Colombia: A Golden Opportunity

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Colombia A Golden Opportunity
For the Textile Industry
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Agenda
1. Colombia Outlook 2. Why to invest in Textile
and Apparel Industry 3. Industry Dynamics 4.
Proexport Services
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Agenda
1. Colombia Outlook 2. Why invest in the Textile
and Apparel Indsutry 3. Industry Dynamics 4.
Proexport Services
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Colombias economic growth has outpaced that of
the Latin American region
GDP Growth Colombia vs. Latin America (2000
2007)
Source Economic Commission for Latin America and
the Caribbean (ECLAC), DANE, Forecasts ECLAC and
National Planning Department, and World Economic
Forum for Latin America in 2007
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Colombias significant market potential
GDP in Latin America (2007) Current Prices, USD
Billion
Population in Latin America (2007) Million of
inhabitants
Source International Monetary Fund and World
Bank 2007
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FDI increased 323 since 2002
FDI Flows (1994-2007 ) USD Million
Sab Millers investment USD 4,715 M
Source Balance of Payments, Central Bank
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Exports increased 150 since 2002
Exports (1995 2007) USD Million
Source DANE, Proexport
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Second Country with Qualified Human Resource
Availability of qualified labor (0 not
available, 10 readily available)
Availability of qualified engineers (0 not
available, 10 readily available)
Ranking (55 countries)
Source The World Competitiveness Yearbook
2007-IMD
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Access to global markets (2010 plan)
Negotiation agenda through 2010
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Agreements to facilitate investments (2010 plan)
Double Taxation Agreements DTSs

Investment Agreements BITs
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Agenda
1. Colombia Outlook 2. Why invest in the
Colombian Textile and Apparel Industry 3.
Industry Dynamics 4. Proexport Services
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Colombia has access to markets for more than US
220 Billions per year
Thanks to the commercial agreements that Colombia
has with different countries from America and
Europe and to its geographic position, the
country has become a center of production,
distribution and exports hub for markets of South
America, North America and Europe.
Source World Tariff, Ministry of Commerce,
Industry and Tourism, USITC
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Colombia represents a internal captive market of
more than US 800 millions per year
Currently, imports of textiles, fibers and
threads add more of US 847 million annually.
An investment opportunity exists to strengthen
the national fiber and textiles production for
internal consumption and apparel exports.
Although Colombia has a consolidated and
integrated chain of supplying, investment in new
technologies , both hardware and software would
generate improvements and increase the local
production of certain type of weaves like rayon,
tweeds, viscose, denim and polyester and to favor
the competitiveness of the chain completely.
Consumption / Tons / Year
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Because Colombia has one of the lower labor costs
of South America for the Industry
Colombia has a qualified and competitive
human resource in terms of costs, confections.
In this sense SENAs ( National Education
Service Organization) work stands out because its
in charge of encouraging the technical and
technological education through free learning
programs in diverse disciplines.
Source Werner International, 2007
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Colombia has the most competitive FTZs in Latin
America 15 income tax and allows sales to the
local market

• Single 15 income tax rate.
• Any goods entered to the Free Trade Zones are
  considered to be outside the national territory
  when it comes to taxes related to imports and
  exports.
• No customs taxes (VAT or CUSTOMS DUTIES)
• VAT exemption for raw materials, inputs and
  finished goods sold from the national customs
  territory to industrial Free Trade Zone users.
• Exports made from Free Trade Zones to foreign
  countries benefit from international trade
  agreements. (Except Peru)
• No customs taxes for any machinery directly
  related with the business operation which is
  imported for abroad and entered to the Free Trade
  Zone
• Quick and simplified customs procedures

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A company may benefit from the FTZs without
being located in one
Companies not physically located inside a FTZ are
entitled to benefit from the FTZ regime
Requirements to get the Single Enterprise Free
Trade Zone Status
Goods
Each additional investment of U 5.9 MM reduces
the number of jobs required by 15 in any case 50
job must be created.
Exchange rate used  USD 1 COP 1800. Minimum
Monthly Legal Wage for 2008 is COP 461.500. The
M.M.L.W, as well as the exchange rate is subject
to variations.
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Colombia also offers Legal Stability Contracts
Guaranteeing the legislation and administrative
interpretation considered as a determining factor
for the investment project.
Objective

• Investments over U1,900.000
• Investor must pay a premium to the Government
  equivalent to 1 of the investment made.

