colombia outlook and investment potential nov06

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Page 1: Colombia Outlook And Investment Potential Nov06

ah

CONSULATE GENERAL OF COLOMBIA

SYDNEY

Page 2: Colombia Outlook And Investment Potential Nov06

Colombia: Outlook and Investment Potential

DID YOU KNOW THAT...

Colombia owns the Latin America’s biggest coal mine: El Cerrejon, which is one of the biggest coal mines in the world?

Around 400 transnationals, with US$26.6 billion of annual sales, run their operations in Colombia?

More than 50% of the flowers sold in the USA come from Colombia?

Colombia is the world's third largest banana producer?

Colombia ranks fourth in the world in palm oil production, drinking water supplies and nickel?

Page 3: Colombia Outlook And Investment Potential Nov06

Colombia: Outlook and Investment Potential

WERE YOU AWARE THAT:

Colombian novel prize in literature, Gabriel Garcia Marquez, is one of the most read novelists in the world? (One of his books sold more than 500.000 in 3 years)

One of the major Colombian painters and sculptors, Fernando Botero, has exhibited his works at the Champs Elysées in Paris, Central Park in New York, St. Mark's Square in Venice and in the Paseo de Recoletos in Madrid?

The Nasa Neuroscience Director is the Colombian scientist Rodolfo Llinás?

Page 4: Colombia Outlook And Investment Potential Nov06

1. GENERAL INFORMATION

GENERAL INFORMATION ABOUT COLOMBIA

• Official Name: Republic of Colombia

• Total Area: 1,141,748 Km2

• Land Frontiers: Venezuela, Peru, Ecuador, Brazil and Panama

• Coast Lines: Atlantic and Pacific Oceans

• Population: 44 million inhabitants

• Capital: Bogotá, 8 million inhabitants

• Government: Democratic. Presidential election every 4 years

• Official Language: Spanish

• Religion: Freedom of religion (Catholicism)

• Currency: Peso (COP$ 2,320=US$ 1 - average 2005)

Page 5: Colombia Outlook And Investment Potential Nov06

1. GENERAL INFORMATION

1.1. STRATEGIC LOCATION

Sydney14.380

km

Los Angeles

5.660 km

Manila17.290

km

New York3.980

km

London8.470 Km

Madrid8.030 Km

Johannesburg

11.470 km

Quito720 Km.

Caracas1.030 Km.

Lima1.890 Km.

Santiago

4.250 Km.

B. Aires4.690 Km

Rio 4.540 Km

Seattle6.700 Km

Easy access to all markets

Mid point between North and South America

Geographic and environmental diversity

Less than 9 hours in airplane from the principal cities of the continent.

Air trasportation costs to United States are the lowest compared to its main competitors

Page 6: Colombia Outlook And Investment Potential Nov06

1. GENERAL INFORMATION

1.2. MULTIPLE PORTS

TEN PORTS:

2 PORTS - PACIFIC OCEAN

8 PORTS- ATLANTIC OCEAN

Buenaventura is an important port in the Pacific Ocean that facilitates de trade exchange with Asian countries

and Australia.

Page 7: Colombia Outlook And Investment Potential Nov06

1. GENERAL INFORMATION

1.3. MULTIPLE REGIONAL DEVELOPMENT AREAS

COLOMBIA IS DIVIDED IN FIVE MAIN ECONOMIC REGIONS:

•Caribbean Region Tourism, commerce, agriculture, mining,

port activities, fishing and industry•Pacific Region Forestry, mining, fishing, agriculture,

industry, commerce, cattle, port activities.

•Andean region Industry, oil exploration, agriculture, commerce, services, farming, tourism,

mining.•Orinoquia Region Agriculture, mining, forestry, fishing, oil exploration, cattle, commerce•Amazon Region Forestry, ecotourism, fishing, agriculture

Interesting market opportunities for investors. Several development areas throughout the country Country's risk diversification by region.

