FTS DOC

Moderator: Linda Abbruzzese

July 27, 2010

11:47 am CT

Coordinator: Welcome and thank you for standing by. At this time all participants are in a listen-only mode. During the question and answer session, please press star 1 on your touchtone phone. Today’s conference call is being recorded. If you have any objection, you may disconnect at this time.

I now would like to turn the conference call over to Linda Abbruzzese.

Linda Abbruzzese: Thank you. And good afternoon for those of you joining on the East and West coasts. Thank you for joining for our Webinar on the energy opportunities in Columbia. My name is Linda Abbruzzese and I'm an International Trade Specialist for the Marketing Communications Office for the U.S. Commercial Service of the Department of Commerce.

This Webinar is being brought to you in cooperation by the U.S. and Foreign Commercial Service. This Webinar will provide an overview of energy opportunities in Columbia as well as the upcoming Louisiana and Texas Trade Missions to Columbia, which will take place on November 1 through the 5th in this year.

The mission will also include the Expo Oil and Gas Columbia Trade Show in Cartagena, Columbia, which will be held on November 2 through the 5th of this year.

In a moment I'll turn this presentation over to Margaret Hanson-Muse who’s a Commercial Counselor and Julio Carbo, Commercial Specialist, both of the U.S. Embassy in Columbia.

Following Mr. Carbo, we'll be followed by (Vis Ziamara Kresh), International Business Development Officer for the Americas at the Export-Import Bank of the United States.

Later Ms. Delilah DeSouza from International Trade Specialist of The Export Assistance Center in New Orleans and Ms. Nyamusi Igambi, Senior International Trade Specialist of the Export Assistance Center in Houston, Texas will share details about the upcoming Louisiana and Texas Trade Mission.

All of these speakers will be available at the end of this presentation to answer your questions. And contact information will also be provided to everyone.

Now for those of you who just joined, you can still log into this Webinar by entering the (Euro) Web site and pass code per instructions that were sent to you by email. And to make sure everyone gets the most benefit from this Webinar, you'll be able to hear this presentation via your telephone and view it simultaneously via your computer.

So if you’re not hooked up through both, please take a moment to do this. And if you’re experiencing any technical difficulties, please press star 0 anytime during this presentation.

Now to download the PowerPoint presentation slides from this Webinar and also the handouts that are also going to be in association with today’s theme and Webinar, on the upper right hand side is an image which looks like there are three pieces of paper which are located at the top of this page. If you point your mouse’s cursor over this icon, you'll be able to download all the handouts as well as the PowerPoint presentation slides.

Now during this presentation, we will be taking voice and written questions. Now to ask a voice question, please press star 1 on your telephone. We do invite you to type in questions on your screen as they occur to you. For the written Q&A of this Webinar also on the left hand side of your computer there’s another icon with the letters Q&A, which stands for question and answers.

And if you click on this icon, you can click and type in your questions anytime during this presentation. And we will compile these questions and present as many as time allows for this presentation. The questions which are not answered during this Webinar due to some time constraints, we will receive - or we will get back to you via a personal email afterwards.

Now for those of you who just joined us and logged in, you can still join in the Internet conference. But now I'd like to introduce live online Commercial Counselor, Margaret Hanson-Muse of the U.S. Embassy in Bogota, Columbia. Maggie, thank you very much for joining us.

Margaret Hanson-Muse: Thank you very much Linda. I appreciate the opportunity to speak with the audience that you have gathered for me today. I'm Maggie Hanson-Muse. I've been here in Columbia for three years and witnessed the incredible growth and transformation during the (rebay) administration that has really afforded new opportunities for U.S. exporters.

In particular, we have I think very exciting opportunities thanks to the support of the U.S. Ex-Im Bank in the oil and gas industry. Let me tell you a quick story about how it all began. Probably ten years ago the U.S. Trade Development Agency targeted the hydrocarbons industry here in Columbia as one of their top priorities.

After years of providing grants and studies, it resulted in two major awards, the first being to Chicago Bridge & Iron a $3.8 billion award to modernize the refinery in Cartagena; and the second being to Foster Wheeler to probably a $3.6 billion award to modernize the Barrancabermeja refinery here in Columbia.

