The Report: Colombia 2013
Outperforming the majority of its regional peers, Colombia has experienced steady economic growth in the past decade registering GDP growth averaging over 4%, a rate set to continue in 2013. Increased stability and security have renewed investment confidence in Colombia, which, with vast natural resources, a strengthened fiscal policy following reform in 2012, and a number of new free trade agreements, is well positioned to continue experiencing growth. The extractive industries, alongside the financial, infrastructure and retail sectors are particularly dynamic as the government pursues diversification strategies and the middle class expands.
Country Profile
A new era of confidence is sweeping Colombia after a history marked by instability, social inequality and counter-insurgency efforts against guerrilla movements. Steady economic progress and increased security have renewed confidence in Colombia, which has sought to further integrate its economy regionally as well as globally through free trade agreements and membership in regional blocs. With foreign and domestic investments beginning to have tangible effects on the economy, the current administration has sought to reduce social inequality with some success. As the 2014 national elections approach, much will depend on the current negotiations with the FARC, which have so far made important concessions to promote dialogue with the government. This chapter contains interviews with President Juan Manuel Santos; María Ángela Holguín Cuéllar, Minister of Foreign Affairs; Juan Carlos Pinzón, Minister of Defence; and a viewpoint from José Manuel García-Margallo, Spanish Foreign Minister.
Explore chapterEconomy
Consistent macroeconomic growth in the past decade, averaging 4.5% from 2002 to 2012, has renewed investment confidence in Colombia. Strong economic performance is expected to continue with the IMF anticipating GDP growth of around 4.1% in 2013. With a liberal legislative framework for free trade zones and high investor protection, Colombia attracted the second-highest investment flows in the region as a percentage of GDP in 2012, at 26.2%. Five key engines for growth – mining, innovation, housing, infrastructure and agribusiness – are all set to receive a major boost as part of the government’s National Development Plan. This chapter contains interviews with Juan Pablo Rivera, President, Bogotá Free Trade Zone; Sergio Díaz-Granados Guida, Minister of Commerce, Industry and Tourism; Karel De Gucht, EU Trade Commissioner; Gerardo Hernández Correa, Superintendent, Financial Superintendence of Colombia; Rubens V. Amaral Jr, CEO, Banco Latinoamericano de Comercio Exterior; Jim O’Neill, Chairman, Goldman Sachs Asset Management; and a viewpoint from Douglas L Peterson, President, Standard & Poor’s Rating Services.
Explore chapterBanking
Characterised by strong supervision and relatively conservative lending policies, Colombia’s banking sector is among the most stable and profitable in the region, with a return on assets of 1.97% across all credit entities and a return on equity of 13.56% in 2012. Although the sector is dominated by large domestic conglomerates, conditions are ripe for investors. Consumer, microcredit and mortgage lending segments have seen substantial real annual growth rates. Increased sophistication of the sector should be expected as it moves to implement Basel II and Basel III requirements and works towards compliance with International Financial Reporting Standards by January 2015. This chapter includes interviews with José Darío Uribe, Governor, Central Bank of Colombia; Luis Carlos Sarmiento, CEO, Grupo Aval; and Carlos Raúl Yepes, President, Bancolombia.
Explore chapterCapital Markets
Colombia’s increasingly deep, diverse and sophisticated capital markets suggest a coming of age for the sector, which in 2012 saw total annual traded volume reach $36bn and a record total market capitalisation of $270bn. Well-established sovereign fixed-income and foreign exchange markets have been complemented in recent years by a developing derivatives market, increased domestic corporate debt issuance and a rising stock exchange, with strong domestic and international investor appetite across a range of asset classes. The Integrated Market of Latin America, which brings together the equity markets of Colombia, Chile and Peru, currently ranks second to Brazil on the continent in terms of market size, and offers new opportunities for the region. This chapter includes interviews with Juan Pablo Córdoba, President, Bolsa de Valores de Colombia; and Alejandro Santo Domingo, Board Member, Valorem.
Explore chapterInsurance
The insurance sector has experienced significant growth in recent years as a rise in disposable income, an expansion of the formal economy, falling unemployment and gradual advancement on major infrastructure projects have helped expand demand across the spectrum of general and life insurance products. The number of insured has doubled between 2008 and 2011 and, at an average growth rate of 9.6% over the past five years, contributions from pensions and social security policies are raising the industry’s capitalisation to new levels. Low penetration rates suggest ample room for growth while new opportunities are becoming apparent in the microinsurance segment. Proposed regulatory changes, which include plans to implement International Financial Reporting Standards by 2016, are expected to further strengthen the highly concentrated sector. This chapter includes interviews with David Bojanini, President, Grupo SURA; and Raúl Fernández Maseda, President, Mapfre Colombia.
