- The Guide To Cartagena, Colombia
   The Guide To Cartagena, Colombia


By Andrea Jaramillo

March 6 (Bloomberg) -- Colombia’s equity market, the best- performer in Latin America this year, may keep its value as the economy withstands a global slowdown, said Juan Pablo Cordoba, chairman of the Bolsa de Valores de Colombia exchange.

The benchmark IGBC stock index increased 1.8 percent this year, compared with an 8.9 percent retreat in the MSCI Latin America Index and a 14 percent plunge in the MSCI Emerging Markets Index. Shares in the IGBC, which is dominated by state oil producer Ecopetrol SA, trade at 11 times reported earnings, compared with 9.3 for MSCIís regional index.

“While subject to strong volatility from external news, a sustained valuation is consistent with an economy that is defending itself well,” Cordoba said in an interview yesterday in his Bogota office. “That will likely continue to be the trend this year: an IGBC tending to recover but at the same time hurt by a market that is discouraged by international news.”

Colombia’s economy will grow as much as 3 percent this year, according to the central bank. Banco de la Republica was the first central bank in the region to lower interest rates to help the economy weather the global financial crisis. Policy makers cut the benchmark lending rate 2 percentage points since December to 8 percent.

The IGBC index rose 0.7 percent today to 7,695.84. Its gain this year is the best among benchmark indexes in Latin America’s six largest equity markets.

Stocks are climbing on “a perception that the Colombian economy is better positioned and has relatively good tools to defend itself from the global recession,” Cordoba said. “The Colombian economy’s fundamentals give it a good defense.”

Slowing Growth

The country’s economic growth slowed after a 7.5 percent expansion in 2007, the fastest pace in almost three decades, as growth in exports to the U.S. and neighboring Venezuela weakened. The Colombian peso has lost 12 percent against the U.S. dollar this year, making it the worst-performing currency in Latin America.

Bolsa de Valores plans to start futures on the exchange rate and its COLCAP stock index within the first half of the year after the financial crisis caused the exchange to push back plans, Cordoba said.

The exchange started derivatives trading in September when they began futures on a basket of five-year government peso bonds, known as TES. Last month they offered futures for a basket of two-year and 10-year TES. Volume has been “low,” Cordoba said.

Derivatives are financial instruments derived from stocks, bonds, loans, currencies and commodities, or linked to specific events like changes in interest rates or weather.

“It’s a market that is just starting to grow, it’s a learning process, and the economic climate isn’t the best to promote these products,” Cordoba said.

Cordoba said he didn’t know which of the two new futures contracts would begin first.

The COLCAP index is a weighted index that includes the 20 most liquid stocks that trade in the Bolsa, while limiting the participation of any member to 20 percent. That compares to the IGBC index, where Ecopetrol has a weighting of 52 percent.

To contact the reporter on this story: Andrea Jaramillo in Bogota at

Last Updated: March 6, 2009 13:11 EST
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