COLOMBIA : AN INVESTMENT OPPORTUNITY FOR

PRIVATE EQUITY FUNDS

Bogotá D.C. 2012

OUTLINE

Who We Are

Latin America and Colombia, the world's source of development

Evolution of Private Equity in Latin America and Colombia

Investment opportunities for Private Equity funds in Colombia

Economic Sectors

WHO WE ARE

Who We Are

EXPORTS INVESTMENT TOURISM

Entity in charge of Promoting International Tourism,

Direct Foreign Investment, and Exports

Proexport supports foreign investors

www.proexport.com.co

Information tailored to your needs.

Contacts with the public and private sectors.

Itinerary planning and assistance for travel to Colombia.

Assistance during the installation process and monitoring of

established investors.

All services are free of charge and the information provided during

the process is kept confidential.

Proexport around the world

New York

Panama

Peru

Brazil

Mexico

United States

Canada Reino Unido

Germany

Russia

Spain

France

Turquey

Arab Emirates Singapore

8 REGIONAL OFFICES

9 NOVELTIES

18 BUSINESS OFFICES

PROEXPORT'S GLOBAL

PRESENCE

Shanghai

ECONOMIC TRENDS IN LATIN

AMERICA AND COLOMBIA

North America

Latin America

Middle East and Sub-Saharan Africa

Asia and Australasia

Western Europe

+51% +5%

+126% +20%

+148% +20%

+112% +16%

+87% +0%

(LT): Long-Term: Nominal GDP Variation 2000 - 2010

Latin America is the second-highest growing region in the

Short-Term (ST) and third-highest in the Long-Term (LT)

(ST): Short-Term: Nominal GDP Variation 2009 - 2010

ST LT

ST LT

ST LT

ST LT

ST LT

+470% +21%

ST LT

Russian Federation

Source: EIU

Latin America will continue to increase its nominal GDP, always

ranking higher than Russia, the Middle East and sub-Saharan

Africa.

0

1000

2000

3000

4000

5000

6000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Proy. 2011

Proy. 2012

Proy. 2013

Proy. 2014

LATINAMERICA MIDDLE EAST AND SUB-SAHARAN AFRICA RUSSIAN FEDERATION

NOMINAL GDP (US $ Billions)

2000 – 2014*

+126%

Source: EIU

Colombia, with higher growth than Latin

America and the world, playing a positive role

in the region's performance.

Colombia is the third largest contributor to growth in

Latin America.

126%

74%

18%

10%

7%

6%

5%

4%

2%

LATINAMERICA

BRAZIL

MEXICO

COLOMBIA

CHILE

VENEZUELA

PERU

ARGENTINA

ECUADOR

Countries' contribution to the growth of the GDP in Latin America

2000 – 2010

(+126%)

(%) Share of the GDP

Source: EIU

+224%

+54%

+189%

+170%

+107%

+188%

+30%

+264%

Variation

2000 - 2010

7%

5%

47%

8%

3%

1%

5%

23%

Although Argentina represents a larger share of Latin America's GDP, its

growth was lower than Colombia's

Performance higher than Latin America and the World is

expected over the next few years.

Source: ANDI (National Business Association of Colombia), EIU

-04

-02

00

02

04

06

08

Colombian growth Latinamerican growth World growth

Growth of Colombia's GDP vs. Latin America 2001 - 2010 (%)

“The new BRICs are Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa

(CIVETS). They are countries with major populations, dynamic, diverse economies,

political stability and each of them has a brilliant future. Any company with global

ambitions will have to take immediate action in these markets.”

Michael Geoghegan, CEO HSBC

April 26, 2010 in his speech to AmCham Hong Kong

Colombia, The C in the CIVETS

31 – May - 2011

The three raters agree on the good economic and

financial performance of the country, highlighting:

Its ability to deal with internal and external shocks

Country's long history of timely debt payments

Increased macroeconomic policy credibility

Security concerns have been waning

Three of the most important rating agencies have granted the

“Investment Grade” to Colombia

*Three-Month Moving Average August 2010-December 2011.**Three-Month Moving Average unemployment rate December 2011.

