Nearshoring in Colombia: 4 reasons why?

Nearshoring in Colombia involves companies moving their value chains, particularly production facilities, closer to their headquarters. In a world where supply chains are increasingly under threat of disruption, it makes sense to have your business operating in a friendly country. On top of that, there is little difference in time zones, ports on both the Pacific and Atlantic oceans and good trade links.

*Nearshoring in Colombia: A market snapshot*

In general, nearshoring in Colombia is partly undertaken as a response to rising production costs in Asia, as well as to relieve some of the dependency on Asian markets that governments and companies in North America and Europe have developed over recent years.

However, it also provides companies with the convenience of having operations based closer to home, meaning workers are in similar time zones and distances to markets for manufactured goods are much shorter.

SEE ALSO: SAS Corporation Colombia

According to a report from La Republica, since the Colombian government began promoting nearshoring in Colombia in 2019, the country has attracted a total of USD 1.072 billion in investment from 60 companies previously identified as being strong prospects for choosing to nearshore to the country.

That is little more than one third of the 165 companies that have reportedly shown active interest in nearshoring in Colombia, from among more than 900 contacted by investment promotion body ProColombia – suggesting that significantly more investment could be forthcoming in the near future.

Biz Latin Hub can help you with nearshoring in Colombia or elsewhere in the region, as we know all about doing business in Latin America and the Caribbean.

Why nearshoring in Colombia can work for you

While Mexico tends to be the first name on people’s lips when it comes to US companies nearshoring value chains to Latin America – thanks in no small part to the proximity and strong economic ties between the two countries – Colombia is also a strong prospect offering a range of benefits to companies that relocate there.

*A map showing key cities for nearshoring in Colombia*

1. Location

Colombia’s geographic location at the meeting point between North and South America, gives it particular logistical advantages, particularly if primary goods sources elsewhere in South America are needed for manufacturing or production.

The country also boasts major ports serving both the Atlantic and Pacific oceans, providing easy access to markets in North America, Europe, and Asia-Pacific, while regular daily flights between major Colombian and US cities mean the two countries are only a few hours away for business trips.

2. Stability

Colombia has enjoyed prolonged economic and political stability, having been led by elected governments continuously since the 1950s. While it faces similar challenges to many developing economies in terms of corruption, Colombia also boasts comparatively sound institutions.

The country is also a major ally of the United States and European Union, with current US President Joe Biden recently designating Colombia a “major non-NATO ally” in a mark of the close political and economic ties between the countries.

3. Time zone

Colombia is at UTC-5, meaning that it is similar to the East coast of the US, particularly useful for companies based in centers such as Washington and New York. This means that connecting to members of your team based in the country will possibly be very easy.

4. Cultural similarities

Business culture in Colombia has no great differences from Europe and North America. This means that interactions with the people is unlikely to require much effort and is likely to be very smooth. English levels are relatively good, especially in business and commercial circles, as all university graduates are required to study the language.

FAQs on Nearshoring in Colombia

1. What is nearshoring in Colombia?

Nearshoring in Colombia refers to the strategy of relocating business operations or services to Colombia, which is geographically close to the primary markets of many businesses. This strategy is part of Colombia’s economic recovery plan, aiming to attract projects and generate employment.

2. What is offshoring in Colombia?

Offshoring in Colombia on the other hand, refers to the practice of transferring business processes to third parties located in distant locations, such as Colombia, to reduce costs. This term is often used in the context of manufacturing and production.

3. What is the strategy for nearshoring in Colombia?

The advantages of nearshoring include less expensive labor costs, avoidance of language barriers, cultural alignment, geographical proximity, and a similar time zone. However, there are also disadvantages. For instance, developing and qualifying a new strategic supplier entails high costs.

4. What are the advantages and disadvantages of nearshoring?

The nearshoring strategy is a business approach where companies outsource their business processes or services to nearby countries. This strategy is often contrasted with offshoring, where companies outsource processes to distant countries, usually to capitalize on lower labor costs. Nearshoring aims to reduce transportation costs associated with sourcing materials or manufacturing goods overseas. It also seeks to improve supply chain resilience by diversifying operations geographically to mitigate risks.

5. How to take advantage of nearshoring in Colombia?

To take advantage of nearshoring, businesses can focus on the following aspects:

Selecting the Right Location: Choose a country that offers a skilled workforce, cultural and language similarities, and a favorable business environment.
Building strong relationships: Build strong working relationships with the nearshore team to streamline communication and collaboration.
Leveraging Cost Benefits: Take advantage of the cost-effectiveness of nearshoring by outsourcing operations at a lower cost.
Ensuring Quick Response Time: Utilize similar time zones to ensure quick communication and problem-solving.
Utilizing Local Expertise: Leverage the skills and expertise of the local workforce to enhance business operations.

Biz Latin Hub can assist you with nearshoring in Colombia

At Biz Latin Hub, we provide integrated market entry and back-office services throughout Latin America and the Caribbean, with offices in 17 major cities in the region. We can help you with nearshoring in Colombia or elsewhere.

Our portfolio includes accounting & taxation, company formation, due diligence, hiring & PEO, and corporate legal services. Our unrivaled regional presence means we are ideally placed to support multi-jurisdiction market entries and cross-border operations.

If you found this article on nearshoring in Colombia of interest, you may want to check out the rest of our coverage of this South American country. Or read about our team and expert authors.