Investment Opportunities in Colombia Official Visit of President Juan Manuel Santos SERGIO DIAZ-GRANADOS GUIDA Minister of Trade, Industry, and Tourism Seoul, September 15, 2011 1
INDEX Colombia and its economic outlook Current state of the Colombia - Korea relationship Colombia's trade policy Investment opportunities in Colombia 2
% variación Colombia's macroeconomic stability is outstanding... In the last global crisis, some countries were not so affected, such as Colombia. Growth of GDP and Inflation 9.0 8.0 7.0 7.7 6.7 6.9 6.0 5.0 4.0 3.9 5.3 4.7 3.5 4.3 3.0 2.5 3.2 2.0 1.0 1.7 1.5-2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 PIB inf lación Fuente: DANE-Banco de la República 3
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 millones US $ fob Advancing in the internationalization of the economy Foreign trade has tripled since 2001. Exports and Imports (US$ Millions) 42,000 37,000 39,820 38,351 32,000 27,000 22,000 17,000 12,000 7,000 12,330 11,997 Exportaciones Importaciones Fuente: DANE. Cálculos OEE Mincomercio 4
US$ Millones and it is diversifying its destination markets. Exports to Asia have grown 1,260% in the last decade, with and average annual increase of 34%. Colombian Exports by Principle Destinations 16.918 11.049 1260% 5.255 4.488 4.976 4.066 1.766 299 522 2.810 Estados Unidos América Latina y el Caribe Unión Europea Asia Otros 2001 2010 Fuente: DANE-Cálculos Mincomercio 5
3,698 2,542 2,134 1,720 3,016 Millones US$ 6,656 7,137 6,765 9,049 10,252 10,596 9.700 Attracting more FDI flows FDI has gone from average levels of US$ 2 million, at the beginning of the decade, to average levels of US$ 8 billion, in recent years. In fact, the first quarter of 2011 reached a historical record for the period. Foreign Investment in Colombia I trimestre 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Fuente: Banco de la República - Balanza de Pagos-Cálculos OEE-Mincomercio 6
and the Government is committed to improving the business climate. In the last five years, Colombia has been recognized as being among the top ten most reformed countries, worldwide. Colombia s Position in the Doing Business - World Bank 178 183 125 66 66 39 2006 2008 2010 Total países Posicion de Colombia Fuente: Doing Business- World Bank 7
Moreover, Colombia has regained the investment grade from the top rating firms: S&P, Fitch, and Moody s. Sovereign Debt Rating Long Term Fuente: Standard & Poor s, Moody s, Fitch 8
By 2050, Colombia will be among the top 30 economies in the world. Top 30 economies of the world, by 2050 GDP US$ constant 2000 Billion 1 China 24.617 16 Indonesia 1.504 2 US 22.270 17 Australia 1.480 3 India 8.165 18 Argentina 1.477 4 Japan 6.429 19 Egypt 1.165 5 Germany 3.714 20 Malaysia 1.160 6 UK 3.576 21 Saudi Arabia 1.128 7 Brazil 2.960 22 Thailand 856 8 Mexico 2.810 23 Netherlands 798 9 France 2.750 24 Poland 786 10 Canada 2.287 25 Iran 732 11 Italy 2.194 26 Colombia 725 12 Turkey 2.149 27 Switzerland 711 13 S. Korea 2.056 28 Hong Kong 657 14 Spain 1.954 29 Venezuela 558 15 Russia 1.878 30 South africa 529 19 of the top 30 will be emerging economies. Colombia will be the top economy in Latin America for growth in GDP per capita. Per capita income will triple in the 40 years. http://www.research.hsbc.com/midas/res/rdv?p=pdf&key=ej73gssjvj &n=282364.pdf Source: The World in 2050, Quantifying the shift in the global economy, HSBC, Global Research. 2011. 9
INDEX Colombia and its economic outlook Current state of the Colombia - Korea relationship Colombia's trade policy Investment opportunities in Colombia 10
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 US$ Millones In the last decade, bilateral trade has grown. Bilateral Trade, Colombia and Korea Exports FOB - Imports CIF - Balance 1.200 1.000 940,5 800 600 400 200 0 131,5 17,6 372,7-200 -99,4-400 -600-494,8-800 -1.000 Balanza Exportaciones Importaciones Fuente: DANE 11
with complementarities in trade. Colombian Exports to Korea, 2010 Korean Exports to Colombia, 2010 Carbon 33.9% Coffee 17.6% Ferronickel 16.3% Metallurgy 15.1% Petrol 10.7% Basic Chemicals 2.2% Coffee Products 1.0% Other 3.2% Automotive Industry 48.3% Machinery & Equipment 20.7% Basic Chemicals 18.8% Metallurgy 5.8% Textiles 2.7% Plastics 1.6% Other 2.1% Fuente: DANE 12
and an important resurgence in investment flows. Proexport estimates Korean investment at US$ 330 million in recent projects, in various Colombian industries (automotive industry, electronics, oil, and medical equipment). Source: Google images 13
