Colombia

and the largest gas and oil company is South America:

TABLE OF CONTENTS
1. COLOMBIA ………………………………………………………….………………………3
HISTORY……………………………………………………..…………………………..3
POLITICS…………………………………………………..……………………………..3
FOREIGN RELATIONS…………………………………………………….……………5
FOREIGN RELATIONS WITH THE U.S………………………………………..………6
FOREIGN POLICY DECISION MAKING………………………………………………7
DEMOGRAPHICS……………………………………………………………..…………8
RELIGION…………………………………………………….…………………………..9
HEALTH………………………………………..………………………………………..10
INFRASTRUCTURE……………………………………………………………………10
ECONOMY……………………………………….………………………….……… …11
2. ECOPETROL S.A. COMPANY OVERVIEW…………………………….…………… …12
BACKGROUND………………………………………………………………… ……..12
ORGANIZATIONAL STRUCTURE……………………………………..…… ………12
MERGERS AND AQUITITIONS………………………………………………………14
COMPETITORS……………………………………………………….……… ………..14
FINANCIAL ANALYSIS…………………………………………………….. ………..15
RIVALRY COMPARISON…………………………………………………… ……….16
FUTURE GOALS…………………………………………………………..… ………..17

3. CAPITAL MARKET OVERVIEW…………………………………………………………18
INFLATION …………………………………………..………………….……………..18
CURRENT RISK……………………………………………………….………………..18
FINANCIAL CRISIS……………………………………………………..……………..19
INVESTMENT RECOMMENDATION………………………………..………………19

4. CONCLUSION…………………………………………………….…….…………………..20
5. BIBLIOGRAPHY…………………………………………..………………………………..21

COLOMBIA
HISTORY
During the pre-Colombian period, the area now known as Colombia was inhabited by indigenous societies ranging from hunters and nomadic farmers to the highly structured economy of the Chibchas, who are considered to have been one of the most developed indigenous groups in South America.

Santa Marta, the first permanent Spanish settlement, was founded in 1525. The city of Santa Fe de Bogota was founded in 1538 and, in 1717, became the capital of the Viceroyalty of New Granada, which included what are now Colombia, Venezuela, Ecuador, and Panama. Bogota was one of three principal administrative centers of the Spanish possessions in the New World.

On July 20, 1810, the citizens of Bogota created the first representative council to defy Spanish authority. Full independence was proclaimed in 1813, and in 1819 the Republic of Greater Colombia was formed to include all the territory of the former Viceroyalty of New Granada. Simon Bolivar was elected its first president with Francisco de Paula Santander as vice president. Conflicts between followers of Bolivar and Santander led to the formation of two main political parties, Liberal and Conservative. Bolivar's supporters, who formed the center of the Conservative Party, sought strong centralized government, alliance with the Roman Catholic Church, and a limited suffrage. Santander's followers, forerunners of the Liberals, wanted a decentralized government, state control over education and other civil matters, and broader voting rights.

Throughout the 19th and early 20th centuries, each party held the presidency for roughly equal periods of time. Colombia maintained a tradition of civilian government and regular, free elections. Notwithstanding the country's commitment to democratic institutions, Colombia's history has been characterized by widespread and violent conflict. Two civil wars resulted from bitter rivalry between the Conservative and Liberal parties: The War of a Thousand Days (1899-1903), which resulted in an estimated 100,000 deaths, and La Violencia (1946-1957), which resulted in about 300,000 deaths.

POLITICS
Several features distinguish Colombia's political system from that of other Latin American nations. Colombia has a long history of party politics, usually fair and regular elections, and respect for political and civil rights. Two traditional parties, the Liberals and the Conservatives, have competed for power since the mid-nineteenth century and have rotated frequently as the governing party. Colombia's armed forces have seized power on only three occasions, far less often than in most Latin American countries. The 1953 coup took place, moreover, only after the two parties supported military intervention. Colombia's conservative Roman Catholic Church traditionally has been more influential than the military in electing presidents and influencing elections and the political socialization of Colombians.

Some analysts of Colombian political affairs have noted that in the 1980s the military gradually began to assume a larger decision-making role, owing to the inability of the civilian governments to resolve critical situations, such as the sixty-one-day terrorist occupation of the Dominican Republic embassy in 1980. The military had become somewhat more assertive in national security decision making as a result of the growing and more unified guerrilla insurgency and increasing terrorism of drug traffickers Nevertheless, Colombia's long tradition of military subordination to civilian authority did not appear to be in jeopardy in late 1988. When military leaders attempted to challenge civilian authority on several occasions in the 1970s and 1980s, the incumbent president dismissed them.

