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Colombia: An Upcoming Emerging Market for International Investors April 2011.

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Presentation on theme: "Colombia: An Upcoming Emerging Market for International Investors April 2011."— Presentation transcript:

1 Colombia: An Upcoming Emerging Market for International Investors April 2011

2 About Us EXPORTS INVESTMENTTOURISM Proexport promotes International Tourism, Foreign Direct Investment and Exports

3 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

4 Colombia: Country with Investment Grade (S&P) "The recent gains in public confidence resulting from an improved security environment are likely to persist." Colombia's economy has displayed resilience against external shocks, and the country's favorable medium- term growth prospects should contain the public- sector debt burden Source: Standard & Poors – 16 March 2011

5 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 Colombia, The C in the CIVETS

6 Yet against all odds Colombia has become the country to watch in the hemisphere. Newsweek, July 2010. While everybodys been focused on the super hot Brazilian Economy to the south, Colombias quietly gone and become amazingly investable Jim Cramer - 8 February 2011 The World is talking about Colombia… Whether on security, democratic stability, or vibrancy, the strength of Colombias 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, Walter Molano, Emerging-market analyst of BCP Securities

7 Security Perception Enhanced economic performance has come hand in hand with improved security Source: ANDI (Asociación Nacional de Industriales) World Crisis

8 * Forecast (23 March 2011) Source: EIU (Economist Intelligence Unit) Colombian Economy: Bigger than Chile, Ireland, Malaysia, Egypt, Singapore and New Zealand GDP US$ Thousand Millions – 2010*

9 Note: GDP fixed to prices under Power Purchasing Parity * Forecast (23 March 2011) Source EIU (Economist Intelligence Unit) The 28 th largest world economy when adjusted by PPP and one of the largest non-OECD

10 Source: EIU (Economist Intelligence Unit) *Forecast (23 March 2011) The third largest population in Latin America and the second largest Spanish speaking population in the world

11 GDP Per-Capita has doubled since 2004 Source: EIU (Economist Intelligence Unit) *Forecast (23 March 2011) 140%

12 GDP per- capita is reaching US$10,000 when adjusted by PPP GDP at purchasing power parity (PPP), divided by population * Forecast (23 March 2011) Source: EIU (Economist Intelligence Unit) 57% Colombian GDP per Capita (PPP) 2000 – 2010* US$

13 Variation 2008 - 2009: -32% Variation 2009 – 2010: -5% *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) (Central Bank) Main investors in Colombia Stock 2000 – September 2010** Annual FDI net inflows have multiplied by four

14 United States US$ 16.879 M Share 42,5% China US$ 1.967 M Share 4,9% Netherlands US$ 1.617 M Share 4,1% Ecuador US$ 1,825 M Share 4,5% Exports have tripled in nine years Variation 2008 - 2009: -12,7% Variation 2009 - 2010: 21,2% Source: DANE (Departamento Nacional de Estadísticas) ( National Department of Statistics) Colombia Exports by Country 2010

15 United States 345.158 Visitors Share 23,4% Venezuela 197.173 Visitors Share 13,4% Ecuador 122.076 Visitors Share 8,3% Argentina 83.674 Visitors Share 5,7% 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* 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) (National Department of Security) International visitors in Colombia by Country – 2010*

16 In terms of Globalization, Colombia is ranked 3rd among Latin America countries, performing better than world economies such as Japan, Brazil, Russia and Indonesia. Source: Ernest and Young – The Globalization Index 2010, Ranking among 60 countries. Globalization Index, 2010

17 The Highest level of international reserves and the lowest level of inflation on record Source: Banco de la República (Colombian Central Bank)

18 Emerging Markets Bond Index Plus (EMBI+), basis point spread over US treasuries. Source: JPMorgan - Central Bank of Peru Declining spreads on Sovereign Debt -Lower than Latin America as a region-

19 MILA (Integrated Latin-American Market): Merging of the Chilean, Peruvian and Colombian Stock Exchange Markets MILA will become the biggest stock exchange market by number of issuers It is expected a foreign investment growth, multiplying dealings by 5 in forthcoming years Over 500 Companies 46 dealing over US$ 1 million daily 58 dealing between US$500 thousand and US$ 1 million

