As Colombia looks ahead to 2021 and seeks to overcome the social and economic turmoil of the COVID-19 pandemic, the country’s tech sector promises to be a key driver of recovery. While many businesses in the region have faced severe hardship or been shuttered, others have benefited from the “new normal” for doing business in a more isolated and sanitation-conscious world. Here three tech companies in Colombia that can be expected to emerge stronger from the pandemic are considered.
Colombia is Latin America’s fourth-largest economy by gross domestic product (GDP) and has put significant effort into developing its technology sector and digital economy over recent years. As part of its National Development Plan 2018-2022, Colombia announced its intention to invest $6.5 billion (all figures in USD) into the Science, Technology, and Innovation (STI) sector. As such, considerable opportunities for investment can be found in the likes of tech innovation and software development.
If you are considering doing business in Colombia, or already operate in the market, read on to find out about some of the industries that have suffered most due to COVID-19, those that have shown considerable promise, and three tech companies in Colombia that can be expected to emerge stronger from the pandemic.
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Business in Colombia hit hard by the pandemic
As in much of Latin America and the Caribbean, severe restrictions placed on the population to stem the spread of COVID-19 had serious consequences for enterprise in Colombia. With non-essential businesses shuttered and investors skittish about future prospects for growth, numerous industries were battered by the health crisis.
Major players in the automotive sector such as Renault, GM, Toyota, and Nissan, reported declines in sales of more than 55 percent, causing massive layoffs and the closure of large numbers of businesses dependent upon the sector throughout the country.
Meanwhile, the textile industry — which accounts for 9.4 percent of the country’s industrial GDP — faced extreme hardship due to the pandemic, as lockdowns prevented customers from making physical purchases.
Tourism and the aeronautical sectors were also seriously affected, reporting losses of $582 million and $481 million respectively in the first half of the year alone as the country closed its borders and grounded air traffic for several months.
Local Industries that saw growth during the pandemic
The financial sector in Colombia grew by 1.6 percent during the first half of 2020. This was largely due to the debts acquired by small and medium-sized enterprises to keep their business afloat.
Following a similar trend, the agriculture industry experienced growth of 4 percent, stimulated by the increase in food purchases amid concern among the public over possible shortages in large cities such as Bogota, Medellin, and Cali.
The e-commerce sector reported particularly strong growth as people were increasingly forced online to make purchases. That saw digital sales in Colombia rise 130 percent, heralding a major leap in Colombia’s online consumer behavior.
Such a trend is only likely to continue, with e-commerce set to see further rapid growth in the near future, representing a prime opportunity for investors.
Mobile-based payment and banking apps also became increasingly popular in Colombia, leading cybersecurity firm Kaspersky to highlight them as an increasing source of cyber vulnerability in 2021.
3 tech companies in Colombia that will emerge stronger from the pandemic
PayU is a leading Colombian provider of online payment services, based on strategic connections with major banks and other payment providers. Also present in Argentina, Brazil, Chile, Mexico, Panama, and Peru, the company has managed to expand beyond Latin America to enter markets in Africa, Asia, and Europe.
According to company figures, during the first seven months of the year, PayU saw more than 120 million transactions processed in Latin America alone, as 47 million individual accounts made purchases from more than 25,000 e-commerce platforms.
According to to Francisco León, PayU’s director of operations in Latin America, transactions carried out using PayU increased 50 percent in 2020 compared to 2019.
Rappi, commonly known as Colombia’s only unicorn, is an on-demand delivery company that also has a presence in Argentina, Brazil, Chile, Costa Rica, Ecuador, Mexico, and Peru. This Latin American ‘super app’ has been one of the fastest-growing companies in Latin America over recent years, reaching a valuation of $1 billion in September 2018.
The following year, Rappi received another $1 billion of investment from Japanese giant SoftBank. The company, with more than 25,000 delivery employees in Bogota alone, secured 61 percent of the on-demand delivery market in Colombia during the pandemic.
According to Matías Lask, Rappi’s General Manager in Colombia, before the pandemic the company saw approximately 10,000 monthly downloads of its app, yet by July 2020 it had reached 600,000 total downloads following a surge in demand.
In a possible sign of its Rappi’s success during the pandemic, competitor Uber Eats withdrew from the Colombian market in late-November 2020.
BlackSip is a Colombian company that also has offices in Mexico and Peru helping companies in Latin America to build their own e-commerce channels and sell their products over the internet. According to María Paula Silva, Blacksip’s Country Manager in Colombia, e-sales in the country are expected to reach $5.4 billion in 2020 — representing an increase of 35 percent over 2019.
In the first half of 2020, e-commerce sales in Latin America increased a stunning 230 percent. Nearly 34 million Colombians among a population of 49.5 million connected to the internet during that time, of which 22 million are expected to have become digital buyers by the end of the year. As such, the South American nation is currently considered the fourth largest e-commerce market in the region and is expected to generate e-commerce sales of $6 billion by 2022.
According to Silva, these extraordinary developments in the region’s e-commerce sector saw some of BlackSip’s clients experience up to 500 percent increases in consumer purchases.
Opportunities for innovation among tech companies in Colombia
The Covid-19 pandemic has accelerated the shift online and uptake of digital technology in different sectors of Colombia’s economy. The likes of online health and education provision, as well as app development, have seen significant growth and present notable opportunities to investors and foreign technology companies seeking to expand.
Online health and education: As lockdowns have prevented classroom learning and non-essential medical appointments from being carried out in person, people have increasingly turned to digital technology for education and health purposes.
While tech titans such as Google and Microsoft have taken a leading role in catering to this shift, the market for internet-based communication remains unsaturated and presents an opportunity for investment.
App development: According to a report published this year by AppsFlyer, in 2020 Colombia registered a 15 percent increase in app downloads compared to the previous year. That followed a 60 percent increase during 2019 on the previous year and meant Colombia witnessed some of the biggest growth in the region in terms of mobile app downloads.
With an abundance of highly-skilled workers available, Colombia has emerged as a major app and software development hub in the region, and that trend is only likely to deepen.
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