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Colombia: An Upcoming Emerging Market for International Investors March 2011


About Us

Proexport promotes International Tourism, Foreign Direct Investment and Exports TOURISM

INVESTMENT

EXPORTS


Strategy 2011: Search Opportunities

Proexport promotes Colombia worldwide as a supplier of goods and services, Foreign Direct Investment destination and International Tourism. • Search Opportunities in the International Markets.

• Conducive to diversification with innovation. • Contributing to Sustainable Development and employment generation


Colombia, The C in the CIVETS

“The new BRICs are Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa (CIVETS). They are countries with major populations, dynamic, diverse economies, political stability and each of them has a brilliant future. Any company with global ambitions will have to take immediate action in these markets.� Michael Geoghegan, CEO HSBC April 26, 2010 in his speech to AmCham Hong Kong


The World is talking about Colombia…

“Whether on security, democratic stability, or vibrancy, the strength of Colombia’s democracy is there for all to see” Eric Farnsworth, vice president of the Council of the Americas.

“Colombia has increasingly become a bright star in the Latin American constellation,”

“While everybody’s been focused on the super hot Brazilian Economy to the south, Colombia’s quietly gone and become amazingly investable” Jim Cramer - 8 February 2011

Walter Molano, Emerging-market analyst of BCP Securities

“Yet against all odds Colombia has become the country to watch in the hemisphere.” Newsweek, July 2010.


Enhanced economic performance has come hand in hand with improved security

World Crisis

Security Problem

Source: ANDI (Asociaci贸n Nacional de Industriales)


The 28th largest world economy when adjusted by PPP and one of the largest non-OECD

*Gross domestic product (GDP) at purchasing power parity (PPP) Source: EIU (Economist Intelligence Unit)


The second largest Spanish speaking population in the world

250

200

Population (Millions of People), 2010*

191,5

150 111,2

100

50

46,3

45,8

40,1

38,2

33,7

29,6

28,2

21,9

16,9

11

10,6

10,6

0

Source: EIU (Economist Intelligence Unit) *Forecast

9,3

8,4

7,8

7,4

5

4,9

4,3


GDP per- capita is reaching US$10,000 when adjusted by PPP

57%

*GDP at purchasing power parity (PPP), divided by population Source: EIU (Economist Intelligence Unit)


Annual FDI net inflows have multiplied by four

Main investors in Colombia Stock 2000 – September 2010**

FDI, 2000 – September 2010 US$ Millions 12.000 10.252

10.000 8.000

6.656 6.000 4.000

0

7.201 6.324 6.524

United States • Stock US$ 11,919 M • Share 30.5%

Great Britain • Stock US$ 4,658 M • Share 11.9%

Spain

2.436 2.000

10.564

1.720

• Stock US$ 2,820 M • Share 7.2%

Mexico • Stock US$ 2,213 M • Share 5,7% Variation 2008 - 2009: -32% Variation Sep 2009 – Sep 2010: 3,2% *FDI by Exchange Balance **Participation by country positive accumulated inflows, it doesn´t includes investment or reinvestment of profits in the oil sector, Value 2009: US$ 36,364 million (so far there is not data for countries at first semester of the year) Source: Banco de la República (Balance of Payments)


Exports have tripled in nine years

Colombian exports by country, 2010

Exports, 2000 – 2010 US$ Millions

United States

45.000

37.626

40.000

39.820

35.000

• US$ 16.879 M • Share 42,5%

China

25.000

• US$ 1.967 M • Share 4,9%

20.000

Ecuador

32.852

30.000

13.158

10.000

• US$ 1,825 M • Share 4,5%

5.000

Netherlands

15.000

0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Variation 2008 - 2009: -12,7% Variation 2009 - 2010: 21,2% Source: DANE (Departamento Nacional de Estadísticas)

• US$ 1.617 M • Share 4,1%


In nine years international visitors in Colombia doubled. While tourism in the world increased 6,7%, in Colombia this trend increased 8,9% in 2010*

Tourism, 2000 – 2010 Thousand of Visitors*

Internationals visitors in Colombia by country 2010* 1.876

2.000

United States 1.600

1.700

1.200

• 345.158 Visitors • Share 23,4%

Venezuela • 197.173 Visitors • Share 13,4%

800

732

668

400

Ecuador • 122.076 Visitors • Share 8,3%

0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Variation 2008–2009: 17,2% (includes cruise) Variation 2009 - 2010: 10,3% (includes cruise) *It doesn't Include cruise **Includes cruise Source: DAS (Departamento Administrativo de Seguridad)

Argentina • 83.674 Visitors • Share 5,7%


In terms of Globalization, Colombia is ranked 3rd among Latin America countries, performing better than world economies such as Japan, Brazil, Russia and Indonesia.