INDEX Colombia and its economic outlook Current state of the Colombia - Korea relationship Colombia's trade policy Investment opportunities in Colombia 14
THE GOVERNMENT HAS SET GOALS FOR EXPORTS, INVESTMENT, AND VISITORS FOR 2014. 15
2006 2007 2008 2009 2010 meta 2011 proy. 2011 meta 2012 meta 2013 meta 2014 US$ Millones Goals for Colombian Exports For this year, we will surpassed our goal, which was set in 2010, and reach close to USD 50 billion in exports. Export Totals 37,626 39,820 42,200 50,000 45,400 48,900 52,600 29,991 32,853 24,391 Fuente: DANE-Cálculos Mincomercio 16
2006 2007 2008 2009 2010 meta 2011 proy. 2011 meta 2012 meta 2013 meta 2014 US$ Millones Goals in Foreign Direct Investment We are set to surpass the goal established last year, achieving nearly US$ 13 billion in FDI. Foreign Direct Investment in Colombia 13,000 13,200 11,900 9,049 10,596 9,700 10,800 6,656 7,137 6,765 Fuente: Banco de la República-Cálculos Mincomercio 17
HAVING SET OUR GOALS, WE ARE NOW PURSUING OUR PLANS FOR TRADE AND INVESTMENT. 18
Today, Colombia has access to 486 million consumers with the current agreements that are in force. América del Norte Europa Rusia Canadá EFTA Unión Europea Estados Unidos México Rep. Dominicana Triángulo Norte Costa Rica Panamá Venezuela Colombia CAN América Latina Chile Mercosur In Force: CAN, Mexico, Chile, Mercosur, Northern Triangle, Canada, Switzerland and Liechtenstein (members of EFTA) Upcoming: United States, European Union, Norway, and Iceland Under Negotiation: Panama, Venezuela. Future: Costa Rica, Dominican Republic Elaborado por OEE-MCIT 19
Now, our priority is Asia Pacific, where we seek to establish stable and prosperous relations. América del Norte Europa Rusia Canadá EFTA Unión Europea Estados Unidos México Rep. Dominicana Turquía Corea del Sur Japón Asia Triángulo Norte Panamá Costa Rica Colombia Venezuela Golfo Pérsico CAN América Latina Chile Mercosur In Force: CAN, Mexico, Chile, Mercosur, Northern Triangle, Canada, Switzerland and Liechtenstein (members of EFTA) Upcoming: United States, European Union, Norway, and Iceland Under Negotiation: Panama, Venezuela, South Korea, Turkey Future: Costa Rica, Dominican Republic, Russia, Gulf Community, Japan Elaborado por OEE-MCIT 20
Colombia s Strategy for Asia 1 Increase trade and investment agreements 2 Increase trade offices ç 3 Create the trade block, Pacific Alliance 21
1. Increase trade and investment agreements Trade Agreements FTA Korea Under Negotiation In view: EPA Japan (Economic Partnership Agreement) FTA Australia Agreements for the Promotion and Protection of Investments Approved : China, India Signed: Korea Pending Signature: Japan 22
2. Increase Colombia s commercial presence in Asia Already opened :Paris, Tokio, Seoul, Shangai, Turquía 23
3. Create the Pacific Alliance Pacific Alliance 206 million consumers 50% of Latin American exports 35% of the Latin American GPD Aims: Strengthen trade ties with Asia Generate more trade and investment 24
Japón Reino Unido Brasil Alianza del Pacífico Latinoamericano* Canadá India España Australia Corea US$ miles de millones As a block, we generate more opportunities for trade and investment. The combined size of the economies that form the Pacific Alliance make it the 9 th economy, worldwide. 5.459 Nominal GDP, 2010 2.247 2.090 1.681 1.574 1.538 1.410 1.236 1.007 * Incluye Chile, Colombia, México y Perú Fuente: FMI 25
INDEX Colombia and its economic outlook Current state of the Colombia - Korea relationship Colombia's trade policy Investment opportunities in Colombia 26
The land area of Colombia is nearly 1,141,000 km2, 12 times the size of Korea Bordering the Pacific and Atlantic oceans One of the most diverse countries in the world 27
Colombia's population is 45.5 million. The percentage of population under 30 years of age is 55%. 28
A land of diverse regions and diverse investment opportunities. Región Caribe Caribbean Region: tourism, logistics, petrochemical cluster, construction inputs, export platform to the Caribbean Sea. Región Pacífica Región Central / Andina Orinoquia Central / Andean Region: outsourcing, high value-added manufacturing; it s a hub to cover the domestic market and specializes in agribusiness. Pacific Region: manufacturing, agribusiness, logistics, biotechnology, export platform on the Pacific Ocean. Región Amazónica Orinoquía: agriculture, forestry, bio-fuels, oil. Amazon Region : conservation, ecotourism (Leticia).
