Investment environment and business

COLOMBIA
Investment Environment and Business Opportunities in Colombia
2014
About us
Proexport is in charge of the promotion of International Tourism, Foreign Direct
Investment, and non-traditional exports in Colombia
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VALLEDUPAR. PASTO. PALMIRA. ARMENIA = UNIVERSIDAD GRAN
COLOMBIA – CÁMARA DE COMERCIO. VILLAVICENCIO. BOYACÁ =
TUNJA - DUITAMA - SOGAMOSO. IBAGUÉ. SANTA MARTA. SAN
ANDRÉS. ABURRÁ SUR. NEIVA. BARRANQUILLA = CÁMARA
COMERCIO – UNIVERSIDAD NORTE. CARTAGENA. MEDELLÍN.
BUCARAMANGA. CALI = CÁMARA COMERCIO. PEREIRA. BOGOTÁ.
MANIZALES. CÚCUTA. POPAYÁN. BOYACÁ.
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EMIRATES. INDIA. CHINA. SOUTH KOREA. RUSSIA. JAPAN. SINGAPORE.
INDONESIA.
General facts

55%

of the population is less than
old.
30 years
There are seven cities with over
one million people.
Second most bio-diverse
country in the World
12 most
megadiverse countries of the planet.
It is among the
With an extension of
1,141,000 km2 almost 3
times the size of California and
twice the size of Texas.
only country in
South America with access to
both, the Atlantic and the
Pacific ocean.
Colombia is the
Times of great economic achievements
GDP2013: +4.3%
GDP
2012
: +4.0%
Higher than the Latin American
average growth (3.2%).
Controlled
Inflation: 1.94%
FDI2013: US$16,772
FDI
2012
: US$ 15,529
Record figure in Colombian history
Below target inflation
Unemployment rate
2013:8.5%
Unemployment rate for December
2012: 9.2%.
1.01
million barrels per day
of oil production
Fourth largest producer in South America
A competitive location with easy access
to markets around the globe
Frankfurt
11H15M
Canada
Toronto
6H05M
Germany
United States
Los Angeles
8H20M
Paris
10H40M
New York
5H35M
France
Madrid
9H40M
México
Mexico City
4H45M
Quito
1H30M
Caracas
1H20M
Ecuador
Peru
Lima
3H00M
Chile
Santiago
Chile
5H00M
Brazil
Sao Paulo
5H45M
Argentina
Buenos Aires
6H15M
Over 878
Spain
weekly direct international flights.
More than 4,500
Less than 6
weekly domestic flights.
hours
to the main capital cities
in Latin America.
More
than
20 different airlines
The second largest spanish speaking country in the
world and the 23rd most populated
Population 2014*
Millones
202.80
116.20
81.67 78.09 83.70
64.60
47.40 50.50
Source: DANE. EIU - Economist Intelligence Unit. 2014.
* Forecast.
35.60 31.60 30.20
23.51 17.70
10.50 9.70
8.50
8.10
7.20
8.20
5.10
5.50
4.60
Colombia is the 28th largest economy in the world
and one of the largest non-OECD economies
GDP at PPP – 2015
US$ billion
3,688
Germany
2,644
Brazil
2,560
France
2,324
Mexico
1,790
South Korea
1,176
Australia
Malaysia
606
Colombia
599
535
Philippines
Switzerland
481
Belgium
481
455
Sweden
Hong Kong
422
Vietnam
420
Peru
400
Chile
380
Norway
373
Israel
301
Singapur
299
Denmark
New Zeland
257
167
PPP - Purchasing Power Parity. e: estimated.
Source: EIU - Economist Intelligence Unit. 2014
Colombia will contribute significantly to world economic
growth
0
1
2
3
4
5
6
7
8
9
China
India
Nigeria
Vietnam
Indonesia
Colombia
Egypt
Turkey
Brazil
Russia
Why?
South Korea
Mexico
Respect for private and intellectual
property.
South Africa
United States
Canada
BRICs
Japan
United Kingdom
Germany
France
Italy
Source: “Diamonds in the rough: Unearthing opportunity in an uncertain world” .
The Economist March 2013.