Globalization Index, 2010 5

4,5 4 3,5

4,32 3,81

3,61

3,58

3,57

3,43

3,37

3,28

3,18

3 2,5 2 1,5 1 0,5 0

Source: Ernest and Young – The Globalization Index 2010, Ranking among 60 countries.

3,13

3,04

3,00

2,96

2,85


Highest level of international reserves and lowest level of inflation on record

Source: Banco de la RepĂşblica


Declining spreads on Sovereign Debt -lower than Latin America as a region-

1600

Sovereign Spreads (EMBI+): Colombia Vs. Latin America , 2000-2010

1400 1200 1000 800 600 400 200 3Jan00 25Apr00 15Aug00 6Dec00 2Apr01 24Jul01 14Nov01 11Mar02 1Jul02 21Oct02 12Feb03 5Jun03 25Sep03 16Jan04 10May04 27Aug04 17Dec04 7Apr05 26Jul05 15Nov05 1Sep06 26Dec06 19Apr07 9Aug07 3Dec07 28Mar08 18Jul08 7Nov08 5Mar09 24Jun09 14Oct09 5Feb10 28May10 17Sep10

0

Latin America Emerging Markets Bond Index Plus (EMBI+), basis point spread over US treasuries. Source: JPMorgan - Central Bank of Peru

Colombia


Colombia: the third most “Business Friendly� country in Latin America and top reformer in the region

Doing Business Ranking Variation, 2007-2011* (Change in positions)

Source: Top Reformers Report, World Bank *Positive figures show improvements in business environment

LatinAmerica Ranking

Country

Mexico

35

Peru

36

Colombia Chile

39

Panama

72

Argentina

115

Costa Rica

125

Brazil

127

Ecuador

130

Venezuela

172

Mexico

35

Peru

36

43


Ranked among the top countries on investor protection

Strength of Investor Protection, 2011

Rating Ranking made up by 183 countries Source: Doing Business, 2011 (World Bank)

World Ranking

Country

5

Colombia

20

Peru

28

Chile

44

Mexico

74

Brazil

109

Argentina

109

Panama

179

Venezuela


Positioning Colombia as an export platform: 11 free trade agreements (FTA) with 48 countries allowing preferential access to over 1,500 million consumers

In Force Signed In Negotiation Future IN FORCE • CAN (Peru, Ecuador y Bolivia) • MERCOSUR (Argentina, Paraguay, Uruguay and Brazil) • Chile • G2-Mexico • North Triangle (Honduras, Guatemala y El Salvador)

SIGNED • United Stated • EFTA (Iceland, Liechtenstein, Norway and Switzerland) • Canada • European Union (Signature)

IN NEGOTIATION • South Korea • Panama

FUTURE • Japan • Australia • New Zealand • Turkey • Costa Rica • Dominican Republic • Gulf Community


In 2011, Colombia will be negotiating 18 international investment agreements (IIA)

In Force Signed In Negotiation

IN FORCE • Peru (Agreement) • Mexico (Agreement) • Spain (Agreement) • Switzerland (Agreement) • CAN (Ecuador and Bolivia) (Chapter) • Chile (Chapter) • North Triangle (Honduras, Guatemala and El Salvador) (Chapter)

SIGNED • China (Agreement) • Peru (Deeper agreement) • India (Agreement) • United Kingdom (Agreement) • South Korea (Agreement) • EFTA (Iceland, Liechtenstein and Norway) (Chapter) • United States (Chapter) • Canada (Chapter)

IN NEGOTIATION • Kuwait and Japan

Note: The International investment agreements (IIA) include Agreement Investment Treaties (BIT) (agreement) and Free Trade Agreements (FTA) with investment section (chapter).


In 2011, Colombia will be negotiating 16 double taxation agreements (DTA)

In Force Signed In Negotiation

IN FORCE • CAN – Peru, Ecuador and Bolivia • Spain • Chile

SIGNED • • • • •

Switzerland Canada Mexico South Korea Portugal

IN NEGOTIATION • United States, Germany, Czech Republic, Holland, Belgium, India, Japan, France


The most competitive FTZ’s in Latin America: 15% income tax and allows sales to the local market

15% income tax rate. No import duties. VAT exemption for goods sold from Colombia to FTZ Benefit from international trade agreements. (Except Peru)

Allow sales to the local market. Permanent (PFTZ) Free Trade Zones Single-Company (SCFTZ)


New single company FTZ in seven regions of the country

Characteristics Boyacá, Cesar, La Guajira, Norte de Santander, Arauca, Guainía and Vichada. • Equivalent requirements between the different types of Single Company Free Trade Zones. • 2 year limitation for the execution of 100% of the investment and employment commitments. • Application must be filed before the Tax Authorities (DIAN) prior to December 31st, 2011.

