Colombia Presentation - 2014

COLOMBIA

Investment Environment and Business Opportunities in Colombia

2014

About us

Proexport is in charge of the promotion of International Tourism, Foreign Direct Investment, and non-traditional exports in Colombia

www.proexport.com.co

EXPORTS INVESTMENT TOURISM

Proexport Services

Proexport in Colombia

www.proexport.com.co

25

Regional Ofices 8

Information centers

BARRANQUILLA. BOGOTÁ. BUCARAMANGA. CALI. CARTAGENA. CÚCUTA. MEDELLÍN. PEREIRA

VALLEDUPAR. PASTO. PALMIRA. ARMENIA = UNIVERSIDAD GRAN

COLOMBIA – CÁMARA DE COMERCIO. VILLAVICENCIO. BOYACÁ =

TUNJA - DUITAMA - SOGAMOSO. IBAGUÉ. SANTA MARTA. SAN

ANDRÉS. ABURRÁ SUR. NEIVA. BARRANQUILLA = CÁMARA

COMERCIO – UNIVERSIDAD NORTE. CARTAGENA. MEDELLÍN.

BUCARAMANGA. CALI = CÁMARA COMERCIO. PEREIRA. BOGOTÁ.

MANIZALES. CÚCUTA. POPAYÁN. BOYACÁ.

26 commercial offices

prescence in 30 countries

UNITED STATES. CANADA. MEXICO. GUATEMALA. COSTA RICA. CARIBBEN. VENEZUELA. BRAZIL. ECUADOR. CHILE. PERU. ARGENTINA. SPAIN. GERMANY. PORTUGAL. UK. FRANCE. TURKEY. UNITED ARAB EMIRATES. INDIA. CHINA. SOUTH KOREA. RUSSIA. JAPAN. SINGAPORE. INDONESIA.

Proexport en in the world

General facts

Second most bio-diverse

country in the World It is among the 12 most megadiverse countries of the planet.

55% of the population is less than 30 years old. There are seven cities with over

one million people.

With an extension of 1,141,000 km2 almost 3 times the size of California and

twice the size of Texas.

Colombia is the only country in

South America with access to both, the Atlantic and the Pacific ocean.

Times of great economic achievements

GDP2013: +4.3% GDP 2012 : +4.0%

Higher than the Latin American average growth (3.2%).

Controlled Inflation: 1.94%

Below target inflation

Unemployment rate 2013:8.5% Unemployment rate for December

2012: 9.2%.

FDI2013: US$16,772 FDI 2012 : US$ 15,529

Record figure in Colombian history

1.01 million barrels per day

of oil production

Fourth largest producer in South America

A competitive location with easy access to markets around the globe

Mexico City 4H45M

Los Angeles 8H20M

Quito 1H30M

Lima 3H00M

Peru

Ecuador

México

United States

Canada

Brazil

Argentina Chile

Spain

France

Germany

Over 878 weekly direct international flights.

More than 4,500 weekly domestic flights.

Less than 6 hours to the main capital cities

in Latin America.

More than 20 different airlines operating in Colombia.

New York 5H35M

Toronto 6H05M

Caracas 1H20M

Santiago Chile

5H00M

Buenos Aires 6H15M

Sao Paulo 5H45M

Madrid 9H40M

Paris 10H40M

Frankfurt 11H15M

202.80

116.20

81.67 78.09 83.70

64.60

47.40 50.50

35.60 31.60 30.20 23.51

17.70 10.50 9.70 8.50 8.10 7.20 8.20 5.10 5.50 4.60

Population 2014* Millones

The second largest spanish speaking country in the world and the 23rd most populated

Source: DANE. EIU - Economist Intelligence Unit. 2014.

* Forecast.

167

257

299

301

373

380

400

420

422

455

481

481

535

599

606

1,176

1,790

2,324

2,560

2,644

3,688

New Zeland

Denmark

Singapur

Israel

Norway

Chile

Peru

Vietnam

Hong Kong

Sweden

Belgium

Switzerland

Philippines

Colombia

Malaysia

Australia

South Korea

Mexico

France

Brazil

Germany

GDP at PPP – 2015 US$ billion

Colombia is the 28th largest economy in the world and one of the largest non-OECD economies

PPP - Purchasing Power Parity. e: estimated.

