Regulatory changes in Colombia are bound to add fuel to the hot remittance business among local banks. That appears to be piquing the interest of players familiar with the securitization of e-money transfers in the cross-border market, an asset class that Brazilian banks have been tapping for some time. But in the case of Colombia, factors other than growing volumes will have to fall in place before banks venture into the dollar market.

Last month, regulators allowed Colombians residing abroad to open bank accounts inside the country. In addition, according to the local press, the government passed a tax reform that eliminated some charges on remittances, a change that has already been implemented by BanColombia, a leading institution. Combined, those changes are projected to speed up growth in an already burgeoning industry.

The Inter-American Develop- ment Bank estimates that remittance flows into the country reached US$2.4 billion in 2002. A few forecasts have the figure exceeding US$3 billion for last year. With the new rules, this growth of at least 25% will only accelerate.

Even before the changes, bankers had checked out the industry. "There are two banks that are fantastic candidates: BanColombia and Banco de Bogota," said one banker. A Bogota-based analyst cited BanCafe, BBVA Banco Ganadero and Banco de Occidente as other major banks.

But, even if remittances take off, the barriers to their entry will not suddenly vanish, sources said. Colombian banks are often cash-rich and would need exceptionally low rates to be lured abroad. And while no one will say so on the record, many investors and analysts avoid traveling to Colombia because of the perceived security risk.

On the other hand, U.S. players may have a new incentive to head down there - scarcity. The Latin American pipeline, players said, is thinning out and investors will soon crave new product.

Copyright 2004 Thomson Media Inc. All Rights Reserved.

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