A contradictory feature of Colombia's long democratic tradition is its high level of political violence. According to Colombian Ministry of National Defense statistics, an additional 70,000 people had died in other political violence, mainly guerrilla insurgencies, by August 1984. This violence included left-wing insurgency and terrorism, right-wing paramilitary activity, and narco-terrorism. For most of the forty year period following the 1948 Bogotazo, the riot following the assassination of Jorge Eliecer Gaitan, Colombia lived under a constitutionally authorized state of siege invoked to deal with civil disturbances, insurgency, and terrorism. In mid-1988 many Colombian academics who studied killings by drug smugglers, guerrillas, death squads, and common criminals believed that the government was losing control over the country's rampaging violence. They noted that even if the guerrillas laid down their arms, violence by narcotics traffickers, death squads, and common criminals would continue unabated. Scholars have attributed the nation's violent legacy in part to the elitist nature of the political system. The members of this traditional elite group have competed bitterly, and sometimes violently, for control of the government through the Liberal Party and the Conservative Party, which changed its name to the Social Conservative Party in July 1987. These parties cooperated with each other only when the position of the upper class seemed threatened. Unlike their counterparts in other Latin American countries, Colombia's Christian democratic, social democratic, and Marxist parties were always weak and insignificant. Constitutional amendments and the evolution of Colombia's political culture reinforced its highly centralized and elitist governmental system. The elites managed to retain control over the political system by co-opting representatives of the middle class, labor, and the peasantry. A number of Colombians also contended that the traditional parties had impeded modernization. The fact that the guerrilla movement was still strong in the late 1980s, after four decades of "armed struggle," manifested to some scholars the elitist nature of Colombian politics. For Bruce Michael Bagley, the guerrilla insurgency was only the most visible "dimension of a far deeper problem confronting the Colombian political system: the progressive erosion of the regime's legitimacy" as a result of its failure "to institutionalize mechanisms of political participation." Bagley also saw the legitimacy problem reflected in rising levels of voter abstention and mass political apathy and cynicism, as well as declining rates of voter identification with either of the traditional parties and the emergence of an urban swing vote. This view notwithstanding, since the mid-1960s the elites dominating the two-party system usually have accommodated gradual change in order to preserve stability. For example, Colombia took a major step toward breaking with its elitist political tradition and modernizing the country's political structures by holding its first direct, popular elections for mayors in early 1988. Although some political accommodation had occurred, the Colombian government has been less successful in reducing economic inequality. During the 1980s, approximately 20 percent of the population controlled 70 percent of income. Rural poverty was particularly pronounced, with per capita income barely reaching half the national average. Analysts generally believed that these economic factors helped spawn political violence.

FOREIGN RELATIONS
For much of the nation's history, Colombians focused more consistently on domestic issues and political personalities than on world affairs. In the nineteenth century, Colombia limited its involvement in foreign affairs to sporadic border disputes with immediate neighbors (Venezuela, Panama, Peru, and Brazil). Colombia and Venezuela began disputing boundaries after the breakup of Gran Colombia (Colombia, Venezuela, and Ecuador) in 1830. This territorial issue continued to cause friction between the two nations into the twentieth century. During the first two decades of the twentieth century, the secession of Panama from Colombia in 1903 was a major source of friction in Colombia-United States relations. Colombia's boundary with Peru was settled initially in 1922, but problems developed again in 1932 when Peru seized an area around Leticia in the Amazon Basin that both nations claimed. A League of Nations commission resolved the conflict in 1934, however, by suggesting a resolution that returned the disputed area to Colombia. Brazil and Colombia reached agreement on a border dispute in 1928.

Colombia broadened its foreign policy after World War II, becoming active among the Latin American states and small powers in general. It was an important participant in the 1945 San Francisco Conference creating the United Nations (UN) and was a leading opponent of the big-power veto in the Security Council. Colombia argued successfully for a primary role for regional organizations, whose recognition was secured under Article 51 of the UN Charter. Colombia also played an important role in creating the Organization of American States (OAS) in Bogota in 1948. Former Colombian president Lleras Camargo was the OAS's first secretary general.

Nevertheless, even in the post-World War II era, Colombia continued to view foreign policy within a limited context. Whenever Colombia initiated international actions, they were usually meant to complement more important national goals and were seen as extensions of domestic policy. After World War II, Colombia's foreign policy emphasized economic relations and support for collective security through the OAS and the UN. Accordingly, Colombia pursued only limited objectives in bilateral international security and global politics, usually preferring multilateral diplomatic approaches. Colombia's approach to security issues has been characterized by a willingness to settle disputes peacefully through recourse to international law and regional and international security organizations.

FOREIGN RELATIONS WITH THE U.S.
Although Colombia and the United States had cordial and friendly relations during the nineteenth century, relations were strained during the first two decades of the twentieth century as a result of the involvement of President Theodore Roosevelt's administration in the Panama revolt. Despite the diplomatic strain, economic ties with the United States were of great importance to Colombia even in the early twentieth century. The United States was the major market for Colombia's leading export and source of revenue: coffee.

