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COLOMBIAA golden opportunity for investors
Colombia's investment climate has been changing in a very positive way
Colombia's economic growth record surpasses, on average, that of the Latin American Region. GDP growth in 2006 was 6.8%, the highest since 1978
GDP Growth
Source: Economic Commission for Latin America and the Caribbean (ECLAC), DANE, Forecasts ECLAC and National Planning Department
GDP Growth: Colombia vs. Latin America (1980-2006f) %
4.6
6.8
-6
-4
-2
0
2
4
6
8
1981 1983 1985 1987 1989 1990 1992 1994 1996 1998 2000 2002 2004 2006
Latin America Colombia
12,37
7,64
7,17
3,55
2,66
2,01
4,87
9,4
3,9
4,0
3,0
1,1
5,3
10,69
10,79
2,22
0,58
3,13
6,8
12,214,36
0 2 4 6 8 10 12 14 16
Construction
Commerce
Industry
Services
Mining
Agro
GDP
Real growth rate %
200620052004
Source: Fedesarrollo (DANE)
GDP growth by sector 2004-2006
4,87
19,78
9,97
15,6
1,09
6,04
21,7
5,6
25,7
4,9
4,7
21,26
7,85
26,89
2,14
6,71
5,36,8
0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30
GDP
Imports
Exports
Investment ( total)
Public Consumpion
Private Consumption
Real growth rate %
200620052004
Source : Fedesarrollo (DANE)
Components of demand growth 2004-2006
Inflation Rate (1997 – 2006)%
Source: Central Bank
Inflation rateColombia’s inflation rate was 4.5% in 2006, the lowest level in 42 years.
4.54.95.5
6.57.0
7.78.8
9.2
16.717.7
3
6
9
12
15
18
1997 1999 2001 2003 2005 20062006
Perception on Safety * (2002 – 2006)
Confidence and security
Safety levels have increased significantly since 2002, which is reflected by business confidence
* Percentage of businessmen who believe security levels have improved.
83.4
98.2
80828486889092949698
100
2002 2003 2004 2005 2006
Source: Opinion survey by National Association of Industrials (ANDI), Proexport´s Forecast
Reduction in the spread on sovereign debt
Market confidence
Emerging Markets Bond Index (EMBI) (2002-2006)Basic Points
Source: JP Morgan - National Planning Department forecast
0
500
1000
1500
2000
2500
3000
2002 2003 2004 2005
EMBI+
Brazil
Mexico
Venezuela
Colombia
2006
June 2007
Standard & Poor´s upgraded Colombia´s sovereign debt
rating from BB+ to BBB-
Market confidence
Exports (1995 – 2007f) US$ MM
Colombia's total exports doubled in the last four years
Exports
F: Proexport´s ForecastSource: DANE, Proexport
13,12811,97512,33013,15811,61710,86511,54910,5829,758
27,00024,391
16,730
21,188
-5000
5000
15000
25000
35000
45000
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007p
Traditional Non Traditional
Number of foreign travelers (2001 – 2007f)
The number of foreign visitors to Colombia doubled in the last four years
Foreign visitors
F: Proexport´s ForecastSource: Security Administration Department - DAS
1,300,000
1,050,569
933,244
790,940
624,909566,761
615,623
-100000
100000
300000
500000
700000
900000
1100000
1300000
2001 2002 2003 2004 2005 2006 2007f
Colombia received in 2005 and 2006 the highest inflows of FDI recorded to date
Foreign Direct Investment
FDI Flows (1994-2006)US$ MM
* Proexport forecast
Source: Balance of Payments, Central Bank
Sab Miller´s investment US$ 4,715 MM
10,255
6.295
5.6613.117
1.7582.1392.5252.395
1.508
2.829
5.562
3.112
9681.447
0
2.000
4.000
6.000
8.000
10.000
12.000
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Colombia was the third largest recipient of FDI in the region in the 2005-2006 period, following Mexico and Brazil
Source: ECLAC, 2007
FDI flows into Latin America
10255
18782
15067
19643
2579
50086960
18939
34674809
6295
8053
0
5000
10000
15000
20000
25000
México Brasil Chile Colombia Argentina Perú
US
Milli
on D
olar
s 2005
2006
DISTRIBUCIÓN Y DESEMPEÑO POR SECTORES
31,9%
28,1%
12,5%
10,6%
8,5%
8,4%Mining & Quarryng
Oil
Transportation,warehousing andcommunications. Manufacturing
Trade
Others
TOTAL: US$ 6,295 MILLION
FDI breakdown by sector (2006)
Source: Bank of the Republic (Central Bank)
Almost 700 multinational companies have operations in Colombia
Foreign investors present in Colombia
16%
14%
12%
8%
8%
10%
6%
5%
3%
4%
TOTAL*: US $32,444 MM16%
* Excluding the petroleum sector and reinvestment of profitsSource: Bank of the Republic (Central Bank)
Main investors by country of origin
USA
England
Spain
Panama
Virgin Islands
Cayman Islands
Bermuda
Netherlands
Mexico
Canada
Others
Accumulated FDI by country* (1994 – 2005)% of Total
Mexichem (Mexico) (2007):•Signed an agreement to buy Petco and Amanco Group.•Investment: N.A.
