COLOMBIA A golden opportunity for investors

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COLOMBIAA golden opportunity for investors
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Colombia's investment climate has been changing
in a very positive way
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GDP Growth
Colombia's economic growth record surpasses, on
average, that of the Latin American Region. GDP
growth in 2006 was 6.8, the highest since 1978
GDP Growth Colombia vs. Latin America
(1980-2006f)
Source Economic Commission for Latin America and
the Caribbean (ECLAC), DANE, Forecasts ECLAC and
National Planning Department
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GDP growth by sector 2004-2006
Source Fedesarrollo (DANE)
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Components of demand growth 2004-2006
Source Fedesarrollo (DANE)
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Inflation rate
Colombias inflation rate was 4.5 in 2006, the
lowest level in 42 years.
Inflation Rate (1997 2006)
2006
2006
Source Central Bank
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Confidence and security

Safety levels have increased significantly since
2002, which is reflected by business confidence
Perception on Safety (2002 2006)
Percentage of businessmen who believe security
levels have improved.
Source Opinion survey by National Association of
Industrials (ANDI), Proexports Forecast
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Market confidence
Reduction in the spread on sovereign debt
Emerging Markets Bond Index (EMBI)
(2002-2006) Basic Points
2006
Source JP Morgan - National Planning Department
forecast
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Market confidence
June 2007 Standard Poors upgraded Colombias
sovereign debt rating from BB to BBB-
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Colombia's total exports doubled in the last
four years
Exports
Exports (1995 2007f) US MM
F Proexports Forecast Source DANE, Proexport
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The number of foreign visitors to Colombia
doubled in the last four years
Foreign visitors
Number of foreign travelers (2001 2007f)
F Proexports Forecast Source Security
Administration Department - DAS
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Colombia received in 2005 and 2006 the highest
inflows of FDI recorded to date
Foreign Direct Investment
FDI Flows (1994-2006) US MM
Sab Millers investment US 4,715 MM
10,255
Proexport forecast Source Balance of
Payments, Central Bank
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FDI flows into Latin America
Colombia was the third largest recipient of FDI
in the region in the 2005-2006 period, following
Mexico and Brazil
Source ECLAC, 2007
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DISTRIBUCIÓN Y DESEMPEÑO POR SECTORES
FDI breakdown by sector (2006)
TOTAL US 6,295 MILLION
Source Bank of the Republic (Central Bank)
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Foreign investors present in Colombia
Almost 700 multinational companies have
operations in Colombia
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Main investors by country of origin
Accumulated FDI by country (1994 2005) of
Total
16
14
12
10
8
8
6
5
4
3
TOTAL US 32,444 MM
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Excluding the petroleum sector and reinvestment
of profits Source Bank of the Republic (Central
Bank)
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Recent cases of FDI in Colombia

• Mexichem (Mexico) (2007)
• Signed an agreement to buy Petco and Amanco
  Group.
• Investment N.A.
• Nestle (Swiss) (2006)
• Increases exports capacity at its soluble coffee
  plant.
• Investment US 45 M
• Coalcorp (Canada) (2006)
• Concession to build a new harbor terminal in
  Cartagena.
• Investment N.A.
• Telmex (Mexico) (2006)
• Acquires 100 of TV Cable
• Investment US 30 M
• Prisma Energy (UK) (2006)
• Acquires 10 of Promigas
• Investment US 153.7 M

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Recent cases of FDI in Colombia

• Glencore International AG (Switzerland) (2006)
• Acquired 51 of Cartagenas oil refinery
• Investment US 656.4 M
• Millicom International (Luxembourg) (2006)
• Acquired Colombia Móvil (Ola)
• Investment US 479.9 M
• Groupe Casino (France) (2006)
• Acquired Carulla Vivero
• Investment US 110 M
• Sinergy (Brazil) (2006)
• Increased fleet of Aviancas aircraft.
• Investment US 355 M
• Sab Miller (South Africa) (2006)
• Invests in a juice plant in Valle del Cauca
• Investment US 175 M

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Recent cases of FDI in Colombia

• Chevron Texaco (United States) (2006)
• Increases investments in Colombia
• Investment US 110 M
• Abengoa (Spain) (2006)
• Builds hydroelectric plant at Guapi
• Investment US 47M
• Kimberly (USA) (2006)
• Increases investments in Colombia
• Investment US 40 M
• Sab Miller (South Africa) (2005)
• Acquired Bavaria, the countrys most important
  brewery
• Investment US 4,715 M
• Phillip Morris (USA) (2005)
• Acquired Coltabaco, the countrys largest
  tobacco firm
• Investment US 300 M

