Colombia is not only the 4th biggest economy in Latin America and the expected 3rd fastest growing economy by 2020, according to the World Bank Group, but is also a globalized country with expanding economic ties to Australia. Thanks to an increased focus on opening up to international cooperation in areas, such as trade, education, innovation and technology, Colombia is gradually improving economic standards and processes, and as such, is opening the doors for Australian investment.
In order to maintain the positive economic upswing, Colombia seeks to extend its business relations with several countries outside of Latin America, especially with Australia. Australian business continues to benefit from investments opportunities provided by Colombia, for example, local Australia group, Nexpay, an international education payment service company have recently begun operations in Colombia, and with great success.
Overview of Colombia’s Economy and Value for Australian Businesses
Colombia is expected to gain economic power over the next years thanks to incentives forwarded by the newly elected President, Iván Duque Márquez, whose main concerns for regional improvement are infrastructure and sustainability while encouraging innovation and entrepreneurship. Unknown to many, Colombia has free trade agreements with 47 countries, when combined with the new governments push for economic integration, is creating attractive commercial opportunities for Australian investors.
Australia is in negotiations with the Pacific Alliance with the aim of creating a free trade agreement with a number of countries, including Colombia. At present, trade between Australia and Colombia is valued at approx. USD$680 Million, mainly due to a large number of service exports going from Australia to Colombia. This demonstrates the commercial opportunities available for Australia service companies looking to expand in the emerging economy of Colombia.
As President Duque wants to build his presidency around some important pillars, such as investment and innovation, this will also be perceptible in Colombia’s most important economic sectors, namely agriculture and mining. There are many Australian mining providers operating in the industry and Australian companies such as Pacific Minerals Ltd, who have experienced great success in Colombia. Australian mining investment in Colombia comes in many forms, through a subsidiary office, through a merger/acquiring, through the formation of a local company or through the provision of mining equipment, technology and services (METS).
Attractive Colombia Sectors
Colombia’s largest agriculture area is the cattle production, amounting to 20% of overall agricultural output and is, therefore, the 4th most important cattle location in Latin America.
This does not only include pure meat production but also a bilateral use (milk and meat production). Colombia provides several benefits that support foreign investment participation in the cattle production thanks to the following conditions:
- Due to optimal topographic conditions in most of the important cattle locations, sufficient pasture for cattle is guaranteed throughout the year.
- The World Organization for Animal Health (OIE) accredits Colombia as free of diseases through vaccination, ensuring good sanitary animal conditions
- Almost 100% of the cattle are fed by pasture while important genes are further developed.
Apart from these benefits, the cattle segment has great capabilities for Australian investors striving for participation in that sector, especially in the fields of production and commercialization. The investment promoting organization PROCOLOMBIA additionally forwards investment opportunities for foreign investors with local partners in fields ranging from improvement of the cold chain projects to the processed meat industry to the bovine genetics development.
The second most important agricultural sector is the coffee production, as Colombia is the world’s 2nd biggest producer of coffee. After having had a somewhat smaller production of coffee with 14.2 million 60kg bags in 2017/18, production is gaining momentum in the next year, with the region expecting to produce 14.5 million, 60kg bags and, therefore, also increasing its amount of exports of more than 90% of the entire coffee output. Foreign Australian investors should pursue opportunities in the technology of coffee production or the purchasing of a local coffee farm/plantation.
Colombia has the largest reserve of coal in Latin America and receives a great number of foreign investments in the mining industry, especially from Australia. Santiago Angel, head of the Colombian Mining Association, expects a yearly investment of USD$1.5 billion if preferable investment conditions are provided. He states: “Legal certainty is the main challenge that the industry faces, it’s what provides guarantees to investors and keeps mining production going forward,” (Golubova, 2017).
The majority of business opportunities for Australian investors arose and will arise from the Colombian mining industry, particularly after having signed a Memorandum of Understanding (MOU) in mining, 2015. The aim of current and future investors is to achieve an increased productivity and a lower ecological footprint, while not neglecting safety and cost management. Thus, Australian businesses might engage different mining segments, including the development of infrastructure, sustainable mine system operations, or coal washing, among others. Successful Australian companies in the mining sector such as BHP Billiton operate in several countries in Latin America other than Colombia, including Brazil, Chile and Peru and the mining and metal company South32 that operates in Brazil and Colombia.
While the region holds a raft of opportunities, the agricultural and mining sectors continue to present attractive commercial opportunities for Australian investors.
Colombia’s Protection of Foreign Investment
Colombia is one of the most open investor regimes in the world and is becoming even more open to FDI, especially in the mining and agricultural sector. Australian businesses might be interested in entering Colombia because of a low amount of bureaucratic processes and requirements, as opposed to other Latin America jurisdictions. Investors trying to start a business in the country should be aware of some important information see below:
- FDI generally preserves the same treatment as a local investment so that investors can enter into any sector they prefer without falling short on government benefits.
- FDI is allowed in all the economic sectors, except defence, national security activities and radioactive waste processing.
- There is usually no FDI authorization necessitated, except for FDI made into insurance/finance or mining sector. In order to establish a business in the mining segment, authorization needs to be granted by the Ministry of Mines and Energy.
- All FDI needs to be registered in the Banco de la República (Central Bank of Colombia).
What value can Australian Businesses bring to Colombia?
Whereas Colombia has invested US$3-4 million per year since 2010, Australian investors have an investment stock of over US$3 billion in Colombia. The reason for this is that Australian businesses provide invaluable investments into the country, from which the Colombian market benefits. These include a wide range of know-how and advanced skills not only in the previously depicted agricultural and mining sector but also in infrastructure and education. Other strong Australian areas from which Colombia might profit is the service sector, particularly the healthcare and IT sector that are becoming more significant to the Australian economy.
Bring Your Business from Australia to Colombia – Immigration
As an Australian investor, after having decided to expand your business operations to Colombia, you may wish to relocate to be directly involved with local operations. In general, Australian investors can either establish a new company and invest in this company or invest in an existing Colombian company.
Investment Visa (Migrant M or Resident R Visa)
The Australian investor can apply for the investor visa, with the following documents and proof:
- The company’s tax identifier number (NIT).
- The company’s name.
- The company’s headquarter.
- Certification of an investment of min. 350 minimum salaries (to obtain an M visa).
- Certification of an investment of min. 650 minimum salaries (to obtain an R visa).
Need more information?
Colombia offers a wide range of opportunities for Australian individuals and businesses, especially in the agricultural and mining sector. While the Colombian market provides exciting investment prospects, Australians are able to bring new business to the local market.
If you require more information regarding doing business in Colombia or want to obtain an investor visa, don’t hesitate to contact Craig (who is an Australian National) here. His team of bi-lingual professionals will assist you and your Australian business to begin operations in Colombia.
Need more information on doing business in Colombia? Check out the video below to see why so business are expanding their operations to this attractive commercial jurisdiction.