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By Nelson Bocanegra and Helen Murphy
December 16, 2011 2:14 PM EST
While the financial sectors of some developed nations are in turmoil, Colombia's may be entering its heyday, attracting big-name foreign banks while robust local players try their hand at expanding across Latin America.
Colombia is emerging from almost a half-century of war and foreign investors are flooding its financial sector to tap into its newly won stability, growing banking clientele and increasing consumer spending.
"Latin America is the best place to confront the global crisis. It has its fiscal accounts in order, has cash and survived its own crisis a decade ago," said Julian Marquez, an economist with Interbolsa, Colombia's biggest brokerage.
"But Colombia has the upside. The weighting used to be all about fear of the war. Now, it's all about the upside in the economy."
While the United States and many European countries struggle to shore up their fiscal accounts, Colombia's financial management and security advances were rewarded this year with a coveted investment grade.
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That investment rating was lost a decade ago after a financial crisis that shuttered banks and left many Colombians laden with debt. The higher rating comes on the heels of crushing blows against rebels that triggered a wave of foreign investment, direct and portfolio.
Colombia is now following Peru's lead, which drew in billions of dollars into its banking sector after defeating the Shining Path rebels at the end of the 1990s.
The economic boom is also enabling Colombia to flex its muscles abroad, an advance perhaps best illustrated by last year's $1.9 billion (1.2 billion pounds) purchase by Banco de Bogota
For decades, foreign investors treated Colombia as a pariah because Marxist guerrillas and paramilitaries kidnapped business leaders for ransom.
Increased stability has helped bring in about $13 billion in foreign investment this year, with more than $1 billion to the financial sector.
One major player waiting to enter is Banco do Brasil
"Over the next five to 10 years, we are going to see big ones coming in, the big banks," said Marquez.
Drawn by Colombia's low banking penetration, foreign financial entities hope to attract new clients to open accounts. Millions of poor Colombians are turned off by hefty transaction fees, preferring to keep their cash under the mattress, or they live in remote areas where there are few banks.
Just 44 percent of Colombians participate in the banking system, compared with the Latin American average of 51 percent, according to the Andean Development Corporation. Even so, banking has grown enormously since Colombia's financial crisis in 1999, with assets soaring more than 470 percent.
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