Tuesday, July 17, 2018

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Roberto Peckham

Medellin-based international banking giant Bancolombia announced February 21 that its fourth quarter (4Q) 2017 net income fell 20.25% year-on-year, to COP$902 billion (US$318 million), from COP$1.13 trillion (US$398 million) in 4Q 2016.

Net loans grew 4.9% in 4Q 2017 versus 4Q 2016 – an indicator of “moderation in credit demand in Colombia,” according to the company.

Meanwhile, investments rose by 25.39% in 4Q 2017 versus 4Q 2016, to COP$16 trillion (US$5.6 billion), according to the company.

For full-year 2017, consolidated net income fell 9% year-on-year, to COP$2.6 trillion (US$916 million). However, compared to 3Q 2017 net income, 4Q 2017 net income rose 100% -- to COP$902 billion (US$318 million), the company noted.

Net interest income in 4Q 2017 grew 7.4% year-on-year, to COP$2.65 trillion (US$934 million), “explained by higher volumes of peso-denominated loans and the year-on-year increase in net interest margin,” according to Bancolombia.

Net fees rose 11.3% year-on-year, to COP$658 billion (US$232 million), “mainly driven by an increase in fees related to credit and debit cards, bancassurance, as well as trust services,” according to the company.

Provision charges for the latest quarter hit COP$930 billion (US$328 million) and the coverage ratio for 90-day past due loans was 164.2%. “These provisions allow us to maintain a solid coverage ratio amid a challenging environment, as new past-due loans totaled COP$622 billion [US$219 million] for the [latest] quarter,” the company added.

At year-end 2017, Bancolombia’s assets totaled COP$204 trillion (US$72 billion), up 3.9% year-on-year but down 0.1% compared to 3Q 2017. “The increase in total assets during the quarter is largely explained by the growth in loans, cash and reverse repurchase agreements,” according to Bancolombia.

The company also noted that during 4Q 2017, the Colombian peso depreciated 1.6% versus the U.S. dollar, while over the past 12 months, the peso appreciated 0.6%.

“As of December 31, 2017, our operations in Banco Agricola in El Salvador, Banistmo in Panama and BAM in Guatemala, represented 25% of total gross loans,” according to Bancolombia.

“Gross loans denominated in currencies other than COP -- originated by our operations in Central America and the offshore operation of Bancolombia Panama as well as the U.S. dollar-denominated loans in Colombia -- accounted for 34% and decreased 2.2% during 4Q 2017 (when expressed in COP), explained mainly by the reduction of the loan portfolio in dollars in Colombia,” according to the company.

“Total reserves (allowances in the balance sheet) for loan losses increased by 5.0% during the quarter and totaled COP$8.223 trillion [US$2.9 billion], equivalent to 5.1% of gross loans at the end of the quarter.

“As of 4Q 2017, Bancolombia’s goodwill and intangibles totaled COP$6.631 trillion [US$2.3 billion], increasing 1.6% compared to 3Q 2017. This variation is explained by the depreciation of the COP against the U.S. dollar during the quarter,” the company added.

At year-end 2017, Bancolombia’s liabilities totaled COP$179 trillion (US$63 billion), falling 0.7% from the end of 3Q 2017 and increasing 3.3% compared to 4Q 2016, according to the company.

Deposits by customers totaled COP$131.96 trillion (US$48 billion) or 73.5% of liabilities at the end of 4Q 2017, increasing 3.2% during the quarter and 5.9% over the last 12 months. The net loans-to-deposits ratio was 115.4% at the end of 4Q 2017, the company added.

“Bancolombia’s funding strategy during the last months has been to reduce the average life of time deposits and promote saving and checking accounts in the consumer segment in order to keep the funding cost at a minimum,” according to the company.

“The objective is to build and maintain ample liquidity and reduce the sensitivity of the balance sheet to cuts in interest rates,” the company added.

“During the quarter, the deterioration of loans increased mainly in the consumer segment as well as some deterioration in SMEs [small and medium enterprises]. Provisions as a percentage of the average gross loans were 2.3% for 4Q 2017 and 2.2% for 2017.

“Bancolombia maintains a strong balance sheet supported by an adequate level of loan loss reserves. Allowances for loan losses totaled COP7.46 trillion [US$2.6 billion], or 4.8% of total loans at the end of 4Q 2017, increasing as compared to 3Q 2017,” the company added.

