Presentación Colombia –

Inglés

April – 2015

Investment Environment and

Business Opportunities in Colombia

PROCOLOMBIA

About us PROCOLOMBIAWe promote exports, tourism, investment and industrial expansion forinternationalization. We integrate the work of the Country Brand within thestrategic planning of Colombia’s promotion worldwide.

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Presence in 30 countries

Presence in Colombia

25

Regional Offices8

Information centers

Barranquilla, Bogotá. Bucaramanga. Cali.

Cartagena. Cúcuta. Medellín. Pereira

Valledupar, Pasto, Palmira, Armenia =

Villavicencio, Tunja, Duitama, Sogamoso,

Ibagué, Santa Marta, San Andrés, Aburrá, Neiva,

Barranquilla, Cartagena, Medellín, Bucaramanga,

Cali, Pereira, Bogotá, Manizales y Cúcuta.

Information that addresses specific needs

Contacts in the public and private sector

Organization of agendas and accompaniment during the visit to Colombia

Services for investors residing in the country

All services are free of charge and the information provided during the process will be made available under complete confidentiality

Services for investors

COLOMBIA

Table of Contents

Current Macroeconomic Indicators

Colombian Investment Standards

Sectors for Potential Investments

Current Macroeconomic Indicators

Colombian Investment Standards

Sectors for Potential Investments

Macroeconomic stability and strong economic performance in the long term

P: Projected

Source: DANE; Banco de la República; Fedesarrrollo July 2014, EIU - Economist

Intelligence Unit . 2014

* 2014 inflation given by DANE

Inflation

GDP

Unemployment rate

15.6

14.113.7

11.8 12.011.2 11.3

12.0 11.8

10.810.4

9.6

7.06.5

5.54.9

4.5

5.7

7.7

2.03.7

2.41.9

9.1 9.0 8.9 8.9 8.6

3.6 3.4 3.6 3.5 3.32.5

3.9

5.34.7

6.7 6.9

3.5

1.7

4.0

6.6

4.04.7

5.0 5.0 4.7 4.6 4.6

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

GDP Growth, Inflation and unemployment Rate

2002 – 2018p (%)

150

226

302

300

397

425

373

432

448

387

401

415

595

600

1.089

1,176

1,790

2,324

New Zealand

Denmark

Israel

Norway

Peru

Hong Kong

Chile

Sweden

Belgium

Singapore

Switzerland

Vietnam

Colombia

Malaysia

Australia

Mexico

Brazil

Germany

Colombia is within the 30th largest economies in the world.

The country has a population of 47,7 million inhabitants.

Note: GDP adapted to Purchasing Power ParityPPP. Projected data.

Source: FMI . 2014

PIB (PPA) – 2015 (Billions USD)

PIB per capita (PPA ) 2000-2018 (USD)

Colombia´s per capita income has nearly doubled since 2000

High Income

Middle HighIncome

Middle LowIncome

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.

5,805

8.850

10.800

14,110

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 2013 2014p 2015p 2016p 2017p 2018p

A rapidly expanding middle class

2,9%

4,1%

4,2%

4,7%

5,5%

Average real growth of consumer

expenditure, 2014 – 2018

Middle class* in Colombia as a

percentage of total population

16%

25%

37%

46%

2002 2012 2020 2025

24.7

6.7

11.6

19.0

Million

inhabitants

* Calculus based on a 4.6% GDP growth

Middle class: Monthly household income between 3.2MW and

13MW

(MW) Minimum wage in Colombia 2014: USD 320.

Source: Fedesarrollo (2013) and Euromonitor

Multiple development regions

Medellín 2.441,123 hab.

Cali2.344,734 hab.

Barranquilla 1.212,943 hab.

Bogota7.776,845 hab.

Cartagena 990,179 hab.

Cucuta643,666 hab.

Ibague512,631 hab.

Bucaramanga527,451hab.

55% of the population has less than 30 years old.

9 cities have a population of over 500,000 inhabitants

Private sector: Main driver of economic growth

Contribution of demand components to the growth of GDP

Private consumption and investment contributed strongly to the growth between 2010 and 2012

• Decrease in unemployment Rate Increase in trust

• Historically low interest rates Increase of loans

• Important increase of the middle class.