Well, that sounds great. And engineering services company has won these contracts. What does it mean for you the U.S. Exporter? It means a huge opportunity to provide anything ranging from nuts and bolts to pipes to sophisticated electronic sensors, pumps, valves and compressors in order to be able to - to be able to take part in these exciting changes here in Columbia.

So I'm going to for those of you who have not been to Columbia before, take a very quick walk through. We know we kept you waiting. So I want to make this as quick as possible so that everybody has the chance to speak and you have a chance to ask your questions.

So we'll walk through what it’s like to do business in Columbia and we'll spend a little time talking about the needs that Ecopetrol is going to have in the future. And (Ziamara), my colleague from Ex-Im Bank will tell you about the $1 billion commitment that Ex-Im made January 20 of this year to try and make it more attractive for you U.S. exporters to send your products to Columbia.

You’re looking at our first slide, which has three different scenarios form Columbia, and I think this helps sum up what it’s like here. It’s diversity. Columbia has a diverse climate, vegetation, (fara) - (farnet) rather and people.

I'm trying to go to the next slide.

Linda Abbruzzese: I got it Maggie.

Margaret Hanson-Muse: Okay. Thank you. For Columbia it has about 45 million people. It’s three times the size of Montana or twice the size of France. I'm a scuba diver so it excites me that in Columbia I'm able to go diving in places like San Andreas, Providencia and Santa Catalina Archipelago.

For those of you who've never been here, Delta, Continental and American Airlines runs frequent non-stop services from four gateway cities, Atlanta, Miami, Houston and Newark to Bogota, Medellin, Cali and Cartagena and Barranquilla.

Also during the time I've been here, Spirit Airways and Jet Blue have been granted routes if you want to take a lower cost no frills airline to get to Columbia.

Avianca, the national carrier, now has a direct flight from Washington, D.C. in a codeshare with Delta. And Spirit Airways will be initiating service to what’s called the coffer triangle from its Ft. Lauderdale hub.

The country as you can see has access to two oceans. And we really advise that you take a few Spanish classes before you travel because Spanish is the official language. Also think about printing your sales materials and ads in Spanish. Next slide please.

I put the BlackBerry in this slide because I want you guys to understand that Columbia is a modern society where your BlackBerrys will work. The country is experiencing an infrastructure boom. We have now opened the New J.W. Marriott here. There are now two Marriott hotels in Bogota alone. And Marriott has the intention of building seven more hotels in the next five years. Hyatt and Hilton are not far behind.

In terms of road infrastructure, we’re seeing basically the equivalent of the interstate system of the United States that was built during the Eisenhower administration being built and deployed here in Columbia in the next five years. We have also huge mass transportation projects in major cities under construction.

The country is also stepping up its efforts to produce oil and natural gas as well as minerals like coal, gold and emeralds. If you look at how the elections have been, this is the most stable democracy in the hemisphere after the United States, a very long tradition of elections. We recently had our election of the new President who will take office August the 7th along with his new team.

You've also seen that the peso is appreciated against the dollar without hyperinflation. What that means is because we don't have a free trade agreement, your products will be less expensive to your European and other competitors.

We can't beat out Chinese competition because they sell things very cheaply here. But at least people, if you sell on of quality basis, you'll have a bit of - an advantage over other suppliers. Next slide please.

One thing to keep in mind is Columbia has never defaulted on its debt payments. Many people worry about what they call shaky Latin American Government that this point they are not investment grade. We expect that to happen within the next 24 months.

They’re the strong - they’re the 5th largest market for U.S. products in Latin America. When I came here in 2007, they were 29th in terms of U.S. export. Now they’re 26th in terms of received U.S. exports in the world.

Good news for manufacturers; they use U.S. standards in water, electricity and obviously oil and gas engineering equipment. And they really do prefer U.S. products. We have lots of U.S. franchises here from McDonald's, Burger King, KFC. Everybody watched the World Cup via cable TV or Direct TV. You have DSL access via cable into your home. You do have some public wireless Internet but it’s usually limited to hotel lobbies. Next please.