In the early 1920s, Colombian president Marco Fidel Suarez advocated a doctrine called Res Pice Polum, which linked Colombia's destiny to that of the "North Star," the United States, through geography, trade, and democracy. Colombia's powerful coffee exporters were particularly fond of the doctrine. Enrique Olaya Herrera, Colombia's first Liberal president of the century reaffirmed the Northern Star doctrine, but Colombia did not fully embrace it until the nation enthusiastically received United States president Franklin D. Roosevelt's Good Neighbor Policy.

A United States agreement to provide a military training mission and a 1940 bilateral trade agreement strengthened pre-World War II relations between Bogota and Washington. Colombia's position as a close ally of the United States became evident during World War II. Although Bogota's commitment to the Allied cause did not entail the sending of troops, Colombia's strategic position near the Caribbean and the Panama Canal and its pro-United States stance within the region were helpful to the Allied nations.

Colombia's relations with the United States were somewhat strained during the late 1940s and throughout most of the 1950s because of the pro-Catholic Conservative government's persecution of the nation's few Protestants, who were also PL members, during the early years of La Violencia and the dangers posed by the internal disorders to United States nationals living in Colombia. Nevertheless, Colombia's partnership with the United States prompted it to contribute troops to the UN Peacekeeping Force in the Korean War (1950-53). Colombia also provided the only Latin American troops to the UN Emergency Force in the Suez conflict (1956-58).

Colombia became one of the largest recipients of United States assistance in Latin America during the 1960s and early 1970s. Much of the United States aid was designed to enable Colombia to ease its external balance of payments problems while increasing its internal economic development through industrialization, as well as agrarian and social reforms. Nonetheless, Colombia failed to implement significant reforms. By the late 1960s and early 1970s, many Colombian policy makers had become disenchanted with the Alliance for Progress--a program, conceived during the administration of President John F. Kennedy, that called for extensive United States financial assistance to Latin America as well as Latin American support for social change measures, such as agrarian reform--and with United States economic assistance in general. Many felt that Colombia's economic dependence on the United States had only increased. By 1975, however, the United States was purchasing only 28 percent of Colombia's exports, as compared with 40 to 65 percent during the 1960s. In 1985 the United States accounted for 33 percent of Colombian exports and 35 percent of Colombian imports.

Although Colombia voted fairly consistently with the United States in international security forums, such as the UN General Assembly and Security Council, its willingness to follow the lead of the United States within the inter-American system had become less pronounced by the mid-1970s. In 1975 President Lopez Michelsen resumed diplomatic relations with Cuba. He also refused further American economic assistance to Colombia and terminated funding from the United States Agency for International Development, complaining that his nation's unhealthy economic dependency resulted from foreign aid. Other indicators of Lopez Michelsen's independent stance included his refusal to condemn Cuban intervention in the Angolan civil war, his willingness to recognize the new Marxist government in Angola, and his support for Panama in its desire to negotiate a new canal treaty with the United States.

FOREIGN POLICY DECISION MAKING
Under Colombia's Constitution, the president and the rest of the executive branch of government have almost exclusive jurisdictional responsibility for the conduct of foreign relations. The president--charged with formulating and executing foreign policy--clearly was the single most important player in the late 1980s. Despite the existence of committees on foreign relations in both houses, Congress had little role in making foreign policy.

Colombia's foreign policy has shifted frequently as a result of the president's key role and the fact that the nation's presidents have changed every four years. The president appoints and removes cabinet members, chooses diplomats to represent Colombia, and receives foreign diplomats and other representatives. In his responsibility "to direct diplomatic and commercial relations," the president also concludes treaties and conventions with other states, subject to the approval of Congress. The Senate must approve declarations of war made by the president, who controls and directs the armed forces, but he could wage a war without the consent of the Senate if it were urgent to repel a foreign invasion.

The primary agency charged with conducting foreign relations under the president's direction was the Ministry of Foreign Affairs. Within the Foreign Service, two positions were almost as important as that of the minister because of their prestige and value in furthering a political career. One was that of ambassador to the United States, a post considered to be one of the stepping stones to the presidency. Presidents Lopez Michelsen, Turbay, and Barco all served as ambassadors to the United States. The other was that of ambassador to the Holy See. The role of the Roman Catholic Church in the life of the nation meant that this ambassador occupied a position of particular prestige and some importance.

The Ministry of Foreign Affairs did not have exclusive responsibility for carrying out Colombia's foreign policies, however. Beginning in the 1960s, foreign policy also was influenced and developed by the Ministry of Economic Development, the Ministry of Finance, a variety of semiautonomous government agencies, and economic interest groups. Of the latter, the most important probably was Fedecafe, which maintained its own representatives in various foreign countries to manage Colombia's coffee exports for the government.

