According to Santos, Scotia’s arrival in Colombia could be directly traced to a series of decisions the President himself engineered starting in 2003. That was the year, he recalled, when, as finance minister, he was obliged to bail out many of the then-bankrupt Colombian banks at a total cost of at least 5% of GDP. “We rescued the banking sector,” he explained, “and now we’re harvesting what we planted. What we did 10 years ago is being realized in investments like the one being made today.”
Then there was the matter of security. The containment of guerrilla groups has spurred remarkable economic growth and foreign investment, the President narrated. This, he explained, has become especially important in fostering the mining boom that Santos describes as the “economic locomotive” that will drive Colombia’s growth. “Last year we broke all the records,” Santos said with a grin.
Getting Canada’s most international bank into Colombia was also part of the plan, according to Santos. The deal with Colpatria, he explained, represented the fullest flourishing of Colombia’s 2011 free trade agreement with Canada, a project in which he’d invested substantial time and effort, including a trip to Canada in 2010, and a reciprocal stint hosting Prime Minister Stephen Harper last year. “What is the meaning of Scotiabank coming here?” Santos asked in full rhetorical flight at the culmination of his speech: “More efficiency in the financial sector. The economy will work better. More productivity and more investment. The race is on for jobs. We’ve finally broken the negative historical trends.”
It was 10 in the morning and the speechifying had started at dawn. But the President was now signing the deal. Waugh finally had what he’d been waiting for: Today, for just over $1 billion in cash and stock, Scotia was taking a 51% stake in Colpatria, which is Colombia’s second-largest credit-card provider and a major retail bank with 4,000 employees and 175 branches. With a 20% return on equity, Colpatria was Colombia’s second-most profitable bank in 2010. Given Scotia’s deep experience in oil and gas and mining, sectors now booming in Colombia in large part thanks to Canadian investments, Colpatria’s resource-sector connections via Gran Colombia and Mineros will likely be useful; wealth management and insurance also seemed promising to Waugh.
But the real attraction, Waugh believes, is Colpatria’s capacity to expand retail banking among working people spending their way up the consumer chain, starting with purchases as small as toasters and leading to car loans and home mortgages—banking the unbanked, in other words. In Colombia, where only about 30% of people have bank accounts, and total loans across the banking system grew 16.4% in 2010, there is plenty of room to grow. “That’s going to be our main thrust,” Waugh asserts. The explosive popularity of cellular and now smartphones in Colombia, where RIM’s BlackBerry products hold an impressive market lead, confirms that as poverty lifts for millions of people, they embrace consumer contracts, says Santiago Perdomo, Colpatria’s president. For proof, he points to a partnership between his bank and a Bogota electrical utility in which consumers repay bank loans (many of which are made in bank locations strategically placed inside giant retail outlets) through their electrical bills. In a country where only 40% of jobs are formally registered, this program helps the bank develop relationships with huge numbers of self-employed and unofficially employed people. “This is how you reach out to people in the informal sector,” Perdomo explains.
For Scotia, the push into Colombia is just the latest step in a series of gambits that have given the bank a high-profile presence on the Latin American financial industry’s increasingly complex and competitive chessboard. Starting in the 1990s, Scotia has been massaging its disparate collection of pawns and minor pieces—the legacy of its 19th-century roots servicing maritime traffic between Nova Scotia, the Caribbean and Central America—into an increasingly coherent set of major pieces in major nations. In Mexico, Scotia operates 711 branches and has been among the national leaders in auto financing and mortgages since the 1990s. That distinction, alongside Scotia’s Canadian and stateside business, allows the bank to describe itself as the leading provider of business banking and investment services across the NAFTA region, and “unmatched in terms of our North American banking platform.”