Banks recover confidence
WITH THE AFTERMATH OF THE 1999 RECESSION STILL BITING, COLOMBIA'S BANKS ARE BETTING ON FAR-REACHING NEW BILLS-INCLUDING A VITAL PENSION REFORM-TO TURN AROUND THE SECTOR'S FORTUNES

REDUCTION OF THE SPREADS

Colombia’s finance sector is slowly beginning to show signs of improvement after being hit with huge losses resulting from the 1999 recession and the added negative effects of high interest rates, with non-performing loans reaching 14.2% at the end of that dreadful year.
Much needed resources from the World Bank and other international lending institutions allowed the government to bail out or take over several of fundamentally weak institutions in the sector. The year 2000 saw marked improvements and this year there has been a slow increase of available capital to spur economic recovery.
Commercial banks have also increased their capital and loan provisioning levels through an injection of new capital and a lowering of loan delinquencies in both the corporate and consumer sectors.

The government is right on target for meeting its goal of privatizations in the sector. By the end of the year the sale of the state’s only remaining institution in the mortgage sector, Granahorrar, and the last remaining public bank, Bancafe, should be complete. When finished, the Pastrana administration will have reached its objective of liquidating or divesting all public banks, with the exception of the agricultural bank Banco Agrario, by the end of 2001.
But the government says there is still a lot of work and a few key issues to resolve in the finance sector. The government must push through a new package of bills to consolidate and project towards the future the achievements it has already made. Without a doubt, the most important reforms the government faces are those to the pension system. Despite it being a medium and long term issue, these reforms are key and without them, government officials acknowledge that they will not be able to complete the stabilization of the public debt or balance state finances.

Currently, the country’s private financial sector is dominated by the Bolivar Group, which is mostly involved in banking and insurance but provides many other financial services. Banco Davivienda is part of the group and is one of the largest banks in the country. The company is also into leasing, commercial loans and insurance and boasts a company in the Bogota stock exchange that covers pension funds.
MasterCard International Colombia currently has agreements with some 16 Colombian financial institutions. The company started operations in the country around 30 years ago, and in the first six months of 2001 operations grew by 15% over the same period a year ago, indicating a rise in consumer confidence in the economy.
According to MasterCard International Colombia’s general manager, Monica Echeverri, the company has gained a 38% market share of all credit and debit card business in the country. An association comprised of more than 20,000 member financial institutions, MasterCard serves consumers and businesses in 210 countries and has more than 21 million acceptance locations worldwide.

Another major U.S. player taking advantage of Colombia’s improved economic conditions is Citibank, part of the CitiGroup. The President of Citibank Colombia, Steven Puig, recognizes that, “the economy has been rebounding since the recession of 1999. Now, the macro economic management of the country is very good, very strong. The results can be seen in the economic growth that Colombia is now registering, the low inflation–less than 10%–, as well as the development of the exchange.”