The Colombian military also played a key role in determining the nation's foreign policies in incidents involving border disputes or foreign support of domestic subversive groups. For example, the military pressed the Turbay government into suspending diplomatic relations with Cuba in 1981 after Cuba admitted its involvement in an M-19 guerrilla operation in southern Colombia. In 1983, days before President Betancur was to issue an official invitation to Castro to visit Colombia, General Gustavo Matamoros, the Colombian minister of national defense, declared that restoration of diplomatic relations with Cuba was a "moral impossibility." Having already defied the military with his peace overtures to, and general amnesty for, the guerrilla groups, Betancur subsequently dropped his plans for rapprochement with Cuba.
DEMOGRAPHICS
In Latin America, Colombia is the third highest populous country after Mexico and Brazil. It has approximately 45 million people. Columbia had a massive population growth even though it experienced urban violence, poverty rates and four decades of civil war. All these difficult circumstances drove millions of Columbians out of their homes in Columbia. In the 2000's, Colombia experienced a huge rebound in economy that reformed the living standards mostly for the people in urban areas. Today Colombia’s population is approximately 46 million people. Most of the Colombian population is concentrated in the “Andean highlands and the Caribbean coast”. Approximately 54 percent of Colombia consists of nine eastern lowland areas that have populations of 3 percent or less. Because of the huge rural society movement to urban areas, Colombia is considered one of the most urbanized countries in Latin America. The areas of urban population increased from 31 percent in 1938, to 60 percent in 1975. In 2005 the numbers increased to 72.7 percent.
Columbia has the third largest number of Spanish speakers in the world. In the “Ethnologue database” 101 languages are listed as Colombian. It is very difficult to specify the exact number of languages spoken in Colombia since what some people might consider a different language another might consider a dialect of the same language. The Spanish, German, Portuguese and Italian cover around 37 percent. The African ancestry is covering approximately 10.6 percent of the population. Colombia has 500,000 indigenous language speakers. In San Andres and some other providences of Colombia, the English language has an official status.
Colombia is created from many different races and ethnicities. Mestizo, Amerindian ancestry and mixed European create about 49 percent of the Columbian population. The Indigenous Amerindians consist of 3.4 percent. There are also other ethnic groups living in Colombia such as; South Asian (East Indians), Chinese Roma or also Gypsies that came from Eastern Europe, but also Arabs which are from the same groups as whites (Lebanese, Palestinians and Syrians).
Colombia is home to numerous numbers of indigenous people. Great numbers of them were captivated into the “mestizo” population and the remaining part represents about eighty-five different cultures. The “Wayuu” creates the largest indigenous group of people in Colombia. In 1982 the first National Indigenous Congress was created. This is an organization representing the indigenous peoples living in Colombia. In 1991 their own language was created which is today official in their territories.

RELIGION
Various studies show that 95 percent of Colombian populations consider themselves as Christians. A vast majority of them are Roman Catholic and about 1 percent believers of indigenous religion. Less than one percent of the population consider themselves part of Judaism, Buddhism, Hinduism and Islam religions. Studies showed that about sixty percent of Catholics don’t practice their religious faith on a daily basis. In Colombia there is a constant increase of converts from Catholicism to Protestantism. The Protestants create about thirteen percent of the population. Even though Colombia mostly consists of Roman Catholics, there is a guarantee of freedom, equality and religion created by the Colombian constitution. Colombia created an open door for a very large diversity of beliefs that contains activity of atheists who formed the “first World Congress of atheists in Bogota”.
HEALTH
In 1980 health standards in Colombia were strongly improved. In 2005 the expectancy at birth were around seventy three percent. Around 9.2 percent of the adult population did not reach age of 40. There was a slight difference in population of a younger age, 2.1 percent did not live until the age of five. In 2012 the expectancy of life increased to seventy five percent. In 1993 the public health system was transformed by switching the source of funding from providers to consumers. Consequently employees are now responsible for paying into theirown health insurance costs which were previously covered entirely by their employers. This change has resulted in more of the population being covered however the poor are still suffering from high mortality rates due to being unable to afford the insurance.
INFRASTRUCTURE
National Roads Institute (INVIAS) and Ministry of transport and entities are major regulators of the Highways in Colombia. This includes the Pan-American Highway, which connects the country to Venezuela and Ecuador. Responsibility for airports and civil aviation belongs to the Aerocivil. Predictions say that in 2014 there will be 2.279 kilometers of detached expressways in Colombia. Transport systems of the urban areas are developed in Medellin and Bogota. Traffic in Bogota is infuriated by the lack of rail transport. Bogota’s transportation system consists of minibus and bus services that are controlled by both public and private sectors. In 1995 there was a creation of street railways that is also called the “Metro de Medellin”. This railway connects a huge part of areas in Medellin Metropolitam. In 2004 there was creation of a high cable car system that made a connection between the poor neighborhoods of Metro Medellin and Medellin Mountain. In Medellin there was also creation of articulated buses that are called “Metroplus”. The Barranquilla transportation began its operations in 2007 as well as bus rapid transit Transmetro. There was transport created in all other cities such as; megabus in Pereirea; metrolinea in Bucaramanga and massice transcaribe in Cartagena. Development of the “articulated buses” and modern cable cars that started their operations in 2013 modernized cities such as Cali completely. The Colombian airport system consists of 1,101 airfields and airports owned by public and private sectors as well. The central air terminal is the “El Dorado International Airport of Bogota”, it serves approximately twenty million passengers a year. The City of Bogota is working on projects of getting a new international aerodrome, Aerocafe, Airport Café.
ECONOMY
Colombia’s market economy was expending even after dangerous armed conflicts. The economy of Colombia was growing strongly in the late part of the 20th century. Its gross domestic product raised about four percent per year from 1970 till 1998. In 1999 Columbia experienced a recession from which the recovery was long and devastating. There was a tremendous growth change in 2007 that reached a growth of 8.2 percent that was the fastest growth in Latin America. In 2012, the “International Monetary Fund” showed that the Gross Domestic Product of Colombia climbed to $500 billion, putting them in the 28th place in the world. Almost 38 percent of the Gross Domestic Product represents Government spending. Of this, a quarter is distributed to handling the government's debt, estimated at 52.8 percent of GDP in 2007. There are various problem that the economy faces such as; unemployment, uncertain foreign and domestic demand and financing of the pension system. In 2012 the inflation rate was 2.44%, which was comparably lower than the last years.