• 5.9% Growth Rate in 2011

1.2% higher than Latin American average growth (3.6%)

• 2 million new jobs*

Unemployment rate (9.3%** 2011)

• 1 mill. barrels per day of oil and gas production

Fourth largest oil producer in Latin America

• US$13.2 bn in FDI. (4% of GDP)

Record in Colombian history

• US$62.6 bn in exports G&S (18.8% of GDP)

Record in Colombian history

• 1.8% GDP Public Deficit

Non-Financial Public Sector balance

Economic achievements in 2011

Source: IMD World Competitiveness, 2011. Ranking consisting of 59 countries.

7/ The risk of political instability is very low.

8/ Bureaucracy is not an obstacle for business activity.

1,0700

4,9700

5,5900

6,8400

6,9600

8,1700

9,4800

Venezuela

Argentina

Mexico

Peru

Colombia

Brazil

Chile

Risk of Political Instability, 2011 7/

Scale 0-10. 0: high – 10: low

Bureaucracy, 2011 8/

Scale 0-10. 0: it is an obstacle – 10: it is not an obstacle

Chile 4.82

Colombia 3.05

Mexico 2.26

Peru 1.95

Brazil 1.62

Argentina 1.44

Venezuela 0.59

Country Rating

Colombia among countries with low risk of political

instability

FDI Increase in Non Traditional sectors

% Share by total FDI of positive flows by origin country, without reinvesting profit and not including the petroleum sector.

Total investment 2009 – 2011: US$ 27,629 million.

Source: Banco de la República.

FDI in Colombia by Non Traditional Sectors

2009 - 2011

FDI in Colombia by Sectors

2009 - 2011

Oil 37%

Mining 27%

Commerce, Rest. & Hotels

12%

Financial Services

8%

Manufacturing 6%

Transport, Storage and

Communications 5%

Construction 4%

Agribusiness 1%

Commerce, Rest., and

Hotels 33%

Financial Services

23%

Manufacturing 18%

Transport, Storage and

Communication 14%

Construction 10%

Agribusiness 2%

In Force

Signed

In Negotiation

Future

IN FORCE

• CAN (Peru, Ecuador y Bolivia)

• MERCOSUR (Argentina, Paraguay, Uruguay and Brazil)

• Chile

• G2-Mexico

• North Triangle (Honduras, Guatemala y El Salvador)

• Switzerland

• EE.UU y Canada

SIGNED

• EFTA (Iceland, Liechtenstein, and Norway

• European Union (Signature)

IN NEGOTIATION

• South Korea

• Panama

• Turkey

FUTURE

• Japan

• Australia

• New Zealand

• Costa Rica

• Dominican Republic

• Gulf Community

Positioning Colombia as an export platform: 11 free trade agreements

(FTA) with 48 countries allowing preferential access to over 1,500

million consumers

Population Pyramid by Sex and Age

Group in 1985 – 2005 - 2020

Source: Ministerio de la Proteccion Social - EIU

112,5

46,9 40,5

34,0 30,0 28,6

17,1 14,0

0

20

40

60

80

100

120

Population (Millions of People) - 2010*

With the second largest Spanish speaking population, Colombia concentrates almost

the 80% of its population between 20 and 70 years old

Growing young population

Source: EIU (Economist Intelligence Unit)

(10 Oct 20)

Colombian economy: larger than that of Chile, Ireland, Malaysia, Egypt,

Singapore and New Zealand, among others

289

242 238 229 224 223 218 214 207 203 196

154 140 138 130

104 92

36

Nominal GDP US $ Billions - 2010

Colombia's GDP per capita

GDP percapita (constant dollars 2011)

Source: Raddar. Calculations: Ministry of Finance and Public Credit.

