Presentación Colombia Inglés Investment Environment and Business Opportunities in Colombia April 2015
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Table of Contents Current Macroeconomic Indicators Colombian Investment Standards Sectors for Potential Investments
Current Macroeconomic Indicators Colombian Investment Standards Sectors for Potential Investments
Macroeconomic stability and strong economic performance in the long term GDP Growth, Inflation and unemployment Rate 2002 2018p (%) Unemployment rate 15.6 14.1 13.7 GDP Inflation 11.8 12.0 11.2 11.3 12.0 11.8 10.8 10.4 9.6 9.1 9.0 8.9 8.9 8.6 6.7 6.9 7.7 6.6 7.0 2.5 6.5 3.9 5.3 5.5 4.7 4.9 4.5 5.7 3.5 2.0 4.0 3.7 4.0 4.7 5.0 5.0 4.7 4.6 4.6 3.6 3.4 3.6 3.5 3.3 1.7 2.4 1.9 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014p 2015p 2016p 2017p 2018p P: Projected Source: DANE; Banco de la República; Fedesarrrollo July 2014, EIU - Economist Intelligence Unit. 2014 * 2014 inflation given by DANE
PIB (PPA) 2015 (Billions USD) Germany 2,324 Brazil 1,790 Mexico 1,176 Australia 1.089 Malaysia Colombia Vietnam Switzerland Singapore Belgium Sweden Chile Hong Kong Peru Norway Israel Denmark New Zealand 415 401 387 448 432 373 425 397 300 302 226 150 600 595 Colombia is within the 30th largest economies in the world. The country has a population of 47,7 million inhabitants. Note: GDP adapted to Purchasing Power Parity PPP. Projected data. Source: FMI. 2014
PIB per capita (PPA ) 2000-2018 (USD) Colombia s per capita income has nearly doubled since 2000 16.000 Income 14.000 14,110 High Income 12.000 10.800 10.000 8.000 8.850 Middle High Income 6.000 5,805 4.000 2.000 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014p 2015p 2016p 2017p 2018p Middle Low Income Low Income Source: EIU Economist Intelligence Unit. PPP = purchasing power parity. Economies are divided according to 2012 income per capita, calculated using the World Bank Atlas method. The groups are: low income, US$1,035 or less; lower middle income, US$1,036 - US$4,085; upper middle income, US$4,086 - US$12,615; and high
A rapidly expanding middle class Middle class* in Colombia as a percentage of total population Average real growth of consumer expenditure, 2014 2018 46% Million inhabitants 37% 5,5% 4,7% 25% 24.7 4,2% 16% 19.0 11.6 4,1% 6.7 2,9% 2002 2012 2020 2025 * Calculus based on a 4.6% GDP growth Middle class: Monthly household income between 3.2MW and 13MW (MW) Minimum wage in Colombia 2014: USD 320. Source: Fedesarrollo (2013) and Euromonitor
Multiple development regions Cartagena 990,179 hab. Medellín 2.441,123 hab. Barranquilla 1.212,943 hab. Cucuta 643,666 hab. Bucaramanga 527,451hab. 55% of the population has less than 30 years old. 9 cities have a population of over 500,000 inhabitants Cali 2.344,734 hab. Bogota 7.776,845 hab. Ibague 512,631 hab.
Private sector: Main driver of economic growth Contribution of demand components to the growth of GDP Private consumption and investment contributed strongly to the growth between 2010 and 2012 Decrease in unemployment Rate Increase in trust Historically low interest rates Increase of loans Important increase of the middle class.
Foreign Direct Investment FDI inflows 1994 2014 I Trim US$ Mio. Top Investors in Colombia 2000 2014 I Trim 15,119 Var. 8% 16,354 USA US$ 25,912 millions 23.1 % England US$ 15,894 millions 14.1% 7,821 Spain US$ 8,579 millions 7.6% 2,504 Chile US$ 4,408 millions 4% Prom. 1994-2002 Prom. 2003-2011 2012 2013 Source Ballance of Payments- Banco de la República. Share of all countries with positive cumulative investment, The information includes reinvested profits or investments in the oil sector Note: the list of the top countries investing in Colombia does not include Panama.
