Why investors are flocking to Colombia

Why are investors flocking to Colombia?

Colombia is known worldwide for its ever-growing tourism, great beaches, welcoming people and beautiful landscapes. It is also known for being one of the largest coffee producers in the world and accounting for 70-90% of the world’s emerald market. What might not be well known is that Colombia is a paradise for investors with endless opportunities waiting to be discovered. Colombia is one of few countries that can be truly considered an all-in-one commercial and lifestyle destination.

Why Investors are flocking to Colombia?

Latin American powerhouse was dubbed the fourth friendliest destination in the region to do business with, as reported by the World Bank's Doing Business 2018.
Colombia is the fourth friendliest destination in the region to do business with, as reported by the World Bank’s Doing Business 2018.

According to Procolombia, Colombia’s economy has grown on average by 3.8% in the past seven years. Its economy is expected to grow another 3.59% in 2019 and 3.7% in 2020, according to the International Monetary Fund. With a ballooning middle-class and increased consumer spending, new sectors are flourishing and existing sectors are strengthening at a rapid pace.

Colombia is also a reliable partner: the Latin American powerhouse was dubbed the fourth friendliest destination in the region to do business with, as reported by the World Bank’s Doing Business 2018. Colombia is also a leader in the region in terms of investor protection, and sits at tenth place worldwide. It is also the country with the most reforms (34 in total) in its legal framework to improve its negotiating environment.

The country has more than 16 highly covetable trade agreements, enabling preferential access to more than 60 countries and nearly 1500 million consumers across markets. These lucrative trade agreements connect Colombia with the European Union, United States, Mexico, Canada, the Central American Northern Triangle (El Salvador, Guatemala, Honduras), and Panama. On top of this, Colombia is a founding member of the Pacific Alliance, alongside Chile, Peru and Mexico. The Pacific Alliance countries collectively make up the eighth largest economy in the world. These global trade ties give Colombia an expansive reach into many diverse and powerful economies.

The government is providing numerous incentives for investment such as tax benefits (20% income tax instead of 33% and 0% VAT). In a number of industries, the government is exploring further initiatives to target increased investment. One example of this is the new film law, whose rebates are luring film producers and investors into the country, developing a sustainable film industry.

Where to invest?

Colombia has established itself as an attractive market in which a number of industries are currently booming. This includes mining, cannabis, technology, cosmetics, craft beer, and coffee sectors. Its services, agriculture, and manufacturing sectors tend to attract the majority of foreign capital, as identified by the Ministry of Commerce, Industry, and Tourism. The sub-sectors conforming those industries offer the most possibilities for new and expanding businesses.

Colombia’s underrated service industry opportunities

When people think of doing business in Colombia, services aren’t what first comes to mind. Even though this sector has been overlooked throughout the years, it hasn’t stopped it from developing steadily under the radar. Services have become increasingly intertwined with the nation’s other booming sectors, making it a great investment opportunity.

According to the IMD World Talent Report from 2017, Colombia offers the third most qualified workforce in South America. Costs of labor also remain relatively low, making finding qualified workers at lower prices advantageous for businesses. Through the Productive Transformation Program (PTP), the government seeks to develop world-class sub-sectors, including Software and IT services, Outsourcing of BPO services and Data Centers, among others. Colombia is betting on innovation as a cross-cutting component for the transformation of products and services that generates added value and skilled employment.

Services also tie in with many other sectors in the economy (such as tourism, for example). This industry therefore offers great potential for investors as the economy continues to grow.

Transferable agricultural expertise cannabis industry Colombia
More than half of the world’s arable land that could be used for agricultural production is located in seven tropical countries, including Colombia.

Investing in agribusiness 

According to the United Nations Food and Agriculture Organization, more than half of the world’s arable land that could be used for agricultural production is located in seven tropical countries, including Colombia. Over the next 30 years, developed countries will need 120 million hectares for crops projecting Colombia as one of the global agricultural pantries.

According to Procolombia, Colombia has one of the widest ranges of soils and a variety of climates in the world for growing crops. Due to its climate, different thermal floors and fertile land, Colombia provides fruits and vegetables all year round.

Cattle, dairy, cocoa, and horticulture are the traditional agricultural sub-sectors, with horticulture offering some exciting and unexplored opportunities in worldwide trending products, such as organic textiles. On top of this, a lot of excitement surrounds Colombia’s evolving medicinal cannabis industry, which is projected to be a major source of the global supply of cannabis. Medicinal cannabis is projected to grow into a USD$43 billion-dollar market by 2025. Colombia could be responsible for as much as 44% of the world’s supply for medicinal cannabis, cutting the country a large share of these spoils.

Due to its success in this area, Colombia’s agriculture market will continue to be a cornerstone of its economy. This industry is a surefire opportunity for building long-term development and success for businesses.

Consider manufacturing in Colombia

With a GPD of over USD $34 million in 2017 and a share of 12% of total GDP, the manufacturing industry was the third most representative of productive activity in the Colombian economy according to DANE. The main sub-sectors in manufacturing are cosmetics and toiletries, aerospace and fashion system. Textile-apparel manufacturing is one of the country’s main industries.

Government entities are focusing their efforts towards creating new sources of growth through the development of non-traditional sectors, such as the creative industries, tourism, textiles, and handicrafts and design.

There are great opportunities in Colombia’s textile industries. For instance, Colombia is recognized in the region for its topnotch quality products, highly qualified workmanship, and innovative designs. With the country’s network of trade agreements and strategic locations, manufacturing businesses are treated to an ideal export platform. 

Opportunities within opportunities

There is increasing consumer interest in and awareness of Colombia’s sustainable, ethical, and environmentally sound processing methods in the textile and fashion value chain. The fashion industry is steadily growing due to different factors such as the influence of social media and networks.

The world is looking for alternatives regarding sustainable textiles and fibers, and some companies are already using banana fiber, orange peel, and pineapple plants as substitutes. Colombia is the fifth largest producer of banana fiber. Organic textiles can be Colombia’s textile manufacturers newest venture.

When the time comes to diversify your business portfolio, look no further, Colombia is an all-in-one destination. Consider what Colombia’s main industries have to offer, and identify the gaps in those industries that offer opportunities for investors.

Interested in the Colombia market? Reach out to us

It is clear that Colombia provides ample opportunities for foreign investors and entrepreneurial activity with its attractive sectors only expanding and multiplying as the economy continues to grow. Colombia offers a safe and sustainable environment, with low corporate tax, worldwide free trade deals, and political stability for foreign investors that are looking for new opportunities abroad.

Anyone looking to do business in Colombia is advised to get local corporate support to start your business in Colombia. Biz Latin Hub offers local experience and a global perspective. Reach out to our team in Colombia here, we are happy to help you with your new business venture. 

Learn more about our team and expert authors.

The information provided here within should not be construed as formal guidance or advice. Please consult a professional for your specific situation. Information provided is for informative purposes only and may not capture all pertinent laws, standards, and best practices. The regulatory landscape is continually evolving; information mentioned may be outdated and/or could undergo changes. The interpretations presented are not official. Some sections are based on the interpretations or views of relevant authorities, but we cannot ensure that these perspectives will be supported in all professional settings.
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