Page 8: Colombia Outlook And Investment Potential Nov06

1. GENERAL INFORMATION

1.4. POLITICAL STABILITY

Colombia is Latin America’s oldest and most stable democracy.

President Uribe has reached a popularity index of 67%

The Government has set up three basic policies:Democratic securityThe struggle against corruption and political chicaneryEconomic and social reactivation

The existence of subversive groups does not influence the internal democratic stability.

Many State actions against illegal armed groups are already taking place, thanks to a Democratic Security Policy conducted by President Uribe, supported by the international community.

The Government, the congress and the civil society have been working together to neutralize subversive groups.

Page 9: Colombia Outlook And Investment Potential Nov06

1. GENERAL INFORMATION

1.5. SECURITY IMPROVEMENT

Public Security Index, Citigroup Colombia(2000-2006)

The policy for Democratic Security has achieved significant successes in 24 months of government, with regard to a reduction in the murder rate, kidnaps, terrorism, massacres and human rights violation.

Democratic Security Policy has strengthened the Colombian military capacity, in terms of force, means, resources and credibility.

The individual demobilizations of guerrillas totaled 8.977 (Until December 2005)

Kidnappings decreased by 51.80% in 2005. Terrorism decreased by 27.3% in 2005. Victims caused by massacres decreased by 2.7% in 2005.

30405060708090

100110120

2000

BA

SE

Sep

-02

Nov

-02

Jan-

03

Mar

-03

May

-03

Jul-0

3

Sep

-03

Nov

-03

Jan-

04

Mar

-04

May

-04

Jul-0

4

Sep

-04

Nov

-04

Jan-

05

Mar

-05

May

-05

Jul-0

5

Sep

-05

Nov

-05

Jan-

06

Page 10: Colombia Outlook And Investment Potential Nov06

2. CURRENT ECONOMIC SITUATION

IN COLOMBIA

Colombia: Outlook and Investment Potential

Page 11: Colombia Outlook And Investment Potential Nov06

2. ECONOMIC SITUATION

2.1. ECONOMIC GROWTH

GDP Growth: Colombia

Good Performance in Latin American context. Third

greatest in Latin America.

In 2005, the economy grew 5.13%

GDP per capita: US$ 2,277

Colombia vs. Latinoamerica (1980-2005) %

4,35,13

4,3

2,18

2,58

2,8

-2,68

1,28

2,78

2,45

4,35

1,42

-4

-3

-2

-1

0

1

2

3

4

5

6

1980-1985 1985-1990 1990-1995 1995-2000 2000-2005 2005

America Latina Colombia

Fuente: Comisión Económica para América Latina y el Caribe – CEPAL, DANE

Reception
HAY QUE BUSCAR GRAFICO GDP
Page 12: Colombia Outlook And Investment Potential Nov06

2. ECONOMIC SITUATION

6,312,0

0

20

40

609

7-J

98

-J

99

-J

00

-J

01

-J

02

-J

03

-J

04

-J

05

-J

Pasiva Activa

2.2. ECONOMIC STABILITY

Inflation Rate

Colombia had an inflation of 4,85% during 2005.

The savings and lending rates have shown a stable performance, as they reached 6.3% and 12%, respectively, in January 2005.

Interest rates 1997-2005

0

5

10

15

20

25

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

(p)

4.85%

1994- January 2006

Page 13: Colombia Outlook And Investment Potential Nov06

2. ECONOMIC SITUATION

2.3. ECONOMIC STABILITY

Finance obligations

Colombia has never experienced defaulted on its

international debts or financial obligations.