20 Source: Top Reformers Report, World Bank *Positive figures show improvements in business environment Doing Business Ranking Variation, 2007-2011* (Change in positions) Colombia: the third most Business Friendly country in Latin America and top reformer in the region Latin- America Ranking Country Mexico 35 Peru 36 Colombia 39 Chile 43 Panama 72 Argentina 115 Costa Rica 125 Brazil 127 Ecuador 130 Venezuela 172

21 Ranking made up by 183 countries Source: Doing Business, 2011 (World Bank) World Ranking Country 5Colombia 20Peru 28Chile 44Mexico 74Brazil 109Argentina 109Panama 179Venezuela Strength of Investor Protection, 2011 Rating Ranked among the top countries on investor protection

22 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 Turkey FUTURE Japan Australia New Zealand Costa Rica Dominican Republic Gulf Community Positioning Colombia as an export platform: 11 free trade agreements (FTA) with 48 countries allowing preferential access to over 1,500 million consumers

23 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 Force Signed In Negotiation In 2011, Colombia will be negotiating 18 international investment agreements (IIA)

24 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 In Force Signed In Negotiation In 2011, Colombia will be negotiating 16 double taxation agreements (DTA)

25 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 Chocolate Confectionery Palm and vegetable Oil Shrimp Farming Cattle Productive Transformation Program: A Public - Private Partnership to strengthen and build world class sectors Health Services Exportation

26 Automotive Tourism BPO Cosmetics and Personal Hygiene Agribusiness/Biofuels Colombia is a Country of Regions and Opportunities for Investment

27 Automotive Opportunities This industry represents 6.2% of GDP. Colombia is the fifth largest producer of vehicles in the region, with great potential for growth. Opportunities in Automotive : Colombia features trade agreements covering vehicles. Opportunities in Bus and Truck Assembly : Colombias largest cities are developing Mass Transit Systems. Opportunities in Auto Part Manufacturing : Assemblers in Colombia require suppliers for both Original Equipment and replacement parts.

28 Tourism Opportunities Multiple opportunities in recreational an business tourism. Opportunities for recreational tourism : Colombia: Undiscovered Destination Multi-destination country: Andean, Caribbean, Pacific and Amazon. Wide variety of tourism: Natural Tourism, History and Culture, Sun and Beach. Opportunities for business tourism (MICE) : Seven cities with dynamic business activity and several more centers of growth. More than 2.500 multinational operating in Colombia.

29 ICT – BPO&O Opportunities Opportunities for creating shared services centers for Latam. Opportunities for outsourcing companies that provide BPO, KPO, ESO, F&A, HRO and R&D services. Opportunities for developing and integrating IT applications and services. Opportunities for providing telecommunication services to a growing markets, and strengthening telecommunication infrastructure. Opportunities for film studies and developing content for the film, TV and media industries.

30 Cosmetics and Personal Hygiene Opportunities Colombian cosmetics industry is one of the regions largest and fastest growing with significant competitive advantages. Opportunities for Production : Cosmetics production sector has doubled in the last 7 years, exceeding Latam average. Opportunities for Creating Logistics Hub : Outstanding geographic location Excellent logistical capacity. Opportunities for Establishing Research and Development Centers: Colombia has the greatest biodiversity per Km2 of any country in the world.

31 Agribusiness Opportunities Colombia has competitive advantages in agroindustrial sector as land availability, ample water resources and high export potential for this products. Opportunities in Biofuels: Colombia has 7.3 million hectares suitable for biofuel development. High levels of productivity for Sugarcane and Palm Oil. Opportunities in Reforestation: Colombia has certain species with high yields and short biological cycles. Opportunities in the Dairy Sector: Fourth largest milk producer in Latam. Third largest dairy market in Latam.