“Income tax expense was COP$346 billion [US$122 million] for 4Q 2017, increasing 40.9% when compared to the income tax registered in 3Q 2017. Income tax expense for 2017 was COP$1.239 trillion [US$436 million] with and effective tax rate of 31.0%,” the company explained.

“The variation in the income tax between 4Q 2017 and 4Q 2016 was due to the fact that during 4Q 2016, there was a tax reversion in the provision of the income tax after the income statement was finalized, meaning there was certainty about the payable taxes based on the income generated during the fiscal period.

“Usually, this adjustment occurs at the end of each year. Additionally, there was a reversion for the compensation of fiscal credits and the tax reform approved in December 2016, had an impact on deferred taxes because statutory tax rates were lower than those previously estimated,” the company added.

Meanwhile, Bancolombia noted that on December 12, 2017, Standard & Poor’s Global Ratings downgraded the ratings of Bancolombia and its subsidiaries from BBB- to BB+, “in line with a downgrade in the rating of the Republic of Colombia.”

In a subsequent conference call with investment analysts, Bancolombia chief economist Juan Pablo Espinosa added that the bank expects Colombia’s GDP to grow by 2.5% this year -- up from 1.8% last year and just 1.6% in 4Q 2017 -- the result of “poor performance” in manufacturing, agriculture and retail sectors.

Meanwhile, Colombia is likely to see 3.4% inflation this year, down from earlier forecasts, Espinosa added. As for monetary policy, the Colombian central bank potentially could cut another 0.25% from its current rate levels, he predicted.


Medellin-based multinational retail giant Grupo Exito announced February 21 that its full-year 2017 net profits rose five-fold year-on-year, to COP$217 billion (US$76 million).

Exito credited the improvement “mainly to solid operating results in Brazil,” lower interest rates in Brazil and Colombia, and productivity improvements corporate-wide.

Gross revenues rose 9.4% year-on-year, to COP$56.4 trillion (US$19 billion), while earnings before interest, taxes, depreciation and amortization (EBITDA) rose 24.4% year-on-year, to COP$3.6 trillion (US$1.27 billion), according to the company.

Synergies generated between its coordinated operations in Colombia, Brazil, Argentina and Uruguay are now valued at US$100 million in EBITDA, according to Exito.

In Brazil, its “Pão de Açúcar” food store operations saw 8.2% sales growth year-on-year (measured in Brazilian Reais).

But in Colombia, a 2.8% contraction in average family buying power (as measured by Nielsen surveys) hurt domestic sales and operating results.

Despite those economic headwinds in Colombia, Éxito still managed to achieve domestic operating earnings of COP$11.2 trillion (US$3.9 billion) and EBITDA margin in Colombia hit 5.7%, the company added.

Also in Colombia, Exito “continued to focus on strengthening of its omnicanal [multichannel]” formats including the “Surtimayorista” cash-and-carry stores and the “Carulla FreshMarket” food-store formats.

Surtimayorista saw a 52.5% sales growth year-on-year thanks in part to the opening of eight new stores. Those stores borrow heavily from the “Assai” format as employed in Brazil.

Meanwhile, the first “Carulla FreshMarket” store debuted in Bogota, featuring a novel vegetable garden inside the store -- enabling fresh-picked lettuce.

Also during 2017, Exito’s “e-commerce” sales in Colombia via computer and home deliveries grew 19% year-on-year, totaling COP$270 billion (US$95 million), according to the company. As a result. Éxito became Colombia’s number-one home-delivery service via its alliance with Rappi. Those sales grew 26% year-on-year.

The electronic “carulla.com,” “Domicilios Exito y Carrulla” e-commerce home-delivery services, digital catalogs and its “marketplace” web sites also recorded 51 million visitors and 837,000 orders last year. The “marketplace” platform for vendors and corporate partners now totals 700 companies -- offering 50,000 products, according to Exito.

In addition, Exito now offers to pay customers that find cheaper prices at competing stores double the savings that they would have realized at a competitor.

Meanwhile, Éxito’s Colombia-based comercial real-estate division (Viva Malls) saw a 25% hike in sales by its retail occupants, according to the company.

As for Uruguay operations, store sales grew 7.7% year-on-year (measured in local currency), exceeding the 6.55% inflation rate, while EBITDA margin there hit 7.8% as measured in Colombian pesos. The Uruguay operation expanded by nine stores, rising to a total of 33 “Devoto Express” outlets.

In Argentina, Éxito’s real-estate division helped generate positive operating income, thanks in part to 170,000 square meters of space either remodeled or expanded at the San Juan and Rivera Indarte malls.