Requirements Investment (approx.)

and Direct Jobs

USD 1,34 Million

50

Ex/rate COP 2000 = US$ 1

Not all the municipalities in the regions bordering Venezuela are included. Refer to Decree 2696 of 2010.


84 Free Trade Zones

Free Trade Zone Approved Single - Company Free Trade Zone Permanent Free Trade Zone

Investment commitments Total Investment (USD Million)

6.426

Direct Jobs

46.122

Indirects Jobs

94.251

Investment executed so far Total Investment (USD Million)

2.315

Direct Jobs

5.509

Indirects Jobs

25.271

Source: Ministry of Trade, Industry and Tourism. The investment amounts required to obtain the Free Trade Zone status are calculated in Minimum Monthly Legal Wages (M.M.L.W). This information is presented in dollars using a US$1 = COP 2,000 exchange rate. For 2011, the M.M.L.W is COP 535.600. The M.M.L.W, as well as the exchange rate are subject to variations.

23


Colombia offers Legal Stability Contracts to guarantee investment projects

Investments over US$2.01 million* (7500 M.M.L.W.)** Conditions

Period

Signed contracts

Investor pays 1% premium based on the amount of the investment. 0.5% in unproductive periods From 3 maximum

to

20

years

67 legal stability contracts approved, 66 legal stability contracts signed

*The investment requirement is calculated with an exchange rate of COP $ 2000 = 1 USD. It is responsibility of the investor to calculate the investment requirement at the moment of submitting the application for the Legal Stability Agreement. ** One minimum monthly legal wages – M.M.L.W. equivalent COP$ 535.600 or US$ 267,8


Other Tax Incentives

ďƒź 125% income tax deduction over investments in scientific and technological developments.

ďƒź 200% income tax deduction over salaries and social benefits paid to handicapped employees.


Other incentives by sector: Income tax exemption for up to 20 years

Tourism Eco-tourism Late yield crops

Forestry

Editorial New medicinal products and software

Renewable energy River transport

• Exemption for 30 years for companies that build or restyle hotels before 2018. • Exemption for 20 years starting from 2003. • Exemption for 10 years after the start of production in crops planted between 2003 and 2013. • Permanent exemption for investment in new forest plantations, sawmilling and timber plantations. • Publishing of books, magazines, booklets or collections of scientific or cultural characteristics are exempt until 2013. • Exemption for 10 years for products manufactured in Colombia with high scientific and technological research content, starting from 2003.c • Exemption for 15 years for sale (by the generators) of electricity based on wind resources, biomass or agricultural waste. • Exemption for 15 years starting from 2003 to provide services in slabs and boats with net weight below 25 tons.


Productive Transformation Program: A Public - Private Partnership to strengthen and build “world class sectors”

Encourage and improve production of competitive products and services ESTABLISHED SECTORS

Promote development of NEW & EMERGING SECTORS Business Process Outsourcing and Off shoring BPO&O

Promote value added, innovation & development in AGRIBUSINESS SECTOR Cocoa and Chocolate Confectionery

Palm and vegetable Oil

Shrimp Farming

Cattle


Colombia is a Country of Regions and Opportunities for Investment

Infrastructure Tourism BPO Manufactured Goods Export Platform Agribusiness/Biofuels


Caribbean Region

Strategic Location vis-à-vis the Panama Canal

Close to Central America´s and U.S. Markets (East Coast)

Petrochemical Cluster

Hotel, Port and Free Trade Zone Infrastructure

Source: Proexport


Central Region

BPO and other Outsourcing Services

Large domestic Market

Value-Added Manufactured Goods

Specialized Agribusiness

Source: Proexport


Antioquia Region & The Coffee Country (Triángulo del Café)

Traditional Industrial Development Center

Energy Cluster

BPO and other outsourcing services

High Quality Textile Production

Source: Proexport


Pacific Region

MegaBiodiversity Agribusiness Cluster Access to Asia-Pacific markets and West Coast of the United States

Infrastructure/ logistics

Source: Proexport


Eastern Flatlands

Large potential for Biofuels and forestry

Oil and gas

Food Processing

Source: Proexport


PROEXPORT’s services to Investors

• Information tailor made to your needs • Facilitation of contacts with the public and private sector • Setting up of agendas to Colombia • Services for investors already established in Colombia • Free of charge and confidential • Investment specialists in New York, London, Beijing and Sao Paulo.


Thank you!

www.proexport.com.co

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