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The world has been noticing the changes in
Colombia's investment climate
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Business Week, May 28th, 2007
Colombia's strong fundamentals stand out. Its
130 billion economy, a world leader in the
production of coffee, petroleum, textiles, and
flowers, is growing at 6.8 a year, two full
points faster than the Latin American average. In
the past 10 years, Colombia has slashed its
inflation rate from 18 to 5, and since Uribe
was elected, unemployment has dipped from 16 to
13. The nation has never defaulted on its debt
or experienced hyperinflation. And
entrepreneurial thinking is spreading
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The Financial Times
Colombia has proved that it is a safe and
worthwhile investment destination and has now put
itself firmly back onto the investment map.
Courtney Fingar reports from Bogotá and Medellin
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London
The Banker, Octubre Noviembre 2006.
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London
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American Insider - London
American Insider, October November 2006,
promoted Colombia as an investment destination.
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Lonely Planet chose Colombia as one of the 10
hot spots in the world to visit in 2006. It
is modern, vibrant, and one of the best value
places in South America.
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• Bogotá is not for the braves anymore - Feb 12,
  2006
• SETH KUGEL

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• Época magazine Brasil

February 2007, Epoca magazine highlights
Colombia's achievements in improving security
levels in large cities and sets it as an example
for Brasil
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Why Colombia?
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Strategic location
Hours of flight
Colombia and the United Statess East Coast are
in the same time zone
Source Aviatur, U.S. Dept. of Agriculture
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Market size
Fifth largest economy and third largest
population in Latin America
GDP in Latin America (2005) Current Prices, US
MM
Population in Latin America (2005) MM of persons
Source International Monetary Fund and World
Bank, Data for Colombia in 2005 from the
Central Bank and DANE
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Qualified human capital
Availability of trained workforce (0 not
available 10 available)
Competent managers (0 not available 10
available)
3
12
26
6
39
29
40
37
44
40
57
55
Ranking (61 countries)
Source The World Competitiveness Yearbook
2006-IMD
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Flexible labour legislation
Flexibility of Hiring and Firing Practices
 Working shifts (2 day-shifts in Colombia)
1 impeded by regulations 7Flexibly determined
by employers
Source Global Competitiveness Report, 2006-2007
Source Based on Araujo Ibarra Asociados S.A
study.
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Competitive cost of human resources
Gross income of an engineer annual US (2006)
Gross income of an Industrial Worker annual US
(2006)
Bogota
Bogota
Sources UBS Prices Earnings 2006 Edition
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Improvements in infrastructure
Investment in telecommunications ( of GDP)
Energy infrastructure (0 is not efficient
10It is efficient)
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2
Colombia
Colombia
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12
36
23
47
27
53
27
31
55
58
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Ranking (61 countries)
Source The World Competitiveness Yearbook
2006-IMD
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World Economic Forum, April 2007
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Preferential access to global markets
Preferential access to over 1,200 million
consumers worldwide
ATPDEA USA GDP US 11,735,000 MM Population
296 MM
SGP ANDEAN European Union GDP US
11,000,000MM Population 455 MM
FTA with the USA signed October 2006
Grupo de los 3 (Mexico, Venezuela) GDP US
836,446MM Population132 MM
CAN (Peru, Venezuela Ecuador, Bolivia) GDP US
216,138 MM Population 76 M
Complementation agreements Tariff preferences
Free trade agreements
MERCOSUR (Argentina, Brazil, Paraguay,
Uruguay) GDP US 1,372,522MM Population255 MM
FTA with Chile GDP US 92,263 MM Población 16 MM
Fuente ECLAC, Calculations Proexport
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Sectors with tax incentives
Income tax exemptions were granted in some
sectors for a limited time period starting on
January 1st , 2003 (Law 788, 2002)

• Hotel construction and remodeling (30 years)
• Eco-tourism services (20 years)
• New software (10 years)
• Publishing companies (20 years)
• Wind or bio-mass electric generation (15 years)
• River transport (15 years)
• Forestry plantations (permanent)
• New medical products
• Seismic services (Until 2008)

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Colombia offers legal stability contracts as a
guarantee for investors
The promotion of new investments and the
expansion of existing ones by securing stability
on the rules that are applicable to an investment.
Objective

• Amount of the investment 7,500 current minimum
  legal wages. (Around U 1,500,000)
• Payment of a premium to the government equivalent
  to 1 of the investment made.