Other EM
CIVETs
G7
Natural resource boom
Advance in national security and peace
process
FTAs with almost 50 countries (including the
US)
Rapid FDI growth
Colombia's per capita income has nearly
doubled since 2000
Per capita National Income (PPP)
2000 – 2018p, US$
Income
16.000
14,400
14.000
12.000
10,910
10.000
8,940
Middle High
Income
8.000
6.000
High Income
5,826
4.000
Middle Low
Income
2.000
Low Income
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013p 2015p 2018p
Source: EIU – Economist Intelligence Unit. PPP = purchasing power parity.
Economies are divided according to 2012 income per capita, calculated using the World Bank Atlas method. The groups are: low income,
US$1,035 or less; lower middle income, US$1,036 - US$4,085; upper middle income, US$4,086 - US$12,615; and high income, US$12,616 or
Macroeconomic stability and strong economic
performance in the long run
GDP Growth, Inflation and unemployment Rate
2002 – 2018p (%)
Unemployment rate
GDP
Inflation
15.6
14.1
13.7
11.8
12.0
11.2
11.3
12.0
11.8
10.8
10.4
8.5
6.7
7.0
6.5
5.3
5.5
2.5
4.7
4.9
3.9
6.9
5.7
4.5
7.7
3.5
4.0
2.0
4.0
2004
2005
2006
2007
2008
2009
f: Preyected e: Estimates
Source:: DANE; Banco de la República; EIU - Economist Intelligence Unit . 2014
4.3
3.7
1.7
2003
8.1
7.4
7.1
6.8
4.6
4.5
4.3
4.5
3.4
3.6
3.5
3.3
2015f
2016f
2017f
2018f
6.6
2.4
2002
8.8
2010
2011
2012
4.4
3.0
1.9
2013
2014f
Economic growth has been fueled by high rates
of investment
Gross Capital Formation (% of GDP)
2000 – 2016f
33%
27%
25%
24%
18%
16%
14%
2000
2001
2002
Source: EIU – Economist Intelligence Unit
Figures at constant prices of 2005.
e- Estimates
2003
2004
2005
2006
2007
2008
2009
2010
2011 2012 2013e 2014f 2015f 2016f
A rapidly growing middle class
Middle class in Colombia as a percentage of total population
Million
inhabitants
2025
46.3%
2020
2012
37.3%
59.9%
43.8%
24.7
32.1
19.0
22.3
11.6
25.3%
11.6
2002
16.2%
6.7
6.7
Below Baseline Scenario
Above Baseline Scenario
Baseline scenario: 4.6% GDP growth
Below baseline scenario: 4.2% GDP growth
Above baseline scenario: 5.3% GDP growth
Middle class: Monthly household income between 3.2MW and 13MW
(MW) Minimum wage in Colombia 2013: US $333.
Economic growth, Investor Confidence and Security
6000
30,0
5000
25,0
4000
20,0
3000
15,0
2000
10,0
1000
5,0
0
0,0
IED - US$ million*
Insecurity perception**
* Figures do not include FDI registered for SabMiller adquisition of Bavaria in 2005 (USD 4,800 MM).
** Perception of insecurity as a key issue affecting industrial growth in the country. Monthly Industrial Survey -ANDI.
Colombia, an investment-grade country with positive
outlook
Rating
Agency
S&P (April 2013) and Fitch
(december 2013) improved
Colombia´s sovereign debt
outlook.
“Effective implementation of
recent fiscal reforms could
improve its debt and interest
burdens”– S&P
Term
Rating
Date
Long Term– Foreign
Currency
BBB
24– Apr- 2013
Short Term–
Foreign Currency
A–2
24– Apr- 2013
Long Term– Local
Currency
BBB +
5 – Mar - 2007
Short Term – Local
Currency
A-2
5 – Mar - 2007
Long Term–
Foreign Currency
BBB
13 – Dic- 2013
Short Term–
Foreign Currency
F–2
22 – Jun - 2011
Long Term – Local
Currency
BBB+
22 – Jun - 2011
Long Term– Foreign
Currency
Baa3
7– Feb- 2012
Outlook
Stable
Stable
Positive
On December 2013 Fitch Ratings upgraded Colombia's ratings due to Colombia's improvement in its external accounts and positive
government debt dynamics, which support the convergence of external and fiscal credit metrics with rating peers. In addition, the
sovereign's credible and consistent policies provide it with the capacity to withstand external shocks; this was demonstrated during
the recent increase in financial volatility witnessed by several emerging markets.
