LMOs: The Activity After Debt

Republic of Colombia

Ministry of Finance and Public Credit

Washington D.C., October 24 / 2018

Liability Management Activity

3735 32

3539

44 45 46 46 44 43 4139

10

20

30

40

50

60

70

80

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

3

Colombia has a sound debt structure

Internal68%

External32%

USD26%

EUR4%

JPY0%

UVR (COP)20%

COP50%

Debt Currency Composition

Debt by Issuance MarketCG Gross Debt (%of GDP)

Debt by Type of Rate

88,5%

Source: Ministry of Finance and Public Credit. As of

23/10/2018

GDP 2018: USD 340 billion

Fixed Rate 89%

Floating Rate 11%

0%

2%

4%

6%

8%

10%

12%

14%

16%

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16-31

Years to Maturity

2010 2014 2018 Goal Limit

4

The Republic has been active in the liability management front

Evolution of the CG Debt Profile(yearly maturity as % of Total Debt)

Source: Ministry of Finance and Public Credit. As of

23/10/2018

5

Fiscal accounting has imposed restrictions to LMOs specially after the

implementation of the fiscal rule in 2012

Source: Ministry of Finance and Public Credit.

-2.4

-2.3 -2.3 -2.2 -2.2

-1.9 -1.9-1.8

-1.7

-1.3

-1.0 -1.0 -1.0

-2.3

-2.3-2.4

-3.0

-4.0

-3.6

-3.1

-2.4-2.2

-1.8

-1.4-1.3

-1.2

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028

Structural Balance

Total Balance

Fiscal Balance Targets of the Central Government(as % of GDP)

6

Most of the recent LMOs in the local market have been done with public

sector entities and the National Treasury

Source: Ministry of Finance and Public Credit.

Liability Management Transactions in the Local Market

% o

f Int

erna

lDeb

tat E

xecu

tion

4.2%

0.3%

1.2%

6.4%

2.2%

3.0%

1.3%

4.1%

0%

1%

2%

3%

4%

5%

6%

7%

0

2

4

6

8

10

12

14

2011 2012 2013 2014 2015 2016 2017 2018

Tril

lion

CO

P

LM Public Sector Entities LM Market %LM / Total Internal Debt

-7.0

-6.0

-5.0

-4.0

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2030 2032 2033 2035 2049

7

Early in October the government executed a bond exchange for COP 12.8

trillion / USD 4.2 billion

Effect of the October/18 exchange on the Local TES maturity profile

CO

P T

rillio

n

Source: Ministry of Finance and Public Credit.

8

The local TES market has evolved significantly since 2014

26.26%

16.76%

7.12%

6.77%

25.47%

17.62%

0%

5%

10%

15%

20%

25%

30%

35%

40%

Pension Funds Commercial Banks Rest of the Private Sector

Rest of the Financial Sector Foreign Funds Public Sector

TES Holders by Type(% of Total TES)

Source: Ministry of Finance and Public Credit. As of

30/09/2018

9

The change in the bondholder structure has been a positive factor for the

improvement in the maturity profile

0% 10% 20% 30% 40% 50%

1 a 3 años

3 a 5 años

5 a 7 años

7 +

2018 2012

Years to Maturity(% of Total TES)

0 10 20 30 40 50 60 70 80 90

2012

Commercial Banks (2018)

2012

Pension Funds (2018)

2012

Foreign Funds (2018)

2012

Rest of the Financial Sector…

2012

Rest of the Private Sector (2018)

2012

Public Sector (2018)

1y - 3y 3y - 5y 5y - 7y 7 +

Maturity by Type of Holder(COP Trillion)

Source: Ministry of Finance and Public Credit. As of

19/10/2018

-

-

-

10

The rally in rates between 2016 and 2018 contributed to a cost-efficient

extension

4.00%

5.00%

6.00%

7.00%

8.00%

9.00%

10.00%

1Y 2Y 4Y 6Y 8Y 10Y 12Y 15Y

2014 2015 2016 2017 2018

7.10%

4.25%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

11.0%

Dec-13 Dec-14 Dec-15 Dec-16 Dec-17

COLTES 2028 Central Bank´s Rate

Source: Ministry of Finance and Public Credit. As of

23/10/2018

TES 10yr

Local Fixed Rate TES Curve Yield TES 2028 and Central Bank Rate

11

The government achieved a dual reduction in refinancing risks and cost of

debt

Source: Ministry of Finance and Public Credit. As of

30/09/2018

6.9 Yrs

7.30%

4%

5%

6%

7%

8%

9%

10%

4

5

6

7

8

9

Jan-10 Oct-10 Jul-11 Apr-12 Jan-13 Oct-13 Jul-14 Apr-15 Jan-16 Oct-16 Jul-17 Apr-18