During 2017, Éxito added 69 new stores (either ground-up or conversions) corporate-wide. As a result, Éxito now has 1,573 stores: 574 in Colombia, 882 in Brazil, 88 in Uruguay and 29 in Argentina. Store space now totals 2.8 million square meters, while employee count stand at 140,000.

“Our strategic decision to diversify internationally is producing positive results for the organization,” added Éxito president Carlos Mario Giraldo.

“The competitive environment in Colombia is dynamic -- and we’re facing it with innovative options including a deepening of our strategies in electronic commerce, the recent alliance with Rappi to optimize time-of-delivery to homes, and the expansion of Surtimayorista, the cash-and-carry format.

“We have great opportunities to grow and monetize our activities with real estate in Colombia and Argentina, as well as with the start-up of the coalition with Bancolombia via the ‘Puntos Colombia’ [reward program],” Giraldo added.

The “Exito” credit card in Colombia has now grown to 2.6 million cardholders, while the “Viajes Exito” travel-agency service saw a 17% sales hike year-on-year, to 210,000 clients.

The “Movil Éxito” cell-phone service in Colombia also saw sales jump 40% year-on-year, now serving 950,000 cell phones.


Starting humbly from a garage workshop in 1971, Medellin-based clothing manufacturer Creytex has since become an especially successful innovator in the fiercely competitive global textile/clothing business.

It’s an exceptional story, as most local textile and clothing manufacturers here experienced sharp declines last year in the Colombian domestic market -- due mainly to a hike in value-added tax, combined with a national economic slow-down.

But amazingly, Creytex actually boosted its 2017 domestic sales by 20% year-on-year -- and simultaneously boosted profit margins– thanks to exceptional market intelligence, high technology, enthusiastic leadership, motivated employees, and a novel “fast fashion” production system, as company managing director Lina Bustamante revealed to Medellin Herald in an exclusive February 9 interview here.

However, international sales volume dipped last year when one of Creytex’s major international buyers -- with whom it had been supplying for nearly 12 years -- strategically switched production to a proprietary factory in Asia.

That switch wasn’t entirely unexpected, as Bustamante explained. Reason: This big buyer had been gradually withdrawing from various contract manufacturers and shifting production to proprietary factories for “commodity” clothing items where lowest-cost -- rather than fast-fashion -- is the deciding factor.

Even though Colombian textile/clothing production costs are much lower than costs in the USA or Europe, Colombia is still relatively costly -- if price alone is the over-riding factor – compared to certain Asian and Middle-Eastern producers, and even some Central American producers (such as Honduras), Bustamante explained.

So, to stay competitive in the domestic and global clothing business, Creytex has to specialize in “fast fashion” -- and avoid “commodity” production, she added.

Intelligent Evolution

As a result of losing that international “commodity” clothing buyer last year, Creytex now exports about 60% -- down from 70% previously -- of its nearly 4 million clothing items produced here annually, mainly to the U.S. market. The other 40% mainly goes to the Colombian domestic market as well as to nearby South American and Central American markets.

Celebrating its 47th anniversary this year, family-owned Creytex – along with Medellin-based technology partner Inn Solutions (which shares office space at Creytex) – showed-off a miniature version of their “intelligent factory/fast-fashion” system to more than 22,000 attendees at the annual Colombiatex 2018 textile-industry congress here last month.

The novel technologies Creytex employs include the “3Dress” computer-based fashion design system from Italy-based MorganTecnica, which features three-dimensional, on-screen “avatars” that substitute for conventional mannequins or live models in design and development work.

This novel system enables flexible design creations, fitment validations and subsequent adjustments in just hours or minutes– hence cutting many days, weeks or even months from older, conventional development-and-approval cycles in clothing-fashion design.

What’s more, this “3Dress” system also can transmit the final design instructions electronically to computer-driven stamping, sublimation and cutting machines on the factory floor, followed by “lean” final assembly by highly skilled seamstresses -- all overseen by an automated “Shopfloor” software-control system.

This novel system is now run by highly skilled Creytex employees -- with technical help from Inn Solutions and its bilingual (English-Spanish) general manager, Juan Pablo Mejia.

Leading the charge here is the ever-smiling, infectiously enthusiastic Bustamante, who inspires a team of 400 direct workers at Creytex’s clean, quiet, friendly, high-tech factory totaling 7,000-square-meters, spread-out over four floors. (The company also has additional indirect workers producing certain items at satellite workshops near Medellin).