Source: EIU - Economist Intelligence Unit. 2014

0 1 2 3 4 5 6 7 8 9

China

India

Nigeria

Vietnam

Indonesia

Colombia

Egypt

Turkey

Brazil

Russia

South Korea

Mexico

South Africa

United States

Canada

Japan

United Kingdom

Germany

France

Italy

Colombia will contribute significantly to world economic growth

BRICs

Other EM

CIVETs

G7

Why?

Respect for private and intellectual property.

Natural resource boom

Advance in national security and peace process

FTAs with almost 50 countries (including the US)

Rapid FDI growth

Source: “Diamonds in the rough: Unearthing opportunity in an uncertain world” .

The Economist March 2013.

Colombia's per capita income has nearly doubled since 2000

Per capita National Income (PPP)

2000 – 2018p, US$

5,826

8,940

10,910

14,400

0

2.000

4.000

6.000

8.000

10.000

12.000

14.000

16.000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013p 2015p 2018p

High Income

Middle High Income

Middle Low Income

Low Income

Income

Source: EIU – Economist Intelligence Unit. PPP = purchasing power parity. Economies are divided according to 2012 income per capita, calculated using the World Bank Atlas method. The groups are: low income, US$1,035 or less; lower middle income, US$1,036 - US$4,085; upper middle income, US$4,086 - US$12,615; and high income, US$12,616 or more.

15.6

14.1 13.7

11.8 12.0 11.2 11.3

12.0 11.8

10.8 10.4

8.5

7.0 6.5

5.5 4.9

4.5

5.7

7.7

2.0 3.7

2.4 1.9

8.8 8.1

7.4 7.1 6.8

3.0 3.4 3.6 3.5 3.3

2.5 3.9

5.3 4.7

6.7 6.9

3.5

1.7

4.0

6.6

4.0 4.3 4.4 4.6 4.5 4.3 4.5

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014f 2015f 2016f 2017f 2018f

Macroeconomic stability and strong economic performance in the long run

Inflation

GDP

Unemployment rate

GDP Growth, Inflation and unemployment Rate 2002 – 2018p (%)

f: Preyected e: Estimates Source:: DANE; Banco de la República; EIU - Economist Intelligence Unit . 2014

Economic growth has been fueled by high rates of investment

14%

16%

18%

25% 24%

27%

33%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013e 2014f 2015f 2016f

Gross Capital Formation (% of GDP) 2000 – 2016f

Source: EIU – Economist Intelligence Unit

Figures at constant prices of 2005.

e- Estimates

f- Forecast

A rapidly growing middle class

16.2%

25.3%

37.3%

46.3%

43.8%

59.9%

2002

2012

2020

2025

Below Baseline Scenario

Above Baseline Scenario

6.7

6.7

22.3

19.0

32.1

24.7

Million inhabitants

11.6

11.6

Source: Fedesarrollo, 2013

Middle class in Colombia as a percentage of total population

Baseline scenario: 4.6% GDP growth Below baseline scenario: 4.2% GDP growth Above baseline scenario: 5.3% GDP growth Middle class: Monthly household income between 3.2MW and 13MW (MW) Minimum wage in Colombia 2013: US $333.

Economic growth, Investor Confidence and Security

* Figures do not include FDI registered for SabMiller adquisition of Bavaria in 2005 (USD 4,800 MM). ** Perception of insecurity as a key issue affecting industrial growth in the country. Monthly Industrial Survey -ANDI. Source: National Business Association of Colombia - ANDI. Balance of Payments – Banco de la República.

0,0

5,0

10,0

15,0

20,0

25,0

30,0

0

1000

2000

3000

4000

5000

6000

IED - US$ million* Insecurity perception**

Colombia, an investment-grade country with positive outlook

S&P (April 2013) and Fitch (december 2013) improved

Colombia´s sovereign debt outlook.

“Effective implementation of recent fiscal reforms could

improve its debt and interest burdens”– S&P

Source: S&P Ratings; Revista Dinero, Colombian Treasury.

