The Report: Colombia 2019

Since the drop in commodity prices in 2014, Colombia’s economy has been recovering and is set to expand in 2019 and 2020. In May 2018 Colombia was invited to become the 37th member of the OECD, a positive development that should increase the country’s international political and economic prominence in the coming decades. However, challenges to ensuring Colombia’s continued economic progress remain.

Country Profile

The end of the formal conflict between FARC and the government has boosted the country’s image abroad, allowing the tourism industry to fulfil its potential in areas that were previously out of bounds. Medellín, once known as the home of drug cartels, is now a focal point for innovation in Latin America. As such, it is set to become a regional leader in creative industries, an incentive reinforced by President Iván Duque and his Orange Economy Agenda. The government aims to promote Colombia as a regional and global target market and to double its contribution to GDP from 3.5% to 7% between 2012 and 2022. Meanwhile, the long-term Fourth Generation road infrastructure project is making considerable progress in its ambition to reduce journey times between major cities and industrial centres. This chapter contains interviews with Iván Duque, President; Ángel Gurría, Secretary-General, OECD; and Justin Trudeau, Prime Minister of Canada.

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Colombia is poised for expansion in 2019 and 2020, despite some internal and external challenges that have not abated since 2018. Growth of the Colombian economy will be determined by which side of the scale advances further in the short term: strong consumer spending and increased investment in the construction sector due to the ongoing Fourth Generation road programme, or a deepening current account deficit and strained labour market due to the influx of Venezuelan refugees. As the country tries to advance its international competitiveness to secure greater investment and job growth, the government must battle inflation, unemployment and a fluctuating peso. Still, if the current National Development Plan is implemented successfully, the Duque administration is likely to leave behind a stronger Colombia with increased opportunities for all. This chapter contains interviews with Alberto Carrasquilla, Minister of Finance and Public Credit; Flavia Santoro Trujillo, President, ProColombia; and Juan José Echavarría Soto, General Manager, Banco de la República.

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Financial Services

The banking sector has already begun to show signs of improvement in line with macro economic indicators. Measures taken by the national government and the Central Bank of Colombia appear to have enabled the sector to weather the storm, and improving economic conditions should pave the way for a positive performance from the financial sector. Despite the slow evolution of equities trading, Colombia’s capital markets appear to be moving in the right direction with regard to corporate debt, and the expansion of derivatives, Venture Capital and private equity markets. Moreover, regulators continue to engage closely with their counterparts to foment the further development of the Latin American Integrated Market, meaning the regional market will likely continue to gain prominence. The insurance sector in Colombia looks set to maintain its positive trajectory over the medium term, with GDP forecast to expand, and a population increasingly willing to purchase new insurance products. Also, the growth of insurtech will likely be a decisive shift for both customers and providers, giving customers a better experience and broader choice of products, and firms the ability to tap into artificial intelligence and data analytics to boost sales. This chapter contains interviews with David Bojanini, CEO, Grupo SURA; Juan Pablo Córdoba, President, Colombian Securities Exchange; and Javier Díaz Fajardo, President, Bancóldex.

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Energy & Utilities

With the new administration’s pro-business, pro-investment stance, in addition to improvements in international prices, the Colombian oil and gas sector is anticipating increased investment over the coming years. Its efforts to diversify and strengthen its energy mix by capitalising on the country’s abundance of renewable sources and further developing its hydropower segment will likely continue to attract the interest of new industry players. As Colombia’s proven oil and gas reserves begin to decline after having reached their peaks, the announcement of new exploration activities and the first fracking pilot project are reassuring signs that the sector is moving in the right direction. This chapter contains interviews with María Fernanda Suárez, Minister of Mines and Energy; and Astrid Álvarez Hernández, CEO, Grupo Energía de Bogotá.

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With broad political support and efforts to improve the licensing process, the mining industry looks set to experience a rebound in 2019. While investments in coal production are unlikely to increase substantially in the coming years, segments such as gold, copper, nickel, emeralds, and other metallic and non-metallic minerals will provide attractive targets for investment. Government efforts to curb illegal operations, formalise small-scale mining and create a more attractive business environment have already begun to yield results, but the success of new and incoming projects will dictate whether the industry’s momentum will continue. This chapter contains an interview with Kelvin Dushnisky, CEO, AngloGold Ashanti.

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Transport & Logistics

Notable progress has been made in expanding the country’s road system, and increasing port and air transport capacity. Furthermore, new projects are set to increase the transit of goods along Colombia’s railways and rivers. Rising investment in these segments has boosted the competitiveness of the country and contributed to growth. Nevertheless, Colombia faces high logistics costs and ongoing bottlenecks to connectivity. The transport infrastructure gap is large and set to grow further as demand rises. Significant investment will be needed across the sector to close this gap and ensure that the country can sustain its economic development. While this presents a challenge, the country stands to benefit from its mature public-private partnership framework and openness to foreign direct investment. Leveraging private sector expertise and investment within the framework of a long-term national strategy presents a promising formula for an integrated transport network. This chapter contains an interview with Ángela María Orozco Gómez, Minister of Transport.

