Financial Times - By Naomi Mapstone

As rebranding exercises go, Colombia – a country racked by 45 years of guerrilla warfare and the violent rise of drug trafficking – has been a challenge, concedes the woman who heads the country’s export, tourism and industry promotion agency.

While even the most enthusiastic Colombian would admit many problems remain, the exercise seems to have worked. Foreign direct investment is up, as is the number of tourists.

“When I used to knock on the doors of cruise executives, the first thing they said to me was, ‘You’re kidding me’,” says Maria Caudia Lacouture, general manager of Colombia is Passion.

In 2005, when the agency was formulating its strategy, research showed that when Americans thought about Colombia, these things came to mind: “drugs, guerrillas, Pablo Escobar, coffee” and Manuel Noriega, the Panamanian dictator the US deposed in 1989, who had links with the country’s drugs barons.

Four years later, after determined courting of cruise lines and key markets and an advertising campaign advising tourists that the “the only risk is wanting to stay”, Colombia is attracting more than 1.2m visitors a year – double the number in 2002.The US is its biggest market, followed by Venezuela, Ecuador, Spain, Peru, Mexico and Argentina.

More than 206,000 cruise passengers docked in Cartagena, the Spanish colonial port town, in 2008, up from 108,892 in 2007, when the Royal Caribbean line, the world’s Second biggest cruise line, returned to the market.

By July this year, 98 cruise ships carrying 159,875 passengers had landed, up 33 per cent on the same period last year.

Bogotá, Medellín and Calí are also drawing increasing numbers of visitors, in part because of a drive to draw conference business, such as this year’s 50th anniversary meeting of the Board of Governors of the Inter-American Development Bank and the 2010 World Economic Forum for Latin America.

William Brownfield, US ambassador to Colombia, says the increase in tourism is “almost as significant a figure” as the amount of foreign direct investment. “It’s the tourism that’s going to change the image and perception; as the image and perception change, the political reality follows.”

 “Having a bad image has economic consequences,” says Ms Lacouture. “If you have a good image and people are willing to visit, it creates a virtuous circle and generates employment.”

Increasing numbers of tourists have coincided with a surge in foreign direct investment, to $9bn in 2009. They are helping the Colombian economy maintain marginal positive growth amid the financial crisis and contributing to a newfound optimism.

“If you take a snapshot of Colombia today with all its elements – human rights, labour rights, humanitarian issues, economy, security, and you ask, ‘Are there areas in this snapshot that do not meet the minimum standards as established by international conventions?’ Of course there are,” says Mr Brownfield.

“If instead you do a 10-year video which started to run in 1999, does that video show progress in every single quantifiable area? My argument is yes.”

“Of course, we still have a lot of social and security problems that need to be resolved, but we really feel that we’re on the right track,” says Juan Pablo Córdoba, president of the stock exchange (BVC).

“Confidence in the economy has not only recovered, but Colombian companies have been thinking globally. In the 20 years I have been in the professional world, I haven’t seen this before. Long-term for a Colombian company was one year.

“Even with the big boom between 1991 and 1996, we didn’t have companies that were thinking 10, 20 years ahead, and today that’s how most companies are thinking.”
Mr Córdoba says that this represents “a tremendous cultural shift”.

“Of course, countries do not change overnight and we need a good 15 more years of this, but if we continue on this track I think Colombia will be very different 10 years from now.”

Alberto Bernal, head of Bulltick Capital Markets’ research department, says that, despite a fall in exports hurting the real economy, the financial sector has been buoyed by this level of confidence, and that there are indications the country’s poorest are accessing credit in greater numbers.

“The reduction of poverty has been important, although not as good as some people expected,” he says.

ome 46 per cent of the population lived in poverty in 2008, surviving on 275,000 Colombian pesos ($140) a month, compared with 53.7 per cent of the population in 2002, according to the National Planning Department.

“More people having access to the financial sector is an important issue. The level of loans to GDP in 1995 was 45 per cent. It collapsed to 20 per cent after the financial crisis in 2001. And it’s back above 30 per cent right now, so it’s still catch-up growth,” says Mr Bernal.

The fact that Colombia’s banking sector is dominated by locals such as Bancolombia has helped boost the mortgage market, as lending decisions are made locally, he says.

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