By the end of the 20th century, 18.7% of the population was employed in industry; 22.7% was working in agriculture that represented 11.5% of GDP; another 58.5% worked in services that is about 36% of GDP. Colombia is very wealthy with natural resources. Its exports consist of coffee, petroleum, gold, coal, industrial chemicals, agricultural products, ferro-alloys, plastic and textiles. Colombia is a dominant source of emeralds for the world. Colombia imports seventy percent of the cut flowers to the United States. Major trading partners are the European Union, China, United States and Venezuela. This level of exportation had resulted in the re-evaluation of the value of a peso due to the record levels.
In recent years the leading factor of the Colombian economy is industrial activities. There was a tremendous growth in manufacturing production. It grew from $29,240 million to $80,000 million in 2010. Another production growth was in high and medium tech products. They grew in their exports from $2,252 million to $4,868 in 2010. High and medium tech production creates about thirty five percent of industrial exports of Colombia. Due to good economic liquidity, credit growth and positive economic performance, the financial sector in the last few years has grown positively. COMPANY OVERVIEW
BACKGROUND
Ecopetrol S.A., formerly known as Empresa Columbiana de Petroleos, which roots go back to the beginning of 1950’s, started off solely under state ownership to fulfill needs of the imported substitutes. Throughout the years, following state laws of natural recourse extraction and via ambitious acquisitions, Ecopetrol S.A. growth to become an internationally known gas and oil extracting company. It has not only grown to be one of the 40 largest companies in the world but also one of the four main petroleum companies in Latin America competing in the gas and oil integrated industry in 2009 and number one in 2012. Ecopetrol grown dramatically between the years of 200-2006 mainly as a result of a large oil discoveries. Although those discoveries were large for Columbia there were moderate in terms of the overall oil industry. Nevertheless, new oil fields findings ensured Ecopetrol to established its position within the Latin America oil industry and become recognizable worldwide. Company operates in Colombia Brazil, Peru and the U.S. Gulf of Mexico. It exports oil to South and North America, Africa and west parts of Europe with the great expectations to also include export to Asia.
ORGANIZATIONAL STRUCTURE
As a monopolistic company Ecopetrol S.A. faced many difficulties. Especially since the company was also involved in the administering of the oil policy. Not only was the company in need to make a drastic changes to its organization structure to ensure the livelihood of its employees being under the total management of union but also to sustain profitable in the providing the energy. Due to the political instability of the country rebellious groups were formed. In an indirect way the political status of the country influenced the need of change for the company. Rebels organized holdups and robbery of the oil transportation. In 2003 under the pressure of the administrative goal of the Isaac Yanovich's (then president of the Ecopetrol) a reform was written and Ecopetrol S.A. become limited company. For the next few years Ecopetrol S.A. worked on its regime within the company and its management techniques to finally be ready to the new era of internationalization.
In 2007 Ecopetrol S.A. decided it was time for generating additional resources to finance expedition for new oil field findings and extraction. The initial public stock offering was directed to Colombian citizens only, however later trading at the NYSE under the EC ticker allowed the company to attract international investors. Currently Ecopetrol is the largest Colombian company in 89% owned by the state. Below is the ownership composition of Ecopetrol S.A. as of the years 2011-2012. Being a large globalized company Ecopetrol S.A. has adopted divisional organization structure. It allows company to be sufficient within each of its segments. The segments that the company is divided into include exploration and production, transportation and logistics, refining and petrochemicals and marketing and supply. Although each of the segments act as an individual company, maintains their own means to operate on daily bases and their own management to make the necessary decisions, for unusual investments the parent company has to provide the recourses. Divisional organization structure allows company to adjust its operating accordingly to the situation and so to create the procedures that are efficient for the segment. Especially in the globalized company it is necessary to acknowledge different needs of the regions.
Ownership composition of Ecopetrol S.A. December 2011 Dec 2012 Share No. of shares Share No. of shares
Nation 88.49% 36,384,788,817 88.49% 36,384,788,817
Pension Funds 4.09% 1,682,894,076 4.15% 1,707,325,546
Natural Persons 4.24% 1,742,141,391 3.56% 1,465,210,044
Funds and foreign companies 0.40% 164,479,609 0.74% 303,942,722
Legal Entities 1.36% 559,312,923 1.63% 671,837,367
Ecopetrol Fund ADR Program 1.42% 583,081,640 1.42% 583,593,960
Total 100% 41,116,698,456 100% 41,116,698,456

