You probably heard about the 6th Annual Summit of the Americas that took place over the weekend, but for all the wrong reasons. The salacious headlines about the Secret Service may make the 2012 summit one of the most remembered in history.
But the meeting of the member states of the Organization of American States (OAS) is quite newsworthy in its own right. Held once every three years, the summit intends to help “define a hemispheric agenda at the highest level to address urgent challenges and propel positive change.” The theme of this year’s gathering, “Connecting the Americas: Partners in Prosperity,” was meant to focus attention on regional cooperation in order to increase development and fight scourges (including poverty, disasters, lack of access to technology and security).
In discussions, Cuba and the drug war emerged as top priorities, with the U.S. and Canada sometimes expressing viewpoints that differed from those of other OAS members. Also on the agenda was China, which has been exerting its growing influence on the region both diplomatically and economically.
The event put the spotlight on host country Colombia, its charismatic President and the colonial city of Cartagena, a UNESCO World Heritage Site. Widely viewed as an economic up-and-comer, Colombia is projected to have GDP growth of 4-5% in 2012 by the U.S. State Department, and is on pace to surpass Argentina’s GDP by 2014. The nation’s unemployment rate is down from 12% in 2009 to 10.9% as of last year. And its sovereign credit rating was upgraded to investment grade by all three major agencies within a three-month period in 2011.
Also putting Colombia on the radars of those seeking the “next Brazil” are the country’s natural resource reserves, which include oil, metals and more-recently discovered shale gas. And while Colombia’s lack of infrastructure has been considered a hindrance to its economic growth, improved security is beginning to incentivize companies that build railways, bridges and the like to enter this market. Projects already underway include a new international terminal at El Dorado Airport in Bogota, slated to open later this year, an expansion and upgrade to the oil refinery in Cartagena and an expansion of Cartagena’s port.
Colombia is also expected to benefit from its free trade agreement with the U.S. that is set to begin in May, as it has from similar agreements with countries ranging from its South American neighbors, Canada and Mexico to the EU, South Korea and Japan.
However, Colombia still has many problems familiar to emerging-markets observers. In particular, the nation continues to be plagued with a high rate of poverty and one of the highest levels of income disparity in the world.
The chart below compares the three-year performance of the Dow Jones Colombia Total Stock Market Index to regional and global indexes as benchmarks. Notice that the Colombia index outperformed both indexes by a sizable margin. Year-to-date (as of March 31, 2012), the Colombia index is up 13.99%, slightly underperforming its Latin America counterpart (+14.71%), which was propelled by strong gains in Chile and Peru. But it outperformed the global index, which gained 12.28%.
Despite challenges it still faces, Colombia is considered by many to be a rising star among emerging markets—and its success in hosting the Summit of the Americas may have helped to cement those views. Let’s see what the future brings for this nation and its markets.
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