On December 2013 Fitch Ratings upgraded Colombia's ratings due to Colombia's improvement in its external accounts and positive government debt dynamics, which support the convergence of external and fiscal credit metrics with rating peers. In addition, the sovereign's credible and consistent policies provide it with the capacity to withstand external shocks; this was demonstrated during the recent increase in financial volatility witnessed by several emerging markets.

Since 2011 the Colombian sovereign debt has been rated positively by all three agencies, coinciding with a reduction in the vulnerability to external shocks, the fulfillment of its obligations, confidence in the macroeconomic policy of the country and improved security policies.

Rating Date Rating Agency

Long Term– Foreign Currency

Short Term– Foreign Currency

Long Term– Local Currency

Short Term – Local Currency

Outlook

Stable

BBB

A – 2

BBB +

A - 2

24– Apr- 2013

24– Apr- 2013

5 – Mar - 2007

5 – Mar - 2007


Short Term– Foreign Currency

Long Term – Local

Currency

BBB

F – 2

BBB+

13 – Dic- 2013

22 – Jun - 2011

22 – Jun - 2011


Positive Baa3 7– Feb- 2012

Term

Stable

Colombia with the most reforms in Latin America towards the improvement of Business environment

Source: Doing Business 2014. World Bank. *Positive numbers indicate improvements in business environment.

Country Ranking 2014*

Chile 34

Peru 42

Colombia 43

Mexico 53

Panama 55

Costa Rica 102

Brazil 116

Argentina 126

Ecuador 135

Venezuela 181

Ranking Doing Business* 2008-2014

Change in the number of positions

23

16

13

10

6

-1

-7

-9

-9

-17

Colombia

Panama

Costa Rica

Mexico

Peru

Venezuela

Ecuador

Brazil

Chile

Argentina

Colombia is the leader in terms of Investor Protection in the region

Source: Doing Business. World Bank . 2014.

Ranking Country

6 Colombia

16 Peru

34 Chile

68 Mexico

80 Brazil

80 Panama

98 Argentina

182 Venezuela

8.3

7.0 6.3

5.7 5.3 5.3 5.0

2.3

Colo

mbia

Peru

Chile

Mexic

o

Bra

zil

Panam

á

Arg

entina

Venezu

ela

Investment Protection Index Doing Business - 2014

Total commerce has grown almost 5 times in the past 10 years

24.9

15

25.1

51

24.6

71

27.

009

33.4

76

42.3

95

50.5

53

62.8

88 77.

295

65.6

82 8

0.5

02

112.0

95

119.2

99

118.2

19

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Total Comerce (X+M)

United States

• Exports: US$18.458 million

• Imports: US$ 15.681 million

China

• Exports: US$ 5.102 million

• Imports: $9.841 million

Mexico

Exports: US $863 million

Imports: US$ 5.299 million

Brazil

• Exports: US $2.457 million

• Imports: US$ 1.590 million

Exports and Imports. 2000 – 2013 US$ millions

Source: DANE, 2014

Colombia shows a remarkable growth of its exports

Variation 2010 - 2011: 43% Variation 2011 - 2012: 5,7% Variation 2012 -2013: -2.2% Source: DANE .

13,158 13,129

21,190

37,626

56,915 58,822

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Exports. 2000 – 2013 FOB Values US$ millions Top export destinations 2013

United States

• US$ 18,459 million

• Part. 31.4%

Panama • US $2,939 million

• Part. 5.7%

China

• US $5,102 million

• Part. 8.7%

India • US $2,993 million

• Part. 5.1%

Imports also have increased rapidly

Variación 2011 – 2012: 7.2% Fuente: DANE

11,757

21,204

39,666

32,891

54,233

59,397

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Top imports by origin 2013 Imports 2000 – 2013 CIF Values - US$ million

United States • US$ 16,337 million

• 27.5%

Mexico • US$ 5,496 million

• 9.3%

China


• 17.4%

Brasil • US$ 2.590 millones

• Participación: 4.4%

Free Trade Agreements

Source: Colombian Ministry of Commerce, Industry and Tourism. 2013.

Canada

United States

Mexico

Guatemala

Honduras

El Salvador

Ecuador

Brazil Peru

Argentina

Paraguay

Uruguay

Liechtenstein

Switzerland

Island

Norway

European Union

Turkey

Israel

Japan

Panama

Chile

Bolivia

Costa Rica

Venezuela*

Pacific Alliance

South Korea

Cuba*

Nicaragua*

*These are Partial Scope Agreements (PSA) - - - The dotted line refers to member countries of The Pacific Alliance other than Colombia. – Chile, Perú and México.