Ownership composition of Ecopetrol S.A. December 2011 Dec 2012 Share No. of shares Share No. of shares
Nation 88.49% 36,384,788,817 88.49% 36,384,788,817
Pension Funds 4.09% 1,682,894,076 4.15% 1,707,325,546
Natural Persons 4.24% 1,742,141,391 3.56% 1,465,210,044
Funds and foreign companies 0.40% 164,479,609 0.74% 303,942,722
Legal Entities 1.36% 559,312,923 1.63% 671,837,367
Ecopetrol Fund ADR Program 1.42% 583,081,640 1.42% 583,593,960
Total 100% 41,116,698,456 100% 41,116,698,456

Ecopetrol S.A., is an integrated gas and oil company. The Company has divided its operation into four business segments that include exploration and production, transportation and logistics, refining and petrochemicals and marketing and supply. In this way company is fully self-sustainable in operating along the life cycle of oil and gas production.
MERGERS AND ACQUISITIONS
Through the acquisitions Ecopetrol S.A. has obtained the buildings owned by the competitor BP in Colombia. In order to follow through the purchase company needed to partner up with Canadian gas and oil company, Talisman Energy.
Continuously, company is searching for the new exploration areas within Colombia to prevent international companies to enter its home land. It also partners up with neighboring companies to explore for gas and oil. Its biggest competitor PetroBras and Ecopetrol partnered up in hope of exploring and extradition of gas and oil onshore of Peru.
The most recent purchase Ecopetrol completed in April of 2013 with Anadarko Petroleum Corporation where it attributed 15% of the stake in the Deep Nonsen prospect in the Gulf of Mexico
COMPETITORS

Ecopetrol S.A. competes under energy sector with the world wide known companies like Exxon (XOM), Royal Dutch Shell (RDS.B), and BP P.L.C (BP) maintaining its monopoly in Colombia. Close to its roots, within Latin America, company is competing with Petrobras S.A, Argentinian based company. In 2009 Ecopetrol S.A. was at the second place following Petrobras S.A in the Latin America’s 500 largest companies in the gas and oil industry. According to the 2012 list of 250 largest oil companies, presented by Platts, Exxon outperformed the competition and was placed at the top of the list followed by Shell (#2) Bp (#4) following on the fourteenth place by Ecopetrol S.A. with PetroBroas being placed at the eighteenth place. The biggest surprise on that list we find PetroBros to be no longer the largest, in terms of revenue, oil company in the South America.

FINANCIAL ANALYSIS
For the last few years company’s revenue is constantly growing. With the new explorations and investments in the drilling equipment as well as opening new export destinations the profits are being used to finance new investments.
Enterprise value to Income before interest, taxes, depreciation and allocation is shows the ratio of 5.82 for the next twelve months. With the comparison to its competitors that ratio is significantly higher from 3.29. What we can also conclude is that the ration of Ecopetrol S.A. is higher than the sectors valuation.

Ecopetrol S.A. Benchmark EV/EBITDA next 12 months Company Ecopetrol S.A. 5.82
Peer group Ecopetrol S.A. excluded 3.29 Ecopetrol S.A. included 3.46
Sector Integrated Oil & Gas 5.00
S&P 500 8.60
STOXX Europe 600 7.08
Country COLOMBIA 7.89

