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AAuuttoommoottiivvee IInndduussttrryy Volume I – No. 1
January 2010
Editorial:
Fiducoldex – Proexport Colombia Trust Foreign Investment Vice presidency [email protected]
Editores:
Manuel Salgado Pardo Tatiana Rodríguez Foreign Investment Advisor Market Intelligence Analyst Teléfono: +57 (1) 5600100 – Fax: +57 (1) 3415689 Teléfono: +57 (1) 2823232 [email protected] [email protected]
TTAABBLLEE OOFF CCOONNTTEENNTTSS
Introduction
1. Automotive Industry trends in Colombia .................................................................. 4
2. Colombia, an opportunity to invest in the automotive industry ............................ 13
3. The most competitive incentives regime for investors .......................................... 16
4. Relates Entities ........................................................................................................ 19
5. Proexport Services ................................................................................................... 19
Introduction Colombia is the ideal stage to generate a platform for the manufacturing and assembly of cars, trucks, buses and auto parts destined to supply the local and regional markets. The automotive industry represents 6.2% of GDP, employs close to 2.5% of the occupied population and places Colombia as the fifth automobile manufacturer in Latin America. Some of the key factors to invest in this sector that you will find in this document are:
I. Dynamic automotive industry: average growth of close to 11% in manufacturing, 27% in exports and 15% in consumption.
II. Expanded market: preferential access to an expansive number of automotive units of more than 38
million.
III. Developing auto parts sector: auto parts sales to local manufacturers of close to US$ 600 million, increase in imports of 48% in the last three years and in the last 7 years an increase of almost 1.2 million automotive units which represented an increase of close to 31%, all figures that show a strong demand and growth in the country.
IV. Qualified labor at competitive prices: there are close to 15,000 professional and technical graduates available for the automotive industry and related fields. Additionally the industry counts with competitive wages of approximately US$ 1.73/hour for operators.
V. World Class Sector: the chain auto parts - vehicles was selected by the government and private sector as one of the strategic sectors to actively promote through the Productive Transformation Program, a public-private initiative that aims at executing a long term business plan with a common goal, making automotives a World Class Sector.
VI. Tax Benefits & Incentives: the sector has Assembly or Transformation Authorized Warehouses, competitive Free Trade Zones and Legal Stability Contracts.
1. Automotive Industry trends in Colombia
The Colombian automotive industry represents 6.2% of GDP and employs 2.5% of the occupied personnel within the manufacturing industry, making Colombia the fifth automotive manufacturer in Latin America. In Colombia, this industry gathers activities such as assembly (light vehicles, trucks, buses and motorcycles) and the manufacturing of parts and fittings used in the OEM assembly or after-market. As for spare parts, it involves raw material suppliers from other industries such as metal mechanic, petrochemical (plastic and rubber), and textiles.
The Colombian Automotive Industry´s productive chain
Source: National Planning Department (DNP in Spanish) – Chain´s simplified structure
The Colombian automotive industry counts with close to 5 million automotive units, it also holds commercial agreements that provide it with preferential access to a regional automotive market of 34 million vehicles (Mexico, 28 million, Chile, 3 million, Peru, 1.5 million and Ecuador, 1.1 million).
Power Steering, breaks and
suspension
Engine and
lubrication
Chassis
Transmission and
gear box
Wheels, rims and
tires
Bodywork
CKD Material
Primary Assembly
Electronic equipment and
instalation
Accesories, packages and others
Control equipment and tools
Glass
Assembly line
(body shop, paint shop and a final assembly)
Interior decoration
Air conditioning
Automobiles
Commercial
Vehicles
• 38 million automotive units
Automotive units
2008, million units*
Source: INEGI, México. CIDATT, Perú. AEAD, Ecuador.
• Annual average growth of 11% in the last 6 years
The industry has shown positive dynamics in the last six years, with an average growth rate of 11total, Colombia manufactured approximately 116,000 units in 2008 and 88,000 in 2009. Vehicle sales in the country increased to 245,000 units in 2008 and 185,000 in 2009 and in the last 7 years the apparent consumption of vehicles increased about by 1
Domestic vehicle market
2002-2009, Units
Source: Colombian Association of auto parts m
The dynamics of the automotive industry have been led by the passenger and cargo commercial vehicles sector, auto parts and vehicles in general. In the next few pages we will review the detailed tendencies of each sector.