In force

Signed

In negotiation

International Investment Agreements - IIA


Canada

United States

Mexico

Guatemala

Honduras

El Salvador

Peru

Uruguay

Liechtenstein

Switzerland

Island

Norway

European Union

Turkey

Israel

Japan

Panama

Chile

South Korea

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

Spain

China

India

United Kingdom

Kuwait

Singapur

Azerbaijan

Qatar

Russia

In force

Signed

In negotiation

Double Taxation Agreements - DTA


Canada

United States

Mexico

Peru

Switzerland

Holland

Norway

Turkey Israel

Japan

Chile

South Korea

*Negotiations recently concluded. 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

Future

Spain

China

India

Belgium

Singapur

Qatar

Bolivia

Ecuador

Honduras

Brazil

United Arab Emirates

Italy

Germany

France

Czech Republic

Colombia: A gateway to the Pacific Alliance

Source: MCIT, 2013

GDP of USD 2,010.3

billion The members generate 35% of

the region´s GDP

Population of 209 million Almost Brazil´s Population

50% of Latin American

commerce Total trade of US$ 1,116

billion (2012)

FTAs with 60

countries Access to benefits of

markets that represent

85.7% of the World GDP

Mexico

Colombia

Peru

Chile

In 2013 Colombia reached a new record in FDI: Nearly 7 times of what it received 10 years ago

2,504

6,897

13,405

15,529 16,770

Average 1994 - 2002

Average 2003 - 2010

2011 2012 2013

Var. 8%

Top Investing Countries in Colombia 2000– 2013

FDI Inflows. 1994 –2013 USD million

United States


• 24 %

United Kingdom


• 14,5%

Spain


• 7,3%

Chile


• 4,1%

Source: Balance of Payments - Banco de la República. Share of all countries with positive cumulative investment, The information includes reinvested profits or investments in the oil sector Note: the list of the top countries investing in Colombia does not include Panama.

Colombia was among the top 20 destinations of FDI in the world in 2012

Source: World Investment Report, Overview 2013; FDI Markets, Global Greenfield Investement Trends. 2013; CEPAL 2013.

According to The World Investment Report -UNCTAD Colombia is one of the top twenty host

economies for FDI in the world with USD 16 billion in 2012.

168

121

75

65

65

62

57

57

51

45

30

29

28

28

26

25

20

16

14

14

1; United States

2; China

3; Hong Kong (China)

4; Brazil

5; Virgin Islands (UK)

6; United Kingdom

7; Australia

8; Singapur

9; Russia

10; Canada

11; Chile

12; Ireland

13; Luxembourg

14; Spain

15; India

16; France

17; Indonesia

18; Colombia

19; Kazakhistán

20; Sweden

During 2012 Colombia attracted 93

Greenfield projects making it the third

country in the region in terms of the number of projects.

Colombia is the third destination for

FDI in Latin America with

USD 15,649 Million.

The stock of Colombia’s outward FDI has grown nearly ten-fold since 1994

Source: Banrep, 2014; World Investment Report, Overview 2013; FDI Markets, Global Greenfield Investement Trends. 2013; CEPAL 2013.

Stock of outward FDI. 1994 - 2013

USD million

3,652

39,482

Stock 1994 - 2002

Stock 1994 - 2013

FDI outflows by sectors, 1994 – 2013

Industry, 25,1%

Oil & Mining, 21,4%

Financial services, 27,7%

Electricity, gas & water, 12,4%

Transport & communicatio

n, 6,0%

Commerce, restaurants & hotels, 4,6%

Others, 2,8%

United States USD 6,455 million

17%

United Kingdom USD 5,180 million

14%

Panama USD 6,505 million

18%

Peru USD 2,507 million

7%

-606

7,652

2012 2013

Sectors of opportunity- Tourism

Source: Migración Colombia, MCIT, Banco de la República. Cálculos de Proexport

1,053 1,195 1,223 1,354 1,475 1,582 1,692 1,832

51 127 228

285 296

313 254

306

2006 2007 2008 2009 2010 2011 2012 2013

Arrivals (Migración Colombia) Visitors in cruises

United States

• 336,454 visitors

• 18.4%

European Union


• 16.8%

Venezuela


• 14.3%

Argentina

• 129,069 visiors

• 6.4%

Main nationalities of foreign visitors in Colombia, 2013

Foreign visitors in Colombia 2006 – 2013, thousands

Some examples of high profile Colombian “multilatinas”

One of the largest food companies in

Colombia, Nutresa has presence in

12 countries in Latam, with

manufacturing plants in 8 of them.