Explore chapterEnergy & Utilities
The energy sector reached a milestone in 2012 as crude oil production surpassed 1m barrels per day. Colombia’s current generation capacity of 14,420 MW is supplied primarily by hydroelectric power, which accounts for just over two-thirds of the total, with the remainder coming primarily from natural gas- and coal-fired thermoelectric plants. Since 2008 natural gas production has seen private sector output grow at 22.9% year-on-year. The sector has also seen the emergence of a biofuels industry as legislation mandating the use of biofuel mixes created domestic demand for the alternative energy source. Deficient infrastructure and security concerns continue to pose a challenge to the sector. This chapter includes interviews with Frederico Renjifo Vélez, Minister of Mines and Energy; Juan Esteban Calle, Empresas Públicas de Medellín; and Germán Arce Zapata, President, National Hydrocarbons Agency.
Explore chapterMining
The past decade has seen something of a reawakening for the mining industry, as improved security and political support have resulted in increased investment and mineral production. While still a relatively small percentage of the wider economy, revenues from mining exports have risen dramatically over the past decade. Mining activities expanded 6.3% in 2012, largely thanks to the 19% expansion in the mining of metallic minerals. The current administration has high hopes of expanding production of its primary mining exports – coal and gold – while formalising the vast number of informal operations and ensuring a stable and secure environment for private firms. This chapter includes interviews with Beatriz Uribe, President, Mineros; and Maria Constanza García, President, Agencia Nacional de Minería.
Explore chapterInfrastructure
The government plans to implement heavy spending programmes to address Colombia’s severely deficient infrastructure network, a result of a rugged topography and decades of corruption, militancy and shifting government priorities. The Santos administration, which identified infrastructure development as a key pillar of its inclusive economic development policy, has committed to increasing investments from 1% to 3% of GDP. Investment allocations in the national budget have more than doubled in recent years, exceeding $4.2bn in 2012 and 2013. By 2020 the government expects some $50bn to have been invested, with the bulk coming from the private sector following administrative reform of the National Infrastructure Agency and a new law on public-private partnerships, aimed not only at increasing transparency and efficiency but also at attracting private investment. This chapter contains an interview with Luis Fernando Andrade Moreno, President, National Infrastructure Agency.
Explore chapterTransport & Logistics
Colombia’s transportation network, currently a competitive disadvantage for the country, ranks poorly even by regional standards. Decades of under-investment and security concerns have created significant logistical complications, pushing up the duration and cost of domestic shipments, which has recently been exasperated by the high cost of fuel, particularly diesel. Budget allocations for investment in transport have risen significantly in the past two years as the government carries out major modernisation projects. Heavy investment and the gradual implementation of a Customs reform to streamline shipping processes should see the sector regain some dynamism in the near future. This chapter includes an interview with Fabio Villegas, CEO, Avianca.
Explore chapterConstruction & Real Estate
The construction sector has experienced consistent expansion in the past few years, registering 3.6% growth in 2012. While this figure is significantly lower than the 10% growth registered in 2011, prospects for 2013 suggest the sector will regain momentum driven primarily by aggressive government spending programmes aimed at closing the gaps in infrastructure and housing. Likewise, the real estate sector is showing signs of reaching maturity, as strong demand for housing and a healthy mortgage system provide access to property and have thus far, prevented speculation. Housing policies, which have traditionally focused on generating demand among the low-income and middle-class segments, are now shifting focus towards developing strategies to control rising property prices produced by the shortage of land in major urban centres. While surging property values and land prices remain a challenge, it has nonetheless increased the potential of the residential leasing market.
Explore chapterIndustry
Weaker international demand and increasing foreign competition have caused the output of the industry sector to fall 0.7% in 2012, limiting its contribution to GDP to 12%. Traditional industries as well as the manufacturing of vehicle parts and their assembly have been hit the hardest. Nonetheless, some segments, such as fast-moving consumer goods, continue to display potential. Colombia’s shift in industrial focus from primary products to added value has also seen the development of niche segments such as cocoa products. Government initiatives such as the Stimulus Plan for Production and Employment and the Productive Transformative Programme, should help boost sector growth in the near future. This chapter contains an interview with María Claudia Lacouture, President, Proexport.
Explore chapterRetail
Over the past decade retail has become one of the biggest contributors to economic growth. In 2011 the sector’s contribution to GDP reached 8.1%, largely driven by the increasing size and wealth of Colombia’s middle class, greater access to financing and an inflow of foreign retailers. The arrival of foreign competitors with high levels of funding, innovation and efficiency has contributed to the sector’s dynamism as the retail offering continues to diversify and various segments experience rapid growth. Foreign capital inflows rose from $10m to $2.3bn between 2000 and 2011, largely driven by the increase in shopping malls. Colombia’s large population spread over numerous cities has been a key factor in supporting growth and bodes well for the future of the sector.
Explore chapterAgriculture
Selected as one of five strategic growth areas in the National Development Plan, the agricultural sector has traditionally been one of the primary growth engines in Colombia. However, recent supply and demand fluctuations have created challenging times for the sector and government funding has become central for ensuring its short-term viability. This is likely to improve as completion of renovation campaigns comes in sight, crops undergo further diversification, and competitiveness programmes are vigorously pursued to enable the sector’s performance in open markets. The sector is gradually changing its focus from traditional segments such as coffee and cocoa to products with higher demand in export markets. With 14.5m ha of unused land, the sector’s growth potential is tremendous. This chapter includes an interview with Juan Camilo Restrepo, Former Minister of Agriculture and Rural Development.