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

Top Investors in Colombia 2000 – 2014 I Trim

FDI inflows 1994 –2014 I TrimUS$ Mio.

USA

• US$ 25,912 millions

• 23.1 %

England

• US$ 15,894 millions

• 14.1%

Spain

• US$ 8,579 millions

• 7.6%

Chile

• US$ 4,408 millions

• 4%

2,504

7,821

15,119

16,354

Prom.1994 - 2002

Prom.2003 - 2011

2012 2013

Var. 8%

Foreign Direct Investment

Current Macroeconomic Indicators

Colombian Investment Standards

Sectors for Potential Investments

Economic growth, Investor Confidence and Security

• Figures do not include FDI registered for SabMiller acquisition 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**

An investment-grade country with positive outlook

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

Rating DateRating

Agency

Long Term–

Foreign Currency

Long Term– Local

Currency

Outlook

Stable

BBB

BBB +

24– Apr- 2013

5 – Mar - 2007

Long Term–

Foreign Currency

Long Term –

Local Currency

BBB

BBB+

13 – Dic- 2013

22 – Jun -

2011

Long Term–

Foreign CurrencyPositiveBaa2 28– Jul - 2014

Term

Stable

The key drivers for Moody´s upgrade on July 2014 were:

1.Expectations of continued strong growth dynamics despite external headwinds and robust long-term growth

prospects supported by the fourth generation (4G) infrastructure investment program;

2.Sound fiscal management that has led to moderate fiscal deficits coupled with continued compliance with

the fiscal rule and expectations that this will continue.

The World Bank’s Doing Business Report 2015

19

Colombia, 34*

Peru, 35 *

-1Mexico, 39 *

+4

-2

Chile, 41 *

+3

Panama, 52 *

Position out of 189 economies

Change in rank 2014 – 2015**

0

Ecuador, 115 *

+3

Brazil, 120 *

Source: Doing Business Report 2015. World Bank* Position between 189 economies. ** Positive numbers indicate an improvement in the business environment

Colombia tops the region

Invited to become OECD member

Leader in terms of Investor Protection in L.A. and 10th worldwide

Source: Doing Business 2015 – World Bank

* Índex: 0-10 and 10 = the best score

7,2

6,3 6,25,8 5,8 5,8

5,6

4,8 4,7

4,2

Colo

mb

ia

Bra

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Peru

Ch

ile

Me

xic

o

Arg

en

tin

a

Pan

am

a

Uru

gua

y

Ecua

dor

El S

alv

ad

or

Ranking Country

10 Colombia

35 Brazil

40 Peru

56 Chile

62 Mexico

62 Argentina

76 Panama

110 Uruguay

117 Ecuador

154 El Salvador

Investment Protection IndexDoing Business - 2015

Free Trade Zones

Free Trade Zone

Permanent Free Trade Zone

Special Standing"Uniempresarial"

(FTZ)

Guajira

MagdalenaAtlántico

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 afterDecember 31, 2012.

• Income tax of 15% + 9% tax CREE.

Caribbean

Andean Region

Pacific Region

->Reduced income tax-> Sales allowed in the local market

Competitive advantages of Free Trade Zones

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.

Access to more than 45 countries and 1,5 billion consumers through its network of FTAs

Source: Colombian Ministry of Commerce, Industry and Tourism.

2014.

Canada

United States

Mexico

Guatemala

Honduras

El Salvador

Ecuador

BrazilPeru

Argentina

Paraguay

Uruguay

Liechtenstein

Switzerland

Island

Norway

EuropeanUnion

Turkey

Israel

Japan

Panama

Chile

Bolivia

Costa Rica

Venezuela*

PacificAlliance

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, Peru and México.

In force

Signed

In negotiation

International Investment Agreements - IIA

Source: Colombian Ministry of Commerce, Industry and Tourism. 2014.

