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Colombia’s national economic statistical agency DANE on February 15 revealed that the national gross domestic product (PIB in Spanish initials) shrunk by 6.8% for full-year 2020 -- all because of the Covid-19 crisis.

However, GDP sequentially rebounded in third quarter (3Q) and fourth quarter (4Q) 2020, compared to the huge 15% decline in second quarter (2Q) 2020, the DANE report shows.

According to DANE, the economic sectors that contributed the most to the 2020 GDP decline were wholesale and retail trade; repair of motor vehicles and motorcycles; transportation and storage; construction; mining; lodging; and food services.

Commenting on the DANE report, Bruce MacMaster, president of ANDI (Colombia’s biggest industrial-commercial trade association), said: “We can see that in the [sequential] inter-quarter growth data, the economy presented an expansion of 9.4% in the third quarter compared to the second, and 6% in the fourth quarter compared to the third, which accounts for an important correction, accompanied by the lifting of the strictest quarantines since June.

“The indicators for the end of the year 2020 show us trends that suggest that we will reach positive data in the near future. The reactivation, accompanied by the vaccination process, puts Colombia in a more positive outlook,” he added.


Colombia-based Cemex LatAm Holdings announced February 11 that it suffered a full-year 2020 net loss of US$121 million, a huge drop from a US$4 million net profit in full-year 2019.

“The net loss for the entire year was mainly due to non-monetary impairment of goodwill and inactive assets by US$121 million, registered in the third quarter 2020,” according to the company.

Sales also fell 20% year-on-year as the Covid-19 crisis triggered economic shutdowns, which depressed demand for cement and concrete in various markets.

Despite the losses, earnings before interest, taxes, depreciation and amortization (EBITDA) margin improved by 2 percentage points, “supported by our pricing strategy and cost-savings program, even though our volumes were heavily impacted by the pandemic,” according to Cemex LatAm.

In addition, “we reduced net debt by 11% during 2020 and our leverage ratio remained relatively stable at 3.7 times from December 2019 to December 2020, despite of the drop in operating cash flow,” according to the company.

As for fourth-quarter (4Q) 2020, corporate-wide net income improved to US$8 million, compared to a loss of US$3 million in 4Q 2019.

Colombia Results

“Operating income in Colombia reached US$30 million, 1% higher in comparable terms, compared to the fourth quarter of 2019. Net sales increased 1% in comparable terms, compared to the same period of the previous year, reaching US$120 million,” according to Cemex LatAm.

For all of Colombia, industry-wide cement volumes rose 2% in 4Q 2020, but fell 10% in 2020 versus full-year 2019. For Cemex LatAm in Colombia, “our cement volumes fell 17% in 2020, reflecting an impact of our strategy price increase and a new competitor,” according to the company.

Cement prices for Cemex LatAm in Colombia rose 8% in 2020, as measured in local currency. Full-year EBITDA in Colombia rose 6%, despite a 10% drop in sales.

Rest-of-Latin-America Results

In Panama, Cemex LatAm's 4Q 2020 sales fell 40% year-on-year, to US$23 million.

In Costa Rica, 4Q 2020 EBITDA rose 34% year-on-year, to US$8 million. Net sales rose 7%, to US$22 million.

In the rest of its Central America and Caribbean markets, 4Q 2020 EBITDA increased 20% in comparable terms, to US$16 million, while net sales rose 12%, to US$58 million, according to the company.


Medellin-based textile and plastics-recycling giant Enka Colombia announced February 10 that its full-year 2020 profits rose to COP$15.2 billion (US$4.3 million), up slightly from COP$15 billion (US$4.25 million) in full-year 2019.

Earnings before interest, taxes, depreciation and amortization (EBITDA) for full-year 2020 rose 7% year-on-year, to COP$38 billion (US$10.7 million), while EBITDA margin rose to 10.7%, from 8.9% in 2019.

“In 2020, Enka showed a solid operating performance as a result of the good performance of strategic markets, the devaluation of the peso and the active management of fixed costs and expenses, which offset the lower sales volume due to Covid-19,” according to the company.

Coltejer Losses Worsen

Meanwhile, Medellin-based textile giant Coltejer revealed in a February 4 filing with Colombia’s Superfinanciera oversight agency that its full-year 2020 net losses hit COP$94.6 billion (US$26.8 million), worse than the net loss of COP$24.9 billion (US$7 million) in 2019.

Sales also dropped to COP$74.8 billion (US$21 million), down from COP$141.9 billion (US$40 million) in 2019.