Nestle (Swiss) (2006): • Increases exports capacity at its soluble coffee plant. • Investment: US$ 45 M
•Coalcorp (Canada) (2006):• Concession to build a new harbor terminal in Cartagena. • Investment: N.A.
Telmex (Mexico) (2006):• Acquires 100% of TV Cable• Investment: US$ 30 M
Prisma Energy (UK) (2006) • Acquires 10% of Promigas • Investment: US$ 153.7 M
Recent cases of FDI in Colombia
Glencore International AG (Switzerland) (2006):• Acquired 51% of Cartagena´s oil refinery • Investment: US$ 656.4 M
Millicom International (Luxembourg) (2006):• Acquired Colombia Móvil (Ola)• Investment: US$ 479.9 M
Groupe Casino (France) (2006):• Acquired Carulla Vivero• Investment: US$ 110 M
Sinergy (Brazil) (2006):• Increased fleet of Avianca´s aircraft.• Investment: US$ 355 M
Sab Miller (South Africa) (2006):• Invests in a juice plant in Valle del Cauca• Investment: US$ 175 M
Sinopec Corp (China) and ONGC (India) (2006):• Acquired 50% of Omimex Colombia • Investment: US$ 55 M
Recent cases of FDI in Colombia
Chevron Texaco (United States) (2006):• Increases investments in Colombia • Investment: US$ 110 M
Abengoa (Spain) (2006):• Builds hydroelectric plant at Guapi• Investment: US$ 47M
Kimberly (USA) (2006):• Increases investments in Colombia• Investment: US$ 40 M
Sab Miller (South Africa) (2005):• Acquired Bavaria, the country’s most important brewery• Investment: US$ 4,715 M
Phillip Morris (USA) (2005) :• Acquired Coltabaco, the country’s largest tobacco firm• Investment: US$ 300 M
BBVA (Spain) (2005): • Acquired the Granahorrar• Investment: US$ 424 M
Falabella (Chile) (2005):• Established department stores in Colombia• Investment: US$ 100 M
Recent cases of FDI in Colombia
The world has been noticing the changes in Colombia's investment climate
“Colombia's strong fundamentals stand out. Its $130 billion economy, a world leader in the production of
coffee, petroleum, textiles, and flowers, is growing at 6.8% a year, two full points faster than the Latin
American average. In the past 10 years, Colombia has slashed its inflation rate from 18% to 5%, and
since Uribe was elected, unemployment has dipped from 16% to 13%. The nation has never defaulted
on its debt or experienced hyperinflation. And entrepreneurial thinking is spreading”
Business Week, May 28th, 2007
“Colombia has proved that it is a safe and worthwhile investment destination and has now put itself firmly back onto the investment map. Courtney Fingar reports from Bogotá and Medellin”
The Financial Times
London
The Banker, Octubre – Noviembre 2006.
London
American Insider - London
American Insider, October – November 2006, promoted Colombia as an investment destination.
Lonely Planet chose Colombia as one of the 10 “hot spots” in the world to visit in 2006.
“It is modern, vibrant, and one of the best value places in South America.”
“Bogotá is not for the braves anymore” - Feb 12, 2006 SETH KUGEL
Época magazine – Brasil
February 2007,
“Epoca” magazine highlights Colombia's achievements in improving security levels in large cities and sets it as an example for Brasil
¿Why Colombia?