1,1
1,5
3,0
5,3
Ecuador
Perú
Chile
Colombia
México
2002 2003
Production 79.921 62.816
Exports 23.124 9.357
Imports 33.595 34.707
Apparent Consumption 90.392 88.166
0
50.000
100.000
150.000
200.000
250.000
300.000
AEAD, Ecuador. INE, Chile.2008, * Units include vehicles, trucks, passenger and cargo com
Annual average growth of 11% in the last 6 years
The industry has shown positive dynamics in the last six years, with an average growth rate of 11total, Colombia manufactured approximately 116,000 units in 2008 and 88,000 in 2009. Vehicle sales in the country increased to 245,000 units in 2008 and 185,000 in 2009 and in the last 7 years the apparent consumption of vehicles increased about by 100% going from 90,392 to 180,472 units.
parts manufacturers (ACOLFA in Spanish) 2009
The dynamics of the automotive industry have been led by the passenger and cargo commercial vehicles sector, auto parts and vehicles in general. In the next few pages we will review the detailed tendencies of
28,0
2003 2004 2005 2006 2007 2008 2009
62.816 93.547 109.333 138.690 181.941 116.437 88.342
9.357 28.396 41.899 48.654 70.593 26.760 3.523
34.707 55.688 78.196 112.173 151.117 126.884 95.653
88.166 120.839 145.630 202.209 262.470 216.547 180.472
5.3 million includes motorcycles, the automotive fleet reached 3.8 million units
INE, Chile.2008, * Units include vehicles, trucks, passenger and cargo commercial vehicles
The industry has shown positive dynamics in the last six years, with an average growth rate of 11%. In total, Colombia manufactured approximately 116,000 units in 2008 and 88,000 in 2009. Vehicle sales in the country increased to 245,000 units in 2008 and 185,000 in 2009 and in the last 7 years the apparent
00% going from 90,392 to 180,472 units.
The dynamics of the automotive industry have been led by the passenger and cargo commercial vehicles sector, auto parts and vehicles in general. In the next few pages we will review the detailed tendencies of
88.342
3.523
95.653
180.472
1.1 Light-Vehicles
• Recognized OEM´s operate in Colombia not only to supply the local market but the
regional one as well
In the local and regional vehicle assembly activities, the automotive industry counts with three OEM companies: General Motors, Renault and Mazda. During 2009, light vehicle production reached 74,094 units, close to 84% of the total vehicles produced by these companies. General Motors 44,682 units, followed by Renault Automotriz (CCA) with 6.717 units. In the last six years these three companies have manufactured approximately 602,815 units for the local market, with an average growth rate of 13%.
1.2 Commercial Cargo Vehicles
• General Motors and HINO: Recognized assemblers already have operations in Colombia
General Motors and Hino already have operations in the country for the assembly of light weight trucks. The first assembled close to 4,500 units in 2009. Hino, assembled 2.130 units in 2009.
General Motors -Colmotores
Sofasa
General Motors -Colmotores Toyota
Recognized OEM´s operate in Colombia not only to supply the local market but the
In the local and regional vehicle assembly activities, the automotive industry counts with three OEM companies: General Motors, Renault and Mazda.
vehicle production reached 74,094 units, close to 84% of the total vehicles produced by these companies. General Motors – Colmotores led the manufacturing of this type of vehicle with 44,682 units, followed by Renault – Sofasa with 22,695 units, and Mazda – Compañia Colombiana
In the last six years these three companies have manufactured approximately 602,815 units for the local market, with an average growth rate of 13%.
Vehicles
General Motors and HINO: Recognized assemblers already have operations in Colombia
General Motors and Hino already have operations in the country for the assembly of light weight trucks. The first assembled close to 4,500 units in 2009. Hino, which started manufacturing at the end of 2008,
SofasaCCA - Compañia Colombiana
Automotriz
Recognized OEM´s operate in Colombia not only to supply the local market but the
In the local and regional vehicle assembly activities, the automotive industry counts with three OEM
vehicle production reached 74,094 units, close to 84% of the total vehicles produced Colmotores led the manufacturing of this type of vehicle with
Compañia Colombiana
In the last six years these three companies have manufactured approximately 602,815 units for the local
General Motors and HINO: Recognized assemblers already have operations in Colombia
General Motors and Hino already have operations in the country for the assembly of light weight trucks. which started manufacturing at the end of 2008,
• High demand for cargo vehicles in the Colombian market The behavior of the commercial cargo vehicles sector in the country has been extremely positive. Near 95% of the cargo in Colombia is moved by road, this figure being 125 million tons per year, generating the frequent and continuous use of light and medium Sales of commercial cargo vehicles in the last four years have reached 62,088 units, of which 38% are assembled in the country and 62% are imported commercial vehicles.