Operating loss rose to COP$67.7 billion (US$19 million), compared to an operating profit of COP$13.2 billion (US$2.7 million) in 2019, the company added.

Sales declines caused by the Covid-19 crisis are largely to blame for the poor results.

 


Colombia’s mostly state-owned Ecopetrol oil company announced January 27 that it’s making a bid worth an estimated US$3.8 billion for the Colombian government’s existing 51% share stake in Medellin-based multinational electric power transmission giant ISA.

The bid, if successful, would help boost Colombia’s government finances because Ecopetrol soon would sell more of its stock -- along with “non-strategic” assets -- to pay for the government’s 51% share of ISA.

Bottom line: the proposed deal would take money from private investors and transfer it into Colombia’s Treasury Ministry -- helping to reduce billions of dollars of new debt arising from massive government subsidies to help citizens and companies overcome huge losses from the Covid-19 crisis.

ISA would still remain 51% government-owned, but the government stake in Ecopetrol would be diluted to around 80%, from nearly 90% currently.

The deal simultaneously would help Ecopetrol prepare for the world-wide transition away from fossil hydrocarbons and reposition it to supply more “green” electric power along with non-polluting electric vehicles. Ecopetrol is already building new solar-power production farms here in Antioquia and elsewhere in Colombia.

“The investment in ISA would represent a transformational step for Ecopetrol in its energy transition and decarbonization path,” according to Ecopetrol’s press statement.

“Ecopetrol would be strengthened with world-class energy infrastructure assets that would generate a material stream of income in low-emission businesses.

“ISA is a leader in the continent with significant positions in the transmission of electricity in Colombia, Brazil, Chile and Peru, among other countries. It stands out for its outstanding financial and operating results, and a robust growth plan that Ecopetrol would maintain.

“The [combined] operation would contribute to the economic reactivation of the country and would represent an opportunity for shareholders by having a unique energy conglomerate in America, with greater capacity to generate value from the complementarity of its businesses and geographic presence.

“The resilience of [Ecopetrol] Group would be strengthened by having a greater portion of stable and predictable income in the long term, while reducing exposure to oil price volatility. The nation would maintain control of both companies through the participation of at least 80% in Ecopetrol.

“The transaction would be financed with a scheme that includes a new capitalization of Ecopetrol through the issuance of shares, equity and other available financing schemes, including the divestment of non-strategic assets. The financial structuring of the operation would maintain a level of Ecopetrol indebtedness aligned with its investment grade.

“The transaction would be carried out through an inter-administrative contract between Ecopetrol and the Ministry of Finance and Public Credit. To make this investment, it is not necessary to make a Public Acquisition Offer (OPA) to ISA shareholders, to the extent that the nation would continue to be the real beneficiary of ISA’s shares and would maintain ultimate control over them.

“If an agreement is reached between the parties (Ministry of Finance and Public Credit and Ecopetrol), the closing of this transaction will be subject to the performance of a detailed due diligence, as well as the issuance and placement of shares by Ecopetrol, prior obtaining the required authorizations,” the company added.

While Ecopetrol potentially could have the upper hand in the proposed deal, other potential buyers include Bogota's GEB power company.


Medellin-based electric power giant EPM announced this morning (January 13) that it has petitioned an Antioquia Administrative Court in Medellin to assume jurisdiction over its COP$9.9 trillion (US$2.85 billion) lawsuit against Hidroituango construction contractors.

The petition to the Court follows the failure last week of a “conciliation” procedure that had been supervised by Colombia’s Solicitor-General.

EPM now simultaneously asks the Medellin Chamber of Commerce to assume arbitration of its related COP$5.5 trillion (US$1.58 billion) claim against insurer Mapfre for its supposed coverage of losses arising from a diversion-tunnel collapse at the Hidroituango hydroelectric project in 2018.

The petition to move the main damages claim against Hidroituango contractors to an Antioquia Administrative Court now faces a venue fight, as the contractors have instead petitioned for an international tribunal to settle the dispute. Rationale: One of the three main construction contractors isn’t Colombian, but is instead Brazil-based Camargo Correa Infra. The other two are Colombian companies Conconcreto and Coninsa-Ramón H.

EPM asserts that it initially moved to bring a “conciliation” suit against the contractors last year because of a supposed two-year legal deadline to bring claims following the April 28, 2018 diversion-tunnel collapse.

This EPM argument is disputed by former Colombia Supreme Court Justice Javier Tamayo Jaramillo, now head of the Medellin law firm of Tamayo Jaramillo & Associates.