Explore chapterICT
The ICT sector is undergoing considerable development as the government implements its Vive Digital Plan, a strategy that targets the overall improvement of telecommunications connectivity and is expected to facilitate $12.5bn worth of investments into the sector between 2011 and 2014. The telecoms sector saw the mobile penetration rate surpass 100% in 2012 and its first major auction of 4G spectrum in 2013. While it still faces major challenges, the auction will improve network quality and increase the Vive Digital Plan’s budget considerably. Likewise the IT market has expanded, bringing in $5.8bn in revenue in 2012 as the adoption of new technologies increases, creating more opportunities for internet providers, software engineers and many other segments. This chapter includes an interview with Diego Molano Vega, Minister of Information and Communications Technology.
Explore chapterResearch & Innovation
Identified as one of five sectors with strategic importance for its ability to bring about growth in other sectors, the research and innovation sector is set to undergo development in the near future as the 2012 tax reform will see 10% of all revenues from the extractive industries go towards funding innovative projects promoted by regional governments. The contribution of innovation to the country’s economic growth remains small, but efforts are under way to strengthen innovation facilitators, encourage the formation of innovation-based clusters and links between local, regional and national stakeholders and realign academia, researchers and the private sector. These initiatives have already shown some positive signs as a growing number of multinationals are setting up or expanding their research activities in the country, a trend expected to continue.
Explore chapterTourism
An improved perception of security has boded well for Colombia’s tourism sector. Identified as a strategic growth area in the National Development Plan, the sector has grown consistently in the past few years, earning $21.2bn in 2012 and accounting for 5.3% of GDP, a figure expected to reach 5.4% in 2013, making the sector the third-most-important source of foreign currency behind oil and coal. Some 1.7m visitors entered Colombia in 2012, a 7% increase from the previous year and nearly double the global growth rate of 4%. Given these positive indicators, the government has ambitious plans to boost the annual number of visitors to 4m by the end of 2014, for which it set aside a budget of $373.8m. Ecotourism and the global meetings industry have displayed the most potential for growth.
Explore chapterSport
Sport has not only become a vehicle for social inclusion in Colombia, but also a budding industry contributing to economic development. While public sector investment has been promising, the private sector has been more reticent, and has mainly focused on sponsoring big-name teams and athletes. This is likely to change now that the basis of professional sports development, aside from football, has been established. In addition to a range of investment opportunities from specialised training to the promotion of particular sports, the most popular sporting disciplines are currently experiencing improved levels of sponsorship, a consequence of their higher visibility domestically and internationally.
Explore chapterHealth
A handful of international awards and recognition have placed Colombia’s health system on the global radar as the sector seeks to conform to international standards. A recent reform to the universal health care system in 2012 improved coverage and made access to services more affordable, boosting the potential for the pharmaceuticals industry and allowing Colombia to build its presence has a producer and distributor in Latin America. Medical tourism has experienced growth, in particular in the areas of plastic and reconstructive surgery even though illegal operations remain a problem. Nonetheless, complex financial and management issues continue to restrict the growth of a quality health system, which faces ongoing challenges, in particular the shortage of specialists and a growing gap in quality standards between urban and rural centres.
Explore chapterEducation
The education sector is growing in tandem with the economy, as expansion stimulates a need for highly skilled workers. Demand for higher education has increased significantly in the past decade. In 2012 the number of students enrolled in specialisation programmes surpassed 81,000, an increase of nearly 50% from 2002. Several reforms are currently under way aimed at improving access, funding and quality. The government has channelled considerable funds into the sector in the past two years and will continue to do. The additional funds should help the sector address its main challenges – a lack of infrastructure and resources to maintain high levels of instruction and a gap in quality standards between urban and rural areas – and help guarantee continued growth.
Explore chapterTax & Accountancy
This chapter offers a comprehensive overview of the tax reform introduced in 2012, which sought to increase transparency and participation and affected a number of important areas, such as capital gains, mergers, share acquisition, branch profits and equity contributions. Among other changes, the reform reduced the capital gains tax, introduced the concepts of thin capitalisation and income tax for equality, as well as a registration tax on cash contributions. This chapter features a viewpoint from Eduardo Calero, Partner, PwC, on the implications of the reform.
Explore chapterLegal Framework
Since 1990 Colombia has attempted to modernise its legal system to promote economic growth and attract foreign investment. The array of recently signed free trade agreements as well as reforms to increase transparency and participation are redefining the legal landscape, which, having undergone significant improvements, still suffers from a weak judicial system in enforcement of contracts and significant bureaucratic delays. This chapters features a viewpoint from Martín Carrizosa, Partner, Prietocarrizosa on the significance of the Pacific Alliance.
Explore chapterThe Guide
Among the cultural attractions that Colombia has to offer, its array of music and dance styles are the most representative. In addition to an introduction to Colombia’s most distinguished dances, this chapter contains helpful information for visitors to Colombia, including information on dress code, language, visas, communications, currency and traffic. It also features hotel listings and contact information for various institutions, including embassies and regional agencies.
Explore chapterTable of Contents
There are no articles in this chapter. To view the table of contents, please open click the "View in online reader" link above.