Commercial cargo vehicle sales
2006- I Trimester 2009, % of Total
Source: Colfecar (Colombian Federation of road cargo transporters
• Currently, near 48% of the 285,661 units in circulation have more than 20 years in use The average use of current vehicles in circulation is 23 years, even there are close to 33.000 vehicles with more than 50 years in circulation; and the need to have them replaced can be clearly seen; because of this a renew1 process of this 48%, around 136.000 units vehiclesautomotive units in circulation and make the sector one of the most competitive.
1.3 Commercial passenger vehicles
• For the local assembly of buses, important companies with world recognition stand out
SUPERPOLO S.A, the merger between Carrocerías Superior and the Brazilian company Marcopolo, and BUSSCAR DE COLOMBIA S.A., partner of Brazil´s BUSSCAR ÔNIBUS S.A. with a group of Colombian investors, are the companies that led the national assembly of busessales of approximately US$ 53 million while BUSSCAR US$ 19 million.
1 Program headed by the Ministry of Transport
62%
38%
Total: 62,088 units
High demand for cargo vehicles in the Colombian market
The behavior of the commercial cargo vehicles sector in the country has been extremely positive. Near 95% of the cargo in Colombia is moved by road, this figure being 125 million tons per year, generating the frequent and continuous use of light and medium weight trucks, as well as eighteen wheelers.
Sales of commercial cargo vehicles in the last four years have reached 62,088 units, of which 38% are assembled in the country and 62% are imported commercial vehicles.
Colombian Federation of road cargo transporters)
Currently, near 48% of the 285,661 units in circulation have more than 20 years in use
current vehicles in circulation is 23 years, even there are close to 33.000 vehicles with more than 50 years in circulation; and the need to have them replaced can be clearly seen; because of
process of this 48%, around 136.000 units vehicles has been started, this to modernize the automotive units in circulation and make the sector one of the most competitive.
1.3 Commercial passenger vehicles
For the local assembly of buses, important companies with world recognition stand out
between Carrocerías Superior and the Brazilian company Marcopolo, and BUSSCAR DE COLOMBIA S.A., partner of Brazil´s BUSSCAR ÔNIBUS S.A. with a group of Colombian investors, are the companies that led the national assembly of buses for 2008. SUPERPOLO reported sales of approximately US$ 53 million while BUSSCAR US$ 19 million.
Program headed by the Ministry of Transport – Scrapable Process
Imports
Assembled in Colombia
The behavior of the commercial cargo vehicles sector in the country has been extremely positive. Near 95% of the cargo in Colombia is moved by road, this figure being 125 million tons per year, generating
weight trucks, as well as eighteen wheelers.
Sales of commercial cargo vehicles in the last four years have reached 62,088 units, of which 38% are
Currently, near 48% of the 285,661 units in circulation have more than 20 years in use
current vehicles in circulation is 23 years, even there are close to 33.000 vehicles with more than 50 years in circulation; and the need to have them replaced can be clearly seen; because of
has been started, this to modernize the
For the local assembly of buses, important companies with world recognition stand out
between Carrocerías Superior and the Brazilian company Marcopolo, and BUSSCAR DE COLOMBIA S.A., partner of Brazil´s BUSSCAR ÔNIBUS S.A. with a group of Colombian
for 2008. SUPERPOLO reported
AGRALE another Brazilian player has operation in Colombia since 2002.Ultra, Autobuses AGA, Inca Fruegauf, Incon
• Positive dynamics; close to 66% of commercial passenger vehicle sales are assembled in
Colombia
The national manufacturing of passenger transport vehicles represented 66% (11,487 units) of total sales between the first trimester of 2006 and the first trimester of 2009, which amounted to 17,847 units. Imports were 34% with 5,995 units. Commercial passenger vehicle sales
2006- I trimester 2009, % Source: Colfecar
• The unification of the mass transport system in the main cities in Colombia will lead to
increased vehicle purchases
The total automotive units for passenger transport have an average useful life of seven years, which means high rotation of these units; considering the current consolidation of the mass transport system in the main cities, this represents a market with siand the acquisition of more advanced technologies.