Current Macroeconomic Indicators Colombian Investment Standards Sectors for Potential Investments
Economic growth, Investor Confidence and Security 6000 30,0 5000 25,0 4000 20,0 3000 15,0 2000 10,0 1000 5,0 0 0,0 IED - US$ million* Insecurity perception** Figures do not include FDI registered for SabMiller acquisition of Bavaria in 2005 (USD 4,800 MM). ** Perception of insecurity as a key issue affecting industrial growth in the country. Monthly Industrial Survey -ANDI. Source: National Business Association of Colombia - ANDI. Balance of Payments Banco de la República.
An investment-grade country with positive outlook Rating Agency Term Rating Date Outlook Long Term Foreign Currency Long Term Local Currency BBB BBB + 24 Apr- 2013 5 Mar - 2007 Stable Long Term Foreign Currency BBB 13 Dic- 2013 Stable Long Term Local Currency BBB+ 22 Jun - 2011 Long Term Foreign Currency Baa2 28 Jul - 2014 Positive The key drivers for Moody s upgrade on July 2014 were: 1.Expectations of continued strong growth dynamics despite external headwinds and robust long-term growth prospects supported by the fourth generation (4G) infrastructure investment program; 2.Sound fiscal management that has led to moderate fiscal deficits coupled with continued compliance with the fiscal rule and expectations that this will continue. Source: S&P Ratings; Revista Dinero, Colombian Treasury.
Source: Doing Business Report 2015. World Bank * Position between 189 economies. ** Positive numbers indicate an improvement in the business environment The World Bank s Doing Business Report 2015 Colombia, 34* 19 Peru, 35 * -1 Mexico, 39 * Colombia tops the region Invited to become OECD member +4 Chile, 41 * -2 Panama, 52 * Position out of 189 economies Change in rank 2014 2015** +3 Ecuador, 115 * 0 Brazil, 120 * +3
Colombia Brazil Source: Doing Business 2015 World Bank * Índex: 0-10 and 10 = the best score Peru Chile Mexico Argentina Panama Uruguay Ecuador El Salvador Leader in terms of Investor Protection in L.A. and 10th worldwide Investment Protection Index Doing Business - 2015 Ranking Country 7,2 10 Colombia 6,3 6,2 5,8 5,8 5,8 5,6 35 Brazil 4,8 4,7 4,2 40 Peru 56 Chile 62 Mexico 62 Argentina 76 Panama 110 Uruguay 117 Ecuador 154 El Salvador
Free Trade Zones ->Reduced income tax -> Sales allowed in the local market Guajira Atlántico Magdalena Free Trade Zone Bolívar Norte de Santander Antioquia Santander Caldas Risaralda Boyacá Special Standing "Uniempresarial" (FTZ) Permanent Free Trade Zone Valle del Cauca Cauca Quindío Huila Cundinamarca Caribbean Andean Region Pacific Region FTZ requested or approved prior to December 31, 2012. 15% Income tax. FTZ filed after December 31, 2012. Income tax of 15% + 9% tax CREE.
Competitive advantages of Free Trade Zones No import duties. VAT exemption for goods sold from Colombia to FTZ. Benefit from international trade agreements. Allows sales to the local market. Free trade zones for different investor styles.
Access to more than 45 countries and 1,5 billion consumers through its network of FTAs Norway Island Canada Liechtenstein United States Switzerland European Union Turkey South Korea Japan Israel Mexico Guatemala Honduras Nicaragua* Costa Rica Panama Cuba* Venezuela* El Salvador Ecuador Pacific Alliance Peru Bolivia Chile Brazil Paraguay Uruguay Argentina In force Signed In negotiation *These are Partial Scope Agreements (PSA) - - - The dotted line refers to member countries of The Pacific Alliance other than Colombia. Chile, Peru and México. Source: Colombian Ministry of Commerce, Industry and Tourism. 2014.