Lower middle income

7.000 USD,

10.200 in

PPP

0

1000

2000

3000

4000

5000

6000

7000

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010

US$

Upper Middle Income

Lower Middle Income

Low Income

Source: Ministerio de Hacienda y Crédito Público - EIU

Per-Capita National Income – Atlas Methodology

(Current USD)

According to international standards, Colombia is part of the

group of upper-middle-income countries since 2005

GDP Per Capita

US$ 9.276 at PPP

SECTOR 2000 2005

Food, Beverage and Tobacco 19.406 30.941

Medical Expenses 2.272 4.587

Holidays and Amusement 821 1.171

TOTAL 22.498 36.699

Non Durable Goods US$ Millions

SECTOR 2000 2005

Clothes and Shoes 3.086 4.484

Furniture 3.171 5.176

Equipment and Accessories 1.133 2.412

TOTAL 7.391 12.072

Durable Goods US$ Millions

Real Consumption by Type of Good

Source: DANE

1US$= 1900 COP$

63%

64%

TOTAL EXPENSES 2010 US$ 103.693 Millions

Evolución Evolution of Private Equity

in Latin America and Colombia

Within the current crisis and instability in American and European markets, the opportunity of

investments in Colombia grows in sectors as Infrastructure, Telecommunications and Industry.

In 2011, Private Equity Funds (PEF) will present a more

pronounced migration toward Emerging Markets such as Asia,

Middle East , East Europe and Latin America.

Private Equity Funds Migration towards Emerging

Markets

Private Equity trend towards EM, specifically LATAM

The attractiveness of emerging

markets for General Partners

investment for this year.

According to this, Latin America is

becoming more attractive for

investors than a year ago

LP Commitments of investments in

Emerging Markets, related with

corporative strategy

About 11% of new investors expect

to begin investing in Latin America in

the next 2 years.

Source: Emerging Markets Private Equity Survey. EMPEA – Coller Capital

0

10

20

30

40

50

60

70

80

Brazil China Latam (exc Brazil)

India Russia

2010 Survey 2011 Survey

-20 0 20 40 60

Brazil

China

Latam (exc Brazil)

India

Russia

Decrease or Stop Investing Expand Investment Beging Investing

Private Equity Industry

In Colombia

Colombia is the only country in the region showing a

steady improvement in its PE environment

Source: Lavca 2011 Scorecard

* (1-100 where 100 = best)

Regional

Ranking Country

1 Chile

2 Brazil

3 Mexico

4 Colombia

5 Uruguay

6 Trinidad&Tobago

7 Costa Rica

8 Panama

8 Peru

10 Argentina

10 El Salvador

Currently ranked No 4 among Latam countries, an

increase 7 positions since 2008

Colombia: An improved PE/VC environment

Colombia’s greatest strength when compared to the region is

corporate governance policies

Initiative developed in 1999 in order

to promote competitiveness and

self regulation

Colombia Guide

and Country Code Sort out corporate

issues

Partnership with Swiss Government ,

Bancoldex and PEF to create a

corporate governance culture in the

sector

Main Work Targets: Corporate Governance Consulting

University Support (Research and Formation)

Banking Support (Reducing Company Risk)

Strong Legal

Framework Law 694 / 05

Resolution 271 / 08

Decree 2955 / 10

“Corporate Governance is concerned with

holding the balance between economic and

social goals and between individual and

communal goals” Sir Adam Cadbury

Corporate Governance and Development

0 10.000 20.000 30.000 40.000 50.000 60.000

2007

2008

2009

2010

feb-11

26.905

30.726

42.051

52.053

51.513

• Changes in regulation allowed Colombian pension funds and insurance companies to invest in private

equity.

• Since 2011, they entered officially into the new multi-fund system allowing a higher exposure to private

equity. => Moderate fund can invest up to 10% in private equity funds (5% local and 5% foreign)

Source: Colombia Financial Superintendence report, december September 2011

Average Annual Growth of 29% in

4 years

AUM of Mandatory Pension Funds in Colombia 2007 - 2010 (USD MM)

A growing market opportunity for new source of capital

with local pension funds and insurance companies

46.917 47.209

48.191 47.863

2.072 2.113

2.202 2.257 163

209

246 289

45.000

46.000

47.000

48.000

49.000

50.000

51.000

March April May June

Higher Risk

Conservative

Moderate

AUM of Mandatory Pension Funds by Multifund 2011 (USD MM)

0 200 400 600 800 1.000 1.200 1.400 1.600

2007

2008

2009

2010

mar-11

738

796

854

914

974

781

1.241

1.380

1.523

1.585

Life Insurance General Insurance

Reserves of life and general insurance

companies in Colombia (USD MM)

Insurance companies

Source: Colombia Financial Superintendence report, december September 2011

Some of them are already investing

in private equity funds such as:

However, there are a total of 22

insurance companies in Colombia

allowed to invest such as:

Government Programs to promote the development of the

Private Equity and Venture Capital Industry

apps.co

Bancoldex Capital Program is an initiative designed to

promote PEF/VC industry development in Colombia through

two components

Investment program

•Bancoldex invests in private

equity and venture capital

funds as a Limited Partner.