Recently, the company signed an

agreement to acquire 100% of the

shares in Tresmontes Lucchetti

S. A. in Chile for USD 758

million.

SURA Brand is currently well known in the

insurance, pension and investment fund

business through its operations in Mexico,

Peru, Uruguay and Chile.

In 2011, the group bought ING assets in Latin

America for USD $ 3,614 million.

It is the largest financial conglomerate in

Colombia. The Group has subsidiaries in El

Salvador, Panama, and Puerto Rico.

In 2012, Bancolombia acquired 100% of the

ordinary shares and 90.9% of the preferred

shares of HSBC Bank in Panama.

Carvajal SA, is a conglomerate with

presence in 15 countries and

recognized for its role in the field of

packaging, stationery, design and

advertising.

In 2013, Carvajal S.A made an

investment of $ 23.7 million for the

construction of a manufacturing and

distribution center in Peru.

Colombiana SA is one of the country's

leading companies in the production and

marketing of sweets, chocolate and biscuits.

The company has strengthened its

international strategy with the opening of 11

branches throughout the Americas and has a

production plant in Guatemala to supply the

American market.

Tecnoquímicas is specialized in heath products

and services, personal care and household

cleaning, processed foods, and agricultural and

veterinary products in Colombia and Latin

America.

The company has direct presence in Central

America through its 3 production plants in El

Salvador.

Some examples of high profile Colombian “multilatinas”

Labor incentives

New employees with incomes lower than 1.5 Minimum Wages (US$ 476). Length of benefit by employee : 2 years.

New women employees above 40 years old with more than 1 year unemployed. Length of benefit by employee: 2 years.

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.

Discount in the income tax and supplementary contributions, and other contributions from payroll.

(Do not include positions generated by mergers or replacements)

Incentives for job creation and formalization

Start of main economic activity: date of registration in the commercial register.

Small firms: staff no more than 50 employees, total assets not exceeding 5,000 SMMLV.

Payment of income tax.

Payment of levies and other contributions from payroll.

The business registration and renewal.

0% - 2 first years 25% - third year 50% - fourth year 75% - fifth year

100% - from the sixth year.

0% - first year 50% - second year 75% - third year

100% - from the fourth year.

Application of escalation

Free Trade Zone

Permanent Free Trade

Zone

Special Standing

"Uniempresarial" (FTZ)

Guajira

Magdalena Atlántico

Bolívar

Valle del Cauca

Cauca

Norte de Santander

Santander

Boyacá

Cundinamarca

Huila

Antioquia

Caldas

Risaralda

Quindío

FTZ requested or approved prior to

December 31, 2012.

• 15% Income tax.

FTZ filed after December 31, 2012.

• Income tax of 15% + 9% tax CREE. Caribbean Region

Andean Region

Pacific Region

Free Trade Zones: Reduced income tax and sales allowed to the local market

Free Trade Zones: Reduced income tax and sales allowed to the local market

No import duties. VAT exemption for goods sold from Colombia to FTZ.

Benefit from international trade agreements.

Allows sales to the local market.

Free trade zones for different investor styles.

A country of regions and differentiated opportunities for investors

Caribbean Region Tourism, Logistics, Petrochemical, Construction Supplies Atlantic Export Platform.

Central/Andean Region Outsourcing Services, high value-added manufacturing, hub to cover domestic market, specialized agribusiness.

Pacific Region Manufacturing, Agribusiness, logistics, biotechnology, Pacific export platform.

Eastern Region Agriculture, forestry, biofuels, hydrocarbons

Amazon Region Conservation, ecotourism (Leticia)

Colombia Presentation - 2014

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