Canada

United States

Mexico

Guatemala

Honduras

El Salvador

Peru

Switzerland

Turkey Japan

Chile

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

Spain

China

India

UnitedKingdom

Kuwait

Singapore

Azerbaijan

Qatar

Russia

France

UAE

In force

Signed

In negotiation

Costa Rica

South Korea

Israel

Panama

PacificAlliance

Double Taxation Agreements - DTA

Canada

Mexico

Peru

Switzerland

Japan

Chile

South Korea

Spain

India

Belgium

FranceCzech

RepublicPortugal

United States

Bolivia

Ecuador

Netherlands

In force

Signed

In negotiation

United Kingdom

A competitive location with easy access to markets around the globe

Mexico City4H45M

Los Angeles8H20M

Quito1H30M

Lima3H00M

Peru

Ecuador

México

United States

Canada

Brazil

ArgentinaChile

Spain

France

Germany

Over 935 weekly direct international flights.

More than 6,197 weekly domestic flights.

Less than 6 hours to the main capital cities

in Latin America.

More than 20 different airlinesoperating in Colombia.

New York 5H35M

Toronto6H05M

Caracas 1H20M

Santiago Chile 5H00M

Buenos Aires 6H15M

Sao Paulo 5H45M

Madrid9H40M

Paris 10H40M

Frankfurt11H15M

Labor incentives

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

New women employees above 40 yearsold with more than 1 yearunemployed. Length of benefit byemployee: 2 years.

New employees under twenty eight(28) years old. Length of benefit byemployee: 2 years.

New employees certified in displacementsituation, reintegration or disability.Length of benefit by employee: 3 years.

Discount in the income tax and supplementary contributions

POTENTIAL SECTORS

INFRASTRUCTURE

Current state of infrastructure

3,66

0 1 2 3 4 5 6

Uruguay

Venezuela

Argentina

Perú

Brasil

Colombia

Ecuador

Mexico

Chile

2,9

0 1 2 3 4 5 6

Brasil

Colombia

Uruguay

Venezuela

Argentina

Perú

Ecuador

Mexico

Chile

1,7

0 1 2 3

Uruguay

Venezuela

Colombia

Brasil

Perú

Ecuador

Argentina

Chile

Mexico

State of the Roads

3,4

0 1 2 3 4 5 6

Uruguay

Venezuela

Brasil

Colombia

Perú

Argentina

Ecuador

Mexico

Chile

State of the Total

Infrastructure

State of the Railways State of the Port Infrastructure

Quelle: World Economic Forum. Global Competitiveness Report 2011 - 2012

1 = Extremely Undeveloped; 7 = Completely efficient by the International Standards

Source: MCIT, 2013

8,170 Km of roads to be constructed or improved. (ANI, 2013)

The Government aims to increase port capacity

by 70%

A budget of 25 billion USD (2014-2018)

Source: Ministry of Transport

Fourth Generation of PPP’S (4g) –

Roads: US$ 24 Bill.-Intervention of 8.000 Km of Roads

- 1.300 Km of new Roads

- 40 new concessions

Ports: US$ 2,1 Bill.

(2015-2018)

Improvement of the

Magdalena river

navigability:

US$ 1.3 Bill.

Airports: interventions US$ 1.8

Bill (10 projects) and

constructions US$ 2.3 Bill (2

projects). (2015-2018)

Step Rail Ways Concession

Program (feasibility study – step

2) US$ 4.2 Bill.

Opportunities to

develop air, road, river

and airport

infrastructure

Infrastructure: A major drive for growth

ENERGY

Market structure

12

31

53

94

Transmission

Distribution

Generation

Commercialization

Agents of the power sector registered in Colombia

USERSNon regulated users (large users):

o Power demand > 2 MW or power consumption of55 MWh/month.

o These users can celebrate bilateral contracts withmarketers

o Set the price and quantity freely between the twoparties.