Creytex not only designs and produces clothing for both domestic and international markets – touting a special expertise in needle-point knitting -- but also produces its own textiles, another key factor responding to the “fast fashion” trend sweeping global clothing markets.

In years past, many of Medellin’s small-to-medium-sized enterprises (including Creytex) had depended heavily (or even exclusively) upon giant textile manufacturers (such as Coltejer and Fabricato) to supply feedstock textiles.

But the ever-growing “fast fashion” trend means that manufacturers like Creytex can’t wait weeks or months for certain critical supplies from big textile makers – and retailers likewise no longer can sustain excess inventories or suffer heavy mark-downs to move excess product that’s growing “stale.”

So, as part of its novel fast-fashion production system, Creytex instead makes its own textiles, including numerous blends of cotton and synthetic fibers, for example. This system boosts efficiency, cuts losses, cuts production time, avoids costly subcontracting, increases control and enables greater volume production and higher margins, Bustamante explained.

While “low-cost” Asian producers might out-compete Medellin producers on cost in “commodity” clothing, Creytex has multiple advantages with its “fast fashion” system – including low-cost, fast-delivery air freight from Medellin to Miami, she said.

This system can quickly deliver “high-demand” fashion items -- from design to production to delivery in Miami -- in just days, rather than the months-long delays typical of Asian manufacturers shipping to the U.S. market.

Batch Production

What’s more, Creytex can design, produce and deliver such “high-demand” items in customized, limited, serial batches – responding quickly to demand changes -- rather than producing and delivering huge (but slow-to-market) volumes that are typical of “commodity” producers.

In addition, Creytex now electronically gathers and analyzes customer demand at individual stores in Colombia, so that it can quickly respond to demand changes and adjust production for individual clothing items – avoiding inventory excesses and improving net profit margins.

“Fast fashion has to include the whole chain,” from design, to production, to shipping, to demand response, as well as employment of smart-technology and smart management, Bustamante explained.

“This is not a volume business. It’s about having the ideal product, in the ideal place, at the ideal time. And mass production can’t account for all markets. You also have to account for seasons, climates and the [socio-economic demographics] of each shop. This requires [investment in] more data analysis, but it also means better profitability.”

For the Colombian domestic market, Creytex has its own, proprietary leisure-wear and children’s-wear brands (“Belife” and “Baby Planet”), whereas its principal international buyers (mainly for leisure, performance and life-style wear) include Columbia, Concepts Sport, Gear for Sport, Little Me, Camp David, Pelo and Ripley, she said.

Beyond employment of high technology for “fast fashion,” Creytex also meets strict international standards for responsible social and environmental practices, as measured by buyers’ own periodic audits – such as the “Worldwide Responsible Accredited Production” (“WRAP”) protocol, she said.

Visitors to the Creytex facilities see more than just compliance with standards. They have been surprised by the clean, quiet, friendly, well-organized worker environment -- something not always seen in certain Asian or Middle-Eastern clothing factories, where conditions can almost resemble Medieval despair.

About which Bustamante remarked: “I’ve had clients tell me, ‘your employees look happy!”

However, continuous motivation and retention of skilled workers isn’t easy – especially in an age when many younger people would rather seek employment in (for example) call-centers rather than clothing factories, Bustamante told us.

While Medellin has a more-than-100-years-long history of industry leadership in textiles, clothing and fashion – and can boast of now having several generations of highly skilled textile/clothing workers – being successful in clothing manufacture today also requires exceptionally intelligent, inspiring leadership.

That’s why Creytex employs a “coach” at each sewing station to encourage and teach workers, and also includes a bonus system for exceptionally productive employees.

Bottom line: Competing successfully in international and domestic clothing markets with fast response, precision quality, close attention to profitability, market intelligence and socially responsible operations is an evolving process.

Creytex first began exporting 15 years ago – at a time when many industry experts told Bustamante that achieving success from Medellin in such foreign markets was dubious.

But clients visiting Creytex today will be greeted by Bustamante’s winning smile, warm intelligence, the voice of experience, and see impressive operations. Likely as not, they'll probably come away with proof that after more than 100 years of major textile/clothing/fashion experience, leading Medellin entrepreneurs still can compete successfully in one of the world’s toughest businesses.


Cemex Colombia fourth quarter (4Q) 2017 earnings before interest, taxes, depreciation and amortization (EBITDA) fell 20% year-on-year, to US$30 million, Cemex Latam Holdings (CLH) announced February 8.

Net sales for the CLH-Colombia division also fell 12% year-on-year, to US$134 million, according to the company.