66%
34%
Total: 17,847 Units
AGRALE another Brazilian player has operation in Colombia since 2002. Local companies like AGA, Inca Fruegauf, Inconcar, were also good players.
Positive dynamics; close to 66% of commercial passenger vehicle sales are assembled in
The national manufacturing of passenger transport vehicles represented 66% (11,487 units) of total sales between the first trimester of 2006 and the first trimester of 2009, which amounted to 17,847 units. Imports were 34% with 5,995 units.
ssenger vehicle sales
The unification of the mass transport system in the main cities in Colombia will lead to
increased vehicle purchases
The total automotive units for passenger transport have an average useful life of seven years, which means high rotation of these units; considering the current consolidation of the mass transport system in the main cities, this represents a market with significant potential, apart from a high purchasing index and the acquisition of more advanced technologies.
Assembled in Colombia
Imports
Local companies like Non Plus
Positive dynamics; close to 66% of commercial passenger vehicle sales are assembled in
The national manufacturing of passenger transport vehicles represented 66% (11,487 units) of total sales between the first trimester of 2006 and the first trimester of 2009, which amounted to 17,847 units.
The unification of the mass transport system in the main cities in Colombia will lead to
The total automotive units for passenger transport have an average useful life of seven years, which means high rotation of these units; considering the current consolidation of the mass transport system in
gnificant potential, apart from a high purchasing index
• The mass transport systems have forecasted they will need to purchase a fleet of buses of
3,300 units between 2009 and 20102
It is estimated that between 2009 and 2010 3,300 new units will be purchased for the integrated mass transport systems of the main cities in the country. It should be noted that in all the cities, the systems are in their initial stages, only Bogota is on the 3rd stage of the final project which includes 8 stages which will be finished by 2031. In the cities of Cali and Bucaramanga, the projects will be finished by 2017; Cartagena´s is just starting out the bidding process which will go through 2013. Taking into account that the useful life of these standard, conventional and feeder buses is estimated at only 8 years, allows for important fleet renewal cycles in these cities. Equally, the government is in the process of structuring the new “Strategic Public Transport Systems” (SETP), with an estimated investment of US$ 2.2 billion in small cities such as: Armenia, Pasto, Manizales, Popayan, Santa Marta, Neiva, Valledupar, Monteria, Villavicencio, Buenaventura, Ibague and Sincelejo, which will allow for an even bigger increment in the country´s need for new passenger bus units in the next few years.
City Transport System No. Buses
Medellín Metroplus 1,121
Cali Metrocali 913
Cartagena Transcaribe 716
Bucaramanga Metrolinea 368
Pereira Megabus 137
Soacha Transmilenio (Bogotá) 45
1.4 Auto parts
• Recognized auto parts companies are established in Colombia
Colombia has become the export platform for recognized foreign companies such as Yazaki, Michelin, Saint Gobain, Vitro, Good Year, Dupont, DANA Corporation, and AGP American Glass Products (Bullet proof glass), amongst others.
2 The fleet for 2009 and 2010 includes articulated buses, conventional among others
• The dynamics of the automotive industry in the last few years, have
auto parts sector
The increase in vehicle sales in Colombia and the Andean countries between 2002 and 200development of mass transport systems and the signing of commercial treaties to explore new export markets, have leveraged this growth, reaching revenues of US$ 1.3 billion and generating close to 22,000 jobs in 2008.