with multiple poles of development: 9 cities & metropolitan areas with populations greater than 1,000,000 inhabitants. Barranquilla (1,9) Cartagena (1,3) Cúcuta (0,8) Medellín (3,6) Bucaramanga (1,1 ) Eje Cafetero: Pereira, Manizales, Armenia y Cartago (1,8) Cali (2,9) Ibagué (0,6) Bogotá (8,7) Población de ciudades incluyendo su área metropolitana. 2011 Fuente: DANE
The Government s goal is to have the economy grow by 6%, supported by the 5 key engines of development. The National Development Plan, 2010-2014 Mining Infrastructure Innovation Housing Agro
Opportunities linked to the 5 locomotives of growth Innovation Increase the share of Science and Technology in the National GDP. 10% of royalties from oil and mining are oriented towards innovation Infrastructure Pursue an ambitious infrastructure plan, which involves new interdepartmental highways, ports, and airports, and requires over US$ 50 billion and major private sector support. We currently are organizing the National Infrastructure Agency. Mining & Energy Colombia is the 4 th coal exporter and the 12 th oil exporter. Colombia has a potential coal reserves of approximately 17 million tons and gold reserves of 28 million ounces, as well as other precious metals. Market for value-added services linked to this sector
Opportunities linked to the 5 locomotives of growth Housing Colombia has a critical shortage of housing in major cities. It plans to build one million houses, of which 70% will be affordable housing. Agricultura Colombia is a country with one of the largest amounts of available land for agricultural expansion that would not put conservation areas or tropical forests at risk. Key agro sectors with preferential access to international markets (bio-fuels, oils, cocoa, coffee, fruits)
The Government is boosting 12 sectors through its Productive Transformation Program. SERVICES MANUFACTURING AGRO-INDUSTRIES Business process outsourcing BPO&O Software & IT Graphic Arts Industry Textile, Apparel, Fashion & Design Chocolate, Confectionary, and its raw materials Beef Health Tourism Electric Energy and its Goods and Services Auto Parts & Vehicles Palm, vegetable oils & fats Shrimp Farming Cosmetics & Toiletries 34
The Productive Transformation Program aims to generate US$12 billion in exports from these sectors. SERVICES 1.5 USD MANUFACTURING 8.5 USD AGRO-INDUSTRIES 2.0 USD 35
And, each of the sectors in the Productive Transformation Program has a local strategy for its development. Assembly: Industry represents 6.2% of GDP. Colombia is 5 producer in the region with high growth potential. Development of national mass transit system and regional (Panama). Presence of international assembly, Renault, General Motors, Mazda, Toyota - Hino, Busscar, Daewoo Bus, and Superpolo. Auto parts: Export growth of 58% in the last four years. Around $ 700 million in sales of auto parts to local producers. Increase in fleet of 1.2 million units. Strengthening the industry, creation of a center for technological development.
Regions with opportunities for Graphic Communications Industry In Colombia the industry has a stronger presence in Bogota, Medellín and Cali, respectively. It is composed of about 20 large companies, 214 medium and 4,500 small. Presence in the country of large international companies: Arvato, Quadgraphics, Sun Chemical and large publishing groups. The industry is in a process of transformation for managing digital contents in several formats. The graphic communications industry generates 13,000 jobs. The publishing and printing services 15,000. The total chain generates 40,000 jobs. Total of sales close to US2,400 million, including the sales of the newspapers sector. Colombia is the second largest exporter in Latin America after Mexico and has a leading position in the export of books on the region. In 2010, the exports of the industry were USD $ 251.29 M. The main destination markets were Venezuela, USA, Ecuador and Peru.
Region with opportunities for Colombia Textile, Apparel and Clothing Strengths The textiles, design and apparel sector is one of the most important industries in Colombia: Has a business track record of over 100 years Sales for more than 5 billion USD Generates more than 600.000 direct and indirect jobs Accounts for 8% of manufacturing GDP and 3% of GDP Exports reached US $544million Jan-Jun 2011, growing +14.43% than 2010 Colombia has become a strategic market for the Textile and Apparel Industry High-quality needlework Efficiency and speed in production and product delivery processes (4 to 6 weeks) Short lead time Quality certifications (ISO, BASC, WRAP) Strategic Location easy acces to US, Europe and Asia Markets These factors have turned the industry into one of the most promising sectors of the national economy, and one of the greatest beneficiaries of the free trade agreements
Region with opportunities for the Cosmetic and personal Care Products sector Production: Industry growth over 8% in the last 5 years Qualified labor More than 38.425 graduates in industry related programs. Natural ingredient and a vast Bio Diversity. Research and Development: Second most Bio diverse country in the planet. Network of R&D labs that support the industry as well as a national program for Bio Technology. Network of Universities and R&D labs with supporting researchers. Tax exemption with Colciencias in R&D processes. 125% discount on income tax invested in R&D. Distribution Centers: Free Trade Agreements: 5 FTA.. Export Logistics: more than 3.700 maritime frequencies from the 4 most important ports in the Atlantic and Pacific Oceans. Main Exporters in the Region for Cosmetic and Personal care Products Second most important market in the region for Cosmetics and personal care products.
