Article

Cartagena, Colombia: a historic site for a historic moment

By Christoph Frei, WEC Secretary General

From left to right: José A. Vargas Lleras,President of the WEC Colombian Committee
& President of ANDESCO Board of Directives; Christoph Frei, WEC Secretary General;
Alvaro Uribe Velez, President of Colombia

Cartagena is a picturesque harbour city in the Colombian Caribbean: a place which the Spanish used in the 15th century for their gold exports from Latin America to Europe; a place where in the 16th century Sir Francis Drake made his ambivalent reputation by stealing some of that gold from the Spanish - an explorer and hero to some, a pirate to others; and on July 2, 2010 the place where President Álvaro Uribe Vélez, after receiving a standing ovation by 1000 business and government representatives, gave an emotionally loaded farewell speech to Colombia's private sector after eight years of strong leadership, at an event where the World Energy Council was honoured with a keynote address.

When asking Colombian business and government representatives about his leadership, it was described with affection as micro-management with a strong sense for the big picture and the country's immediate needs; leadership that was dedicated to the democratisation of security, to the building of trust with investors, and to the improvement of prosperity across all social levels; leadership that built on empathic people skills and courage to take tough choices for a country that needed them; and leadership that left institutions weakened but that the Colombian people reward with an 80% approval rate at the completion of his second term and mandate as President.

The country looks different now than in 2002 when the Uribe government took office. The World Economic Forum's 2009/10 Global Competitiveness report states that "the country has achieved significant advances in macroeconomic stabilization and civil pacification and can count on a rather extensive market size and sophisticated business sector, successfully absorbing technology from abroad and with a fairly high innovation potential." However, the poor institutional is among the factors listed as hindering Colombia's competitive potential going forward.

The slogan of a rapidly growing tourism industry is that the only risk in Colombia is that you don't want to leave anymore. In his speech, President Uribe challenged the business leaders that the time was ripe to shift from an inward focus to international expansion. Meanwhile, Colombia suffers from having lost Venezuela as a major export market and also from the financial crisis, leaving Colombia's growth rate under a percent over the past year.

Latin America's integration is the key to greater regional development and opportunities for the less dominant economies in the region, but remains embryonic and suffers from "politics instead of policy" as put by a senior government representative. In such a context, a pragmatic agenda focused on a limited number of like-mined countries may achieve more than a visionary big picture approach and Colombia has certainly displayed a constructive attitude towards this agenda over the past years - as an important step, Colombia, Peru and Chile have agreed to establish a joint stock market.

Colombia's power sector is a matter of national pride and has proven robustness in a very dry period, which for a country with 70% hydro, is not without risk, as can be observed in neighbouring countries. Similar dependencies and growing electricity demand coinciding with under-investment, has led to water shortage and several serious blackouts in the past years. Not so in Colombia, where about 40 producers compete to supply electricity and where big international companies with solid pockets have taken over some of the large domestic companies.

The natural gas issue is more complex. The country is left with18 years of reserves at current production rates and the critical question is whether to build the internal transportation and distribution infrastructure with such a limited time horizon, after which, import dependency may turn into a political risk. Natural gas is used for peak supply in the power sector, which makes it a take-and-pay commodity in the perspective of the power sector (in which the buyer is neither constrained to take a delivery nor to pay if he doesn't) and unattractive for exploration and production companies. How to get out of this deadlock? A gas market reform has been negotiated with the private sector over the past months and shall pave the way to a more efficient development and use of the country's natural gas resources.

Much dynamics is seen in the liquids sector, which has doubled crude production to one mbd over the past four years. The industry invests in technology, from deep-water to biofuels, where it set as objective to reach 10% of the overall liquids market by 2020, up from 7% today.

Climate change is not a frontrunner issue in Colombia. It is still a reality here that coal plants are easier to build than hydro projects, in spite of substantial unexploited hydro potential. The conservation of the local environment is given more weight than climate change and the possibility of a future carbon price is discounted.

This may change. On August 7, the new President Juan Manuel Santos will take office. He has most recently been a minister of defence and close political ally of Uribe, before that, a minister of economy and finance and a minister of foreign trade in two previous governments. His strong reputation and backing are built on his determined fight against FARC in his role as Minister of Defence. Expectations are that he will continue the same line as his predecessor, but his recent reaching out to Tony Blair for advice indicates that he will place more emphasis on effective institutions. His appointee as environment minister is Sandra Bessudo - a biologist with a passion for scuba diving and shark protection. A new chapter is about to start for this historically dense country.

Thank you!
The National Association of Public Utilities and Communications Companies- (ANDESCO) affiliates over 110 Colombian companies of electricity, gas, telephone, water and sewerage and waste management. The International Congress organized by ANDESCO is considered a key event for Colombian business leaders, gathering over 1000 high level representatives from both private and public sectors. Since 2002 the Colombian President has actively participated in the discussions of this Congress, along with his ministers, and directors of different public entities. As an important constituent member of the WEC Colombian MC, ANDESCO invited the WEC Secretary General as a keynote speaker for this special opportunity. I would like to thank the ANDESCO team, its President Dr. Gustavo Galvis Hernandez and its Chairman of the Board Jose Antonio Vargas Lleras for their hospitality and invitation.

Date of publication: 13/07/2010