British companies are optimistic about risks of doing business in Colombia, the deputy head of the UK’s Trade Mission to the country said Tuesday.
After agreeing on a trade pact earlier this year, British companies have been surveying the Colombian market for investment opportunities – mostly in infrastructure and the financial sector. And they’re being bold about the risks that have historically steered foreign companies away from the Andean country.
“There are probably far riskier countries where British companies are operating,” Deputy Head of UK’s Trade Mission to Colombia Tony Regan told Colombia Reports. “I don’t think the risks are that different from other countries.”
Over the past half-century, companies have been forced to weigh the high political risks of entering the Colombian market, where the threat of guerrilla attacks on infrastructure was likely and happened often.
In 2012, repeated bombings of the Caño Limon-Covenas pipeline almost forced US-based Occidental Petroleum Corporation to shut down operations in Colombia.
But those sources of risk, according to Regan, exist in many parts of the world – more so in Africa and the Middle East, where the UK also has a strong presence. “They’re not unique to Colombia,” said Regan.
Colombia has opened the doors for UK companies to enter the financial sector, bid on infrastructure projects and invest in a range of other industries in an effort to leverage foreign money for developing the Colombia’s economy.
One of those companies is Lloyds, a global insurer based in London. Regan says that companies like Lloyds are the ones that can meet the $50 billion insurance requirement required by the Colombian government and take on the risk. “Risk is something we know and understand… it’s not something we’re afraid of,” said Regan.
Instead, the UK views security in the Colombian market. Mayor of London Lord Robert Gifford cited Colombia’s says that right now is the perfect time to invest in Colombia.
“There is a stable banking system [in Colombia],” Gifford told reporters. “I think the best chance is in the local savings, either through pension funds, life insurance or traditional savings.”
In some previous cases, however, Colombia infrastructure contracts have been blatantly robbed, marking a serious political risk for companies interested in entering the Colombian market.
In 2011 members of the Nule Group were sentenced to prison and fined millions on charges of siphoning money out of a major Bogota transportation contract. The scandal delayed construction of a major thoroughfare in Bogotá, causing daily chaos for the city’s transit.
“I think in relation to the risk of extortion or corruption,” said Regan, “the way in which national agencies are structuring their contracting tendering processes, those risks are eliminated.”
“Actually,” added the official, “To bid for a major contract, companies have to demonstrate financial capacity and operating capacity. These standards are quite strict. And only the biggest and the best companies will win them.”
Solid financial arrangements, clear management principles, and a clear international arbitration standard are also parts of the deliberation process. In other words, if there’s a dispute, it gets settled by international standards, and not by Colombian norms.
This week, the route where Bogota’s rapid-transit bus system rushes passengers through thick traffic, a double-decker London bus made by Ireland-based bus manufacturer Wright will join the throng. Wright is interested in doing business in the Colombia market, which will likely demand 8,000 to 10,000 more buses over the next decade.
That is a sign of Colombia’s growth, not just in terms of a burst in population that uses urban transit, but a city that desperately needs to get more efficient. If the British don’t take on the risks of doing business in Colombia, then who will?