The Report: Colombia 2014
Despite instability associated with the global mining and hydrocarbons sectors, Colombia displays stable economic growth amidst a regional slowdown, in large part a result of economic liberalisation, free trade agreements and entry to a variety of trade blocs. After recording 6.6% growth in 2011 and 4% in 2012, Colombia saw a slowdown in the first half of 2013, but the economy regained momentum by the end of the year.
Country Profile
In just a decade, advances in the fight against insurgent groups, coupled with long-term policies that have generated confidence among investors, have radically changed the way the world looks at Colombia. On the political front, the government of President Juan Manuel Santos Calderón has maintained a dialogue over the past 18 months with the Revolutionary Armed Forces of Colombia, with hopes of achieving peace after half a century of internal conflict. The possibility of a peace agreement has the potential to redefine not only the political climate in Colombia but also the economy – important for a country that still faces significant challenges. High crime rates in major cities, coverage gaps in education and health, and a high inequality coefficient are some of the issues the government will work to tackle in the next four years. This chapter contains interviews with Juan Manuel Santos Calderón, President of Colombia; Maria Ángela Holguín, Minister of Foreign Affairs; and Hasan Tuluy, World Bank Regional Vice-President for Latin America and the Caribbean.
Explore chapterEconomy
Despite the global vagaries of the mining business and potential volatility in hydrocarbons, a combination of economic liberalisation, free trade agreements and entry to a variety of trade blocs has assured steady growth for Colombia over the past few years. After expanding 6.6% in 2011 and 4% in 2012, Colombia’s economy experienced a slowdown during much of the first half of 2013, registering GDP growth of just 2.6% in the first quarter. Nonetheless, the sound performance of the construction sector, along with strong public investments, recovery in the hydrocarbons industry and restored consumer confidence, allowed Colombia to finish 2013 with solid growth of 4.7%. While the first quarter of 2014 displayed a slight slowdown, with GDP expanding by just 2.9%, large-scale investments in infrastructure point to continued growth in 2014, with the central bank forecasting GDP to expand by 5%. This chapter contains interviews with José Ángel Gurría, Secretary-General, Organisation for Economic Cooperation and Development (OECD); Enrique García Rodríguez, Executive President, CAF development bank of Latin America; and José Darío Uribe, Governor, Central Bank.
Explore chapterBanking
The past decade has seen the Colombian banking sector expand against a backdrop of economic growth, improved security and macroeconomic stability. An emerging middle class in need of financial services has fuelled the rise in banking penetration. Although accessing financing has often been a struggle for low-income households and micro-businesses, a fresh influx of microcredit and mobile banking is providing financial services to new segments of the population. Total assets of credit institutions reached $213.9bn by December 2013, growing 14.7% from the previous year. Though well-established Colombian groups continue to lead the market, recent merger and acquisition activity is changing the sector’s structure, bringing in new players. On the regulatory front, 2014 has been a transition year thus far, as Colombia’s financial system moves towards the adoption of International Financial Reporting Standards, scheduled to commence in 2015. This chapter features an interview with Luis Carlos Sarmiento Gutiérrez, CEO, Grupo Aval.
Explore chapterCapital Markets
In recent years the Colombian Stock Exchange (Bolsa de Valores de Colombia, BVC) has made significant efforts to increase investment options and expand the capital markets, including the creation of the Colombian Global Market (Mercado Global Colombiano, MGC) and the derivatives market, incorporation into the Integrated Latin American Market (Mercado Integrado Latinoamericano, MILA), and the implementation of Colombia Capital, a programme focused on developing future issuers. The local capital markets are also gaining attraction abroad, with the participation of foreign investors in the stock market increasing significantly in the past two years, growing from 8% in 2011 to 20% in 2013. Positive reviews are likely to bring more capital flows and raise values. This chapter contains interviews with Juan Pablo Córdoba Garcés, President, Colombian Securities Exchange; and Carlos Raúl Yepes Jiménez, President, Bancolombia.