Average Life (Years) vs Average Coupon (%)

Internal Debt Average Life Internal Debt Average Coupon (%)

12

LM in international markets has been less frequent as maturities are lower

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

2031

2032

2033

2034

2035

2036

2037

2038

2039

2040

2041

2042

2043

2044

2045

2046

2047

2048

CG Debt Portfolio Amortizations (USD million)

External Debt Internal Debt

Source: Ministry of Finance and Public Credit. As of

23/10/2018

13

Colombia reopened the Latam sovereign market in October with a prefunding

exercise and a tender offer for bonds maturing in 2019

Source: Ministry of Finance and Public Credit

110

115

120

125

130

9/22/2018 10/2/2018 10/12/2018 10/22/2018

127

Launch

Colombia CDS 5y

Type Dual Tranche + Tender Offer

Bond 4.5% due 2029 5% due 15, 2045

Issue Size USD1.5 billion USD 0.5 billion

Issuance Spread T+140 T+185

Issuance Yield 4.578% 5.184%

Demand USD 9.7 billion

Bonds subject to repurchase 7.375% due March 2019

Amount accepted for repurchase USD 1 bllion

Terms of the Transaction

What’s Next?

15

Colombia has conducted the 5 year review of its medium term debt strategy

New Stochastic Debt Model,with WB and IDB technicalsupport.

2013

2018 - I

2018 - II

…

InstitutionalArrangements

Institutional arrangements fordeveloping Debt ManagementStrategy.Implementation of DebtManagement Committee andTechnical Debt Group.

2019

Debt Model

16

The strategy has been successful so far but some more work can be done

Central Government Amortization Profile(USD Million)

Source: Ministry of Finance and Public Credit. As of

23/10/2018

0

2

4

6

8

10

12

14

16

2019

2020

202

1

2022

2023

2024

2025

2026

2027

2028

2029

2030

2031

2032

2033

2034

2035

2036

2037

2038

2039

2040

2041

2042

2043

2044

2045

204

6

2047

2048

2049

205

0

8% LImit 10 LImit

2018

2020

2022

0%

2%

4%

6%

8%

10%

0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44

Ann

ualC

once

ntra

tion

Years to Maturity

LMOs will be relevant for a convergence towards the new target

Projected Central Government Amortization Profile(% of Total Debt)

Source: Ministry of Finance and Public Credit.

6.2

6.66.4

6.76.6

6.7

7.5

8.4 8.2 8.2

8.99.2 9.1 9.1 9.2

6.0

6.5

7.0

7.5

8.0

8.5

9.0

9.5

10.0

10.5

11.0

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Colombia should be able to maintain its average life indicator at sound levels

even under adverse macroeconomic conditions

Central Government Average Life(Years)

Source: Ministry of Finance and Public Credit

3.50

4.00

4.50

5.00

5.50

6.00

6.50

7.00

7.50

8.00

Oct-18 Nov-18 Sep-19 Jul-20 May-22 Jul-24 Nov-25 Aug-26 Apr-28 Sep-30 Jun-32

Spot

Having dealt with short term maturities Colombia can be more tactical and

focus also on curve efficiency objectives

Fixed Rate TES Curve (% yield)

Source: Ministry of Finance and Public Credit. Curve

as of 22/10/2018

The exposure to interest rate risk is low but the floating EUR portfolio could be

hedged

Euribor 6m vs EUR Swap 5y and 10y

Source: Bloomberg. Curves as of 22/10/2018

0.98

0.37

-0.27

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

Jan-10 Oct-10 Jul-11 Apr-12 Jan-13 Oct-13 Jul-14 Apr-15 Jan-16 Oct-16 Jul-17 Apr-18

Swap EUR 10Y (vs 6M) Swap EUR 5Y (vs 6M) EURIBOR 6M

Gracias!