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Colombia’s Economic Advances Offer More Opportunities for U.S. Business

by Laura Lochman, Economic Counselor, U.S. Embassy Bogota

Over the past decade, Colombia has dramatically improved security throughout the country with the help of more than $8 billion in U.S. government assistance, and has achieved an average economic growth rate of 5 percent.  The entry into force of the U.S.-Colombia Trade Promotion Agreement (TPA) on May 15, 2012, and the nine other free trade agreements Colombia now has in force, provide additional opportunities for Colombian economic expansion. 

Although Colombia still faces challenges, including infrastructure deficiencies and income inequality, the country of 46 million boasts a growing economy with investment grade status, a rising middle class, and a government that is committed to democratic prosperity and regional leadership.

Since taking office in August 2010, the Santos Administration has demonstrated political will to create the conditions for economic development, job growth, and poverty reduction.  Sound fiscal and macroeconomic management allowed Colombia to claim the triple crown of seeing its credit ratings increased to ‘Investment Grade’ level by Standard and Poor’s, Moody’s and Fitch Ratings.  Colombia has reduced the unemployment rate to single digits (8.9 percent in October 2012), kept inflation in check (currently less than 3 percent), and attracted record foreign direct investment (FDI) of more than $13 billion in 2011 – a 50 percent increase over the previous year.  For the two first quarters of 2012, the Central Bank recorded FDI of $7.8 billion, and the government expects total 2012 FDI to exceed $15 billion.  About 250 U.S. companies operate in Colombia, with FDI concentrated in mining, hydrocarbons, and manufacturing (followed by consumer products, high tech, and franchising). 

Since May 2012, the Santos Administration has been dedicating 10 percent of royalty income to science, technology and innovation.  Medellin is emerging as an innovation center in Colombia with highly effective public-private partnerships and increasing amounts of domestic and foreign investment in the sector.  In 2010, the Ministry of Information Technology and Communications launched an ambitious program to increase internet access, provide computers for school children, increase the fiber optic network, and launch 4G broadband technology through an estimated $1.7 billion in public and private sector investments from 2010 to 2014.  Today, six in ten urban Colombians have internet access.
Colombia’s mineral and energy resources are abundant, especially in coal, natural gas, precious minerals and oil, and companies from Canada to China have established operations in Colombia.  However, the large-scale increase in demands for exploration has taxed the environmental licensing agency (ANLA), causing delays in adjudication of environmental license requests.  As improved security conditions translate into new exploration in previously off-limits areas, Colombia’s infrastructure demands for roads, ports, and railroads have increased. Only 15 percent of Colombia’s roads are paved, and the nation has just 1,000 kilometers of dual-lane divided highways.  Colombia has only 900 kilometers of railroad, and river navigation has yet to be developed to transport goods on a large scale.
To address challenges posed by the country’s geography, multiple population centers, and lack of previous investment, Colombia has more than doubled its spending on transportation infrastructure from $1.6 billion in 2010 to $3.3 billion in 2012, and aims to reach the goal of three percent of GDP, or approximately $10 billion, by 2014.  A broader infrastructure development program over the next several years will create enormous opportunities for companies willing and able to undertake the river dredging and construction of state of the art highways, ports, and airports the country needs.
Colombia is unique in that there are five bona fide commercial hubs in the country - Bogota, Medellin, Barranquilla, Cali, and Cartagena – and major ports on both the Caribbean and the Pacific coasts.  Colombia offers U.S exporters access through multiple hubs, each of which has its own American Chamber of Commerce.

The United States is Colombia’s most important trading partner.  Total trade in 2011 exceeded $37 billion, and January through October 2012 trade has already exceeded $34 billion.  In 2011, more than 38 percent of Colombian exports went to the United States, and 25 percent of Colombia’s imports of goods came from the United States.  U.S. goods and services exports to Colombia are expected to continue to grow, as the May 2012 U.S.-Colombia TPA immediately eliminated tariffs on 80 percent of U.S. industrial and consumer goods exports to Colombia (with remaining tariffs phased out over 10 years) and on 50 percent of U.S. agricultural exports to Colombia.  The TPA also provides enhanced investor and intellectual property protections, market access for remanufactured goods, expanded access to service markets and government procurement opportunities, and improved dispute settlement mechanisms (arbitration). 

International indexes generally rate Colombia as one of the best countries in Latin America for doing business and investing.  Some U.S. investors have voiced concerns about corruption and bureaucratic red tape.  The U.S. Embassy encourages U.S. companies interested in exporting to Colombia to review our Country Commercial Guide located at: http://export.gov/colombia/. We encourage those interested in investing in Colombia to read our blog on Opportunities for U.S. Businesses in Colombia and to contact us for more information.

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