For many, thoughts of Colombia gravitate back to the news headlines from the 1980s and 90s, which featured ruthless drug cartels that rode roughshod over authorities. It’s a memory likely to be further embedded in our minds by the hugely popular Netflix series, Narcos. Although Colombia still has some lingering security issues, it’s positioned itself so far ahead of where it was 20 or 30 years ago, that it’s hardly recognizable.
Like other emerging markets, Colombia has been progressing at an impressive rate. Their middle class is rising steadily, and in the last decade alone, they’ve been able to reduce their poverty rate from 40% to about 27%. Their economy has grown consistently at an annual rate between 2% to 5%, and they’ve only experienced one recession in the last three decades. So, it’s time to take a fresh look at this important market, its opportunities, and how it can serve as your passport to South America. The following key market highlights were provided by our expert panellists during the recent webinar, Colombia: Your connection to the South American market.
Top 10 takeaways
1. The road to 4G
In Colombia, 4G refers to the Fourth Generation of Road Concessions program. This massive infrastructure initiative will encompass $15 billion in spending to develop road concessions on a public-private partnership basis. The goal is to improve the connections and logistics between the main cities in Colombia with the key ports located on both coastlines.
2. Forward momentum
Geographically, Colombia is enviably located with access to both the Atlantic and Pacific oceans. It’s a gateway to the Pacific Alliance—the trading bloc comprised of Chile, Colombia, Peru and Mexico—with which Canada is an associated state. Here’s a few facts that point to Colombia’s positive trajectory.
- Stable economy: Economic growth is roughly pegged at 3% from 2019 through 2020. Positive business dynamic has been driven by improved ease of doing business ratings, a strong financial system, as well as the stability and soundness of banks.
- Reform agenda: Among other issues, it addresses public finances, increasing competitiveness and combatting corruption.
- Globally competitive: According to the World Economic Forum, Colombia ranks positively in their Global Competitiveness Index Report.
- OECD member: Colombia joined the Organisation for Economic Co-operation and Development (OECD) in May 2018. This underscores their commitment to reforms in the areas of governance, improving health and education standards, rooting out corruption, improving infrastructure and other progressive policies.
- FTA with Canada: Colombia has 15 free trade agreements (FTAs), including the Canada-Colombia Free Trade Agreement, as well as a treaty to eliminate double taxation.
3. Stumbling blocks
Like many emerging markets, Colombia is being dragged down by overall global economic and political conditions. Other considerations with negative impacts include:
- Modest oil production: Growing by just over 1% last year, the tepid rate of oil production has negatively affected overall exports.
- Venezuelan crisis: Turmoil in neighbouring Venezuela has resulted in a large migration into Colombia, with the financial costs that go along with it.
- Peace accord: The historic peace deal forged between the government and the Revolutionary Armed Forces of Colombia (FARC) appears to be losing steam.
- Tax regime: Is both complicated and constantly changing, with on average one tax reform every two years.
- Public safety: Although improved, there are still issues with public safety. Remember to consult Canada’s travel advisory service before planning your trip.
4. Selling to key Colombian corporates
- Through our Business Connection Program, Export Development Canada (EDC) has developed strategic business ties with the utility and energy companies listed below. By lending money to these international conglomerates, we’re better able to forge ties with their procurement teams and can point them to Canadian suppliers with the capacity to meet their needs.
- Grupo Energía Bogotá
5. Bilateral trade and investment relationship
Bilateral trade between Canada and Colombia has grown by 50% in the last decade, a strong indication of the increase in confidence among exporters to this market. Colombia is the fourth-largest destination for Canadian direct investment in South America, with assets in excess of $5 billion, predominantly in infrastructure, extractive and financial services.
6. Market opportunities
- Infrastructure and power: In addition to the 4G program noted earlier, there are several development projects underway for airports, ports, hospitals and schools.
- Oil and gas: Exploration and production solutions are in demand, as is the need for enhanced oil recovery from existing fields and new offshore developments in the Caribbean coast. An LNG facility and pipeline project are slated for development in the Pacific region.
- Multilatinas: Is the name given to the utility companies that have expanded their operations beyond Colombia. By doing business with the multilatinas, you can increase your opportunities throughout South America, Central America and the Caribbean.
- Non-conventional renewables: A new renewable law is encouraging the development of wind, solar, biomass and geothermal generation.
- Mining: Production and services are needed for gold, silver and copper projects.
7. Financing and insurance solutions
Doing business with international customers can be more complicated, so EDC has developed a number of products and services to make your transactions easier and safer. Credit Insurance provides peace of mind should your customer be unable to pay for their order. You might consider taking out Political Risk Insurance if you’re dealing in a more volatile sector in Colombia. And remember that we can offer financing to your international buyer, which can give you a competitive edge in the market. Last year alone, we helped 266 Canadian companies do business in Colombia, 100 of which were small- and medium-sized enterprises (SMEs). We provided $332 million in financing and facilitated $915 million in total business volume.
8. Exporters who work with TCS do better
Canadian exporters who work with the Trade Commissioner Service (TCS) do better than those who don’t. How much better?
- They earn 20% more in export value.
- They export to 25% more markets.
- They export in excess of 10% more products.
With upwards of 1,000 trade professionals working in 160-plus cities around the world, the TCS is one of the most important trade partnerships you can establish. They have a team of 10 trade commissioners working out of the Canadian Embassy in Bogota, who service more than 100 Canadian companies operating throughout Colombia. They’ll save you time and money by introducing you to vetted local contacts—agents, distributors, lawyers, accountants, translators, plus every other service professional you’ll need to succeed in Colombia.
9. Upcoming trade shows
Attending a trade show is the best way to get a hands-on look at Colombia. Check out these upcoming events, where the TCS will be present:
- Bogotá Audiovisual Market
- ANDICOM (ICT Congress)
- Conference of the Americas on International Education (CAEI)
- Colombian Oil & Gas Summit
- Colombia Gold Symposium
- WEFTEC: The water quality event (held in Chicago, with large Colombian contingent)
Remember, the CanExport Program offers up to 50% in financial support to offset the export marketing activities of Canadian SMEs looking to pursue opportunities in Colombia and other new markets.
10. Strategies for success
- Develop a long-term commitment to the market.
- Ensure a local presence to build customer rapport and provide after-sales support.
- Invest in local partnerships through joint ventures, a memorandum of understanding or strategic alliances.
- Build up your trade network by partnering with the TCS and EDC, and make sure you connect with trade associations and sector regulators.
- Be culturally aware—understand that Colombia is a relatively conservative country.
EDC webinar series: Our popular webinars are packed with information you need to succeed globally. Check out past webinars or sign up for upcoming broadcasts of interest to you.