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Construction & Real Estate

As the economy made a recovery in late 2018 it is likely that construction will soon follow suit, with initial estimates for the first quarter of 2019 already showing signs of improvement. Social housing and infrastructure will likely receive the most attention from investors, with both segments addressing crucial deficits in the country. Likewise, the advent of new vehicles to channel private sector funding is expected to continue driving the sector’s growth. Moreover, changes in retail and office management and rising demand for flexible, bespoke industrial spaces are likely to leverage and sustain new trends in the ways that firms physically conduct their business in Colombia. While cross-segment growth may not accelerate significantly in 2019, developers have demonstrated foresight that should help the supply side adjust to ongoing structural changes in the property market. This chapter contains an interview with Roberto Moreno, President, Amarilo.

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Industry & Retail

Industry got off to a strong start in 2019, as domestic consumption and exports rebounded. The national government’s policies to expand successful programmes and do away with under-performing ones, together with a focus on improving productivity and leveraging collaboration between the country’s regions, should help to strengthen industrial capacity. However, while efforts to modernise and reduce administrative hurdles are positive steps towards improving performance, regaining momentum in infrastructure development and reducing logistics and transport costs remain economy-wide priorities. Broad trends have buoyed the retail sector in recent years, including the growing number of new shopping malls and the expanding presence of internationally branded stores. The drive to increase IT usage among Colombians has also transformed the country into one of the region’s fastest-growing online retail markets. This chapter contains an interview with José Manuel Restrepo, Minister of Commerce, Industry and Tourism.

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Colombia’s geographic and climatic advantages, alongside its numerous developments, place it in good stead to become a more prominent regional and global player in food production. Efforts to boost financial capacity, especially of small-scale producers, should lead to greater productivity and higher margins for stakeholders along the value chain. Further prioritisation of agro-industry is a key trend that will play out over the coming years, as the country looks to add value to its wide array of produce, with a particular focus on lucrative export markets in Europe, the US and beyond. However, it remains to be seen how the industry can become a driver of broader economic growth, but the rebirth of rural Colombia will be key to any future success.

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The ICT sector is one of the most promising sectors in Colombia with high demand for telecommunications services, and an emphasis on innovation in commerce and industry. However, financial challenges, such as changes in interest rates, also significantly impact the growth of ICT due to the long-term nature of investments in the sector. Similarly, companies can struggle to access financing to offer new products and attract a greater share of the competitive market. This is influenced by pressures both within the country’s active start-up scene and from the development of new technologies across the world. Although it is expected that companies will be able to keep up, the key to ensuring penetration rates continue to increase will be designing products that meet consumer demands and anticipate upcoming trends. This chapter contains a roundtable with Ignacio Roman Vila, President, Avantel; Fabián Hernández, President, Telefónica Movistar Colombia; and Marcelo Cataldo, President, TigoUNE.

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Over the past decade and a half the long-kept secret of Colombia’s cultural heritage and natural beauty has spread throughout the international tourism circuit. While recent years have been challenging for Colombia’s exporting sectors, tourism has been a consistent contributor to the economy and a catalyst for development in not only large cities, but also in areas formerly controlled by FARC. As the state regains control and opens up new areas, tourism is one of the most significant opportunities to boost rural infrastructure and socio-economic well being. It will be imperative that officials maintain momentum and convert the increasing number of visitor arrivals at traditional destinations into a viable source of development for more rural areas previously considered beyond state boundaries. This chapter contains an interview with Jean Claude Bessudo, President, Aviatur.

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In recent decades Colombia’s health sector has gone through substantial changes and improvements, shifting from being underdeveloped to one of the highest ranked in the region. The sector continues to struggle with structural issues related to liquidity. However, the government is hoping that a boost in general health spending and a targeted infusion of financing will help alleviate some of the financial pressure the system is experiencing. Meanwhile, efforts to universalise coverage and shift the focus of the system to the patient are expected to result in access and quality improvements. It remains to be seen over the long term what effect the 2015 health law will have on overall health outcomes, but improved indicators in recent years and increased funding are positive signs for the future.

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Colombia’s education sector has a number of hurdles to overcome before it can reach its objective to permanently boost outcomes. First and foremost, the government’s obligation to provide extra funding for the sector will need to remain sustained and highly targeted, to increase participation rates and close the divide between rural and urban areas. In addition, it is important for higher education establishments to identify and act on both private sector necessities and new trends. These changes will help to ensure that students are prepared for an increasingly dynamic and digitalised economy. This chapter contains an interview with Alejandro Moreno Salamanca, CEO, Inalde Business School.

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In conjunction with EY Colombia, this chapter explores the taxation system and Colombia’s efforts to build an investor-friendly environment. It also contains an interview with Jaime Vargas, Tax Managing Partner and International Tax Services Leader, EY Colombia.

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The Guide

This section includes information on hotels, government offices and other listings, alongside useful tips for visitors on topics like currency, visas, language, communications, dress code, business hours and electricity.

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Table of Contents

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