RIVALRY COMPARISON BP Exxon Shell Ecopetrol Petrobras
2012 Revenue
In Millions - - - COP$ 68,852,002 ARS 12,765 In USD $ $388,285 $482,295 $481,700 $41,311.20* $2,583.00*
2011 Revenue in Millions In USD $ $386,463 $486,429 $484,489 COP$ 65,752,268 ARS 14,278 Industry Average
Revenue Growth from 2011-2012
0.47%
-0.85%
-.058%
4.71%
-10.60%
-2.65
*indicates the exchange rate as of 1/11/2013 1ARS =$0.2024 ; 1COP$=$0.0006 ; Revenues in Millions
Ecopetrol’s biggest competition is Petrobras Argentina. Being that the both companies are the largest in the South America and competeing for the export to North America Europe and and East part of Asia. In 20011 gas and oil industry experience a high revenue in volume. In comparison 2012 was a disaster for Petrobras Argentina who experience reduction of 10.60% in revenue. United States based company as well as Royal Dutch Shell revenue for 2012 were close to be equal with 2011revenues. What makes Ecopetrol stand out among its competition is the positive growth of revenue since 2012. Being above negative industry average with a positive output is a great recognition of hard work especially when bigger companies are falling behind. Current Ratio Financial leverage Return on Asset Return on Equity Fixed Asset Turnover Beta
BP 1.43 2.54 3.9% 10.08% 3.24 1.99
EXXON 1.01 2.01 13.50% 28.03% 2.18 0.77
Shell 1.18 1.91 7.54% 14.86% 2.97 1.29
Petrobras 1.39 1.87 3.00% 6.02% 1.33 1.13
Ecopetrol S.A. 0.99 1.76 12.8% 27.0% 2.05 .079
Industry average 1.3 1.1 8.9 19.2% 1.06 1.17

Through the company’s financial data investors may see the information that is not readily available. In the table above our financial analysis has been summarized. Through the financial ratios we have determined that one of the main worries when deciding if one should invest in the company is its liabilities. In general if the company has current ratio less than one it may have difficulties in meeting its short term obligations as not enough of liquid assets is available. That situation creates higher risk of defaulting. Meeting its obligations should be necessity of each company, as it may impact the credit rating of the company and later on adversely impact interest rates for the company. Here we see that Ecopetrol’s current ratio is slightly under 1. The risk of the state owned company to default is close to zero or is non-existing.
Borrowing is good for the economy once was said. However, borrowing more than you need or be able to repay is pointless. From the financial leverage we clearly see that among competitors Ecopetrol S.A. is using the least amount of debt. Increased amounts of debt lead to overpayment in interest expense what in result generates volatile earning.
Ecopetrol is efficiently managing its assets generating a return of 7.8% more return on assets than the industry average informs. Its return on asset ratio is close to the industry leader Exxon which has ratio of 28%. Also the company is more effective in financing its assets than PetroBras.

FUTURE GOALS
Ecopetrol is utilizing its plan of reconstruction of the company, especially the upstream segments. Its initial public offering in 2007 activated the financing to reorganize company over the next few years. Company expects to spend over $80 billion for that project and wish to accomplish final results by 2020.
Recent discoveries of the new oil fields make the company’s outmost goal achieved. Just within the last 4 months company identified 3 fields from which extradited profits will be fully recognized by Ecopetrol S.A. It is a great news to potential investors as the reserves of current fields are diminishing quicker than expected. It was predicted that without new findings company will be able to sufficiently provide energy for the needs to its citizens, which were growing at the expected rate, until year of 2050. Unfortunately the rate is currently higher of 2.5% than expected and it was a great concern for the company and the state that the reserves would be used up much quicker than anticipated. With the new fields discovered, Ecopetrol S.A. is hoping to expend its international presence and provide the energy supply to highly in need Asian regions. Currently Ecopetrol S.A. is providing oil and gas resources to the close by countries of Latin America and erope. The future forward goals include the expansion of export to Asia. Company expects to be able emerge in the Asian market by the end of 2013.