For CLH's regional operations, “during the fourth quarter [2017] our working capital investment remained in negative territory for seventh consecutive quarter, with minus-14 average working capital days. During this period, we achieved negative trade working capital in our operations in Colombia, Costa Rica, Nicaragua, Guatemala, and El Salvador,” the company explained.

CLH’s net sales in the region for full-year 2017 declined 6% year-on-year, “mostly explained by lower cement volumes and prices in Colombia. As a result, operating EBITDA declined by 15% and 27% during the fourth quarter and the full year, respectively, compared to those of the same periods in 2016,” according to the company.

“Despite the positive traction of our value-before-volume strategy in Colombia, where our cement prices in December were about 3.5% higher than they were in June of 2017, as well as the positive results in Costa Rica and our rest-of-CLH region, during the [fourth] quarter not only cement price levels in Colombia continued well below those of last year, but also national cement consumption in Colombia and Panama remained subdued,” added Cemex Latam CEO Jaime Muguiro.

According to CLH, EBITDA “was negatively affected as our cement prices in Colombia declined by 12% and 19%, in local-currency terms, during the fourth quarter and full year, respectively, compared to those of the same periods in 2016.”

However, “in Colombia, after four consecutive quarters of declines in our cement prices, in local currency terms, they increased by 2% during the fourth quarter, on a sequential basis. Our successful cost containment efforts in Colombia helped us partially offset the negative effect of lower demand for our products in the country,” CLH added.

Maceo, Antioquia Plant Awaits License OK

Meanwhile, Cemex’s US$420 million cement plant in Maceo, Antioquia, continues to lack a crucial operating permit that would enable start-up at its rated capacity of 1.3 million tonnes per year. The company has expressed hopes that the permit snag could be overcome by year-end 2018.


Colombia’s national economic statistics agency (Departamento Administrativo Nacional de Estadistica, DANE) revealed February 5 that full-year 2017 exports jumped 19% year-on-year, to US$37.8 billion, up from US$31.7 billion in 2016 -- a year that saw exports drop 11.8% year-on-year.

By dollar value, petroleum and mining exports led the field, up 32.4% year-on-year, mainly from coal, petroleum coke and briquettes, DANE found.

Agricultural, food and beverage exports rose 7.2% -- mainly thanks to a rise in palm-oil export -- while manufacturing exports rose 2.4%, up from a 10% net decline in 2016, according to DANE.

By department, Antioquia once again led the nation in 2017, accounting for 18.1% of total national exports (excluding petroleum).

Exports in the broad “other” category in 2017 rose 15.7%, mainly from a rise in gold exports (dominated by Antioquia).

The USA once again led all nations in share of receipt of Colombia exports, at 29.7% of the total, followed by (in order) Panamá, China, Netherlands, México, Ecuador and Turkey, according to DANE.


The Supreme Court of Colombia on January 17 notified a group of investors suing a fiduciary over a failed medical-office-building project near Medellin that a fiduciary has extremely limited legal obligations to oversee performance of shaky real-estate development projects or verify crucial financial assertions made by the developer.

The group of investors had sued Colombian fiduciary Corficolombiana (a subsidiary of banking giant Grupo Aval) arguing that project developer Arcor Inmobiliaria SA had failed to achieve the mandatory 50% “equilibrium point” of funding from project investors -- as required by the contract -- before receiving the investor funds from Corficolombiana.

(Editor's full disclosure: Medellin Herald obtained a copy of the Court ruling directly from the lawyer who represented the plaintiffs, among which included myself and my wife).

Arcor asserted that it had accumulated COP$4.57 billion (US$1.6 million) in investor deposits for the project -- supposedly exceeding the Arcor-calculated 50% “equilibrium point” that triggered disbursement of investor funds from Corficolombiana to Arcor.

However, Arcor’s claim that it had supposedly reached the 50% “equilibrium point” lacked a required signed statement from the official financial auditor, the Supreme Court ruling noted.

Nevertheless, the Supreme Court ruled that the lack of this signed document was “insufficient to demonstrate the non-compliance of the fiduciary.”

The only actual work Arcor performed at the site was demolition of an old building, digging a hole for the proposed basement parking lot and erecting a handful of pillars. No new building was ever constructed, leaving the investors with a loss that collectively exceeds US$2 million.

Following Arcor's abandonment of the project, a Circuit Court in Cali (where Corficolombiana is headquartered) confirmed its liquidation. Years later, the lot upon which the building was to be erected was resold to a third party, the funds from which enabled the project investors to recoup about half their original investments.