Since 2011 the Colombian sovereign debt has been rated positively by all three agencies, coinciding with a reduction in the
vulnerability to external shocks, the fulfillment of its obligations, confidence in the macroeconomic policy of the country and
improved security policies.
Colombia with the most reforms in Latin America
towards the improvement of Business environment
Ranking Doing Business*
2008-2014
Change in the number of positions
Country
Ranking
2014*
Colombia
23
Panama
16
Chile
34
Peru
42
Colombia
43
Mexico
53
Panama
55
Venezuela
Costa Rica
102
Ecuador
Brazil
116
Brazil
-9
Argentina
126
Chile
-9
Ecuador
135
Venezuela
181
Source: Doing Business 2014. World Bank.
*Positive numbers indicate improvements in business environment.
Costa Rica
13
Mexico
10
Peru
Argentina -17
6
-1
-7
Colombia is the leader in terms of Investor Protection in
the region
Investment Protection Index
Doing Business - 2014
8.3
Ranking
7.0
6.3
5.7
5.3
5.3
5.0
Source: Doing Business. World Bank . 2014.
Venezuela
Argentina
Panamá
Brazil
Mexico
Chile
Peru
Colombia
2.3
Country
6
Colombia
16
Peru
34
Chile
68
Mexico
80
Brazil
80
Panama
98
Argentina
182
Venezuela
118.219
United States
80.502
• Exports: US$18.458 million
• Imports: US$ 15.681 million
China
65.682
• Exports: US$ 5.102 million
• Imports: $9.841 million
50.553
42.395
33.476
27.009
24.671
25.151
24.915
62.888
77.295
112.095
Exports and Imports.
2000 – 2013
US$ millions
119.299
Total commerce has grown almost 5 times in
the past 10 years
Mexico
Exports: US $863 million
Imports: US$ 5.299 million
Brazil
• Exports: US $2.457 million
• Imports: US$ 1.590 million
2000
2001
2002
2003
2004
2005
2006
2007
2008
Total Comerce (X+M)
Source: DANE, 2014
2009
2010
2011
2012
2013
Colombia shows a remarkable growth of its exports
Exports. 2000 – 2013
FOB Values US$ millions
Top export destinations 2013
56,915
58,822
United States
• US$ 18,459 million
• Part. 31.4%
37,626
China
21,190
13,158
13,129
• US $5,102 million
• Part. 8.7%
Panama
• US $2,939 million
• Part. 5.7%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
India
• US $2,993 million
• Part. 5.1%
Variation 2010 - 2011: 43%
Variation 2011 - 2012: 5,7%
Variation 2012 -2013: -2.2%
Imports also have increased rapidly
Imports 2000 – 2013
CIF Values - US$ million
Top imports by origin 2013
United States
59,397
54,233
39,666
32,891
21,204
11,757
• US$ 16,337 million
• 27.5%
China
• US$ 10,363 million
• 17.4%
Mexico
• US$ 5,496 million
• 9.3%
Brasil
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Variación 2011 – 2012: 7.2%
Fuente: DANE
• US$ 2.590 millones
• Participación: 4.4%
Free Trade Agreements
Norway
Island
Liechtenstein
Canada
Switze
rland
European
Union
United States
Turkey
South Korea
Japan
Israel
Mexico
Costa Rica
Guatemala
Cuba*
Panama
Honduras
Venezuela*
Nicaragua*
El Salvador
Ecuador
Pacific
Alliance
Brazil
Peru
Bolivia
Paraguay
Chile
Uruguay
Argentina
In force
*These are Partial Scope Agreements (PSA)
- - - The dotted line refers to member countries of The Pacific Alliance other than Colombia. – Chile, Perú
and México.
Source: Colombian Ministry of Commerce, Industry and Tourism. 2013.
Signed
In negotiation
International Investment Agreements - IIA
Norway
United
Kingdom
Canada
Island
Liechtenstein
Switzerland
United States
Russia
European
Union
Spain
Turkey
Israel
Mexico
South Korea
Japan
China
Azerbaijan
Kuwait
Qatar
Guatemala
India
Panama
Honduras
El Salvador
Singapur
Peru
Chile
Uruguay
* Negotiations recently concluded.
Note: The International investment agreements (IIA) include Agreement Investment Treaties – BIT
(agreement) and Free Trade Agreements – FTA- with investment section (chapter).
