Report on Foreign Direct Investment in Colombia

The figures to December 2010 showing details by target sector and country of origin are a source of the Banco de la Republica's Balance of Payments,

which includes influxes of currency, profit reinvestment and capital payments other than foreign currencies.

The figures to May 2011 are from the Banco de la Republica's Foreign Currency Balance and exclusively measure influxes of currencies from abroad.

May 2011

OVERVIEW OF FDI BEHAVIOR IN 2010

Following the financial crisis, capital inflows to emerging economies went througha generalized increase as a result of the international liquidity originated by theexpense expansion policies of developed countries.

In addition, the increase in the international prices of raw materials has madedirect investment more attractive in the countries that produce thesecommodities, such as the case of Colombia, in which 7% of all the region's capitalinflow was concentrated in 2010.

Although the FDI in Colombia reached US$6.760 m in 2010 (5% less than in2009), it was above the historic average of the decade, driven mainly by the highinternational prices of minerals and petroleum; these two sectors concentrated67% of the net positive revenue reported by Colombia over the last year.

Considering all the other sectors, financial activity received 13% of the totalinflows received by the country in 2010, followed by manufacturing activities at8% and trade with 6% of the total.

2.134 1.720

3.016

10.252

6.656

9.049

10.596

7.137 6.760

-

2,000

4,000

6,000

8,000

10,000

12,000

2002 2003 2004 2005 2006 2007 2008 2009 2010

FDI INFLOWS INTO COLOMBIA (2002 – 2010) US$ MILLIONS

Source: Balance of Payments, Banco de la República

Between

2009 and

2010, FDI in

Colombia

dropped

5.3%

Petroleum Sector 9%

Mines and Quarries,

28%

Financial Establishments;

13%

Manufacturing; 8%

Com., Rest. and Hoteles; 6%

Construction, 4%

Ss Comunales, 1%

Agricul., Hunting,

Forestry and Fishing; 1% Elect., Nat. Gas

and Water; 0%

FDI INFLOW MAIN SECTORS

SHARE % TO 2010*

In 2010, the mining and

petroleum sectors

accounted for 67% of

the total investment,

followed by financial

establishments with

13% and

Manufacturing with

8%.*

*Share of all sectors with positive net investment excluding petroleum and mining: USD $2,432.1 **Share of all sectors with positive net investment USD $8,114.6 Million

Source: Balance of Payments, Banco de la Republica. Proexport calculations

348

-977

28

88

262

594

621

720

3.025

2.428

-589

35

52

99

262

446

594

945

2.055

2.862

Agricultura, Caza, Silvicultura y Pesca

Servicios Comunales

Construcción

Comercio, Restaurantes y Hoteles

Manufactureras

Establecimientos Financieros

Minas y Cantanteras

Sector Petrolero

2010

2009

Petroleum

Mining and Quarries

Financial establishments

Manufacturing

Commerce, restaurants and hotels

Construction

Public Services

Agriculture, Hunting, Forestry and Fishing

Electricity, Water and GasElectricity, Water and Gas

FDI INFLOW MAIN SECTORS2009 – 2010 USD MILLIONS

NOTE: Sectors arranged by FDI amounts to 2010

Source: Balance of Payments, Banco de la República. Proexport calculations

SECTOR % Var.

2009 - 2010

Agriculture, Hunting, Forestry and Fishing

86.4%

Financial Establishments 31.2%

Petroleum 17.9%

Public Services 12.1%

Construction 0.2%

Manufacturing -4.4%

Commerce, restaurants and hotels -25.0%

Mining and Quarries -32.1%Electricity, Natural Gas and Water -

Transp. Storage and Communications -

TOTAL -5.3%

Although the sectors with the largest share are Petroleum, Mining and Quarries, the

ones with the highest growth were Agriculture and Financial with 86% y 31%

respectively.

Transp., Storage and Commun.

MAIN COUNTRIES INVESTING IN COLOMBIA BETWEEN 1994 AND 2010(%) SHARE IN 2010*

*Total investment of countries with positive net investment excluding reinvested profits and petroleum sector investment (figures excluded from thecountry's investment total and broken down individually). Value 2010: USD $2,235.8 Million

NOTE: The order of the countries has been established according to the largest shares in 2010 of the main countries investing in Colombia as accumulatedfrom 1994 to 2010.

Source: Balance of Payments, Banco de la República

Total FDI 2010: USD $6.760 Million*

Panama 14.5%

Panama; 28%

Anguilla, 20%

Bermudas, 15%

England; 9%

Canada; 7%

Brazil; 2%

Switzerland; 2%

Venezuela, 2%

France; 2%

Cayman Islands; 2%

Others; 12%

Transp., Storage and Commun.

