Investment in Colombia will rise by $11.5 billion (USD) between 2020 and 2022, under a government program that seeks to target key sectors for growth and deepen the engagement of ‘mega investors’ in the South American nation’s market.
Colombia is the fourth-largest economy in Latin America by GDP, as well as one of the primary recipients of foreign direct investment (FDI) in the region. According to the United Nations’ 2020 World Investment Report, FDI inflows into Colombia increased 26 percent in 2019 compared to the previous year, rising from $11.5 billion (USD) to $14.5 billion (USD).
The new “Commitment to Colombia” program seeks to keep that investment on an upward trajectory, despite disruptions caused by the COVID-19 global pandemic.
Promoting investment in Colombia
The new governmental strategy is built upon two pillars: tax incentives for investors, and the optimization of corporate processes. As such, Colombia is offering generous tax incentives to foreign companies willing to relocate from other territories. Meanwhile, the country’s authorities are working to simplify the process of company formation in Colombia, to streamline market entry for foreign investors.
The government’s principal goal is to attract ‘mega investors,’ a term that refers to companies with more than $280 million (USD) in available capital to invest. The government agency in charge of promoting foreign investment in the country — Procolombia — has contacted more than 500 companies to offer them the possibility of being part of this strategy. So far, more than 30 have expressed their interest in relocating to Colombia.
In addition, the Colombian and the US governments announced a private investment plan through which the US will invest up to $5 billion (USD). These investments will seek to promote economic development and security, mainly in rural areas where drug-related violence hit the hardest in recent decades.
Colombia’s President Ivan Duque has also announced a public-private investment plan worth over $26 billion (USD), focused on generating a million new jobs over the next two years. Since the plan was launched this year, investment agreements have been signed for a total of $1.4 billion (USD).
Colombia: a top destination for foreign investment
Colombia has traditionally been one of the most attractive countries in Latin America for foreign investors and has a raft of free trade agreements (FTAs) in place with key markets across the globe. The country is considered an emerging economy, while its FTAs give businesses located there access to markets valued at $43 trillion (USD).
Colombia also holds a geostrategic location for international trade, representing the ‘meeting point’ between North and South America. Meanwhile, it has long been a key regional ally of the likes of the United States, promoting a business- and investment-friendly environment.
Currently, the main sectors to invest in are agriculture, manufacturing, and services industries. Besides its coffee and avocado industry, the country’s cannabis sector is expected to evolve into an important commodity for Colombia in the upcoming years. According to Procolombia, the country’s cacao crop — which has been heavily promoted in drug-crop replacement programs — is considered among the world’s finest.
Colombia has also emerged in recent years as a regional leader in software development and agro-industrial services.
The newest member of the OECD
Colombia joined the Organization for Economic Cooperation and Development (OECD) in April 2020, following an application process that lasted seven years. During that time, the Colombian government implemented public policies to improve the life quality of its people and stimulate Colombia’s foreign investment, achieving the necessary development markers to be part of the prestigious organization. As part of the OECD, Colombia must maintain a robust commitment and adherence to international compliance in trade-related operations.
Some of the FDI related policies that Colombia will focus on as a member of the OECD are:
- Treating local and foreign investors on a more equal footing. In this way, both will be able to invest in the sector they prefer and enjoy the benefits of the government.
- Maintaining an expansive selection of sectors into which foreign companies are allowed to invest, which only excludes defense, national security activities, and radioactive waste processing.
- Eliminating barriers to foreign companies investing in the country by streamlining the authorization process, apart from for investments in insurance, finance, or mining sectors, for which stringent checks are undertaken.
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