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