Conditions
Period
From 3 to 20 years maximum.
Admission
Technical report
Evaluation and approval
of the application
Final evaluation
These contracts exclude rules regarding the
social security system, the obligation to report
and pay taxes levied by the government under a
state of emergency, indirect taxes (i.e., the VAT
or the tax on banking transactions), prudential
regulations of the financial system and the
utility rate system.
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And other favorable Tax Incentives

• 100 of the amount paid for industry commerce,
  sign and billboard, and property taxes during the
  corresponding taxable year, as long as they are
  directly related to the taxpayers economic
  activity.
• 40 of the amount invested in productive real
  assets acquired. (No limit in time)
• 25 of the tax paid on financial transactions may
  be deducted, regardless of their relationship to
  the taxpayers economic activity.
• Deduction of 125 of the Income tax paid in
  science and technological projects
• VAT exemption on the sales contract (services
  export exemption).
• Plan Vallejo VAT exemption for the temporary
  imports of raw materials and inputs exclusively
  and totally used by the producer to produce goods
  to be exported

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Also, special foreign trade regimes like
Warehousing for Industrial Processing
Allow the producers to import raw material and
inputs without paying the VAT and customs duties.
Objective warehouses authorized by the
National customs and tax office (DIAN) to store
raw materials and inputs scheduled to undergo
industrial transformation, processing or
manufacturing Users Highly exporting users
(ALTEX) or Permanent Customs Users (UAP). This
regime applies only for the manufacturing of
goods devoted exclusively and totally to be
exported.
Metalmechanic and Textile companies are the most
frequent users
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And The Vallejo Plan for Raw Materials and Inputs
Applies to the imports of raw materials and
inputs devoted exclusively and totally to the
production of a determined volume of final goods
to be exported. Benefits imports are totally
exempt from tariff VAT and any other import
duties. Requirements The total exportation of
the manufactured goods must be done within the
following eighteen months. Users Any company
admitted by the DIAN
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The Vallejo Plan for Replacement
Gives the exporter of goods the right to
replenish or replace, through a new tax-exempt
import, the raw materials or inputs he used to
produce goods when the initial import was subject
to the payment of taxes in full (customs duties
and VAT). Benefit Imports of raw material
without VAT Tariff and other custom
duties Users any company that exports
manufactured products Requirements The
exportation of all the final products
manufactured with the imported raw materials.
Difference with the raw materials plan This
program does not requires the presentation of
Demonstration Studies, only the declaration of
exportation a importation of final products and
the input products square.
This plan is mostly used for small and medium
size companies
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The Plan Vallejo for Maquila

• Allows foreign contracting party to provide the
  national producer 100 of the raw materials or
• inputs required to manufacture the good to be
  exported, national labor and services are
• incorporated into the final product.
• Benefits
• Raw materials and inputs that are delivered by
  the foreign client or supplier and which may
  enter the countrys national customs territory
  provisionally without paying customs duties and
  VAT.
• Non payment is caused for the importation of the
  raw materials and inputs. (Non reimbursable
  import).
• VAT exemption on the sales contract (services
  export exemption).
• Users National producers
• This regime applies only for the manufacturing of
  goods devoted exclusively and totally
• to exports.

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For Permanent Customs Users (UAP)
Imported merchandise is automatically
released. An increase in the cash flow and
administrative efficiency Possibility of differ
the tax And customs payments for a month.
Possibility of being recognized as a warehouse
for industrial processing and International
distribution. Requirements During the previous
12 months the company must have conducted foreign
trade operations for a FOB price of US3 m. Have
processed at least 2,000 import or export reports
during the immediately twelve (12) preceding
months. Vallejo plan users that during the last 3
years had exported an amount equal to or greater
than US2 million.
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And for Highly Exporting Users (ALTEX)
Non-accrual of the VAT for ordinary imports of
industrial machinery not produced in the country
and destined to the transformation of raw
materials. Possibility of DIAN ( National Customs
Office) allowing the importer to use a
bonded warehouse for industrial processing and
of acquire the status as Permanent
Customs Users. Consolildate in one single export
document all the partial dispatches abroad of the
same product, abolishment of the physical customs
inspections of imported or Exported merchandise
(except for exceptional cases). Requirements
Exports during the 12 months prior to the
application date must have been for a FOB Amount
equal to or greater than US2 m. The price of the
merchandise exported either directly or through
an intermediary must represent at least 30 of
the amount of their local sales during that same
period.
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Agenda
1. Colombia Outlook 2. Why invest in the
Colombian Textile and Apparel Industry 3.
Industry Dynamics 4. Proexport Services
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Over 100 years of experience in this industry and
worldwide recognition sophisticated and mature
industry

• The production of the Industry has grown by 47
  percent (US 1,206 million) between 2002 and
  2006.
• Colombia has nearly 500 textile mills and 10.000
  apparel companies. Most of them are small and
  medium sized companies of which 50 have between
  20 and 60 machines.
• Creates more than 800.000 direct and indirect
  jobs and therefore represents 12 of the total
  labor force provided by the manufacturing
  Industry.
• Accounts for 10.3 percent of manufacturing GDP
  and 1.6 percent of national GDP.
• Accounts for 12 percent of the total non
  traditional exports. In 2007, total exports grew
  47 percent from US 1,330 million, in 2006 to US
  1,957 million, in 2007.