Some economic indicators 2004 2005

Private investment increased 43.5% 44%

Exports grew 21% 54.6%

Imports grew 27%

Unenployment rate 12.10% 11.8%

Page 14: Colombia Outlook And Investment Potential Nov06

Colombia: Outlook and Investment Potential

3. CURRENT BUSINESS OPPORTUNITIES

AUSTRALIA-COLOMBIA

Page 15: Colombia Outlook And Investment Potential Nov06

GDP in Latin America (2005)

Current Prices, US$ Millions

Fifth largest economy and third largest population in Latin America

7,247

9,650

15,926

33,062

78,576

113,956

132,848

181,662

768,737

792,683

122,610

26,900

0 200000 400000 600000 800000 1000000

Paraguay

Bolivia

Uruguay

Costa Rica

Ecuador

Peru

Chile

Colombia

Venezuela

Argentina

Mexico

Brazil

Source: International Monetary Fund and World Bank, *Data for Colombia in 2005 from Bank of the Republic (Central Bank) and DANE

Colombia

Among the Andean countries, Colombia has the second-largest economy and the largest population.

3

4

6

9

13

15

26

28

39

105

184

41*

0 50 100 150 200

Uruguay

Costa Rica

Paraguay

Bolivia

Ecuador

Chile

Venezuela

Peru

Argentina

Colombia

Mexico

Brazil

Population in Latin America (2005) Millions of persons

Colombia

Market sizeQualified human capital3. BUSINESS OPPORTUNITIES

3.1 MARKET SIZE

Page 16: Colombia Outlook And Investment Potential Nov06

Source: The World Competitiveness Yearbook 2006-IMD

Qualified human capital

Availability of trained workforce(0= not available; 10= available)

Ranking (61 countries)

6.2

5.4

5.3

4.2

5.2

6.9

0 2 4 6 8

Venezuela

Argentina

Brazil

Mexico

Chile

Colombia

26

39

44

40

57

12

Competent managers(0= not available; 10= available)

Ranking (61 countries)

4.3

5.2

5.4

6.0

7.4

7.1

0 2 4 6 8

Venezuela

Mexico

Argentina

Brazil

Colombia

Chile3

6

29

37

40

55

Colombia

Colombia

3. BUSINESS OPPORTUNITIES

3.2. HUMAN RESOURCES AVAILABILITY

Page 17: Colombia Outlook And Investment Potential Nov06

Remuneration manufacturing industryUS$/hour (Including benefits)

Source: The World Competitiveness Yearbook 2006-IMD

Remuneration service professionals US$/year (Department Managers)

43

35

13

11

10

5

18

19

0.8

1.7

2.0

2.6

3.6

16.4

23.2

2.2

0 5 10 15 20 25

China

Argentina

Chile

Colombia

Mexico

Brazil

Spain

USA

16

56

35

22

19

17

9

12

10

5,850

7,800

8,500

14,800

19,500

24,200

25,500

33,600

56,050

0 20000 40000 60000

Brazil

MexicoVenezuelaArgentina

ColombiaChinaChile

SpainUSA

Colombia 19,500

Ranking (60 countries) Ranking (60 countries)

Colombia

Qualified human capital3. BUSINESS OPPORTUNITIES

3.3. LOW LABOR COSTS

Page 18: Colombia Outlook And Investment Potential Nov06

3. BUSINESS OPPORTUNITIES3.4. INVESTMENT GRADE RATING ACORDDING TO THE LEADING

CREDIT RATING AGENCIES

ChileMexico

Standard & Poor‘sChile***

Mexico

Colombia**

Peru**Brazil**

Argentina* Venezuela**

A -

BBB-

BB

BB-

B+

CCC+

SDInvestment Grade

Chile**Mexico***

Colombia*

Brazil**

Peru**

Argentina**Venezuela**

Moody’s

Baa1

Baa2

Ba2

Ba3

B1

Caa1

Ca InvestmentGrade

Colombia

Peru

Brazil

Argentina

Venezuela

Fitch

A -

BBB-

BB

BB-

B

B

DDDInvestmentGrade

Colombia has the third best rating on foreign currency sovereign bonds

* Negative Outlook** Stable Outlook*** Positive Outlook

Page 19: Colombia Outlook And Investment Potential Nov06

3. BUSINESS OPPORTUNITIES

3.5. INVESTMENT AND EXPORT TRADE INCENTIVES

Free Trade ZonesGeographical zones with tax, foreign

exchange and procedural incentives.