CAPITAL MARKET OVERVIEW
INFLATION
In May 2013 Colombia’s inflation rate was listed at 2 percent. The Consumer Price Index (CPI) was 113.48 as of May 2013. Three major aspects of the consumer price index are: Transports which is 15.2 percent of the total weight, housing which consists of 30.1 percent and food at 28.1 percent. All other aspects are: health care at 2.4 percent, communication at 3.7 percent, education at 5.7 percent, leisure at 3.1 percent, clothing at 5.2 percent and other expenses account for 6.4 percent. These CPI's include urban population, accounting for the largest population registered in the country. In April 2013 Colombian foreign reserves attained $40.1 billion which was 19.5 percent “year-to-year” growth for the month. Even though exports did not perform very well in Q113, it is expected that an improvements will be seen throughout the remainder of the year. By the end of 2013 Colombia expects its forecast reserves to grow to $42 billion.
CURRENT RISK
Thanks to the oil zone and strength, growth of 2011 remained on a good track. There was a great growth attributed to domestic demand which is expected to remain on the same or similar level even though there was euro-zone crisis and not very strong growth in the United States. Due to sustained investment and mixture of dynamic household, domestic demand will stay strong. Construction and manufacturing investments will also maintain a good growth rate.
In comparison with 2010 the surplus of trade tripled. This is due to the renewed increase in the price of raw materials and higher volume of exports with Venezuela during 2011. Because of the similar price stability of raw material the current account deficit will stay the same in 2012. Imports will be directed by constant domestic demand; such as capital goods, electronics, automobiles because their domestic production is limited. Foreign investors are investing their money into attractive industries such as; gold, nickel, coal, oil by which they are financing the Colombian account deficit. There is a great shift to banking, construction and food from the investor’s site. With the progress of the country being so positive, it has received a two year extension by the IMF for its $6.2 billion Flexible Credit Line (FCL).
FINANCIAL CRISIS
During the late 1990s and early 2000s, Colombia’s financial system experienced a period of financial stress, characterized by the failure of many banks and other financial institutions, as well as by the severe deterioration of the whole system’s financial health. The capitalization ratio of the system fell dramatically, as did profitability and liquidity. As a consequence of the crisis, the number of institutions, 110 in June 1998, dropped to only 57 in December 2001, after failures, mergers, and acquisitions. Total assets of the financial system experienced a real contraction of more than 20 percent during the same period, making that episode of financial stress the deepest financial crisis experienced by the country in the last century.
During the 1980s, Colombia’s financial system was subject to elevated reserve requirements and forced investments to strong constraints on foreign investment. There were as well on the types of operations that intermediaries could do on interest rates. Additionally, a process of bank nationalization was held during that decade. In contrast, at the beginning of the 1990s, a program of financial liberalization was implemented. The process was supported by the laws, which eased the conditions for the entrance of foreign investment to Colombia, promoted more competition in the financial system, and gave financial institutions more liberty in the management of financial operations and interest rates. As a result, the ratio of intermediated assets to GDP increased from 31 percent in 1990 to 47 percent in 1996. The number of financial institutions increased significantly, the participation of the assets of foreign banks in the total assets of the system increased, and most of the government-owned financial institutions were privatized.
As a consequence of the growth in the financial system and of the economic expansion that took place during the first half of the 1990s, between 1991 and 1997 Colombia registered a credit boom without precedent. The ratio of loans to GDP and the price of assets grew steadily, as did the number of intermediaries. But, as is often the case when quick expansion of credit follows financial liberalization, the quality of loans of financial institutions decreased, and this degradation of loan quality elevated the financial fragility of the economy. Between 1998 and 1999 a sudden capital reversion occurred, followed by a steep fall in the terms of trade, which led to a reduction in the aggregate level of expenditure. This has been identified as the main cause of both the financial crisis.
INVESTMENT RECOMENDATION
Our recommendation is to sell the stock if you are risk averse investor. As the company follows deeper for investing into recent field findings the stockprice is expected to drop in price. The potencial that the company has is enormouse. So If you believe to be not risk averse investor we recommend tohold on to the stock you posses and look for the opportunity to increase the nomber of shares you own.
With the Colombian currency becoming stronger on US Dollar it is a great allocation of your earnings.

With a trailing price-to-earnings ratio of only about 14, the stock is a bargain considering its growth prospects and virtually unassailable position in the increasingly prosperous and peaceful region. This Latin oil stock will likely pump significant gains into your portfolio.

CONCLUSION
Colombia has significant natural resources and its diverse culture reflects the indigenous Indian, Spanish and African origins of its people. It also has a highly stratified society where the traditionally rich families of Spanish descent have benefited from this wealth to a greater degree than the mixed-race population. The country has also been ravaged by a decades-long violent conflict involving armed groups, drug cartels and gross violations of human rights.
It is a free market economy with major commercial and investment ties to the United States. The country is projecting itself as open for business and as a global partner open for cooperation across multiple areas - trade and investment, security, technology, education, and energy. Colombia is expanding its international engagement both bilaterally and multilaterally. The current administration’s policies aim at attracting foreign direct investment, maintaining growth and stability, and improving the business environment. Colombia has free trade agreements with the United States, Canada, the European Union Free Trade Association, the European Union and South Korea. It is on track toward its goal of reducing unemployment to a single digit figure by 2014.
Colombia has undergone a remarkable transformation – dealing with terrorist insurgency, restoring security and stability, and advancing policies that have led to significant social progress and economic growth. However, a decades-long conflict continues to hinder Colombia's development and impedes attempts to tackle poverty and inequality. While considerable work remains to be done, the nation is now firmly on the path to peace and prosperity.

Bibliography http://people.stern.nyu.edu/adamodar/New_Home_Page/datafile/Betas.html http://www.morningstar.com/ http://csimarket.com/Industry/industry_growth_rates.php?rev&ind=603 http://www.ecopetrol.com.co/english/ http://www.shell.com/ http://www.exxonmobil.com/Corporate/
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