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Fashion Center for Latin America

• Industry trade sources have estimated that
  cotton textile production represents
  approximately 43 percent yarns and woven
  fabrics, 21 percent knit products, 19 percent
  and man-made fiber products, 8 percent.
• The textile industry produces annually
  approximately 950 million square meters of
  cotton, polyester, nylon, viscose and wool
  fabrics, as well as twill, satin, cotton poplin
  and polyester blends.
• Colombia has become one of the main fashion
  centers in Latin America, featuring trade shows
  such as Colombiatex and Colombiamoda which bring
  together recognized companies from many
  countries around the world.
• Currently, Colombia accounts for 0.31 and 0.17
  worlds textile and clothing exports, and is
  responsible for 0.25 of worlds fashion market.

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Constantly growing industry
National Textile and Apparel production U
Million 2000 2006
Production of the Industry has grown by 47
percent (US 1,206 million) between 2002 and 2006
Source DANE ASCOLTEX
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Exports oriented industry
Exports US Million
In 2007, Textile and Clothing exports accounted
for 12 percent of the total non-traditional
exports and 7 percent of total external sales.
Mostly knits, denim, jeans and cotton t-shirts
Source DANE - PROEXPORT
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Exports are mainly concentrated on value added
garmets
Textiles and Apparels Categories 2007
Total Exports 2007 U 1.957 Million
Source DANE
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Main textile exports
Colombias Principal Textile Exports
Principal Textile Exporters
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Main Apparel Exports
Main Exports 2007
Main Exporters
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Main export markets
Textiles and Clothing Exports - Destination 2007
Venezuela appears as the principal destiny
receiving 55 of total Textile and Clothing
exports, followed by United States with 17.
Source DANE
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Imports have also increased to strengthen the
supply chain for the apparel industry
Imports U Million
Total imports grew 20 percent from US 1,060
million, in 2006 to US 1,275 million, in 2007.
Source DANE - PROEXPORT
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Main imported products
Textiles and Apparel 2007
Total Imports 2007 U 1.275 million
Colombia imports synthetic fibers and plain
cotton woven's.
Sourcee DANE
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Textile Imports
Main Textile Imports
Main Textile Importers
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Apparel Imports
Main Importers
Main Apparel Imports
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Main suppliers
Textiles and Clothing imports - Origin 2007
China is the main country from which Colombia
imports textiles and clothing with 23 of the
total imports, followed by United States with 14.
Source DANE
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DuPont de Colombia S.A.
Important multinational companies have operations
in Colombia

• This company started direct operations in
  Colombia in 1963 with diverse commercial
  activities, including textile and nylon products,
  advanced fiber, polymer and packing
  systems, lycra, photopolymer plates for packaging
  printing and security holograms, among others.
• During all these years in Colombia, DuPont has
  established important alliances.
• Besides DuPont de Colombia S.A., the corporation
  and affiliates in the country have other
  investments in automobiles, textiles, housing,
  paints and national industries.

• "Colombia has a privileged geographic location
  that makes it a central cornerstone for all
  regional markets"
• Guillermo A. Heins, President CEO of DuPont for
  Colombia, Ecuador, Peru and Venezuela

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Adidas
Important multinational companies have operations
in Colombia

• The company owns eight points-of-sale four in
  Cali, three in Bogota and one in Medellin.
• The goal of the company is to have 12
  points-of-sale by the end of 2007 and open six
  additional points in 2008..
• In 2007, the company invested about 3 million
  in Colombia and it is expected to invest 1
  million in 2008. This company employs more than
  120 people in Colombia.
• The Colombian consumer should know that what we
  offer here is the same that he/she can find in
  Germany or Argentina and at competitive prices,"
  Sarmiento said and added that the company will
  start producing high-quality products targeting
  local and Latin American markets.

• The Colombian consumer has already learned that
  you should not wear the same type of shoes for
  running, playing tennis, or dressing casually .
  This mature approach shows that there is a large
  potential market to tap into by diversifying the
  supply options
• Federico Sarmiento, Manager of Adidas Colombia.

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Coats Cadena S.A.
Important multinational companies have operations
in Colombia

• Coats is the world's largest manufacturer and
  supplier of industrial sewing and embroidery
  threads.
• Coats' wide product range delivers solutions for
  every conceivable application - be it jeans and
  trainers, or automotive airbags and bullet-proof
  vests.
• Coats delivers consistently superior products and
  services conforming to global specifications and
  is easily available in 67 countries worldwide.
  This offer is supported by Coats Sewing Solutions
  - value added services to assist the sewing
  process, enabling to deliver sewn products with
  better quality with shorter lead times
•  

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Agenda
1. Colombia Outlook 2. Why invest in the
Colombian Textile and Apparel Industry 3.
Industry Dynamics 4. Proexport Services
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Proexport Entity that will provide you
world-class services

• Customer Information
• Contacts with private and public Industry
• Agendas Organization and accompanying when you
  visit Colombia
• Attention to the installed investor
• For free and Confidential All services are for
  free and any information given in the process is
  confidential.

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Proexport offices around the world
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