Contribute to improve the

PE/VC ecosystem in Colombia.

Non Financial Support

Apps.co is a government strategy to promotes mobile Internet

demand in Colombia through Apps development. It will count

with an initial investment of US$36 million to conform a Risk

Private Equity Fund for developing local initiatives with technical

assistance to Colombian Developers, Investors and General

Partners.”

Private Equity Funds in Colombia

2005-2011

In 2011, the number of PEF Closed increased up to 20 with capital commitments of USD 2.131 M

Source: Bancoldex Capital

An increased in the numbers of PE/VC

0

2

4

6

8

10

12

14

16

18

20

2005 2006 2007 2008 2009 2010 2011

2 2

5

8

12

18

20

No. funds closed

0

100

200

300

400

500

600

700 686

495

350

147

40 37 26 8

Capital Commitments

4

8

1

2

1 1 1

1

Closed Funds divided by sector 2011

Some International Private Equity funds with direct investments in Colombian companies:

International players also investing in the country

International General Partners International Limited Partners

2010: investment in Credivalores-Crediservicios, S.A.S. (“Credivalores”), the leading

non-bank provider of consumer loans in Colombia. Investment: US$ 25 Millions

2011: Acquires 3 safety companies to cover local and regional market through Capital

Safety Investment: US$ 55,9 Millions

2011: Acquires Terranum, a Colombian real estate developer

Investment: US$ 75 Millions

Investment opportunities

for Private Equity Funds

Ways to invest

Establishing local private equity funds to invest in the region

Investing and/or Co-investing in Private Equity Funds established in Colombia

Investing directly in Colombian companies

Establishing local private equity funds to invest in the region

Colombia offers an excellent geographic

location that allows to easily access to investment

opportunities y Latin America

According to LAVCA 2011, Colombia´s

strengths when comparing to the region in terms of it´s PE/VC industry are:

Attractive regulatory framework for the

creation of PE/VC funds

Minority Shareholders protection

Restriction for the local institutional funds

to invest in private equity

Requirenments in terms of Corporate

Government

250

50

40

35

30

30

10

11

11

0 100 200 300

Altra II

EPM

Axon-Amerigo

MCD²F

Tagua Capital

IVG

Bamboo Finance

Valor Forestal

Cacao

389

350

183

170

133

132

129

104

106

88

69

57

44

40

40

34

30

29

26

22

15

8

3

3

0 200 400

Infraestructura Brookfield

Hidrocarburos I, II y III

Aureos

Infraestructura Ashmore

Tribeca Energy Fund

Tribeca Fund I

Kandeo

TEKA

Altra FCP I

Fintra - Darby

Access SEAF MAS

Nexus Infraestructura I

Escala Capital

Tribeca Homecare Fund

Tribeca Natural Resources

SEAF FTC

Brilla Colombia

Valorar Futuro

Forestal Colombia

Progresa Capital

Energético Andino

Cine Hispanoamericano

Inversor

Inversor

38

23 funds in Colombia with USD 2,2 Billion of capital raised

Closed Funds (USD 2.2 billion) Funds in fundraising (USD 467 million)

Investing and/or Co-investing in Private Equity Funds

established in Colombia

Source: Estimated data Bancóldex S.A Sept 2012

Agriculture 8% Mining

and quarrying 10%

Industry 0,3%

Electricity, gas and water

5%

Construction 9%

Trade, hotels , restaurants

15% Transportation

9%

Financial Services

24%

Social service activity 20%

Colombia GDP by Sector 2010

AROUND 2

MILLION

COMPANIES

IN COLOMBIA

About 1,8 million

Companies are SME´s.