Source: Colombian Ministry of Commerce, Industry and Tourism. 2013.
In force
Signed
In negotiation
Double Taxation Agreements - DTA
Norway
Czech
Republic
Holland
Canada
Belgium
Switzerland
United States
Germany
France
South Korea
Spain
Italy
Mexico
Turkey
Israel
Japan
China
Qatar
United Arab
Emirates
India
Honduras
Singapur
Ecuador
Brazil
Peru
Bolivia
Chile
In force
Signed
*Negotiations recently concluded.
Note: The International investment agreements (IIA) include Agreement Investment Treaties – BIT (agreement)
and Free Trade Agreements – FTA- with investment section (chapter).
Source: Colombian Ministry of Commerce, Industry and Tourism. 2013.
In negotiation
Future
Colombia: A gateway to the Pacific Alliance
Mexico
Population of 209 million
Almost Brazil´s Population
Colombia
Peru
50% of Latin American
commerce
FTAs with 60
countries
Total trade of US$ 1,116
billion (2012)
Access to benefits of
markets that represent
85.7% of the World GDP
GDP of USD 2,010.3
billion
Chile
Source: MCIT, 2013
The members generate 35% of
the region´s GDP
In 2013 Colombia reached a new record in FDI:
Nearly 7 times of what it received 10 years ago
Top Investing Countries in
Colombia 2000– 2013
FDI Inflows. 1994 –2013
USD million
Var.
8%
15,529
16,770
United States
• US$ 25,980 million
• 24 %
United Kingdom
13,405
• US$ 15,672 million
• 14,5%
Spain
6,897
• US$ 7,902 million
• 7,3%
2,504
Chile
Average
1994 - 2002
Average
2003 - 2010
2011
2012
2013
• US$ 4,283 million
• 4,1%
Source: Balance of Payments - Banco de la República.
Share of all countries with positive cumulative investment, The information includes reinvested profits or investments in the oil sector
Note: the list of the top countries investing in Colombia does not include Panama.
Colombia was among the top 20 destinations of FDI in
the world in 2012
According to The World Investment Report -UNCTAD Colombia is one of the top twenty host
economies for FDI in the world with
1; United States
2; China
3; Hong Kong (China)
4; Brazil
5; Virgin Islands (UK)
6; United Kingdom
7; Australia
8; Singapur
9; Russia
10; Canada
11; Chile
12; Ireland
13; Luxembourg
14; Spain
15; India
16; France
17; Indonesia
18; Colombia
19; Kazakhistán
20; Sweden
USD 16 billion
in 2012.
168
121
75
65
65
62
57
57
51
45
30
29
28
28
26
25
20
16
14
14
Colombia is the third destination for
FDI in Latin America with
USD 15,649 Million.
During
2012
Colombia
93
third
attracted
Greenfield projects making it the
country in the region in terms of the
number of projects.
Source: World Investment Report, Overview 2013; FDI Markets, Global Greenfield Investement Trends. 2013; CEPAL 2013.
The stock of Colombia’s outward FDI has grown nearly
ten-fold since 1994
FDI outflows by sectors,
1994 – 2013
Stock of outward FDI. 1994 - 2013
USD million
39,482
7,652
Transport &
Commerce,
communicatio restaurants &
n, 6,0%
hotels, 4,6%
Others, 2,8%
Industry,
25,1%
Electricity, gas
& water,
12,4%
-606
3,652
Stock
1994 - 2002
Panama
Stock
1994 - 2013
USD 6,505 million
18%
2012
United States
USD 6,455 million
17%
Oil &
Mining,
21,4%
Financial
services,
27,7%
2013
United Kingdom
USD 5,180 million
14%
Peru
USD 2,507 million
7%
Source: Banrep, 2014; World Investment Report, Overview 2013; FDI Markets, Global Greenfield Investement Trends. 2013; CEPAL 2013.