• Colombian exports have increased 58% in the last four years
Between 2005 and 2009 Colombian auto parts exports increased 58%, going from US$ 277 million to US$ 439 million. Venezuela, Ecuador and Brazil amounted to 74% of total exports for that period. Colombian auto parts exports
2005-2009, US$ millions
277 350
-
100
200
300
400
500
600
2005 2006
Electric harnesses
Powdered paint
The dynamics of the automotive industry in the last few years, have motivated the growth of the
The increase in vehicle sales in Colombia and the Andean countries between 2002 and 200development of mass transport systems and the signing of commercial treaties to explore new export
veraged this growth, reaching revenues of US$ 1.3 billion and generating close to 22,000
Colombian exports have increased 58% in the last four years
Between 2005 and 2009 Colombian auto parts exports increased 58%, going from US$ 277 million to US$ 439 million. Venezuela, Ecuador and Brazil amounted to 74% of total exports for that period.
Source: ACOLFA
350
504 519
439
2006 2007 2008 2009
Tires
Tires Floated glass
Tempered glass
motivated the growth of the
The increase in vehicle sales in Colombia and the Andean countries between 2002 and 2008, the development of mass transport systems and the signing of commercial treaties to explore new export
veraged this growth, reaching revenues of US$ 1.3 billion and generating close to 22,000
Between 2005 and 2009 Colombian auto parts exports increased 58%, going from US$ 277 million to US$ 439 million. Venezuela, Ecuador and Brazil amounted to 74% of total exports for that period.
439
2009
Destination of Colombian auto parts exports
2005-2008, %
Destination of Colombian Autoparts
2009, %
Source: ACOLFA
• In the medium and long term, the sector´s strategy will be aimed at a more diversified
market with specific niches and added value.
The sector has had positive evolvement and dynamics, for which medium and long term strategies have been implemented, and aim at consolidating and generating added value to the sector.
Colombia counts with two strategies for this purpose:
VENEZUELA
ECUADOR
29%
BRAZIL
9%
UNITED
STATES
4%
MEXICO
2%
OTROS
22%
Venezuela
32%
Ecuador
15%
Brazil
7%
EE.UU
7%
Peru
5%
Total: USD 1.648 Millones
Destination of Colombian auto parts exports
Source: ACOLFA
In the medium and long term, the sector´s strategy will be aimed at a more diversified
market with specific niches and added value.
The sector has had positive evolvement and dynamics, for which medium and long term strategies have aim at consolidating and generating added value to the sector.
Colombia counts with two strategies for this purpose:
VENEZUELA
34%
Other
34%
1.648 Millones
In the medium and long term, the sector´s strategy will be aimed at a more diversified
The sector has had positive evolvement and dynamics, for which medium and long term strategies have aim at consolidating and generating added value to the sector.
1. Productive Transformation Program for the
medium, and long term, whose goal is focused on the manufacturing of specialized technology auto parts for export purposes to markets like Central America, Brazil, Argentina and the U.S.
2. Market diversification (Medium and long term ): A strategy lead by Proexport, which includes the
following:
I. Diversify in already established markets (United States, Mexico, Canada, Chile, Europe and
Brazil): The strategy includes the identification and ivalue, for potential products amongst which auto parts is included.
II. Diversify in new markets: (Russia).
norms and regulations, and specific trade channels in theexploratory and promotional activities for the auto parts sector.
• Local demand exceeds Colombia´s manufacturing capacity
In the last four years auto parts imports have increased 39%, showing high demand for assemblers well as for the after market. Currently, there are 40 vehicle brands being commercialized in the country, stimulating internal consumption that is presently met by imports. Colombian auto parts imports Vs. vehicle imports
2005 -2009, US$ millions
1.525 1.690
1.074
-
500
1.000
1.500
2.000
2.500
3.000
2005 2006
Productive Transformation Program for the chain autoparts-vehicles: A strategy for the short, medium, and long term, whose goal is focused on the manufacturing of specialized technology auto parts for export purposes to markets like Central America, Brazil, Argentina and the U.S.
Market diversification (Medium and long term ): A strategy lead by Proexport, which includes the
Diversify in already established markets (United States, Mexico, Canada, Chile, Europe and
The strategy includes the identification and incursion in specific niches of added value, for potential products amongst which auto parts is included.
Diversify in new markets: (Russia). The strategy aims at gathering information, research on norms and regulations, and specific trade channels in the market, and the realization of exploratory and promotional activities for the auto parts sector.
Local demand exceeds Colombia´s manufacturing capacity
In the last four years auto parts imports have increased 39%, showing high demand for assemblers well as for the after market. Currently, there are 40 vehicle brands being commercialized in the country, stimulating internal consumption that is presently met by imports.