About 200 Thousand

are Big Companies

48% Industry

52% Retail

Source:

Exposure to multisectorial opportunities through investments

in Colombian companies

Source: ACOPI

325,3

937,7

142,4

4.662,0

912,8

2.254,0

3.088,2

6.503,7

0,0

1.000,0

2.000,0

3.000,0

4.000,0

5.000,0

6.000,0

7.000,0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Montage of the first power transmission

system of 500.000 volts in Peru.

Investment: US$130 Millions

Acquires the 60% of the Peruvian Electric

Company Cálidda.

Investment: US$ 111 Millions

Acquires the 100% of Banco

Centroamericano.

Investment: US$ 1.900 Millions

Acquires all ING company portfolio in

Chile, México, Peru, Uruguay y Colombia.

Investment: US$ 3.763 Millions Source: Banrep -Dinero

US$

Millones

1. USA

2. England

3. Panama

4. Brazil

5. Peru

6. Guatemala

7. Mexico

8. Chile

9. Ecuador

10. Venezuela

Country Ranking

(2000-2010)

Where, the big ones are starting to grow internationally

MILA: Merging of the Chilean, Peruvian and Colombian Stock

Exchange Markets as an exit strategy

MILA will become the biggest stock exchange market by number of issuers in

Latin America

With expected foreign investment growth, trades will multiply by 5 in forthcoming years

A total of 550

Companies

Total Volume traded H1

2012 - USD $49.52 billion

Valuation variation H1 2012

IGBVL (Peru) 3,77% , COLCAP

(Colombia) 4,36% e IPSA (Chile)

5,33% .

Source: BVC

Economic Sectors

Innovation

Housing

Agro

Infrastructure

Mining

The Innovation

Locomotives: All sectors of

the economy have potential

to go forward in the

knowledge path

(Juan M. Santos, 2010)

Five Innovation Locomotives

Encourage and improve production of competitive

products and services ESTABLISHED SECTORS

Promote development of NEW & EMERGING

SECTORS

Business Process Outsourcing and Off shoring BPO&O

Promote value added, innovation & development in

AGRIBUSINESS SECTOR

Cocoa and Chocolate Confectionery

Palm and vegetable Oil

Shrimp Farming Cattle

Productive Transformation Program

Regional Port Societies No. Of Port Year

Current Concessions 5 2008

New Developments 5 2010 – 2014*

TOTAL 10

2000 2010 2017*

Number of Highways

Granted

11 23 26

Km. Of Highways

Granted

2.002 4.009 6.604

Km. Of Double Track 50 860 3.487

Indicator 2000 2009 2019*

National Passengers (MM) 7.7 10.7 >15

National Load (Ton) 115.522 123.065 >130.000

International Passengers (MM) 2.9 5.6 >11

International Load (Ton) 390.584 481.129 >600.000

Project Features Scope Est. Length of

Execution

Central

Railway

System

Corridor of 1.045 km –

Concession for 30 Years

Construction variant La

Dorada; M&O Chiriguaná –

Bs.As.; Rehabilitation

2011-2014*

Carare Train Corridor to Inland Coal

Exploitation

New Tracks: 460km

Rehabilitation: 33Km

Servitude: 62km

2009-2014*

2002 2003 2004 2005 2006 2007 2008

INTERNATIONAL TRAFFIC FLUVIAL CABOTAGE INTERNATIONAL TRADE

Infrastructure Opportunities

National Highways

Air Traffic

Regional Docks

National Railroads

* DNP Estimations

Opportunities in the Colombian Oil Goods and

Services Sector

The oil sector is Colombia is going strong. There are

opportunities in the Oil Goods and Services sector for

growth and improvements on an international scale.

Growth is projected in terms of the number of wells

explored- 570 by 2014- and extraction- to nearly one

million barrels of oil per day (2012).

The Cartagena Refinery will enter operation in 2013

with a capacity of 165,000 BDP. The demand for goods

and services at this facility as well as the Barrancabermeja

Refinery will increase.

Various investment opportunities exist in producing

high-performing, high-quality goods and developing high-

tech oil services.