Regions with opportunities to produce beef The livestock is almost in all regions in Colombia. This sector has the fourth largest cattle herd in Latin America. In 2009 the whole country had the status of Foot Mood Disease with vaccination by the OIE. The OIE certified minimum risk to the country in 2009 of EBB. Colombia has a great position for biomass generation, it is possible to feed the cattle with pasture throughout the year.according with FAPRI, this sector has potential growth of 22% for next nine years. Colombian s beef production increased over 15% between 2002 to 2010. This sector has the fourth largest cattle herd in Latin America. The kind of meat produced in Colombia, comes from the same breeds of Brazil (the largest meat exporter in the world).
Regions with opportunities for the Chocolate, Confectionery and Raw Materials sector Industry: Colombia will be the leader export platform of chocolates, candies and chewing gum. Export tradition for over 50 years. Exports to over 100 diferents markets. High recognition as a competitive producer. High opportunities in dark chocolate, functional, and products with certificates of origin. Cocoa : National Cocoa development plan 2011 to 2021. Colombia`s cocoa is classified as taste and smell by the International Cocoa Organization (ICCO) Land availability and technology. Knowledge and tradition in the production of cocoa.
Regions with opportunities for Palm, Oils & Vegetable Fats and Biofuels sector Crude Palm Oil Colombia has had a sustained growth similar to the global market, in which the average growth rate, in the past 5 years has been of 20%. In 2010 this sector generated more than 50.000 direct jobs The food industry The food industry is doted with important players who have solidity in the internal market as well as export experience and presence in different countries. The biofuels industry Colombia is a leader in mixed policies, which contributes the sustainable growth of internal demand. In Colombia there is great potential to increase the offer of the all products in the supply chain. From the upstream of crude palm oil which is the blood that nurtures the entire sector; passing through the midstream of refined oil and its fractions like liquid oil mixtures, margarines, solid greases; and continuing Downstream with the special greases, Metilester, and glycerin.
Regions with opportunities for Shrimp production Shrimp farming: Cultivation represents the 0.06% of the agroindustry GDP. The cultivated area is in the process of reviving The annual exports exceed $ 66 million and 15 thousand metric tons per year. Colombia ranked 6th as exporter to Spain and the 7th to France. The global demand for aquaculture products is growing and the internal market also represents great potential. With companies who has a long experience in the export market to Europe and United States. Shrimp seed production: White Spot Virus-tolerant seed has developed, and with very good growth rate. Shrimp seed is in demand in regional markets and potentially in Asian markets. Genetic improvement programs are strengthening.
We also offer various incentives to encourage and facilitate FDI. The Free Zones are important instruments for businesses. They have the potential to allow regions to transform themselves into poles of development. 44
metros cuadrados To date, there are over 11 million square meters in free zones and close to 3.9 million more available. Available area in operating, permanent free zones - March 2011 (square meters) 11,740,000 12,000,000 10,000,000 8,000,000 6,000,000 3,900,000 4,000,000 2,000,000 - TOTAL EN OPERACIÓN ÁREA DISPONIBLE Fuente: ANDI. Cálculos realizados por la Secretaria Técnica. 45
metros cuadrados The area available will grow in the coming years, to begin the operation of new zones that were approved previously, which will over 9 million more square meters, by 2014. Projected Available Area 10,000,000.00 9,000,000.00 7.714.661 9.255.003 8,000,000.00 7,000,000.00 6,000,000.00 5.834.170 5,000,000.00 3.900.000 4,000,000.00 3,000,000.00 2,000,000.00 1,000,000.00 - Fuente: MCIT. 2011 2012 2013 2014 46
In Conclusion We are committed to supporting the growth of trade and investment between Colombia and Korea, and this year, we hope to close trade negotiations for a free trade agreement. Colombia has a solid economy, and it has one the friendliest business environments in Latin America. We have created a portfolio of incentives and opportunities for the private sector, and our promotional agency (Proexport), which already has an office in Seoul, is ready to assist in issues of trade and investment with Colombia. 47