Special Economic Export Zones5 cities with specific flexible labor

regulations in addition to similar incentives as in FTZ

• Only for new investment

Paez and Quimbaya ZonesSpecial and limited regimes for areas

affected by natural disasters with tax exemptions.

Plan Vallejo Import-Export mechanism for the production of exports with customs and VAT exemptions

New Customs Legislation Special set of export incentives In force since on July 1st, 2000 Custom Statute, Decree 2685 of 1999.

VARIOUS MECHANISMS OPERATE IN COLOMBIA TO PROMOTE INVESTMENT AND EXPORT ACTIVITY THROUGH A SERIES OF SPECIAL INCENTIVES.

Page 20: Colombia Outlook And Investment Potential Nov06

3. BUSINESS OPPORTUNITIES

3.6. PRIVILEGED ACCESS TO GLOBAL MARKETS

Andean Community (CAN)Free Trade ZoneCommon External Customs Tariff

Chile - CARICOMFree Trade Agreements

G-3 Free Trade Agreement with Mexico and Venezuela

ALADIPartial-Scope AgreementsFree Trade Zone

CAN - MERCOSURFree Trade Zone

World Trade Organization –WTOMultilateral Treaty , Member since 1995

TRADE AGREEMENTS

ATPDEA (EEUU)Unilateral agreementMore than 6.100 Duty Free products.

ANDEAN GSP (European Union)

Unilateral agreement Most Industrial and Agricultural Products are Tariff-Free.

TARIFF PREFERENCES

Foreign investors in Colombia can receive the benefits of important trade agreements and tariff preferences, that have given to Colombia

privileged access to world markets, representing a competitive advantage for Colombian exports.

TLC with United States is under discussion.

Page 21: Colombia Outlook And Investment Potential Nov06

3. BUSINESS OPPORTUNITIES

3.7. COLOMBIA’S FOREIGN INVESTMENT REGIME

Foreign Investment Regime:• Free remittance of profits• Equalitarian treatment• Universality principle (restrictions: defense and national security

toxic, radioactive dangerous waste disposal activities)

International Agreements for foreign investment protection:

• OPIC (Corporation of Private Investment in Foreign Countries)• MIGA (Multilateral Agency of Investment Guaranty)• ICSID (International Center to solve disagreements related to

investment)• Bilateral Investment Treaties (BIT’s) under discussion• Registered on the Intellectual Property World Organization

Page 22: Colombia Outlook And Investment Potential Nov06

3. BUSINESS OPPORTUNITIES

3.8. FOREIGN DIRECT INVESTMENT IN LATIN AMERICA

Colombia: Fourth Foreign Direct Investment destination in Latin America 2006

Trend Report: PROEXPORT

Page 23: Colombia Outlook And Investment Potential Nov06

Trend Report: PROEXPORT

3. BUSINESS OPPORTUNITIES

3.8. FOREIGN DIRECT INVESTMENT IN COLOMBIA

Page 24: Colombia Outlook And Investment Potential Nov06

16%

14%

12%

8%

8%

10%

6%

5%

3%

4%

TOTAL*: US $32,444 MM16%

* Excluding the petroleum sector and reinvestment of profits

Source: Bank of the Republic (Central Bank)

Main investment partners

USA

England

Spain

Panama

Virgin Islands

Cayman Islands

Bermuda

Netherlands

Mexico

Canada

Others

Accumulated FDI by country* (1994 – 2005)% of Total

The main foreign investors in Colombia are:

3. BUSINESS OPPORTUNITIES

3.9. FOREIGN DIRECT INVESTMENT BY COUNTRY OF ORIGIN

Page 25: Colombia Outlook And Investment Potential Nov06

3. BUSINESS OPPORTUNITIES

3.10. FOREIGN COMPANIES IN COLOMBIA

Some Strategic Alliances / Acquisitions

Type Sector Colombian Company Foreign Company Country

Acquisition Public Services Procesos y Diseños S.A John Wood Group Pcl ScotlandAcquisition Mining Intercor Consorcio CZN UKCapital /Expansion Commerce Carulla Newbridge Andean Partners USCapital / Expansion Mining Gas Natural S.A Gas Natural SpainCapital / Expansion Communications Comcel America Movil MexicoCapital / Expansion Communications Caracol Radio Grupo Prisa SpainJoint Venture Food Services Colombina Joyco SpainLocal Market Pharmaceutics Nucleotronics Bio Products Laboratory UKJoint Venture Basic drainage Aguas de Cartagena Aguas de Barcelona SpainInternet Communications/IT Bavaria UOL BrazilTechnological Transference

Insurance Colseguros Allianz France/Germany

Capital / Expansion Commerce Exito Casino FranceDistribution Food services C. Nacional de Chocolates Mavesa VenezuelaCapital / Expansion Communications Celumóvil Bell South USAcquisition Financial Banco Ganadero BBVA SpainAcquisition Financial Banco Real ABN-AMRO NetherlandsExpansion Automobile CCA Ford Motor US

Page 26: Colombia Outlook And Investment Potential Nov06

3. BUSINESS OPPORTUNITIES

3.11. AN EXAMPLE OF POSITIVE EXPERIENCE

BHP BILLITON

BHP Billiton owns a third of Latin America’s biggest coal mine: El

Cerrejon. The biggest coal mine in the world, located in the province of La Guajira

on the Colombian Caribbean coast. It produces the lowest cost coal supplying the

Atlantic basin.

Billiton's owns 99.9% of the nickel mine Cerro Matoso.

Cerro Matoso is located in the province of Córdoba, in northern Colombia.

An integrated nickel mining and smelting operation, Cerro Matoso combines one of the

richest lateritic nickel deposits in the world with a low-cost ferronickel smelter. Cerro Matoso is one of the world's lowest cost,

major ferronickel producers.

Page 27: Colombia Outlook And Investment Potential Nov06

3. BUSINESS OPPORTUNITIES

TELECOMMUNICATIONS

ELECTRIC ENERGY PROJECTS

HIGHWAY CONCESSIONS

MASSIVE TRANSPORTATION SYSTEMS

OIL SECTOR

RECOVERY OF THE MAGDALENA RIVER

INFRASTRUCTURE INVESTMENT

3.12. MAIN PROJECTS TO INVEST IN COLOMBIA

Page 28: Colombia Outlook And Investment Potential Nov06

GAS

COAL

MINING

FORESTRY

TOURISM

SOFTWARE

AGRO INDUSTRY AND FISHERY

OIL PALM AGRO INDUSTRY

ATTRACTIVE SECTORS

3. BUSINESS OPPORTUNITIES

3.12. MAIN PROJECTS TO INVEST IN COLOMBIA

Page 29: Colombia Outlook And Investment Potential Nov06

4. EXPORTS

TRADE BALANCE COLOMBIA - AUSTRALIA

Total trade between Colombia and Australia has had a decrease in the last years. In 2005, the total trade was (A$m) 49

EXPORTSAustralia to Colombia

IMPORTSColombia to Australia

Source: DFAT (Department of Foreign Affairs and Trade Australia

Page 30: Colombia Outlook And Investment Potential Nov06

4. EXPORTS

4.1. TRADE BALANCE

AUSTRALIA EXPORTED US$22 MILLIONS IN 2005 TO COLOMBIA.