Source: Aviatur, U.S. Dept. of Agriculture
Colombia and the United States´sEast Coast are in the same time zone
Strategic locationHours of flight
GDP in Latin America (2005) Current Prices, US$ MM
Fifth largest economy and third largest population in Latin America
Source: International Monetary Fund and World Bank, * Data for Colombia in 2005 from the Central Bank and DANE
Population in Latin America (2005) MM of persons
Market size
7.247
9.650
15.926
33.062
78.576
113.956
132.848
181.662
768.737
792.683
122.610
26.900
0 200.000
400.000
600.000
800.000
1.000.000
Paraguay
Bolivia
Uruguay
Costa Rica
Ecuador
Peru
Chile
Colombia
Venezuela
Argentina
Mexico
Brasil
3
4
6
9
13
15
26
28
39
105
184
42
0 50 100 150 200
Uruguay
Costa Rica
Paraguay
Bolivia
Ecuador
Chile
Venezuela
Peru
Argentina
Colombia
Mexico
Brasil
Source: The World Competitiveness Yearbook 2006-IMD
Qualified human capital
Availability of trained workforce(0= not available; 10= available)
Ranking (61 countries)
6.2
5.4
5.3
4.2
5.2
6.9
0 2 4 6 8
Venezuela
Argentina
Brazil
Mexico
Chile
Colombia
26
39
44
40
57
12
Competent managers(0= not available; 10= available)
4.3
5.2
5.4
6.0
7.4
7.1
0 2 4 6 8
Venezuela
Mexico
Argentina
Brazil
Colombia
Chile3
6
29
37
40
55
Flexible labour legislation
1= impeded by regulations7=Flexibly determined by employers
Country Day Shift Night Shift
Colombia 6 a.m - 10 p.m 10 p.m - 6 a.m
Chile 6 a.m - 9 p.m 9 p.m - 6 a.m
México 6 a.m - 8 p.m 8 p.m - 6 a.m
Costa Rica 5 a.m - 7 p.m 7 p.m - 5 a.m
Ecuador 6 a.m - 7 p.m 7 p.m - 6 a.m
Argentina 6 a.m - 7 p.m 7 p.m - 6 a.m
Source: Based on Araujo Ibarra & Asociados S.A study. Source: Global Competitiveness Report, 2006-2007
Flexibility of Hiring and Firing Practices Working shifts
(2 day-shifts in Colombia)
4,34,0 4,0
3,8
3,2
2,7
2,0
0,00,51,01,52,02,53,03,54,04,55,0
Cos
ta R
ica
Col
ombi
a
Chi
le
Mex
ico
Per
u
Bra
zil
Ven
ezue
la
1 2 3 4 5 6 7Ranking*
Competitive cost of human resources
14.600
12.400
12.200
10.700
10.300
7.500
4.900
4.700
0 5000 10000 15000
Sao Paulo
Rio de Janeiro
Santiago de Chile
Buenos Aires
Lima
Caracas
Mexico DF
Gross income of an Industrial Workerannual US$ (2006)
Sources: UBS Prices & Earnings 2006 Edition
27.700
22.900
22.700
20.400
15.600
15.200
15.100
12.600
0 10000 20000
Sao Paulo
Santiago de Chile
Rio de Janeiro
Buenos Aires
Caracas
Mexico DF
Lima
Gross income of an engineerannual US$ (2006)
Bogota Bogota
Improvements in infrastructure
3,25
3,35
3,9
4,61
5,33
5,72
6,58
0 2 4 6 8
Argentina
Mexico
Venezuela
Brasil
Chile
España
Investment in telecommunications(% of GDP)
36
55
53
47
33
58
22
23
12
27
2
27
31
320,53
0,55
0,57
0,57
0,62
0,86
1,57
0 0,5 1 1,5 2
Mexico
España
Venezuela
Argentina
Chile
Brasil
Ranking (61 countries)
Source: The World Competitiveness Yearbook 2006-IMD
Energy infrastructure (0= is not efficient; 10=It is efficient)
Colombia Colombia
World Economic Forum, April 2007
Fuente: ECLAC, Calculations Proexport
ATPDEA USA
GDP US$ : 11,735,000 MM
Population 296 MM SGP ANDEAN
European Union
GDP US$ : 11,000,000MM
Population 455 MM
MERCOSUR (Argentina, Brazil,
Paraguay, Uruguay):
GDP US$: 1,372,522MM
Population255 MM
CAN (Peru, Venezuela
Ecuador, Bolivia):
GDP US$ : 216,138 MM
Population 76 M
FTA with the USA signed
October 2006
Grupo de los 3: (Mexico,
Venezuela)
GDP US$ : 836,446MM
Population132 MM
FTA with Chile
GDP US$ : 92,263 MM
Población 16 MM
Preferential access to global markets
Complementation agreementsTariff preferences Free trade agreements
Preferential access to over 1,200 million consumers worldwide
Sectors with tax incentives
Hotel construction and remodeling (30 years)
Eco-tourism services (20 years)
New software (10 years)
Publishing companies (20 years)
Wind or bio-mass electric generation (15 years)
River transport (15 years)
Forestry plantations (permanent)
New medical products
Seismic services (Until 2008)
Income tax exemptions were granted in some sectors for a limited time period starting on January 1st , 2003 (Law 788, 2002)
Colombia offers legal stability contracts as a guarantee for investors
Amount of the investment: 7,500 current minimum legal wages. (Around U$ 1,500,000)
Payment of a premium to the government equivalent to 1% of the investment made.