In a legal analysis submitted by Tamayo to the “Todos Por Medellin” civic group last month, Tamayo explains that the actual legal deadline for filing such a damages claim instead would come within two years following the expiration of the construction contract, not the two years following the tunnel collapse incident.

“There is almost absolute doctrinal and jurisprudential unanimity in that the expiration date of this type of actions is counted from the settlement of the respective contract, which, to date, has not occurred,” Tamayo states in his legal opinion.

“What was the desire to file a lawsuit against so many defendants without having sufficient proof of their responsibility or even knowing the intensity of the damages or the value of them? Was it a matter of causing a media impact to create the feeling that the previous [EPM] administration was going to let EPM’s actions against those responsible for [the tunnel collapse] expire?”

The new EPM lawsuit claims that the construction contractors as well as insurers Suramericana, Chubb Seguros and Mapfre now must answer its claims in court or else in arbitration.

While Mapfre “has recognized the coverage of the [tunnel-collapse] event and has ratified it in the framework of the conciliation hearings, we are still working on the determination of the compensable amounts in the insurance [policy] conditions, based on the fact that this claim is the largest worldwide in terms of All Risks Construction and Assemblies, and is therefore subject to study and review throughout the insurance market,” according to EPM.

“It is for this reason, and no other, that it was not possible to arrive at a figure that would allow us to satisfactorily terminate the preliminary ruling conciliation process. Mapfre confirmed that its main interest is to cover all compensable losses, in accordance with the insurance conditions.

“Based on the foregoing, the EPM Group ratifies its commitment to advance in the technical adjustment process until compensation for losses is achieved within the framework of the insurance contract signed with the Mapfre company.”

Meanwhile, “in both judicial scenarios, conciliation exercises are contemplated, which offer us a new opportunity to seek a comprehensive solution to the differences derived from the contingency,” according to EPM.

Contractors Dispute Claims

According to the “CCC Ituango Consortium” of Hidroituango construction contractors, they now seek international arbitration and will file counter-claims against EPM.

“The consortium reiterates its interest in demonstrating that in the execution of the civil works under its charge, it has not only acted in good faith but diligently and in accordance with good engineering practices, complying with the designs and instructions provided by Empresas Publicas de Medellin (EPM),” according to CCC Ituango’s official press bulletin, reacting to the “conciliation” failure.

“Having extended the contract at the end of December [2020] by EPM, the consortium will continue executing the work in the same way as it has always done: complying with its contractual obligations, maintaining adequate quality standards and meeting technical requirements. and designs supplied by EPM itself.

“The consortium remains firm in its commitment to take Hidroituango forward, understanding that this requires collaborative work with the other contractors of the project, but above all, having the adequate coordination of EPM so that the objectives of the project are met.

“The CCC Ituango Consortium is led by Camargo Correa Infra and as a [Brazilian] foreign partner we will submit the [lawsuit demand] differences to an international court, where technical and legal arguments prevail to make clear the actions of the consortium in the [diversion-tunnel collapse] contingency of April 2018.

“At the same time, we are forced to seek to compensate the reputational and economic impact that this unique claim has been causing for the Consortium,” the bulletin concludes.

EPM Trade Union Slams Lawsuit Decision

Meanwhile, Sinpro – EPM’s biggest employee trade union – likewise slammed EPM’s failure to settle the claims under friendly “conciliation” terms.

“We have indicated since September [2020] that EPM’s claim of COP$9.9 trillion from the contractors represents great risks for the company’s finances and for the development of Medellin and Antioquia, as there could be a possible counterclaim from the contractors with possible consequences in the qualifications of [Wall Street bond-rating] risk qualifiers and the possible loss of part of the [Mapfre] insurance coverage, without taking into account what it implies for the contractors.

“These are the risks that the Mayor of Medellin, the [recently installed] Board of Directors of EPM and the [recently named] general manager of EPM are now bringing upon the company in a new display of folly where it is evident that personal and political interests prevail over legal interests and of the community,” Sinpro warned.

The Sinpro charge alludes to Medellin Mayor Daniel Quintero’s bypassing of the prior EPM Board of Directors last year in bringing a lawsuit against Hidroituango contractors that potentially could cost EPM billions of dollars in counter-claims.

If successful, counter-claims could wreck city-owned EPM’s finances for years or even decades to come – all triggered by politically self-interested, sweepingly populist claims that portray Mayor Quintero as standing-up to Medellin’s “corrupt” business sector.

However, this claim is publicly and sharply disputed by dozens of commercial and industrial trade associations, several trade unions and many civic groups, some of whom are calling for Mayor Quintero to be removed from office via a recall petition.


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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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