Although in 2010,

approximately 63% of the

Investment came from

countries like Panama,

Anguilla and Bermudas, the

main traditional sources of FDI

were England and Canada.

FDI INFLOW BY COUNTRIES2009 – 2010 USD MILLIONS

203

1.234

-327

65

47

78

386

287

46

337

-623

-241

-18

48

54

163

191

328

455

620

Suiza

Brasil

Canadá

Inglaterra

Bermudas

Anguilla

Panamá

2010

2009

* The order of the countries has been established according to the highest investment flows in 2010 of the main countries investing in Colombia as accumulated from1994 to 2010. Countries like the United States, Spain and Mexico have been included in the Graph because, although they had negative flows in 2010, they aretraditionally important investors to Colombia.

Source: Balance of Payments, Banco de la República

Country% Var.

2009 - 2010Anguilla 899.2%Canada 107.9%

Panama 84.0%Bermuda 14.2%

Brazil 12.9%

Switzerland -27.3%

England -50.4%United States -

Mexico -Spain -TOTAL -5.3%

Spain

Mexico

United States

Canada, Denmark, Ecuador and Ireland reported a growth of more than 100% between 2009

and 2010 as issuers of FDI to Colombia

Panama

Anguilla

Bermuda

England

Canada

Brazil

Switzerland

ANNUAL AVERAGE FDI OF COUNTRIES WITH SALES OFFICES (USD MILLION)

COUNTRYAVERAGE

INVESTMENT 2000-2010

AVERAGE

INVESTMENT2005-2010

DIFFERENCE

Brazil 4.9 7,7 2,8

Venezuela 4,0 (3.7) (7.7)

France 3.1 5,0 1,9

Peru 1,1 0,7 (0.3)

Costa Rica 0.7 1,5 0,9

Ecuador 0.5 0,2 (0.3)

China 0,2 0,8 0,7

India 0,0 0,0 (0.0)

Chile (1.0) (0.1) 0,9

Mexico (2.3) (2.7) (0.4)

United Kingdom (2.3) 58,3 60,6

Germany (8.2) (0.4) 7,7

United States (12.0) (145.7) (133.7)

Spain (47.9) (22.6) 25,3

Canada (50.1) 25,9 76,0

Countries like Canada and the United Kingdom have shown a significant upward trend in their

investments in Colombia over the last 5 years

Source: Balance of Payments, Banco de la República, Proexport Calculations

FOREIGN DIRECT INVESTMENT MEASURED BY THE DOMESTIC FOREIGN CURRENCY BALANCE*ACCUMULATED JANUARY –JUN 04, 2010-2011USD MILLIONS

Source: Foreign Currency Balance. Banco de la República. *The Domestic Foreign Currency Balance for FDI measures currency movements from abroad, whereas the Balance of Payments does not include other forms of FDI such as reinvested profits and non-currency foreign capital contributions.

88%

12%10%

0

1000

2000

3000

4000

5000

6000

2010 2011

461

866

3,364

5,117

Otros Sectores Petróleo y Minería

Total FDI: 3,684

86%87%

88%

Other Sectors Petroleum and Mining

88%

14%

2010-2011 GROWTH

Total FDI 56%

Petroleum 52%

Others 88%

12%

Total FDI: 5,752

MAIN CASES OF INVESTMENT 2010:Communications and Information Technology Services

12 2

1

1

2

1

2

12

1T 2T 3T 4T

Number of projects Subsectors - 2010

BPO Comunicaciones

RRHH Ingenieria

Engineering

BPO

HR

Communications

Q 1 Q 2 Q 3 Q 4

The South Korean airport operator Korea Airports Corporation

invested USD $60.9 million in the operation and administration of fiveairport terminals in Colombia. (La República, November 04, 2010).

(BPO&O)

Chilean communications company DeVeTel came to Colombia to offerits services in the country's mobile telephony sector. (La República,December 02, 2010).

(Communications)

The Canadian company of services and products for oil and miningdevelopment Estrella International Services acquired Colombian firm

STS Andes, specialized in cargo transport in the hydrocarbon sector

for USD $20 million. (Portafolio, November 04, 2010)

(Engineering, Mining and Petroleum Services)

The US multinational company that manufactures and sells ITproducts, IBM invested USD $8 million in the construction of a newdata center in Colombia. (Portafolio, August 12, 2010).

(Software)

In 2010, thirteen cases of investment, four greenfield and seven reinvestments were

detected

Source: Cases collected from stories published in major national and international media sources

US asset management and AVL solutions company,Lender Systems, invested US $0.03 million in thecreation of the firm Intellitech, which will specialize inloan portfolio management in Colombia. (La República,April 12, 2010).