32 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. Free Trade Zones Single-Company (SCFTZ) Permanent (PFTZ) The most competitive FTZs in Latin America: 15% income tax and allows sales to the local market

33 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 31 st, 2011. Requirements Investment (approx.)and Direct Jobs USD 1,34 Million50 Not all the municipalities in the regions bordering Venezuela are included. Refer to Decree 2696 of 2010. Ex/rate COP 2000 = US$ 1 New single company FTZ in seven regions of the country

34 Free Trade Zone Approved 34 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. Single - Company Free Trade Zone Permanent Free Trade Zone Investment commitments Total Investment (USD Million) 6.658 Direct Jobs 46.721 Indirect Jobs 95.001 Investment executed so far Total Investment (USD Million) 2.317 Direct Jobs 5.509 Indirects Jobs 26.052 89 Free Trade Zones

35 Requirements for industrial firms of goods and services Total Assets (US$) Investment Ammount (US$ Million) Minimum direct jobs generation 0 – 134.00000 134.001 – 1,34 Million020 1,34 Million – 8,03 Million 1,3430 More than 8,03 Million3,0850 Back 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. PERMANENT FREE TRADE ZONES (PFTZ) Several firms installed in a FTZ already established

36 (1)Each additional investment of US$ 6.16 million reduces 15 jobs of requirement. In any case, there must be generated at least 50 jobs. (2)For health services companies, 50% of jobs may be vinculated, not direct. (3)50 indirect jobs can replace 20 direct jobs. FTZ type Investment (US$ Million) AND direct jobs Goods (1)40,17150 Services (2) 2,68 – 12,32 500 12,32 – 24,64 350 US$ 24,64 or more150 Services – Ports (3)40,1720 Exchange rate: US$ 1 = COP 2,000. Minimum Monthly Legal Wages (M.M.L.W.) for 2011 is COP 535.600. M.M.L.W. and Exchange Rate are subject to changes. Back SCFTZ Agribusiness SINGLE-COMPANY FREE TRADE ZONES (SCFTZ): A single firm can get all FTZ advantages by installing itself in any place in Colombia

37 FTZ type Investment (US$ Million) Or related jobs to the production Agribusiness20,09500 Subsectors which are eligible for FTZ status under agribusiness requirements Biofuels Meat and Fish Oil and grease products from vegetables and animals Dairy products Legume and fruits, prepared or preserved, tea, soup, vinegar, sauces and yeast* Coffee * According to the national statistics this products classification is called products not classified previously. Exchange rate: US$ 1 = COP 2,000. Minimum Monthly Legal Wages (M.M.L.W.) for 2011 is COP 535.600. M.M.L.W. and Exchange Rate are subject to changes. Back SINGLE-COMPANY FREE TRADE ZONES (SCFTZ): A single firm can get all FTZ advantages by installing itself in any place in Colombia

38 Investments over US$2.01 million* (7500 M.M.L.W.)** Investor pays 1% premium based on the amount of the investment. 0.5% in unproductive periods Period Conditions From 3 to 20 years maximum Signed contracts 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 Colombia offers Legal Stability Contracts to guarantee investment projects

39 Exemption for 30 years for companies that build or restyle hotels before 2018. Tourism Exemption for 20 years starting from 2003. Eco-tourism Exemption for 10 years after the start of production in crops planted between 2003 and 2014. Late yield crops Permanent exemption for investment in new forest plantations, sawmilling and timber plantations. Forestry Publishing of books, magazines, booklets or collections of scientific or cultural characteristics are exempt until 2013. Editorial Exemption for 10 years for products manufactured in Colombia with high scientific and technological research content, starting from 2003. New medicinal products and software Exemption for 15 years for sale (by the generators) of electricity based on wind resources, biomass or agricultural waste. Renewable energy Exemption for 15 years starting from 2003 to provide services in slabs and boats with net weight below 25 tons. River transport 125% income tax deduction over investments in scientific and technological developments. Scientific and Technological Development Other incentives by sector: Income tax exemption for up to 20 years

40 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 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. New employees with incomes lower than 1.5 SMMLV. Length of benefit by employee : 2 years. Formalization and Employment Generation

41 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. PROEXPORTs services to Investors

42 Thank you!

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