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September 5, 2014

Editor’s letter: The quest for El Dorado

In the aftermath of America’s discovery, Spanish conquistadors were mesmerised by the myth of El Dorado, or the golden one. The legend had it that the king of a wealthy pre-Columbus civilisation would coat his skin with gold powder and immerse himself into a lake as part of a sacred ritual. Worshippers would throw pieces of jewellery made of gold, emeralds and other gemstones into the lake.

Such an exuberant ceremony, which helped maintain the conquistadors’ avaricious quest, is thought to have taken place in what today is Colombia’s Lake Guatavita. At a time of economic slowdown, the old and indebted Europe turns its eyes again towards the New World. The gold rush of our time is fuelled by Latin American economies’ extraordinary GDP growth.

Colombia and Peru, contenders for the title of fastest-growing economy in the region, offer a telling story. Their GDP grew by 6.4% and 4.8% respectively in the first quarter of the year compared to the same period in 2013.

Yet in Peru, some members of its congress (congresistas) demanded the resignation of finance minister Luis Miguel Castilla, as the country lowered its growth forecast to approximately 4.5% or 3.5% for this year. Spain, once its colonial ruler, is continuing to struggle to overcome negative growth rates.

In those circumstances it’s interesting to speculate what the Peruvian opposition party congresistas might have demanded from Spanish finance minister Luis de Guindos!

Admittedly, it’s not a fair comparison. But it shows that this time round, European businessmen who dare to invest in Latin America will be entering sovereign countries and competing on a level playing field with national and international peers.

Equally, Latin American countries, such as Colombia, are eagerly adopting international financial reporting and auditing standards in order to speak the global language of accounting, and therefore attract greater foreign direct investment flows into their countries.

AurenTo do so they would still need some expertise from an international partner. This is happening in Colombia between Spanish network Auren International and national firm TH&R Consultores y Auditores.

In a market dominated by Anglo-American firms, the emergence of Auren (a member of the Forum of Firms) is remarkable given Spain’s underperforming economy. The Colombian firm is already part of Antea, an association of firms founded by Auren International.

However, Antoni Gómez, chairman of Antea and president of Auren, told me this month that TH&R will be integrated within the network by 13 October. The fact that TH&H has agreed to go that extra mile, complying with the strict quality requirements to join a Forum of Firms network, is good news for both parties.

In the context of Colombia’s extremely fragmented accounting market, where the gap between the Big Four and smaller firms is extremely wide, that could mean other national firms will follow suit.

But there’s no efficient market without a strong profession, and Colombia’s nearly 200,000 accountants aren’t united under a professional body.

Divide and conquer is a maxim the Colombian profession would do well to remember ahead of the celebrations of Columbus Day next 13 October.

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Colombia survey: Chronicle of a success foretold

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