International Investment Agreements - IIA Canada United Kingdom Russia Switzerland Mexico Guatemala Honduras United States Costa Rica France Spain Israel Kuwait Turkey Azerbaijan UAE Qatar India China Japan South Korea El Salvador Panama Singapore Peru In force Pacific Alliance Signed Chile In negotiation Note: The International investment agreements (IIA) include Agreement Investment Treaties BIT (agreement) and Free Trade Agreements FTA- with investment section (chapter). Source: Colombian Ministry of Commerce, Industry and Tourism. 2014.
Double Taxation Agreements - DTA Canada United Kingdom Belgium Netherlands United States Switzerland Portugal Spain France Czech Republic South Korea Japan Mexico India Ecuador Peru Bolivia In force Chile Signed In negotiation
A competitive location with easy access to markets around the globe Canada Toronto 6H05M Paris 10H40M Frankfurt 11H15M Los Angeles 8H20M United States New York 5H35M France Germany México Madrid 9H40M Spain Mexico City 4H45M Quito 1H30M Ecuador Lima 3H00M Peru Santiago Chile 5H00M Chile Caracas 1H20M Brazil Argentina Sao Paulo 5H45M Buenos Aires 6H15M Over 935 weekly direct international flights. More than 6,197 weekly domestic flights. Less than 6 hours to the main capital cities in Latin America. More than 20 different airlines operating in Colombia.
Labor incentives Discount in the income tax and supplementary contributions New employees under twenty eight (28) years old. Length of benefit by employee: 2 years. New employees certified in displacement situation, reintegration or disability. Length of benefit by employee: 3 years. New employees with incomes lower than 1.5 Minimum Wages (US$ 476). Length of benefit by employee : 2 years. New women employees above 40 years old with more than 1 year unemployed. Length of benefit by employee: 2 years.
POTENTIAL SECTORS
INFRASTRUCTURE
Current state of infrastructure State of the Total Infrastructure State of the Roads Chile Mexico Mexico Chile Ecuador Argentina Colombia Brasil 3,66 Ecuador Perú Perú Brasil Argentina Colombia 1,7 Venezuela Venezuela Uruguay Uruguay 0 1 2 3 4 5 6 0 1 2 3 State of the Railways State of the Port Infrastructure Chile Mexico Chile Ecuador Perú Argentina Venezuela Uruguay Mexico Ecuador Argentina Perú Colombia Brasil 3,4 Colombia Brasil 2,9 0 1 2 3 4 5 6 Venezuela Uruguay 0 1 2 3 4 5 6 Quelle: World Economic Forum. Global Competitiveness Report 2011-2012 1 = Extremely Undeveloped; 7 = Completely efficient by the International Standards
A budget of 25 billion USD (2014-2018) 8,170 Km of roads to be constructed or improved. (ANI, 2013) The Government aims to increase port capacity by 70% Source: MCIT, 2013
Infrastructure: A major drive for growth Fourth Generation of PPP S (4g) Roads: US$ 24 Bill. -Intervention of 8.000 Km of Roads - 1.300 Km of new Roads - 40 new concessions Opportunities to develop air, road, river and airport infrastructure Step Rail Ways Concession Program (feasibility study step 2) US$ 4.2 Bill. Ports: US$ 2,1 Bill. (2015-2018) Airports: interventions US$ 1.8 Bill (10 projects) and constructions US$ 2.3 Bill (2 projects). (2015-2018) Improvement of the Magdalena river navigability: US$ 1.3 Bill. Source: Ministry of Transport
ENERGY
Market structure Competition Monopoly Monopoly Agents of the power sector registered in Colombia Commercialization Generation Distribution Transmission 12 31 53 Total Agents: 190 Source: XM 94 USERS Non regulated users (large users): o Power demand > 2 MW or power consumption of 55 MWh/month. o These users can celebrate bilateral contracts with marketers o Set the price and quantity freely between the two parties. Regulated users: o Subject to a contract of uniform conditions. o Rates are regulated by the CREG through a general tariff formula.
