For Uribe, a deal is crucial both for the tangible economic benefits and the perceptual ones. He has invested much political capital already, visiting the U.S. at least 25 times since taking office. Winning full free-trade benefits with the U.S. would do much to bolster the fragile investor confidence he has been nurturing, while a loss would damage his prestige. Uribe's challenge is one that everyone, from business leaders to taxi drivers, acknowledges. "Investing here is rooted in improving physical safety and lowering the risk of doing business," says Alexander P. Kazan, a Latin American strategist at Bear Stearns & Co. (BSC ) "You really cannot overstate the importance."
SLEEPY EXCHANGE
On a cool April morning, I make my way to Bogotá's bustling financial district. Amid the roar of motorcycle engines and a haze of bus exhaust, the district brims with young professionals sipping tintos—tiny cups of dark coffee—while chatting on newfangled cell phones. At every crosswalk and on street medians, the less fortunate hawk snacks, cigarettes, and telephone calling cards from salvaged baby carriages, stark reminders of the gaping disparities in this poor nation.
Halfway up a glassy office building is an ultramodern floor containing Colombia's stock exchange, the Bolsa de Valores. It's high-tech, but no one would confuse it with the NASDAQ. Just 12 people sit around a circular table staring at their flat-panel displays in a space no bigger than a conference room at a Best Western hotel. It's so quiet you might think you showed up to take the GMAT. I jokingly ask if we're at the right place. Our photographer wonders aloud if he should bother unpacking his equipment.
"This is it," says Jaime Sarmiento, the exchange's 34-year-old communications director, sensing the anticlimax of the moment. He points up at the ticker, a circular LCD sign. "Does anyone know how to turn this thing on?" The specialists on the floor arrange a photo op, choosing a mustachioed elder to sit on the elevated chair in the center of the ring and motion as if he is directing order flow. Truth be told, everyone is just waiting for 1 p.m., when the market closes and the power lunch scene takes hold. When I ask if the early close is a vestige of the Spanish siesta, I'm curtly told that it's purely a result of how little business there is to transact. Sarmiento takes us downstairs to tour the café, a swank lounge that was conceived as a high-energy, high-buzz meeting place for stock junkies. On this day, two or three guys sit around reading the paper, blissfully unaware of the handful of digits flickering on the wall-mounted display above.
Such sleepiness belies the market's breathtaking volatility. This is the central paradox of extreme emerging markets: With so few buyers and sellers, small upticks can quickly turn into major surges, while the faintest of downticks can lead to painful routs. After posting a 128% gain for 2005, second best in the world, the Bolsa nosedived 45% in two months during last year's late-spring emerging-markets swoon, the second-worst showing on the globe. It has since jumped 75%; on June 15, 2006, alone, the index gained 16%. It's down 5% in 2007.
All the choppiness merely confirms the suspicions of most of the locals, who eschew stocks for government bonds, even though they yield just 6% now, a third of what they did eight years ago. "The general public just isn't all that accustomed to stocks," says Rodrigo Jaramillo, CEO of Interbolsa, the country's largest brokerage, and former chairman of the stock exchange. He notes that fewer than 70,000 Colombians bought local shares in 2006.
Even people who invest for a living are reluctant to buy Colombian stocks with their own money. "I like to invest in young cows," admits a 26-year-old private investment adviser in a British-spread collar and Hermès tie between bites of an empanada in a breakfast joint near the exchange. His eyes light up as he explains that his uncle has given him dibs on investing in heifers, an inside opportunity that has lately scored him 20% to 30% annual returns. Why dabble in risky stocks, he asks, when he can collect steady returns on the family ranch? "I sponsor the cows until—how do you say?—graduation," he says, grinning diabolically, of the day when they're auctioned off and he reaps his windfall.
But in fits and starts local investors are coming around. I'm struck by how many twenty- and thirtysomethings in Bogotá are at the leading edge of business and civic life: chief executives, money managers, restaurateurs, even cabinet ministers. Young and educated, Colombia's new elite could ply their trade anywhere in the hemisphere. A decade ago there would have been no question that they would end up abroad. Just four years ago, Bogotá's Club El Nogal, a hot night spot, was car-bombed by a leftist rebel group, resulting in 36 deaths. But El Nogal has come back stronger than ever. Even with all the bomb-sniffing dogs, the place is nearly impossible to get into on a weeknight. Bogotáns consider it a metaphor of their resilience.
I meet some young professionals for dinner at Balzac, a restaurant modeled after Manhattan's trendy Balthazar. José María de Valenzuela, a recently minted MBA at INSEAD in France, lights a cigarette and reflects on his accomplishments. "There was just a small possibility I'd end up back here," he says. All of 32, Valenzuela, who did his undergraduate work at Brown University a decade ago, used to specialize in what you might call distressed investing. "People were afraid to leave the city," he recalls of the siege mentality of seven or eight years back, when terrified families sought escapism at his miniature golf course in Bogotá. "You could buy real estate just for the cost of the taxes." Which is what Valenzuela did, before selling into a property boom and plowing his winnings into what he and a former finance professor correctly thought would be the start of a roaring bull market for stocks. Last summer, Valenzuela rolled those profits into a partnership with HenCorp Futures, a U.S.-based trading firm, to offer currency strategies to foreign investors—a critical building block to outside participation in the Colombian market. The only way to buy Bolsa-listed stocks directly is in pesos, and there are no pure-play Colombian mutual funds available to foreigners.
The next afternoon, on Valenzuela's recommendation, I head to Harry's Bar, in a tony Bogotá neighborhood that resembles San Francisco's Russian Hill. Amid the din of clinking wine glasses, blond-streaked women and sharply dressed men pick at plates of seared tuna and Argentinian steak. In the evenings the place is often overrun by actors, soccer stars, and diplomats. The owner, spotting my reporter's notebook, stops by. "Please tell America we're not a bunch of drug dealers shooting at each other from trees," he says.
COFFEE BUZZ
In walks my lunch guest, Felipe Gaviria, the boyish money manager whose name is on the lips of everyone in the smart-money set. In 1997, at 23, Gaviria was promoted to head of currency trading at a small bank in Cali. Two years later he left for business school in Barcelona. He returned to Colombia when Uribe was elected in 2002, sensing the moment was right to buy Colombian property and bet that the peso would strengthen against the dollar. Now he oversees $3 billion in pension assets for Spain's Grupo Santander. It's common knowledge that Gaviria is being wooed by bulge-bracket investment banks and hedge funds. "I receive everybody," he says coyly.
With more money pouring in as the economy grows, Gaviria says he's impatient for more local investment options. Fortunately for him, some big ones are just around the corner. In an audacious move, Procafecol, of the fast-growing Juan Valdez coffee shop fame, is floating its shares on the Bolsa. The unlikely beneficiaries: thousands of rural caficultores, or coffee growers, who make up Colombia's national coffee alliance. They've recently been swarmed by an army of financial advisers dispatched to the countryside. "Your preferred shares give you dividend priority over ordinary investors," reads the glossy offering letter, as if to poke fun at the more cosmopolitan Class B shareholders.
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