Regulated users:o Subject to a contract of uniform conditions.o Rates are regulated by the CREG through a

general tariff formula.Total Agents: 190Source: XM

Competition Monopoly Monopoly

Installed capacity in Colombia

Thermal31,4%

Hydraulic63,5%

Minors4,6%

Cogenerators0,5%

Total NIS 2013: 14,559 MW

Source: XM- 2014

National Interconnected System (NIS)Installed capacity December 31, 2013

Coal22,1%

Fuel Oil6,8%

ACPM20,3%

Jet11,0%

Gas-Jet A1

6,1%

Gas43,7%

Thermal:

4,515 MW

Hydro:

9,135 MW

Thermal Resources

Antioquia

Amazonas

Arauca

Atlántico

Bolívar

Boyacá

Cesar

Cauca

Casanare

Caquetá

CaldasChocó

Córdoba

Bogotá

La Guajira

Guaviare

GuainíaHuila

Magdalena

Meta

Nariño

Norte de Santander

Quindío

Risaralda

San Andrés y

Providencia

Tolima

Sucre

Santander

Vaupés

V. del Cauca

Vichada

Putumayo

Connected Zones (NIS) of Colombia

Source: Mining and Energy Planning Unit for Energy Solutions of Unconnected Zones (IPSE), 2013.

National Interconnected System (NIS)

− It includes 48% of the national territory andprovides coverage to 96% of thepopulation.

− Estimates on future demand are based onthe interconnected zones.

− 32 large hydroelectric plants and 30thermoelectric plants provide electricity tothe SIN.

Non-connected areas (UA)

− ZNI account for 52% of the country: 17departments and 1.441 municipalities (625thousand people).

− It is mainly supplied by diesel generators.NIS

Non-connected

areas

Investment opportunities in power Generation

• Since 1994, 2 reforms (Laws 142 and 143) were implemented aiming primarily to foster the private investment in the sector. This has translated into business opportunities for companies that have specific projects.

Solid and well established regulatory framework:

• Colombia has natural resources for power generation: water, coal and the possibility of gas in amounts that allow greater supply than that of the country's demand.

Resources to enhance the expansions:

• For the period 2019 - 2028, an increase of installed capacity is required, with the aim of meeting the criteria for energy reliability.

An energy deficit starting in year 2022

• The World Bank forecasts that demand will reach 2,500 TWh by the end of that 2030. This growth implies a need of an additional 239 GW in the region approaching 330GW of installed capacity.

Power demand in Latin America will double between

2008 and 2030

• Will increase energy exports to Latin American countries. Interconnection project between Colombia – Panama (2018), Andean Electrical Interconnection System between Ecuador-Peru-Chile.

International interconnection projects

• Different stages which sum 4,974 MW. 90 Hydraulic projects which sum 3,631 MW, 8 thermal projects equivalent to 858 MW, 4 Eolic projects which estimate to produce 654 MW, and 1 solar with an installed capacity of 19.9 MW

103 Power Generationprojects under development

Investment opportunities in Non-Conventional power Generation

• Geospatial position of Colombia . (Generation of energy from Non-Conventional resources such as: solar, wind, biomass, geothermal and solid waste).

Development of Non-Conventional power generation

projects

• This Law promotes the development and use of non-conventional energy sources (especially those from renewable sources), in the national energy system, establishes the legal framework and instruments for the use of non-conventional energy sources (FNCE for its acronym in Spanish), especially those from renewable sources, and creates tax incentives for the investment in this kind of projects.

Law 1715 of 2014 integrates non-conventional renewable energy to the national energy

system.

• The National Interconnected System (NIS) connects 48% of the national territory and covers 97% of the population. The Non-connected zones (ZNI) account for 52% of the country´s area (17 departments and 1,441 municipalities) and 625 thousand people. Currently, these zones produce energy with Diesel.

Non – Inteconnected Zones account to 52% of the National

Territory

OTHER SECTORS

Export Platform attracting European FDI

Identification of strategic sectors to attract foreign direct investments include:Manufacturing Industry, Agroindustry and Services. The principal subsectorsinclude:

- Chemical Industry- Construction Industry- Automobile Industry- Pharmaceutical Industry- Aerospatiale Industry- BPO et IT - Cosmetic Industry

- Financial Services - Logistics- Creative Industries- Petrol extraction and Services - Real Estate- Hotels and Touristic Industries. - Foods and Services Industries- Radio and TV Industry