With the exception of one year, the economy has grown steadily for the last 72 years. The global economic crisis had an impact on them but they didn't go negative like we did in the United States.

The other key fact to keep in mind, and this is another reason why we’re seeing such tremendous growth in the oil and gas industry, is what we call the Venezuela affect. The Venezuelans closed their border to trade the 4th quarter of last year and that has really negatively impacted Columbia’s GDP.

And about a week - this weekend or last Friday, Venezuela broke diplomatic relations with Columbia. We believe that things will be changing with the new administration. However, it does mean that even more emphasis is going to be placed on the Columbian oil and gas industry as it becomes even more difficult to do business with Columbia. Next slide please.

You'll see the tremendous growth here of Columbia. It’s an economic miracle having nearly tripled its exports and imports from 2000 up to 2009. We expect the 2010 growth rate to recover to a more reasonable percentage of 3 to 4% in terms of GDP growth. Next please.

Just so that people understand, I always like to put up this slide with just a reference to Pablo Escobar. Many people still don't realize he died in 1993 and really the U.S. Government working with the Columbian Government has made tremendous progress in terms of improving the security here in Columbia.

That’s one of the reasons why we’re seeing more and more multinational companies switch their headquarters from Caracas to Bogota. It’s a safer place to do business. You have more formal business practices and you have much, much improved security. The picture on the right is a picture of downtown Bogota at night. Next please.

I can't not make a presentation without dealing with the C word; in this case corruption. I can't say that it’s been totally eliminated from Columbia but compared to what it was like in 1990s, there’s a lot more transparency. People understand that bribery just doesn't work and once you start paying a bribe, you'll never be able to stop.

And with more and more companies like Ecopetrol listing themselves on the New York Stock Exchange, you have more supervision by the Department of Justice and the SEC. So you really do see that people are trying to clean up their act.

You’re seeing also that Columbia has gone from just being Juan Valdez, I export coffee, to diversifying it’s exports and to signing more free trade agreements. Their economy is becoming more and more open each day. They still have a ways to go and the U.S. Government through USAID works on these kinds of issues especially to open opportunities for small to medium sized companies. Next please.

These are you challenges. There are still at least four big social challenges and five big economic challenges. But the key strategy for U.S. export is to keep in mind is to offer trade financing to address the last issue. Many of your partners here may lack access to credit financing and therefore if you’re able to come in with your X in bank financing lined up, you will find a big open market.

You also need - if you've never done business here before, you also need to be aware that probably 60% of the economy of the businesses are informal and you'll run into a lot of red tape. But if you’re working with the commercial service, Delilah - my colleagues Delilah and Nya and our offices here, you will be able to overcome that red tape and join the thousands of U.S. companies that have been successful doing business here. Next please.

You'll see that we expect Columbia to grow 3 to 4%. Again, I already mentioned the Venezuelan border. That does - that will still continue to have an impact on trade. We’re - my biggest concern representing U.S. business interests here is the growing influence of China, India and Brazil.

And I know in the oil and gas industry especially since the disaster in the gulf, there will be more emphasis on high quality equipment, which is where I believe U.S. companies have a definite advantage and guarantees. This is something that China and India in their haste to sell things quickly, they sometimes skip on quality. So that is something to really hammer as you market your products here.

Columbia’s doing a lot more trading and investment with Peru. They've accepted UL standard. They are the largest Facebook user in Latin America. So if you think that there’s a way to market your product using social marketing, go right ahead because you'll find that there are communities on Facebook and LinkedIn.

And I already mentioned that the Ex-Im Bank granted a billion dollars to Ecopetrol to use to purchase U.S. products. Next please.

Just a quick run through of the FTA negotiations. Ours is still pending ratification in the U.S. Congress but Canada and the European Union have approved their FTA. And the question is when will they implement. Some say as soon as January 2011 for Canada, which will make life very difficult for us here especially if you’re a wheat farmer.

But we will see because we know that in Columbia law there’s still many hurdles and reforms that they have to undertake and implement before they will be able to respect the obligations they've signed up for. So we’re hopeful that the U.S. free trade agreement will be ratified by the U.S. Congress in the coming months. Next please.