Colombian auto parts imports Vs. vehicle imports
Source: ACOLFA
1.690
2.238 2.258 2.132 1.909
2.464 2.215
2006 2007 2008
Autopartes Vehículos
: A strategy for the short, medium, and long term, whose goal is focused on the manufacturing of specialized technology auto parts for export purposes to markets like Central America, Brazil, Argentina and the U.S.
Market diversification (Medium and long term ): A strategy lead by Proexport, which includes the
Diversify in already established markets (United States, Mexico, Canada, Chile, Europe and
ncursion in specific niches of added
The strategy aims at gathering information, research on market, and the realization of
In the last four years auto parts imports have increased 39%, showing high demand for assemblers as well as for the after market. Currently, there are 40 vehicle brands being commercialized in the country,
2.132
1.509
2009
2. Colombia, an opportunity to invest in the automotive industry
2.1 The autoparts-vehicle chain has been identified by the government and private
sector as a world class sector to be promoted and potentialized. The auto parts sector has been identified as one of the 8 sectors that make part of the Productive Transformation Program in Colombia; this initiative goal is that by 2032 Colombia will be recognized as a leader export country in the auto parts sector, generating revenues of US$ 10 billion and positioned as a regional leader in specific segments. To accomplish this, a business plan with 25 initiatives has been structured, its execution aims at: � Development of solid assembly alternatives, with a specialized and competitive proposal at the
regional level, which will allow the focus to be on vehicle exports.
� Consolidate the presence in auto parts export niches.
� Focus efforts on specialized parts, distinctive for certain emerging technologies.
2.2 Quality of the automotive industry and presence of multinational companies for
the chain development.
Colombia counts with local and foreign companies certified according to the highest international standards under norm TS 16949, who have experience in the handling of three technologies: American, European, and Asian. Some of the foreign companies that stand out are: Good Year, Michelin, Yazaki, Saint Gobain, Vitro, Dana, Dupont, among others.
2.3 The auto parts supply allows assemblers to meet a minimum regional content to be
able to access preferential tariffs in the agreements. Local auto parts companies and the interest of new ones in the Colombian automotive market, make it easier to reach the minimum regional content required by the Andean countries and will allow the expansion of the supply and product variety.
2.4 Colombia´s greatest asset is the availability of qualified human capital at
competitive costs. There are more than
and labor costs are competitive at US$ 1.73/hour for industry operators. The qualified labor availability at a competitive cost is one of the key factors in the automotive industry. The automotive industry and related fields count with 14,910 graduates between professional and technical, besides competitive wages for jobs within the industry, such as operators who have the lowest wages in the region, and manufacturing engineers who have salaries of US$ 2,000 is US$ 1,700 lower than in Brazil and US$ Number of graduates in the industry
2001-2008, US$/Hour
Source: Colombian Ministry of Education
• The auto parts sector stands out for its specialization in different segments.
Currently, the sector generates 22,000 jobs, a growth of approximately 38%; the sector´s labor in the country is specialized for each one of the segments and has 60 years of experience in vehicle assembly in the country.
Professionals 11,343
Technicians 3,567
Total: 14,910 graduates
2.4 Colombia´s greatest asset is the availability of qualified human capital at
competitive costs. There are more than 15,000 professional and technical graduates,
and labor costs are competitive at US$ 1.73/hour for industry operators.
The qualified labor availability at a competitive cost is one of the key factors in the automotive industry.
nd related fields count with 14,910 graduates between professional and technical, besides competitive wages for jobs within the industry, such as operators who have the lowest wages in the region, and manufacturing engineers who have salaries of US$ 2,000 per month, figure that
700 lower than in Brazil and US$ 3,000 than Chile.
Number of graduates in the industry Operator´s salary in the automotive industry
Source: Colombian Ministry of Education Source: The World Competitiveness Yearbook 2009
The auto parts sector stands out for its specialization in different segments.
Currently, the sector generates 22,000 jobs, a growth of approximately 38%; the sector´s labor in the country is specialized for each one of the segments and has 60 years of experience in vehicle assembly in
7,53
4,05
1,88
1,73
0 10
United States
Brazil
Argentina
Mexico
Colombia
2.4 Colombia´s greatest asset is the availability of qualified human capital at
15,000 professional and technical graduates,
and labor costs are competitive at US$ 1.73/hour for industry operators.