Objective The promotion of new investments and the expansion of existing ones by securing stability on the rules that are applicable to an investment.
* Excludes laws on mandatory taxes or investments issued during state of emergency, social security, indirect taxes, financial sector regulations and public utility services rate regime.
Conditions
Between 3 and 20 yearsDuration
Request Technical
assessment Evaluation Approval
Santa Marta
Barranquilla
CandelariaCartagena
Rionegro
PacíficoPalmaseca
Bogota
Quindío
Cúcuta
Some incentives for foreign trade
10 Free Trade Zones (FTZ)- Flat 15% income tax rate for industrial users and no tax on remittances abroad.- Tax exemption on duties and VAT on imports of capital equipment and production inputs.-Non restricted foreign exchange management.-Expedite and simplified procedures.
Large exporter regime (Altex)- No payment of VAT on industrial machinery not produced in the region. -Favorable customs procedures
Vallejo Plan- Imports of inputs and raw materials are exempt from duties and VAT, if they are used in the production of goods that will be exported.
New Free Trade Zone Regime
Flat rate on taxable income: 15%
Goods interned into these areas are considered to be outside the national territory for import
and export taxes (VAT, DUTIES)
VAT exemption on raw materials, supplies and finished goods sold from the national
customs area to industrial users in the FTZ
Exports from the FTZ to third countries benefit from international trade agreements.
Imported machinery directly related to the business operation is not subject to customs´
taxes.
Decree 383 of 2007 establishes the following benefits:
Three types of Free Trade Zones
PERMANENT FREE
TRADE ZONE
SPECIAL OR SINGLE-COMPANY FTZ
TEMPORARY FREE
TRADE ZONE
An FTZ operator manages the area where companies established in the FTZ carry out their industrial or trade activities
Authorized for a single company to perform its industrial or trade activities within a determined area.
Authorized for fairs, trade shows, congresses and international seminaries that are important to the country’s economy and international trade.
Requirements to establish a Special or Single-Company FTZ
Within the following three years from being granted FTZ status:
-Make investments worth approximately U$ 32,000,000 or create 600 direct jobs.
- For agro-industrial projects: U$ 16,400,000 or the hiring of 500 employees
High economic and social impact (as per assessment issued by the Trade and Industry Ministry, the National Planning Department and the National Tax Authority)
Important contribution to:
1. Industrial rationalization, and/or2. technological and/or service transfer
Company Requirements
Project Requirements
Why using Colombian Free Trade Zones?
1. Colombia offers a competitive preferential rate of 15% for a 30-year time period, extendable for another 30 years. This rate does NOT depend on exports or sales to the domestic market, it is compatible with WTO rules, and does not have a maximum time limit or procedures pending with the WTO.
2. The law allows establishes a special regime for “single-company” Free Trade Zones, which can locate in any region of the country.
3. No sectors are excluded from using FTZs.
4. It offers both tax exemptions on imports and tax exemptions on income taxes and other regional taxes.
5. Tax exemptions on imports are not conditioned to the availability of national production.
Why using Colombian Free Trade Zones?
6. Goods produced in the FTZ may be sold to the domestic market (subject to payment of the corresponding duties).
7. The country’s trade agenda ensures stability and a privileged position as an exporting platform.
8. Colombia offers an important domestic market with good growth potential.
9. The country offers important human capital advantages at the professional level, in terms of quality, availability and cost.
PROEXPORT COLOMBIA
YOUR LOCAL PARTNER IN COLOMBIA
Proexport offers investors the following services:
Provides updated economic and legal information Assists potential investors in getting established in the country Supports investors that are already established Helps to assess and improve the business climate
Support from Proexport
International recognition:
Special award for merit and innovation from International Foreign Trade Center - 2004
Awarded Leading Agency in Providing Investor Information
by WAIPA and MIGA - 2006
Beijing, China
Caracas, Venezuela
Ciudad de México, México
Hamburgo, Alemania
Lima, Perú
Londres, Inglaterra
Madrid, España
Miami, E.U.
Nueva York, E.U
Quito, Ecuador
San Jose, Costa Rica
Santiago de Chile,
Chile
Toronto, Canadá
Bruselas, Bélgica
Caribe
Roma, Italia
Washington
Sao Pablo, Brasil
Comercial officesCommercial
representations
Proexport international network
www.colombiaespasion.com
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