Just in case you hadn't heard, since they’re - a lot of them are from Texas. Our three hostages were released two years ago. We actually had a huge 4th of July party to celebrate that on the 2nd of July this year. But in general, just - people always ask me what are the stats. Here are the stats.

Security just is not the issue that it used to be. And - but we do warn - we do advise people to use just common sense when you’re going into remote areas. Check with the Embassy. Check with the company that you’re working with to make sure you’re taking the right measures. Next please.

Now we just get into what the best prospects are for Columbia. We’re talking about oil and gas. So Linda, we can just go through these next slides fairly quickly. Next please.

We'll now start to talk about oil and gas. So I'm going to turn it over to Julio briefly to describe what’s going on in the oil and gas industry.

Julio Carbo: Thanks you Margaret. Well, Columbia is the 3rd largest exporter of crude oil in South America from Brazil and Venezuela. And the growth of the market is continuing at an even faster rate.

Columbia has reserves of 1.9 billion barrels and a production level of 671,000 barrels per day. But as of June 2010, the production rate increased to 757,000 barrels per day of which Ecopetrol, the largest Columbia oil company, the national oil company, is producing 550,000 barrels per day.

The ratio between research and production yields eight more years of production levels and consumption internally for fuels. So the country has embarked on a large exploration campaign in order to identify new reserves.

Natural gas reserves in 2009 reached 8.6 (tera) cubic feet of gas on the production level. And as of June of 1116 million cubic feet per day. And the reserve to production ratio is 22.8 years.

The (unintelligible) prospecting activity has reach 112 kilometers of (seismic 2D) equivalent. And (83) wells drilled since 2002 reached 443. This is a record number.

In addition, the contracting activities by the National Hydrocarbons Agency, that is the agency that administer the hydrocarbon research, has reached 346 contracts of which 266 are actual exploration and production contracts and the remainder at the so-called technical evolution assessment. Basically is developing additional studies, pre-processing seismic before actually committing to any drilling activity.

Right now the assigned area for exploration reach 21 million hectares of which 14 million is onshore and the remainder offshore both on the Caribbean and Pacific Ocean. The production areas are two million hectares.

Recently in June the National Hydrocarbons Agency awarded 80 blocks on their so-called Ronda Columbia is an option of 47 million hectares of 228 blocks in areas that had onshore in the Caribbean all the way to San Andreas Highland North of Panama and the Pacific Ocean, the whole (unintelligible) on a smaller mini blocks for smaller companies.

Margaret Hanson-Muse: Don't change the slide Linda. Just hold there please.

Julio Carbo: Ecopetrol changed the global and competitive industry as when President (Weben) enacted Decree 1716, 2003 that authorized the government to auction off 10% of the company and created the what is so-called (mace) economy but majorities are still owned by the government.

(Unintelligible) company like in America...

Margaret Hanson-Muse: Fourth largest.

Julio Carbo: ...the fourth largest and 17% production growth in 2009. It controls over 10,000 kilometers of transportation infrastructure and has an existing 330,000 barrels per day of refining capacity.

Ecopetrol has procurement needs of today near 2020 and they expect (unintelligible) of up to $80 billion and aims to produce one million barrels per day in 2015 and up 1.3 million barrels per day by 2020.

The projected investment for 2010 is 6.9 billion of which 68% goes to exploration, 4.5 billion and production investments on exploration of $951 million.

The current investment for this year for the refinery capacity is $1.3 billion. And the (product) aims to reach the refining capacity of 415,000 per day in 2013 in to projects; one in Cartagena; one in Barrancabermeja.

In addition, the company is streamlining their procurement process. It is not necessary for U.S. companies to register at this point of time. Basically if you search the Web site www.ecopetrol.com and look for (Provedores), the basically suppliers and look for the contracting alternatives, you will find a links for market intelligence, selection processes and previous contracting activities and so on.

I will provide you the information of these links at a later date. We have key contacts in Ecopetrol that specializes on a different area.

Margaret Hanson-Muse: All right. We'll return to the presentation please Linda.

Linda Abbruzzese: Okay. Stay on this slide?

Margaret Hanson-Muse: Okay. Okay. We have to - okay. Julio talked about the refinery project and we've listed what we think the equipment needs are going to be. Also keep in mind that Ecopetrol if you look at its logo, it’s an iguana and that stands for clean energy.