(Other financial services)

US conglomerate of financial services Citigroup opened anew service center in the city of Bogotá D.C. (Portafolio,August 06, 2010).

(Banking system)

US conglomerate of financial services Citigroup acquired 31.9% of Colombian company Transportadora de Gas Internacional for USD $400 million through its

subsidiary, Citi Venture Capital. (Portafolio, December

20, 2010)

(Investment Banking)

In 2010, four cases of investment were detected, two of which were acquisitions, one

greenfield and one reinvestment.

Source: Cases collected from stories published in major national and international media sources

MAIN CASES OF INVESTMENT 2010:Financial Services

1 1

1

1

1T 2T 3T 4T

Number of projectsSubsectors - 2010

Otros servicios bancarios

Sistema bancario

Banca de inversión

Banking system

Investment banking

Oder financial services

Q 1 Q 2 Q 3 Q 4

Chilean absorbent paper manufacturer CMPC invested US$74 million in opening a plant in Gachancipá,Cundinamarca. (Portafolio, July 09, 2010).

(Absorbents)

US cosmetics and perfume company Avon invested USD$50 million in a distribution center in the town of Guame,Antioquia. (Dinero, June 03, 2010).

(Cosmetics)

Peruvian cosmetics and perfume company Yanbal invested USD $25 million in a distribution center in the town of Tenjo, Cundinamarca. (La República, July 29, 2010).

(Cosmetics)

US multinational personal hygiene product manufacturerProctor&Gamble invested USD $25 million in theconstruction of a distribution center in Rionegro,Antioquia. (La República, May 27, 2010).

(Personal hygiene)

During the period from April to September 2010 four cases of investment were detected

in Cosmetics and Hygiene Products, which were all reinvestments

Source: Cases collected from stories published in major national and international media sources

MAIN CASES OF INVESTMENT 2010:Cosmetics and Hygiene Products

1

1

1

1

1T 2T 3T 4T

Number of projectsSubsectors - 2010

Aseo Personal

Cosméticos

Absorbentes

Personal hygiene

Cosmetics

Q 2 Q 3 Q 4

Absorbents

Q 1

MAIN CASES OF INVESTMENT 2010:Tourism

US hotel chain Marriott International opened a new hotelin the financial district of Bogotá D.C. under its brand JWMarriott. (La República, June 23, 2010).

(Tourism Infrastructure)

US hotel chain Starwood Hotels and Resorts invested

about USD $62.5 million on opening new hotels inColombia. (La República, June 23, 2010).

(Tourism Infrastructure)

French hotel and travel agencies group Accor investedapproximately USD $62.5 in positioning its brands in LatinAmerica, among which Colombia was one of the topcountries. (FDI Markets, March 2010).

(Tourism Infrastructure)

Source: Cases collected from stories published in major national and international media sources

23

4

1T 2T 3T 4T

Number of projectsSubsectors - 2010

Infraestructura de TurismoTourism Infrastructure

In 2010, there was a rise in the investment in hotel infrastructure. The first nine months of the year

showed increases. Almost all these cases are Greenfield.

Spanish pizzeria chain Telepizza acquired 80% of theColombian company Jeno's Pizza. (Portafolio, June 01, 2010).

(Processed Foods)

Italian dairy product manufacturer Parmalat investedUSD $3.2 million in adapting its plant in Chia,Cundinamarca. (Portafolio, March 07, 2011).

(Processed Foods)

During the first half of 2010, two cases of investment were observed in the agro-

industry sector, specifically in Processed Foods

Italian car manufacturer Fiat invested USD $15 millionon opening a new point of sale in the city of BogotáD.C. (Portafolio, April 09, 2010).

(Sales)

Swedish car manufacturer Volvo opened a new showcase in the city of Bogotá D.C. (Portafolio, March 07, 2010).

(Sales)

During Q2 2010 two cases of reinvestment were detected in the automotive sector, specifically in the sale of vehicles in the

Colombian capital

Source: Cases collected from stories published in major national and international media sources

MAIN CASES OF INVESTMENT 2010:Agro-industry/Automotive

AGRO-INDUSTRY

AUTOMOTIVE

CONCLUSIONS

Although the Petroleum and Mining sectors still have the highest share in FDI, the Agriculturaland Financial sectors showed relevant increases.

The United Kingdom and Canada are listed as the main sources of investment in Colombia inthe year 2010, as well as those with the highest growth rate over the last 5 years.

The ICT sector went on from two investment projects in Q1 of the year to six in the lastquarter, for a total of 15 for the entire year.

There were nine cases of investment during the year 2010 in the Hotel sector.

The Financial and Cosmetics sectors each presented 4 investment projects throughout 2010.

The Agro-industry and Automotive sectors each presented two cases of investmentthroughout 2010.