Conditions
Duration
Between 3 and 20 years
Request
Technical assessment
Evaluation
Approval
Excludes laws on mandatory taxes or investments
issued during state of emergency, social
security, indirect taxes, financial sector
regulations and public utility services rate
regime.
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Some incentives for foreign trade

• 10 Free Trade Zones (FTZ)
• - Flat 15 income tax rate for industrial users
  and no tax on remittances abroad.
• - Tax exemption on duties and VAT on imports of
  capital equipment and production inputs.
• -Non restricted foreign exchange management.
• -Expedite and simplified procedures.
• Large exporter regime (Altex)
• - No payment of VAT on industrial machinery not
  produced in the region.
• -Favorable customs procedures
• Vallejo Plan
• - Imports of inputs and raw materials are exempt
  from duties and VAT, if they are used in the
  production of goods that will be exported.

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New Free Trade Zone Regime
Decree 383 of 2007 establishes the following
benefits

• Flat rate on taxable income 15
• Goods interned into these areas are considered to
  be outside the national territory for import and
  export taxes (VAT, DUTIES)
• VAT exemption on raw materials, supplies and
  finished goods sold from the national customs
  area to industrial users in the FTZ
• Exports from the FTZ to third countries benefit
  from international trade agreements.
• Imported machinery directly related to the
  business operation is not subject to customs
  taxes.

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Three types of Free Trade Zones
PERMANENT FREE TRADE ZONE
An FTZ operator manages the area where companies
established in the FTZ carry out their industrial
or trade activities
Authorized for a single company to perform its
industrial or trade activities within a
determined area.
SPECIAL OR SINGLE-COMPANY FTZ
TEMPORARY FREE TRADE ZONE
Authorized for fairs, trade shows, congresses and
international seminaries that are important to
the countrys economy and international trade.
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Requirements to establish a Special or
Single-Company FTZ

• Within the following three years from being
  granted FTZ status
• -Make investments worth approximately U
  32,000,000 or create 600 direct jobs.
• - For agro-industrial projects U 16,400,000
  or the hiring of 500 employees

Company Requirements

• High economic and social impact (as per
  assessment issued by the Trade and Industry
  Ministry, the National Planning Department and
  the National Tax Authority)
• Important contribution to
• 1. Industrial rationalization, and/or
• 2. technological and/or service transfer

Project Requirements
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Why using Colombian Free Trade Zones?

• Colombia offers a competitive preferential rate
  of 15 for a 30-year time period, extendable for
  another 30 years. This rate does NOT depend on
  exports or sales to the domestic market, it is
  compatible with WTO rules, and does not have a
  maximum time limit or procedures pending with the
  WTO.
• The law allows establishes a special regime for
  single-company Free Trade Zones, which can
  locate in any region of the country.
• No sectors are excluded from using FTZs.
• It offers both tax exemptions on imports and tax
  exemptions on income taxes and other regional
  taxes.
• Tax exemptions on imports are not conditioned to
  the availability of national production.

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Why using Colombian Free Trade Zones?

• 6. Goods produced in the FTZ may be sold to the
  domestic market (subject to payment of the
  corresponding duties).
• The countrys trade agenda ensures stability and
  a privileged position as an exporting platform.
• 8. Colombia offers an important domestic market
  with good growth potential.
• 9. The country offers important human capital
  advantages at the professional level, in terms of
  quality, availability and cost.

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PROEXPORT COLOMBIA

• YOUR LOCAL PARTNER IN COLOMBIA

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Support from Proexport
Proexport offers investors the following
services

• Provides updated economic and legal information
• Assists potential investors in getting
  established in the country
• Supports investors that are already established
• Helps to assess and improve the business climate

International recognition
Awarded Leading Agency in Providing Investor
Information by WAIPA and MIGA - 2006
Special award for merit and innovation from
International Foreign Trade Center - 2004
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Proexport international network
Londres, Inglaterra
Hamburgo, Alemania
Toronto, Canadá
Bruselas, Bélgica
Madrid, España
Nueva York, E.U
Beijing, China
Washington
Miami, E.U.
Ciudad de México, México
Caribe
Caracas, Venezuela
San Jose, Costa Rica
Quito, Ecuador
Roma, Italia
Lima, Perú
Sao Pablo, Brasil
Santiago de Chile, Chile
Comercial offices
Commercial representations
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www.colombiaespasion.com