A hard lesson for investors in Colombian development projects (“sobre planos”) supposedly guaranteed by fiduciaries: Don’t assume that fiduciaries are actually checking the performance of construction contractors or that they truly know whether the “equilibrium point” has in reality been reached. Under the Supreme Court ruling, fiduciaries can just take the word of contractors about contract compliance, no matter how phony or flimsy those claims may be.

For example: Arcor provided documents -- obtained by the suing investors -- claiming to show that it had bought numerous plumbing fixtures for the office building. But these fixtures never showed up at the site -- and neither the fiduciary nor the contractor ever explained to investors what happened to these materials.

Investors also had been led to believe that the 50% “equilibrium point” supposedly pertained to funds obtained for the actual proposed office building, not later add-ons. Yet Arcor had included in the “equilibrium point” funds it supposedly obtained from the sale of additional mini-booths (“burbujas”) – which in any case were never built.

So, a first warning: naive investors shouldn't assume that having a fiduciary involved in a new-build project in Colombia somehow provides guarantees protecting investors against contractor non-compliance or fraud.

Second warning: Investors also should note that Corficolombiana has been tied to several other, high-profile construction scandals in Colombia.

One example: Corficolombiana’s ex-president José Elías Melo is now facing criminal charges in the massive Odebrecht bribery scandal involving highway construction projects in Colombia.

Melo – who has denied the charges – is alleged to have known about bribes totaling US$6.5 million that Odebrecht officials admit they paid to high government officials in order to obtain contracts for the giant “Ruta del Sol” phase-two highway project, according to the Colombian attorney general.

Another example: More recently, 132 national and international investors in the unfinished, abandoned, multi-million-dollar “Meritage” condominium and commercial-center project adjacent to the "variante al aeropuerto" highway between Medellin and the international airport at Rionegro have been victimized by another scandal involving Corficolombiana.

In total, the Meritage investors had paid more than COP$47 billion (US$16.6 million) for future apartments and commercial spaces in a project snarled by criminal charges involving alleged narcotraffickers.

A lawyer representing investors filing suit to recover their funds claims that the investors have been “abandoned” by project fiduciary Corficolombiana as well as the Colombian attorney general, who moved to halt and seize the project.

According to the lawyer, the attorney general supposedly should have warned investors about investing in a site whose legal ownership is entangled in a dispute between alleged drug-mafia kingpins.

In an October 7, 2017 report about the Meritage scandal by Colombian daily newspaper El Tiempo, foreign investor Paul Torres was quoted as saying that “Colombia doesn’t offer any guarantees to foreign investors.”

Similarly, a June 15, 2017 report from Medellin-based newspaper El Colombiano had this to say about the Meritage scandal: “In this country, it’s no longer enough to study the history of property titles, according to the Civil Code, but rather one must search until infinity to discover possible crimes of previous [property] owners. A very grave issue for legal security.”


The World Bank’s International Finance Corporation (IFC) and Colombia’s Financiera de Desarrollo Nacional (FDN) development agency jointly announced January 29 a COP$209 billion (US$74 million) investment in building new schools in Medellin.

The private-sector winners of concession bids to build and maintain the new buildings will enter into “public-private association” (PPA) contracts with a duration of 20 years.

Colombia’s Education Ministry and the Medellin municipal government will co-finance the projects, tapping the expertise of IFC and FDN.

The private concessionaires not only must construct the new buildings but also must “guarantee their good quality, their maintenance and provide cleaning, security and [computer-internet] connectivity,” according to the IFC-FDN joint press statement.

In all, 13 schools will be built, rebuilt, expanded or upgraded in Medellin, adding the equivalent of 290 new classrooms and 161 other public spaces -- benefitting some 11,280 students, according to the agencies.

The school construction project is necessitated by Medellin’s decision to lengthen school days, effectively adding two-years’ of classroom education time-and-space for students, explained Education Minister Yaneth Giha.

The new PPA project in Medellin and a similar project in Barranquilla are Colombia’s first-ever PPA school-construction deals, according to the agencies. PPAs enable “efficiencies gained from experience in the private sector, such as introducing technologies that permit improvements in service delivery,” according to the agencies.

Payments to the concessionaires in the PPAs will begin upon successful completion of construction, as well as satisfactory maintenance – an incentive for the concessionaires to ensure timely, quality completion, according to the agencies. Unsatisfactory completion will result in payment deductions.