A regional goods and services exportation platform can

be established for meeting the needs of the Venezuelan,

Peruvian and Ecuadorean markets.

Caribbean Zone

Eastern Central Zone

Southern Central Zone

Bogotá - National Provider New Exploratory Areas

Regional Opportunities Health Services

There are 5 metropolitan areas in

Colombia with more than 1.8 million

residents.

These regions have graduated

more than 18,000 physicians and

9,000 nurses in the past 5 years.

There are another 5 mid-sized cities

with populations greater than

500,000 residents.

BPO

Opportunities to create Shared Service Centers for Latam.

Opportunities for Outsourcing Companies providing services

of Costumer Care, ESO, FAO, HRO, and R&D

Software and IT Services

Opportunities for development and integration of IT services

and Applications.

Opportunities for M&A and Software companies

Opportunities for Data Centers

Telecommunications

Opportunities to provide Telecommunication Services in

growing markets, improving its Telecommunication

Infrastructure.

Opportunities in Information Technologies and BPO&O Sector

Colombia has competitive advantages such as

land availability, wide water sources and high

exporting potential.

• Biofuels opportunities :

More than 7.3 million hectares ideal for

biofuels production.

High yield in Sugar Cane and Oil Palm.

• Forestry Opportunities: species with

elevated profit margins and short biological

cycles.

• Diary Opportunities:

Fourth milk producer in Latin-

American.

Third biggest market in Latin-

American.

Opportunities in Agribusiness Sector

Opportunities for MICE tourism:

Outstanding behavior of Colombian economy: Historically Colombia has

enjoyed a remarkable economical stability. During the last decade Colombian GDP has shown superior increases than world´s average, and

has been the less unsteady of South America.

Eight cities with more than 500.000 inhabitants established as important

commercial, development and business areas.

More than 2.500 multinationals in Colombia

In four years, Colombia scaled 16 positions at ICCA Ranking reaching

position 34th on 2010.

Leisure Tourism Opportunities:

International tourism in Colombia, grows three times faster than world

average.

Multi-destination country: Andean Country, Caribbean Country,

Amazonian Country and Pacific Country.

Multiple awards ad a tourism destination such as: “Revelation Destination”.

Wanderlust Magazine. “Destination To Discover”: Lonely Planet. “One of the

destinations to visit on 2010” NY Times.

Highest biodiversity country per squared meter

12 UNESCO acknowledgements as world heritage.

11.600 new rooms between 2004 y 2010.

Investment on 2010 was three times bigger than investment on 2004

Opportunities in Tourism Sector

Exploration 22 millions hectares

Production 2 millions hectares

Techcnical Areas of

Evaluation

17 millions hectares

Electric Generation • Current Capacity: 13.455 MW

• New capacity of 3.445 MW will be

installed within 2012 and 2018 by

Public and Private Companies through

Concession Contracts.

• To Achieve this goal, sector will

demand investments close to US$ 10

Billions.

Hydrocarbons

• Total Investment in Exploration

and Production for the next 5 years

is US$ 24 Billions: Piping US$ 10

Bln, Refining US$ 8 Bln, and

Biofuels US$ 700 Millions

• Potential of Reserves is estimated

between 8.960-138.631 (MBPe)

Mining

Estimated investments in Mining

sector for the next 5 years is US$

4,3 Billions

Mining and Electricity Sector Opportunities

Housing and Innovation Opportunities

Housing Innovation

• Confidence Index has been improving since 2008, allowing

people take decision to obtain a brand new house.

•Sector is divided into 2 big areas, Social and Regular

Housing, both increasing sales in 69% between 2004 and

2010.

•According to DNP, Housing sector will increase approx 10%

between 2010 and 2011. Target: One million houses in 2014.

•Increase participation of Science and

Technology in the national GDP. Target for 2019

is 2%.

•Increase the number of Patents per 100

thousand inhabitants.

•Challenge in Professional Education, increasing

almost 4 times 2006 records for 2012.

Growing domestic market without signs of saturation

Increasing export trend, covering global and regional makets in all sectors

Corporative Governance policies among local companies

Quality and availability of human resource to all economy levels

Strong legal support and incentives to promote Private Equity in Colombia

Colombia offers…