Explore chapterInsurance
Since the 1990s Colombia’s insurance sector has grown faster than overall GDP, driven by personal lines and social security. The industry recorded 11.3% growth in assets to end 2013 with $21.4bn, up from $19.2bn in 2012, while total written premiums reached $9.45bn, an 18% increase compared to the previous year, which had ended with $8bn. Investments held by the sector also rose from $13.7bn to $15.7bn. Almost two-thirds of the assets and three-quarters of the investments are held by the life insurance division. The market, comprised of 45 insurers, includes a number of global underwriters, with the sector split evenly between domestic and foreign firms. At 2.4%, Colombia’s insurance penetration remains low even by regional standards (compared to Chile’s 5% and Panama’s 4%), suggesting significant room for organic growth in the sector.
Explore chapterEnergy & Utilities
In the past 10 years, Colombia has emerged as one of Latin America’s leading hydrocarbons producers. With just over 1m barrels per day of production in 2013, Colombia trailed only Mexico, Venezuela and Brazil in the region. On a relative basis, natural gas production, at 1.2bn cu feet per day, is more modest, but has also grown every year but one since 2003. With one of the lowest reserves-to-production ratios among the world’s major oil producers, the sector’s primary problem is limited reserves. The industry has begun exploring new unconventional hydrocarbons resources such as shale oil and gas, offshore oil and gas, and coal-bed methane, all of which have the potential to become significant sources of new revenue for the industry. With stable production from conventional sources and expanding opportunities in unconventional and offshore blocks, Colombia’s energy sector appears poised to sustain at least moderate levels of growth. This chapter contains interviews with Javier Gutiérrez, President, Ecopetrol; and Javier Betancourt, President, National Agency of Hydrocarbons (ANH).
Explore chapterMining
With vast coal, gold and other mineral reserves, Colombia continues to be one of Latin America’s leading mining countries. The sector has expanded significantly in the past decade, with the last two governments emphasising its importance to the national economy and courting foreign investment. However, in recent years falling commodity prices have stalled development projects, while strikes, guerrilla attacks and government sanctions have interrupted production. Exports of coal, the dominant component of Colombian mining, fell 4% in tonnage and a 14.3% in value to $6.7bn in 2013 compared to the previous year. Gold, the second-biggest mining segment, with exports of $2.3bn in 2013, was down by a third from 2012. Nonetheless, as the security situation improves, opening up new areas to geological analysis, Colombia’s strong institutions, protection of investors, extensive reserves and competitive royalty rates should continue to attract significant interest in the mining industry. This chapter features an interview with Ken Kluksdahl, President, AngloGold Ashanti Colombia.
Explore chapterTransport & Logistics
Colombia’s transport sector is set to undergo significant expansion in the next few years, much of which is owed to the current flagship fourth-generation road concession programme. The development of land transportation networks has become a top priority as the National Infrastructure Agency aims to increase roads under concession from 6000 km to 11,000 km, revitalise the aged railway network and raise rail lines under operation from 900 km to more than 2000 km. Expansion of port infrastructure, which has already benefitted from successful public-private concessions, will also make the country better equipped to deal with rising cargo inflows stemming from enhanced trade. Meanwhile, the increasing number of travellers is spurring improvements in air transport. While the current model for public-private partnerships presents some challenges as a means to attract foreign direct investment, government efforts to improve access to financing and ultimately increase interest in road concessions continue. This chapter contains interviews with Cecilia Álvarez-Correa, former Minister of Transport; Luis Fernando Andrade, President, National Infrastructure Agency; and Eleuberto Antonio Martorelli, President, Odebrecht Colombia.
Explore chapterConstruction & Real Estate
Buoyed by a strengthening of the government’s housing programme, as well as a continued emphasis on improving transport infrastructure across the country, Colombia’s construction sector is well positioned for growth over the coming years. The sector grew 9.8% in 2013, considerably more than the 3.6% increase seen in 2012, accounting for 6.5% of GDP in 2013, according to BBVA Bank. Driven by demand for housing and a mounting construction sector, the real estate sector is also experiencing healthy growth. According to the Colombian Federation of Real Estate, the sector accounted for 8% of GDP in 2013, with real estate services generating a value of $9.8bn, a 3.2% increase on 2012 figures. As the housing stock is absorbed by high demand and a well-structured mortgage system, fears of an impending bubble have so far been exaggerated. This chapter features an interview with Luis Felipe Henao Cardona, Minister of Housing and Social Development.