Source: DFAT (Department of Foreign Affairs and Trade Australia

Page 31: Colombia Outlook And Investment Potential Nov06

4. EXPORTS

4.2. POTENTIAL PRODUCTS TO EXPORT TO COLOMBIA

EDUCATION (Aproximately 2000 colombian students in Australia)

WINE

INFORMATION TECHNOLOGY

E-COMMERCE SERVICES

SOFTWARE

MEDICAL EQUIPMENT

TELECOMMUNICATION SERVICES

TOURISM

AIR CRAFT SPARE PARTS

CHEMICALS

Page 32: Colombia Outlook And Investment Potential Nov06

5. IMPORTS

5.1. TRADE BALANCE

IN 2005 AUSTRALIA IMPORTED US$28 MILLION FROM COLOMBIA.

Calima Pty Limited has been distributing its 100% Colombian Coffee to the industry for the last 2 years, increasing a broader awareness of the culture, and heritage of Colombia through a number of high profile cafes/restaurants in Sydney, and expanding to other cities.

Source: DFAT (Department of Foreign Affairs and Trade Australia

Page 33: Colombia Outlook And Investment Potential Nov06

5. IMPORTS

5.1. TRADE BALANCE

IN 2005 AUSTRALIA IMPORTED US$28 MILLION FROM COLOMBIA.

Calima Pty Limited has been distributing its 100% Colombian Coffee to the industry for the last 2 years, increasing a broader awareness of the culture, and heritage of Colombia through a number of high profile cafes/restaurants in Sydney, and expanding to other cities.

Source: DFAT (Department of Foreign Affairs and Trade Australia

Page 34: Colombia Outlook And Investment Potential Nov06

5. IMPORTS5.2. THE 25 COLOMBIAN COMPANIES WITH MORE

EXPORTATIONS

              

                                                                                    

                     

Out of the 25 colombian companies with higher exports. Australia already has a very important investment in two of them (Cerro Matoso and Cerrejon).

Australian investors have ample business opportunities with several other companies.

The potential products are: chemicals, fertilizer, chocolates, biscuits, confectionery, dairy products, construction materials, etc.

Page 35: Colombia Outlook And Investment Potential Nov06

5. IMPORTS

5.3. OTHER IMPORTANT PRODUCTS TO IMPORT

LEATHER

EXOTIC FRUITS

FLOWERS

ORGANIC PRODUCTS

COFFEE

CONFECTIONERY

WOMEN’S CLOTHES AND UNDERWEAR

BANANA

CRAFTS

LIQUOURS (RUM)

Page 36: Colombia Outlook And Investment Potential Nov06

5. IMPORTS

5.4. WHY COLOMBIAN PRODUCTS IN AUSTRALIA?

COLOMBIAN EXPORTING COMPANIES ARE CERTIFIED INTERNATIONALLY BY ORGANIZATIONS SUCH AS THE ISO (International Organization for Standarization)

PRODUCTS ARE COMMERCIALLY COMPETITIVE, WITH FLEXIBLE PRICING ISSUES

COLOMBIAN COMPANIES ARE WILLING TO NEGOCIATE ADVANTAGEOUS AGREEMENTS FOR AUSTRALIAN COMPANIES

OPEN MIND FOR NEW BUSINESS

Page 37: Colombia Outlook And Investment Potential Nov06

6. CONCLUSION

COLOMBIA IS AN EMERGING MARKET IN THE ANDEAN REGION WITH AMPLE OPPORTUNITIES FOR INVESTMENT

GREATER NUMBER OF INCENTIVES TO TAKE ADVANTAGE OF BY INVESTING IN COLOMBIA

BETTER INFRASTRUCTURE, IMPROVEMENTS IN DATA AND TELECOMMUNICATIONS TECHNOLOGY, POLITICAL AND SOCIAL STABILITY, OFFER A SUITABLE ENVIRONMENT FOR INVESTMENT IN COLOMBIA

THERE ARE MANY INTERACTIVE BUSINESS OPPORTUNITIES BETWEEN AUSTRALIA AND COLOMBIA ON TRADE, JOINT VENTURES AND PRODUCTION.