Sectors of opportunity- Tourism
Foreign visitors in Colombia
2006 – 2013, thousands
51
127
228
285
296
Main nationalities of foreign
visitors in Colombia, 2013
313
254
306
United States
• 336,454 visitors
• 18.4%
1,692 1,832
1,582
1,475
1,354
1,223
1,053 1,195
European Union
• 307,212 visitors
• 16.8%
Venezuela
2006
2007
2008
2009
2010
2011
2012
2013
• 261,343 visitors
• 14.3%
Argentina
Arrivals (Migración Colombia)
Visitors in cruises
Source: Migración Colombia, MCIT, Banco de la República. Cálculos de Proexport
• 129,069 visiors
• 6.4%
Some examples of high profile Colombian “multilatinas”
SURA Brand is currently well known in the
insurance, pension and investment fund
business through its operations in Mexico,
Peru, Uruguay and Chile.
One of the largest food companies in
Colombia, Nutresa has presence in
12 countries in Latam, with
manufacturing plants in 8 of them.
In 2011, the group bought ING assets in Latin
America for USD $ 3,614 million.
Recently, the company signed an
agreement to acquire 100% of the
shares in Tresmontes Lucchetti
S. A. in Chile for USD 758
million.
It is the largest financial conglomerate in
Colombia. The Group has subsidiaries in El
Salvador, Panama, and Puerto Rico.
In 2012, Bancolombia acquired 100% of the
ordinary shares and 90.9% of the preferred
shares of HSBC Bank in Panama.
Some examples of high profile Colombian “multilatinas”
Carvajal SA, is a conglomerate with
presence in 15 countries and
recognized for its role in the field of
packaging, stationery, design and
advertising.
In 2013, Carvajal S.A made an
investment of $ 23.7 million for the
construction of a manufacturing and
distribution center in Peru.
Tecnoquímicas is specialized in heath products
and services, personal care and household
cleaning, processed foods, and agricultural and
veterinary products in Colombia and Latin
America.
The company has direct presence in Central
America through its 3 production plants in El
Salvador.
Colombiana SA is one of the country's
leading companies in the production and
marketing of sweets, chocolate and biscuits.
The
company
has
strengthened
its
international strategy with the opening of 11
branches throughout the Americas and has a
production plant in Guatemala to supply the
American market.
Labor incentives
Discount in the income tax and supplementary contributions, and other contributions
from payroll.
(Do not include positions generated by mergers or replacements)
New employees under twenty eight
(28) years old. Length of benefit by
employee: 2 years.
New employees with incomes lower
than 1.5 Minimum Wages (US$
476). Length of benefit by employee :
2 years.
New employees certified in displacement
situation, reintegration or disability.
Length of benefit by employee: 3 years.
New women employees above 40 years
old with more than 1 year
unemployed. Length of benefit by
employee: 2 years.
Incentives for job creation and formalization
Application of escalation
Payment of income tax.
Payment of levies and other contributions from
payroll.
The business registration and renewal.
0% - 2 first years
25% - third year
50% - fourth year
75% - fifth year
100% - from the sixth
year.
0% - first year
50% - second year
75% - third year
100% - from the fourth
year.
Small firms: staff no more than 50 employees, total assets not exceeding 5,000
SMMLV.
Start of main economic activity: date of registration in the commercial register.
Free Trade Zones: Reduced income tax and sales
allowed to the local market
Guajira
Free Trade
Zone
Magdalena
Atlántico
Bolívar
Antioquia
Norte de
Santander
Santander
Special
Standing
"Uniempres
arial" (FTZ)
Permanent
Free Trade
Zone
Caldas
Boyacá
Risaralda
Quindío
Valle del
Cauca
Cauca
Cundinamarca
Huila
FTZ requested or
approved prior to
December 31, 2012.
Caribbean Region
Andean Region
Pacific Region
• 15% Income tax.
FTZ filed
December
2012.
after
31,
• Income tax of
15% + 9% tax
CREE.
Free Trade Zones: Reduced income tax and sales
allowed to the local market
No import duties. VAT exemption for goods sold
from Colombia to FTZ.
Benefit from international trade agreements.
Allows sales to the local market.
Free trade zones for different investor styles.
A country of regions and differentiated
opportunities for investors
Caribbean Region
Tourism, Logistics, Petrochemical,
Construction Supplies
Atlantic Export Platform.
Central/Andean Region
Outsourcing Services, high value-added
manufacturing, hub to cover domestic
market, specialized agribusiness.
Pacific Region
Manufacturing, Agribusiness, logistics,
biotechnology, Pacific export platform.
Eastern Region
Agriculture,
hydrocarbons
forestry,
Amazon Region
Conservation, ecotourism (Leticia)
biofuels,