They’re looking to lean up diesel, get rid of (unintelligible) and do anything that makes sense in terms of providing more energy to people at a lower cost and on a clean basis.

So these are just some of the things that we came up with and Nya and Delilah have a study that Julio wrote that will enable you to go into more detail. All of the statistics that he read to you will be available as a handout. It'll be uploaded shortly. Okay. Next slide please.

This just talks about what Ex-Im is doing with Ecopetrol here. In Columbia Ex-Im is also interested in working on the Bogota airport renovation. And I'm not going to say anything more because this is really (Ziamara)’s area. Next please. You can keep going. These are just the other best prospects. Next please. Next please.

We talked a bit about the refinery modernization but since a lot of people in oil and gas have some sort of tangential relationship with ports and other infrastructure projects, we want you to know that there’s three ports that are undergoing a big renovation. We already told you a little bit about the super highway that’s being built.

Columbia’s planning to launch a satellite. And besides the Bogota, there’s another package of airports that are going to be privatized and concessions in the next year. Next please. This just tells you the trade shows that we’re doing in 2010 that don't really relate to you. Next please.

In 2011 we'll be coming back again to the offshore technology conference. I don't know those of you who were there. But Columbia had a lunch for 350 people. It was the largest one in the history of the conference. And therefore there’s a lot of excitement about our little country. Next please.

Just so that you know, we do run trade missions to Columbia. The one we’re targeting to invite you to is the one that we’re running in conjunction with the certified trade show November 2 through 5 of this year. You'll come to Bogota for a day and then go to Cartagena for four days. Delilah and Nya will tell you more about that. Next please.

Now if you've never done business in Columbia, these are things that you absolutely must do. If you have - would like to work with us to find your local partner, work through Nya and Delilah and they'll hook you up.

If you’re already found a local partner, talk to us directly so that we can do a background check in order to make sure they’re not a bad person because you can't use the excuse I didn't know with the Department of Justice. They want to make sure that you’re not doing business with a known narco trafficker or a known terrorist.

Frankly this applies to Israel. It applies to Saudi Arabia. It applies to countries in Africa. It applies to China. It applies to Hong Kong. Wherever you go, you absolutely must do a thorough background check before you sign a contract for somebody to represent your company. It’s very, very important.

Also I caution you to include arbitration clauses in your contract with distributors in case you need a less expensive ways in the court system to get out of a problem.

And in terms of security, you just use situational awareness. It’s like being in Los Angeles, Houston or New York City. You just have to be on the lookout wherever you are and stay in touch with the (undis) if you think you need more support. Next please.

Well, that concludes our presentation. And I turn it back over now to Linda to continue on with the next part of the presentation. Thank you so much for your attention. We will be here listening and available to answer your questions.

Linda Abbruzzese: Okay. Great. I think we have a representative from Export-Import Bank who would also like to explain a little bit about her experience. Her name is (Ziamara Kresh) of Export-Import Bank. And let’s try to get the slides here for her.

(Ziamara Kresh): Thank you Linda and Maggie for such a great presentation as well as Julio. I think with the background given on doing business in Columbia, you have a great opportunity to learn a little bit more about the opportunities and why Ex-Im Bank has selected Columbia as the market of interest.

For those of you that are not familiar - oh, Linda.

Linda Abbruzzese: Yeah.

(Ziamara Kresh): Okay. Perfect. Thank you. For those of you that are not familiar with Ex-Im Bank, the Export-Import Bank is the official - hold on. I'm sorry about that. We have an interruption. A party just walk into my office.

So we are the official export agency of the United States. We are completely independent. And our mission is to support you - to support you as experts in markets where either there is a sense of potential risk be it commercial, political. We cover both sectors.

Since 1934 when we were created, we have supported more than 400 billions in transactions. It is important to note that we were created in 1934 immediately after the great depression and with the purpose of supporting and creating more U.S. jobs.

I'm not saying we’re in a depression but we certainly are going through difficult times and we have seen a tremendous amount of request from the banking community on Ex-Im Bank transactions. What we...

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