Explore chapterIndustry & Retail
As the significantly divergent performances of its various sub-sectors suggest, Colombian industry is at a crossroads. Some sub-sectors have sustained robust growth during the past decade and have developed export channels targeting regional markets. However, other industries have not been able to overcome the number of challenges that nearly all Colombian manufacturers must contend with, in particular high transportation costs and increased international trade which has brought low cost goods to the domestic market. The sector’s contribution to GDP fell from 14% in 2011 to 12% by 2013, prompting the government to implement several programmes to buoy domestic manufacturing. As the cosmetics industry demonstrates, however, opportunities still abound, and there is a place in the regional market for Colombia, a mid-sized exporter, to meet its neighbours’ growing levels of consumer demand. This chapter contains an interview with José Alberto Vélez Cadavid, President, Grupo Argos.
Explore chapterAgriculture
Despite lower international prices for some of Colombia’s key cash crops, the agriculture sector ended 2013 posting growth of 5.2%, higher than overall economic growth of 4.7%. Coffee’s 22.3% expansion made it the sector’s shining star in 2013. However, the various challenges the sector faces, in particular increased international competition as a result of a number of recent free trade agreements, led to a series of strikes involving multiple subsectors in the first half of 2013, which culminated with a large-scale national strike mid-year, placing agriculture centre-stage politically. The government of Juan Manuel Santos Calderón, re-elected for a second term in June 2014, has prioritised agricultural development and an increasing budget reflects the government’s commitment to revitalising the sector. Stable growth has continued into the first three months of 2014, with the sector expanding 6.1%. With the possibility of negotiating a peace agreement strengthened by the re-election of Santos, the next decade could see the sector play a more prominent role in the national economy.
Explore chapterResearch & Innovation
The economic growth Colombia has seen over the past decade is multiplying opportunities to strengthen research and innovation, while new investment from a growing number of firms already operating in the country is helping to raise the sector’s profile. Averaging 0.18% from 2009 to 2013, investment in research and development (R&D) remains well below regional neighbour Brazil’s 1.2% and the OECD average of 2.4%. However, it is set to reach 0.2% in 2014. A marked imbalance between private and public investment remains, with only about 30% of R&D in Colombia being conducted by private businesses, compared to 65-75% in OECD countries. Nonetheless, an impetus to improve the laws for intellectual property, coupled with funding programmes for innovation at small and medium-sized enterprises, continues to push private companies to modernise. This chapter contains an interview with Juan Camilo Quintero, Executive Director, Ruta N.
Explore chapterICT & Media
Colombia’s telecommunications market is going through intense growth as operators strive to enhance their offers in a growing array of services. The sector achieved revenues of $13.9bn in 2012, compared to $2.6bn in 2000, according to figures by the OECD. Much of this dynamism has come from the introduction of 4G services, for which five operators won licences in the 2013 government auction, and several companies have already started commercialisation of new 4G offers. Meanwhile, increasing convergence of telecommunications services is prompting the rise of triple play. While América Movil’s Claro continues to dominate the market, growing numbers of mobile internet users are creating demand for new products and services, and adding on to investment opportunities for telecommunications operators, equipment providers and content developers. This chapter contains an interview with Alberto Samuel Yohai, President, Colombian Chamber of Informatics and Telecommunications; and a viewpoint with Mariana Garcés Córdoba, Minister of Culture.