The qualified labor availability at a competitive cost is one of the key factors in the automotive industry.
nd related fields count with 14,910 graduates between professional and technical, besides competitive wages for jobs within the industry, such as operators who have the lowest
per month, figure that
ndustry
Source: The World Competitiveness Yearbook 2009-IMD
Currently, the sector generates 22,000 jobs, a growth of approximately 38%; the sector´s labor in the country is specialized for each one of the segments and has 60 years of experience in vehicle assembly in
27,76
20 30
Direct jobs evolution
In the auto parts sector
Source: McKinsey & Company – Developing World Class sectors. Study commissioned by the Ministry of Commerce, Trade & Tourism
2.5 Sustained growth in the unit volume in Colombia. In six years the number of
automotive units increased by 56%.
Evolution of automotive fleet
Million of units
Source: Annual book of statistics 2008, Ministry of Transport
Due to the relative ease in obtaining credit lines that the banking system has offered in the last few years, an appreciation of the Colombian peso and currently the automotive fleet is around 5.3 million unit
0
5.000
10.000
15.000
20.000
25.000
2001 2008
16.000
Growth. 01/08 :
38%
3,4 3,5 3,7
0,0
1,0
2,0
3,0
4,0
5,0
6,0
2002 2003 2004
Employed personnel per segment
Developing World Class sectors. Study commissioned by the Ministry of Commerce, Trade &
Tourism – Productive Transformation Program
Sustained growth in the unit volume in Colombia. In six years the number of
automotive units increased by 56%.
Source: Annual book of statistics 2008, Ministry of Transport
Due to the relative ease in obtaining credit lines that the banking system has offered in the last few years, an appreciation of the Colombian peso and the increase in per capita income in Colombia, currently the automotive fleet is around 5.3 million units. (Include motorcycles)
2008
22.000
3,7 4,04,4
5,0 5,3
2004 2005 2006 2007 2008
Electric
21%
Motor train
20%
Exterior
12%
Interior
6%
Employed personnel per segment
Developing World Class sectors. Study commissioned by the Ministry of Commerce, Trade &
Sustained growth in the unit volume in Colombia. In six years the number of
Due to the relative ease in obtaining credit lines that the banking system has offered in the last few the increase in per capita income in Colombia,
Chassis
41%
2.6 Road infrastructure megaprojects will give the market greater competitiveness in
highway transport, generating a bigger flow of new units in the market.
In Colombia close to 95% of cargo is transported by road. For 2008, total mobilized cargo was 125 million tons. For this reason the Ministry of Transport in its competitiveness policy has put forward the concession of three megaprojects: Ruta del Sol, which looks at the construction of the second lane from Bogota to the Atlantic Coast which totals 1,172 km; Autopistas de la Montaña, which will improve the connectivity to the Department of Antioquia; and Ruta de las Américas, which looks at connecting Panama with Venezuela, bordering Colombia´s Atlantic Coast. In total the length of this project is close to 2,000 km.
3. The most competitive incentives regime for investors
3.1 Assembly or Transformation Authorized Warehouses that guarantee free tariff for
autoparts complying with the requirements of Andean origin. For transformation and assembly operations, in automobiles as well as auto parts, the figure of Assembly or Transformation Authorized Warehouses (DHTE in Spanish) of final goods established in the Andean Automotive Agreement, provides for the following advantages: - 0% tariff for imports of manufactured or assembled vehicles from countries members of the Andean
Automotive Agreement, as well as for auto parts and materials manufactured in such deposits that meet the origin requirements.
3.2 30% deduction for companies whose investment in the country includes the
acquisition of fixed productive real assets
3.3 Competitive Free Trade Zones With the objective of promoting trade, investment, and creation of labor sources in the country, Colombia has a Free Trade Zone regime that includes two schemes: Single Enterprise Free Trade Zones, and Permanent Free Trade Zones. The following are the most relevant incentives for the Free Trade Zone regime:
� 15% Income tax (the regular income tax tariff is 33%). � VAT exempt and no import duties � Benefits from international commercial agreements. � Exports can be made from the FTZ to the rest of the national customs territory, unlike
other Free Trade Zone regimes where all goods must be exported.