Installed capacity in Colombia Total NIS 2013: 14,559 MW National Interconnected System (NIS) Installed capacity December 31, 2013 Thermal Resources Cogenerators 0,5% Minors 4,6% Thermal: 4,515 MW Coal 22,1% Hydro: 9,135 MW Thermal 31,4% Gas 43,7% Fuel Oil 6,8% Hydraulic 63,5% Gas- Jet A1 6,1% Jet1 1,0% ACPM 20,3% Source: XM- 2014
Connected Zones (NIS) of Colombia National Interconnected System (NIS) San Andrés y Providencia Atlántico Magdalena La Guajira It includes 48% of the national territory and provides coverage to 96% of the population. Sucre Cesar Bolívar Córdoba Norte de Santander Estimates on future demand are based on the interconnected zones. Risaralda Chocó Antioquia Santander Caldas Boyacá Bogotá Arauca Casanare Vichada 32 large hydroelectric plants and 30 thermoelectric plants provide electricity to the SIN. Quindío V. del Cauca Tolima Meta Cauca Huila Guainía Non-connected areas (UA) Nariño Putumayo Caquetá Guaviare Vaupés ZNI account for 52% of the country: 17 departments and 1.441 municipalities (625 thousand people). NIS Non-connected areas Amazonas It is mainly supplied by diesel generators. Source: Mining and Energy Planning Unit for Energy Solutions of Unconnected Zones (IPSE), 2013.
Investment opportunities in power Generation Solid and well established regulatory framework: Since 1994, 2 reforms (Laws 142 and 143) were implemented aiming primarily to foster the private investment in the sector. This has translated into business opportunities for companies that have specific projects. Resources to enhance the expansions: Colombia has natural resources for power generation: water, coal and the possibility of gas in amounts that allow greater supply than that of the country's demand. An energy deficit starting in year 2022 For the period 2019-2028, an increase of installed capacity is required, with the aim of meeting the criteria for energy reliability. Power demand in Latin America will double between 2008 and 2030 The World Bank forecasts that demand will reach 2,500 TWh by the end of that 2030. This growth implies a need of an additional 239 GW in the region approaching 330GW of installed capacity. International interconnection projects Will increase energy exports to Latin American countries. Interconnection project between Colombia Panama (2018), Andean Electrical Interconnection System between Ecuador-Peru-Chile. 103 Power Generation projects under development Different stages which sum 4,974 MW. 90 Hydraulic projects which sum 3,631 MW, 8 thermal projects equivalent to 858 MW, 4 Eolic projects which estimate to produce 654 MW, and 1 solar with an installed capacity of 19.9 MW
Investment opportunities in Non-Conventional power Generation Development of Non- Conventional power generation projects Geospatial position of Colombia. (Generation of energy from Non-Conventional resources such as: solar, wind, biomass, geothermal and solid waste). Law 1715 of 2014 integrates non-conventional renewable energy to the national energy system. This Law promotes the development and use of non-conventional energy sources (especially those from renewable sources), in the national energy system, establishes the legal framework and instruments for the use of non-conventional energy sources (FNCE for its acronym in Spanish), especially those from renewable sources, and creates tax incentives for the investment in this kind of projects. Non Inteconnected Zones account to 52% of the National Territory The National Interconnected System (NIS) connects 48% of the national territory and covers 97% of the population. The Nonconnected zones (ZNI) account for 52% of the country s area (17 departments and 1,441 municipalities) and 625 thousand people. Currently, these zones produce energy with Diesel.
OTHER SECTORS
Export Platform attracting European FDI Identification of strategic sectors to attract foreign direct investments include: Manufacturing Industry, Agroindustry and Services. The principal subsectors include: - Chemical Industry - Construction Industry - Automobile Industry - Pharmaceutical Industry - Aerospatiale Industry - BPO et IT - Cosmetic Industry - Financial Services - Logistics - Creative Industries - Petrol extraction and Services - Real Estate - Hotels and Touristic Industries. - Foods and Services Industries - Radio and TV Industry