to the company.

“Transfer of the wet process [units] will be done at a later stage because expansion of the wastewater treatment plant at Bello is necessary,” according to Fabricato.

“This expansion has already been contracted and should be operating as of May next year. The [wastewater treatment] technology is the same with which we operate today and will allow us to treat and reuse water in our production process. Thus, the current [water] volume of 50,000 cubic meters per month will rise to 100,000 cubic meters per month,” the company added.

Total investment for expansion of wastewater treatment is US$900,000, according to the company.

“The consolidation of the productive process [at Bello] was made possible due to the investment made during the previous years and will allow us to maintain the installed production capacity using fewer resources, including space,” according to Fabricato.

“Consolidation of production will not require elimination of any business unit. Fabricato will continue to be present in the production and marketing of denim fabrics, drills (for fashion, for manning and for military forces), knitted fabric, woven interlinings and nonwoven interlinings.

“This [consolidation] process will not affect the fulfillment of the purchase orders of our clients,” the company added.

Consolidation will cut fixed production costs, improve the use of self-generated hydroelectric and thermoelectric power at the Bello plant, cut logistics costs and enable development of a real estate project at Rionegro – via leasing of the 36,000 square meters available at the old plant.

“The lease of the Riotex property is additional to the well-known ‘Ciudad Fabricato’ projects in Bello and ‘Fibratolima’ in Ibagué, thus giving full use to the available real estate assets,” the company added.

Antidumping Decision

Meanwhile, Fabricato announced November 28 that as a result of its request for an investigation into foreign denim-fabric-dumping into the Colombian market, the Ministry of Commerce, Industry and Tourism on November 23 adopted a US$4.63/kilogram provisional duty on Chinese denim for at least the next six months, “renewable for three additional months or until the investigation is completed,” according to the company.


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SILLETEROS PARADE 2016 by JOHN AND DONNA STORMZAND (click to enlarge)

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About Medellin Herald

Medellin Herald is a locally produced, English-language news and advisory service uniquely focused upon a more-mature audience of visitors, investors, conference and trade-show attendees, property buyers, expats, retirees, volunteers and nature lovers.

U.S. native Roberto Peckham, who founded Medellin Herald in 2015, has been residing in metro Medellin since 2005 and has traveled regularly and extensively throughout Colombia since 1981.

Medellin Herald welcomes your editorial contributions, comments and story-idea suggestions. Send us a message using the "contact" section.

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