This scheme “has many benefits such as better access to financing, greater efficiency and a better distribution and transfer of risk,” added FDN president Clemente del Valle. “In addition, this is a scheme that guarantees optimal maintenance of the schools and quality services, which will assure the well-being and care of school children over the long term.”

The contracting agencies will measure 81 indicators of concessionaire performance related to infrastructure and services. For its part, the city of Medellin will be in charge of student education, hiring the teachers, school administration and school cafeteria service.

At the end of the concession period, the schools will revert to Medellin city ownership and operation, according to the agencies.

 


Medellin-based multinational retail giant Exito is enjoying ever-greater success with its “Didetexco” clothing manufacture/export subsidiary – even in the face of Colombia’s  competitive problems with illegal, below-cost, and unethical clothing vendors (mainly exporting from Asia).

In a presentation to the Colombiatex 2018 annual show here January 23, Didetexco general manager Ramiro Arango and fashion coordinator Juliana Rincon pointed to tremendous growth in the division’s production, sales and exports – with 97% of clothing for Exito’s domestic and foreign markets made right here in Colombia.

“To ‘democratize’ fashion is our goal, with everyday-low-prices and sustainability,” Arango said.

The Didetexco clothing division – launched here in 1949 by Exito founder Gustavo Toro Quintero – initially tapped relatively low-cost supplies (scraps and remains from Medellin’s major textile manufacturers) and also provided dignified labor for seamstresses coming from vulnerable economic sectors.

Today’s business model for Didetexco involves tapping “sinerproveedores” – that is, scores of independent workshops in many Colombian towns and cities (including municipalities in Antioquia). These workshops employ some 9,000 directly or indirectly, mostly female heads-of-households.

While these workers aren’t direct employees of Exito, Didetexco nevertheless ensures that these workers receive all legal Colombian salary and benefits packages – in contrast to certain Asian countries that unethically employ slave-like child labor in clothing manufacture, dump toxic chemical byproducts, or sell to third parties that might be laundering illegal drug money by importing below-cost clothing.

In 2017, Didetexco’s “sinerproveedores” produced 33 million items of clothing -- up 153% since 2015 -- with 2.79 million of those units sold for export, up 390% since 2015, Arango boasted here.

For Exito, having Didetexco enables expansion of its domestic clothing retail sales to its recently acquired retail chains in Argentina and Uruguay -- via clothing exports from Colombia -- as well as to Brazil, which until recently (December 2017) had tariffs that made it cheaper to export designs rather than clothes.

However, thanks to a new free-trade agreement (eliminating tariffs on clothes), it’s possible that Exito in future could export at least some clothes from Colombia to Brazil.

The Didetexco subsidiary also is now exporting clothes from Colombia to France as well as to Africa, Arango showed.

Thanks to special agreements between Didetexco and several well-known clothing designers (including Silvia Tcherassi), Exito clothing brand-names now include Arkitect, Bronzini, People, Bluss, Custer, Myst lingerie, WKD, Coqui, Carrel, Eventi and Ama’s.

Besides having strong brand names, other competitive advantages enjoyed by Didetexco/Exito include: mid- and long-term deals with the “sinerproveedores;” strong capacity and expertise in exporting; creative designers; strong knowledge of fashion trends; seasonal product lines; “complete package” products; strong marketing and communications; ethical labor and environmental practices; aggressive brand promotion; strong controls on product supply in response to demand; and growing consumer awareness, Arango said.

In addition, “we can react fast and produce fast” in response to changing fashion trends, he said. “From runway to retail, we do fast turnaround. You can’t do that with Bangladesh or China,” even though those countries may offer relatively cheap costs for clothing -- but can't offer fast shipping.

The Didetexco business model also employs a firm “gross margin return on investment” (GMROI) policy that ensures relatively fast inventory rotation, as products will go straight from factories to stores, not to warehouses, he said.

“We also fight [alongside Colombia’s fellow law-abiding clothing makers] to ensure just import duties, so that we can formalize more jobs,” he added.


The Medellin-based “Vias del Nus” (“Vinus”) highway construction concessionaire announced January 22 that it won crucial permits from Agencia Nacional de Licencias Ambientales (ANLA) to build twin tunnels through “La Quiebra,” the principal obstacle blocking cost- and time-efficient freight traffic between Medellin and the Rio Magdalena.

The “Quiebra” pass currently only has an obsolete, narrow-gauge railway tunnel as well as a steep, winding highway nearby that snarls freight traffic.

