Colombia's New Economic
Reality
As Colombian President Alvaro
Uribe prepares to hand off power to his successor Juan Manuel
Santos, who was elected in last week's runoff election,
it is a good time to reflect on the dramatic changes the
country has undergone in the past decade.
Viewing security as a top
priority, President Uribe's administration took strategic
steps to stabilize Latin America's oldest democracy and
motivate positive change in Colombia. At the same time,
in an effort to improve the country's economy, a strong
focus was directed towards the attraction of foreign direct
investment, and has led to increased wealth in the country.
With security and economic
fundamentals vastly improved, innovation and exploration
of untapped resources are now propelling Colombia forward
as an emerging investment location. Increasingly recognized
as a country with vast potential, Colombia's biggest challenge
is to close the "image gap" between the public's
perception of Colombia and Colombia's new reality.
To help understand this
new reality, below are 10 things you may not know about
Colombia:
1.
Colombia boasts the best business environment in Latin America:
According to the World Bank's 2010 Doing Business report,
Colombia is the top country in Latin America to start or
expand a business. This is due to recent reforms that have
made the country's regulatory environment transparent and
efficient, from strong property rights and investor protection
to efficient court procedures and major tax incentives.
2.
FDI is growing at record levels: Between 2002 and
2008 Colombia saw an increase of 400% in foreign direct
investment (source: Central Bank). The country expects to
see a record10 billion in total FDI in 2010 (source: National
Business Association of Colombia), as companies increasingly
look to tap into Colombia's traditional sectors, such as
exports, mining and infrastructure. Emerging sectors, such
as biofuels; IT/BPO; audio/visual production and medical
tourism are also new areas attracting investment to the
country.
3.
The pending free trade agreement between Colombia and the
US would create big benefits for the US: As a country
that tripled its exports over the past 10 years (source:
Colombia's National Bureau of Statistics) and is predicted
to experience GDP growth of 3% - 3.5% this year (The Wall
Street Journal), Colombia has made international trade a
priority and is very keen to move forward with the pending
free trade agreement with the US. The United States has
lost corn, wheat and soybean meal sales to Brazil and Argentina
in 2009 because those countries had free trade agreements
with Colombia and the United States did not. With the recent
passage of the EU free trade agreement, the importance of
passing the US agreement is paramount.
4.
Improved security strengthens investor confidence:
According to Colombia's Ministry of Defense, increased military
spending and coordination helped to decrease kidnappings
by 90% and homicides by 45% in Colombia between 2002 and
2009. During this same period, Investment Monitor, fDi Markets,
recorded a total of 81 investment projects from 64 US companies
including industry giants such as Microsoft, Nike and DirecTV.
5.
Innovative infrastructure fuels Colombia's growing IT market:
Colombia developed some of the world's strongest IT infrastructure
in order to keep information and communications secure during
previous times of political unrest. Today, the country has
double the telecommunications investment as a percentage
of GDP--more than any other country in Latin America--and
hosts a backed-up and secure Internet infrastructure, with
5 underwater cables and 212.5 Gbps capacity. Business Monitor
International recently predicted Colombia, whose IT industry
grew 40% between 2005 and 2007, will continue to be one
of Latin America's fastest growing IT markets.
6.
Colombia grows green energy from reclaimed plantations:
With 6.5 million hectares of available land, the most productive
sugarcane in the world and the most productive palm oil
in Latin America, Colombia is dedicated to expanding its
biofuels sector. The amount of biofuels required to be mixed
with all gasoline and diesel sold in Colombia is set to
double to 20% by 2020, creating a guaranteed market. This
has allowed many rural inhabitants to engage their land
in productive use to grow biofuels instead of engaging in
illegal activity.
7.
Colombia has a health system comparable to Sweden and Belgium:
The World Health Organization recently ranked Colombia's
health system as the best in Latin America and placed it
on par with the renowned health systems of countries like
Sweden and Belgium. With nearly 6 million Americans expected
to undergo medical procedures abroad in 2010 (source: Deloitte
Center for Health Solutions), Colombia is well-poised to
capture many of America's "medical tourists" looking
to capitalize on the country's lower procedures costs, which
are typically 10-30% of costs in the US (source: Proexport
Colombia).
8.
Colombia is a leader in entrepreneurship: According
to a 2009 ranking by the IMD World Competitiveness Center,
Colombia is a regional leader in entrepreneurship, second
only to Brazil. With a population of more than 45 million,
one of Colombia's greatest resources is its human capital.
The country has the highest labor force growth rate and
the second largest availability of skilled labor in Latin
America.
9.
Colombia's creative class is spurring new growth in industry
and tourism: Colombia's long history of creativity
in literature, art and music (think Gabriel Garcia Marquez,
Fernando Botero and Shakira) is growing into new opportunities
for business and tourism. From the new "train to Macondo"
commemorating Garcia Marquez's famous town in 100 Years
of Solitude, to The Carnival of Barranquilla, proclaimed
by UNESCO as a Masterpiece of the Oral and Intangible Heritage
of Humanity. Creativity is also leading growth in new industries:
Colombia's audio/visual production cluster is emerging as
one of the country's next big opportunities, with animation
studios and production houses capitalizing on the creative
talent of the local people in Colombia's low-cost environment.
10.
Tourism has doubled since 2002: According to The
New York Times, Colombia is positioned in the tourist market
as one of the most sought-after destinations for 2010. In
fact, between 2002 and 2009 the number of foreign visitors
arriving in Colombia jumped from 1.1 million to 2.5 million.
Every day, Bogota's international airport welcomes more
than 300 international flights, and in order to accommodate
rising demand, over the next two years Colombia will add
7,042 hotel rooms to its list of prestigious accommodations.
Over the past decade Colombia's economy
has made drastic steps forward due to a strict government
focus on security and investment promotion. Various industries,
from energy and IT to tourism and healthcare, have seen
the fruits of these efforts. Progress is reflected by Colombia's
emergence as a major world economic player, jumping six
spots this year in the most recent World Competitiveness
Report giving it the largest improvement in ranking of all
the countries in the region.
As experts predict emerging markets will
grow up to three times faster than developed countries this
year and will drive global economic recovery, Colombia is
well positioned for growth. With a dramatically improved
business environment, partnered with innovation and competitive
resources, the "new" Colombia is a country to
watch in 2010. |