Juan Pablo Córdoba, President, Colombian Securities Exchange (Bolsa de Valores Colombia, bvc): Interview

Interview: Juan Pablo Córdoba

How would you assess the development of Colombia’s capital markets in recent years?

JUAN PABLO CÓRDOBA: The equities market has not fared well in recent years. However, there has been growth across other segments, including bonds and derivatives. The market has faced headwinds from a number of factors in the last few years, including an overly complex fiscal environment and an ample and liquid banking industry, disincentivising companies from capital market financing. Important changes are taking place in the structure and oversight of the market. While traditional issuers have a large, liquid market for issuance of debt at their disposal – with current issuances of up to 25 years in Colombian pesos – smaller operators were excluded from the market. As regulations gradually change and adapt to facilitate fundraising, such as through the creation of a secondary market or a reduction of fees, we expect to see a change in the dynamic of the industry, with smaller companies testing the waters.

This trend towards accessing the next tier, coupled with the creation of new institutional investors aimed at investing in corporate debt, have strengthened the ecosystem, making us highly optimistic with regards to the development of this segment.

Overall, the new government seems to be taking steps in the right direction, especially with the creation of a panel of experts to assess the state of the industry and determine the best course of action to ensure its development. The new fiscal law has also made great strides in elements affecting businesses, potentially increasing corporate appetite for the capital market.

How is the bvc leveraging technology to boost its development and promote participation?

CÓRDOBA: At the bvc we have chosen to rely strongly on technology to attract both new issuers, and new investors. Through the development of our financial technology (fintech) platform a2censo, we incentivise the financing of small and medium-sized enterprises, and open the market to innovative products targeted at individual investors. In this context, the government has been an important ally as they have lowered the regulatory costs while maintaining a healthy level of oversight of the industry. Since the bvc’s recent acquisition of Deceval, prices for transactions have already been reduced by an average of 22% on equities, as we have moved from prices per trade to ad valorem.

Similarly, we hope that integrating technology in our processes will enable us to promote further participation of foreign players into the capital markets. Their role has already been growing from holding 5% eight years ago to 25-30% of Treasury bonds at the end of 2018. As regulation continues to modernise, we will be adding new features to our service offering, such as the ability for companies to discount their invoices through our fintech platform.

To what extent can the capital markets start playing a larger role in financing the real economy?

CÓRDOBA: In 2018 a sustainable segment was launched within the bvc, dedicated to special issuances, including for green, orange, social and sustainable bonds, which were oversubscribed by a higher margin than usual, and spread across a larger number of investors. While institutional investors remain reluctant to invest directly in infrastructure projects, they are beginning to channel funds for such projects through private debt funds. While still small – valued at less than $1bn today – we believe that this trend will consolidate in the short to medium term as risk in construction of these projects progressively dissipates and investors learn how to better manage risk. We have been working with the authorities on the fiscal front to enable those funds to be listed and traded as equity instruments. Currently, the necessary framework has been established to begin trading real estate investment trusts in 2019, and we expect it to continue evolving, so as to enable us to do the same for infrastructure funds in the next five years.