Explore chapterTourism
The possibility of a peace deal after decades of conflict promises to be a game changer for Colombia’s tourism sector. Authorities are getting ready to capitalise on this, rolling out a number of infrastructure projects and providing the sector with additional institutional support in preparation for the post-conflict influx of tourists, and efforts seem to be paying off. The sector has grown at an average annual rate of 5.5% in the past three years, according to the Ministry of Commerce, Industry and Tourism. Arrivals increased by 7.34% in 2013, surpassing 3.7m visitors, while revenues rose from nearly $3.2bn in 2012 to more than $3.6bn, making tourism the third-most important source of foreign currency, behind oil and coal. The sector’s recent performance bodes well for achieving the government’s target of reaching 4m visitors and attracting $4bn in tourist revenue by the end of 2014. Meanwhile, the hotel industry continues to attract significant foreign interest through a 30-year tax exemption law.
Explore chapterSport
Colombia’s recent enhanced sports competitiveness at the international level is raising the sector’s commercial prospects. The government’s commitment to the promotion of sports is particularly visible in the budget allocated to Coldeportes, the body responsible for the promotion and management of sports resources, which increased from $167m in 2013 to $178m in the 2014 budget. The private sector is still relatively shy in this area. However, the success of the Colombian national football team at the Brazil 2014 World Cup seems to be raising the private sector’s interest. Colombia went from having a single sponsor in the late 1980s to becoming financed and promoted by large firms such as Bavaria, Movistar, Avianca and Pacific Rubiales. While the attention of the media and the general public remains focused on football, which also tops the rankings in terms of attracting sponsorships and investments, other sports have gradually begun increasing their profile within the country. This chapter contains an interview with Andrés Botero, Director, Administrative Department of Sport, Recreation, Physical Activity and Use of Free Time.
Explore chapterEducation
The expansion of enrolment at all levels achieved by Colombia since 2002 is noteworthy. Increasing the quality of the educational system has also become a priority, though improvements in this area have been difficult to implement. While recent international and national evaluations show small improvements, they also reflect substantial inequalities between urban and rural areas, socio-economic backgrounds, and public and private sectors. At the tertiary level, even though enrolment has risen significantly in the past decade, it remains below 50%, the target established in the government’s National Policy for Education 2011-14. The government attempted to introduce an ambitious reform in early 2011 designed to address some of the most pressing issues at the tertiary level but wide-scale opposition led to the withdrawal of the proposal in late 2011. Nonetheless, the national debate on education reform continues, and the sector is likely to remain a priority for the re-elected government. This chapter features an interview with María Fernanda Campo Saavedra, former Minister of National Education.
Explore chapterHealth
Though it has seen advances in coverage in the past two decades and has inched closer to attaining universal coverage, the health sector is also seeing pressure from escalating costs due to increased coverage and an ever-expanding mandatory health plan. In 2012 the public sector accounted for 75.8% of total expenditure, with the private sector making up the other 24.2%. Total health care expenditure represented 6.8% of GDP for the same year. Meanwhile, some sub-sectors areas are registering stable growth. A dynamic private sector is pushing medical tourism forward, in the process adding to the country’s expanding infrastructure capacity. Attracting more than 50,000 medical tourists in 2013, the industry reported revenues surpassing $220m in 2013, up significantly on the $130m recorded in 2012. The local pharmaceutical industry grew 6% in 2013, while the medical device market, valued at $1.2bn in 2013, is projected to grow at a compound annual growth rate of 13.3%, reaching $2.2bn by 2018, double its current size.
Explore chapterLegal Framework
In conjunction with prietocarrizosa, this chapter outlines the substantial changes Colombia’s legal framework has undergone in recent years, affecting an array of areas such as public-private partnerships, dispute resolution and simplified stock corporations. Additional reforms are expected in other areas such as health care and social security over the coming years. This chapter features an interview with Martín Carrizosa, Founding Partner, prietocarrizosa.
Explore chapterTax
Featuring an interview with Cesar Cheng Vargas, president, Deloitte Colombia, this chapter explores recent changes to Colombia’s tax system implemented in 2013, touching on areas such as corporate income taxes and reorganisations, tax havens, capital gains taxes and value-added taxes, among others.
Explore chapterThe Guide
As the peace negotiations between the government and FARC continue, Colombia’s art scene has begun to reflect the country’s newfound optimism. This chapter also includes helpful information for visitors, including hotel listings and contact information for various institutions such as embassies and government agencies.
Explore chapterTable Of Contents
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