According to the Vinus partners, the environmental permits from ANLA enable start-up of construction of the Quiebra highway tunnels (each 4.1-kilometers in length) as well as 5.1 kilometers of four-lane divided highway between Porcesito and the “Portal del Tunel” in Santiago, all in northern Antioquia.

“The objective of the Vias del Nus concession, which is part of the ‘Autopistas para la Prosperidad,’ is to generate a road interconnection between the city of Medellin and the main [fourth-generation] highway concessions in the country, as well as linking commercial exchange centers such as the Caribbean Coast, Pacific Coast as well as the Rio Magadalena,” according to the Vinus partners.

“This concession will allow easier and cheaper transport of products destined for export, in addition to favoring the entry of products from other regions to the department of Antioquia.

“Additionally, significant time savings will be achieved by having a design speed of 80 kilometers per hour for the new divided-highway roads and for the specific section of Cisneros-Alto de Dolores to the existing Magdalena-2 highway junction.

“Part of the work to be done consists of rehabilitating existing road and building a third lane on the uphill side of highway between San Jose del Nus and Alto de Dolores in order to improve the characteristics of the road and allow a better speed of operation than today,” according to the partners.

In total, the “Vias del Nus” project includes 154.7 kilometers of new and rehabilitated highway that begins in the northern Medellin suburb of Pradera, joining the existing Hatovial highway concession.

“Within this concession is the functional unit between Bello and Pradera that is currently concessioned to Hatovial and that will become part of the project from May 2, 2021,” according to the partners.

“This concession provides for the operation of five toll stations; four already existing in the corridor -- Niquía, Trapiche, Cabildo (Trapiche control toll station), Pandequeso -- and Cisneros, which will be moved because of the new geometry of the highway when the Quiebra tunnels enter into operation.

“To avoid the [potential] diversion of cargo traffic through the northeast route, it is expected that the Agencia Nacional de Infraestructura (ANI) and the Minstry of Transport or the government of Antioquia will issue a restriction upon cargo carriers for categories V, VI and VII on the Porcesito-La Cortada-Yolombó-Yalí-Vegachí-El Tigre-Remedios route (Northeast Trunk),” the Vinus partners added.

The Vinus concession partnership includes Mincivil S.A. (51.8%); SP Ingenieros (22.2%), Construcciones El Cóndor (21.1%); EDL (3.7%) and Latinco (1.1%).


Medellin-based Celsia – the electric-power division of corporate giant Grupo Argos – on January 26 reported full-year 2017 net profits of COP$251 billion (US$89 million), up 47% from COP$171 billion (US$61 million) in 2016.

Earnings before interest, taxes, depreciation and amortization (EBITDA) hit COP$1.12 trillion (US$399 million) for full-year 2017, up 9% year-on-year -- an all-time record.

As for fourth-quarter (4Q) 2017, net profits dipped slightly, to COP$71 billion (US$25 million), down from COP$75 billion (US$27 million) in 4Q 2016. However, 4Q 2017 EBITDA rose 21% year-on-year.

Consolidated earnings for full-year 2017 dipped 18% year-on-year, to COP$3.1 trillion (US$1.1 billion) because of a decline in thermal-power generation and lower power prices in Colombia, the company explained. However, 4Q 2017 consolidated earnings rose 4% year-on-year.

Total power generation in Colombia for full-year 2017 totalled 5,226 gigawatt-hours (GWh), down from 5,596 GWh in 2016. However, 4Q 2017 generation rose 31% year-on-year thanks to heavier rainfall that enabled greater output at Celsia’s hydroelectric plants.

Celsia’s power operations in Central America generated 9% more income in 2017 versus 2016, hitting US$245 million.

Celsia president Ricardo Sierra added that the company is “very content” with its 2017 financial results, adding that Celsia is now a leader in development of solar-photovoltaic power arrays as well as photovoltaic roofs for commercial operators -- including the Compañia Nacional de Chocolates chocolate factory in Rionegro, just outside Medellin.

Meanwhile, Celsia hailed a recent decision by Colombia’s national power regulator (CREG) that has boosted the financial outlook for thermal power generation -- via a “marginal scarcity price” scheme that allows thermal power generators to tap special revenues mainly generated by hydropower operators. These special revenues enable thermal power generators to survive for months or years until called-upon to boost output during occasional droughts that sap Colombia’s overwhelmingly hydropower-dependent electrical grid.

The company also hailed the recent start-up of a natural gas regasification plant in Cartagena, enabling thermal power generators to tap liquefied natural gas (LNG) imports during periods of peak demand for gas in Colombia.


Page 7 of 45

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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.

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