3.3.1 Permanent Free Trade Zone (PFZ)
Permanent Free Traded Zone, are geographical areas in the national territory where various companies establish themselves to operate with special tax and customs treatment, the zone is administered by a user-operator. Requirements for industrial goods and services companies:
Total assets
(US$ )
Investment amount
(US$ millions)
Generate a minimum
number of direct jobs
of:
0 – 128,750 0 0
128,750 – 1.29 Million 0 20
1.29 – 7.73 Million 1.29 30
More than 7.73 Million 2.96 50
Reference Exchange rate: US$ 1 = COP 2,000. Minimum legal monthly legal wage for 2010 is COP 515,500. Both of these parameters are subject to change
3.3.2 Single Enterprise Free Trade Zone (SEFZ)
• A single company can obtain the benefits of the Free Trade Zone by establishing themselves
anywhere in Colombia fulfill certain requirements
Under this special regime, recognition as a Free Trade Zone can be applied for a single enterprise that develops a new investment project depending on the sector to which it belongs:
Type of SEFZ Investment (US$ millions) Direct jobs
Goods (1) 38.63 150
Services (2)
2.58 – 11.85 500
11.85 – 23.69 350
23.69 or more 150
Services - Ports (3) 38.63 20
(1) Each additional investment of US$ 5.9 mm reduces the number of direct jobs by 15. In any case 50 direct jobs must be
generated. (2) For health service entities duly accredited, 50% of the jobs can be validly linked. (3) 50 indirect jobs can replace 20 direct jobs.
3.4 Legal Stability Contracts
• Colombia offers Legal Stability Contracts to guarantee the terms for investment projects.
Legal stability agreements are tools that foreign investors may use if they comply with the requirements, these agreements allow investors to “stabilize” the regulation the find determining for the investment. Thus the result is that if the regulation is changed in a detrimental way for the investor, the previous regulation that was stabilized will be applied during the term of the agreement (3-20 years)
Requirements:
I. Investments must be reaches approximately US$ 1.9 million (7,500 minimum legal salaries in Colombia). [2]
II. The investor must pay the government a premium equal to 1% of the amount of the
investment made every year. If the investment has a non-productive period, the fee paid during that period will be 0.5%.
3.4.1 Norms not subject to Legal Stability Contracts
• Rules regarding the social security system
• The obligation to report and pay taxes levied by the government under a state of emergency
• Indirect taxes (i.e., the VAT or the tax on banking transactions)
• Prudential regulations of the financial system
• The utility rate system
• Environmental regulation.
[2]
The investment amounts required to Access the Free Trade Zone benefits are calculated in Minimum Monthly Legal Wages (S.M.M.L.V in Spanish). Information given in US$ uses an Exchange rate of COP 2.000 = USD 1, and the minimum wage for 2010 is COP 515,500- Both of these may vary at any time.
4. Relates Entities
Entity Subject Web Page
Acolfa Colombian Association of Auto
parts Producers www.acolfa.org.co
Automotive Industry
Chamber - ANDI
National Association of Industrialists– Automotive Industry
Chamber www.andi.com.co
Asopartes Association of the Automobile and
Parts Sector www.asopartes.com
Productive
Transformation
Program
Ministry of Trade, Industry and Tourism
www.minconmercio.gov.co www.transformacionproductiva.gov.co
Colfecar Colombian Federation of road
cargo transporters www.colfecar.org
Ministry of Transport Formulation and adaptation of
transport sector politics www.mintransporte.gov.co
Ministry of
Environment, Housing
& Territorial
Development
Environmental regulations on emissions
www.minambiente.gov.co
5. Proexport Services The Colombian government makes special emphasis on the need to generate favorable conditions and offer the greatest support possible to investors. Proexport ranked 16th amongst the best Investment Promotion agencies in the world and offers services to foreign investors that include:
• Information requests (economic, legal, procedural or sector specific, etc.)
• Public and prívate sector contacts
• Set up of agendas when investors visit Colombia
• After care services for investors who are already established in the country
• Evaluation and improvement of the business Outlook
All services are at no cost. The main objective is to create new businesses through efficient and friendly processes. All information given and handled in the process is confidential. Proexport counts with teams in 21 cities in the world. For us, it would be a pleasure to help you.
