COLOMBIA

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COLOMBIA
INVESTMENT AND SERVICES
Jorge Humberto Botero Minister of Trade, Industry
and Tourism Cartagena, Junio 10, 2005
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OUTLINE

• INVESTMENT
• COMPETITIVENESS
• FINANCIAL SERVICES
• TOURISM
• PROFESSIONAL
• Software
• Health Care
• Engineering

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OUTLINE

• INVESTMENT
• COMPETITIVENESS
• FINANCIAL SERVICES
• TOURISM
• PROFESSIONAL
• Software
• Health Care
• Engineering

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NET FOREIGN INVESTMENT IN COLOMBIA
Recent Performance - Balance of Direct and
Portfolio

• Net inflows dropped steeply from US 2.286,6
  mill. in 2001 to US 489,2 in 2002, and continued
  falling in 2003.
• 2004 witnessed a substantial recovery back to
  previous levels (US2.093,6 mill.), which is
  being sustained in 2005.

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COMPOSITION OF FOREIGN INV. 2003-2004
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FOREIGN DIRECT INV. (2004) BY SECTORS
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NET FOREIGN INV. (2004) BY COUNTRY OF ORIGIN
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FOREIGN INVESTMENT A PROMISING OUTLOOK

• Excellent news to Prospective Investors
• 1. Bill on Legal Certainty Agreements (Soon
  approval by Congress expected).
• 2. The Internal Agenda.
• 3. Access to existing incentives.

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OUTLOOK (1) LEGAL CERTAINTY AGREEMENTS (LCAs)

• OBJECTIVE
• To establish a mechanism that promotes foreign
  investment by guaranteeing legal certainty to the
  investor.
• WHAT IS AN LCA?
• An agreement whereby the investor is safeguarded
  from statutory and administrative changes
  occurring during the life of the contract. With
  certain exceptions, rules in force at the time of
  signature are frozen.
• ELEGIBILITY
• Any foreign or domestic investor committing over
  US5 million to a new project or to the
  enlargement of an existing project.
• Term of agreement minimum 3 yrs., maximum 20
  yrs.

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OUTLOOK (1) LEGAL CERTAINTY AGREEMENTS (LCAs)

• EXCLUSIONS
• Legal and administrative provisions relating to
  national security, labor law, tax treatment,
  financial sector regulations and public
  utilities.
• CURRENT STATUS
• An LCAs bill was submitted to Congress and is
  expected to be passed into legislation in
  upcoming months.

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OUTLOOK (2) THE INTERNAL AGENDA

• In August 2004, President Uribes Administration
  launched the Internal Agenda, a comprehensive
  Government program aimed at enhancing Colombias
  overall degree of competitiveness.
• PHASE I (Mid/04 - I Sem./05)
• Public-Private interaction to identify sectoral
  hurdles in, e.g., RD, human resources,
  infrastructure, productivity and to propose
  corrective actions.
• Similar dialogue between the National Gov. and
  each Colombian region.
• PHASE II (Through End/05)
• Government-Only Technical assessment of all
  proposals, project identification and financial
  programming.
• Expected sources of funding Public,
  international cooperation, multilateral and
  private.
• INTERESTED FOREIGN INVESTORS WELCOME!!

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OUTLOOK (2) THE INTERNAL AGENDA SECTORAL
COMPONENT
Multiple projects and funding are expected in all
or most of the following supply chains

• GOODS
• Textiles, Apparel.
• Leather/Wear, Footwear.
• Forestry, Wood, Furniture.
• Pulp, Paper, Printing.
• Sanitary, Cosmetics.
• Automotive, Autoparts.
• Home Appliances.
• Electrical, Electronic.
• Metal Industry.
• Coal.
• Jewelry.

• SERVICES
• IT, Telecommunications.
• Energy.
• Health Care.
• Tourism.
• Transp., Logistics.
• Professional Services.
• Financial Services.
• Education.
• Software

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OUTLOOK (3) EXISTING INCENTIVES

• Foreign investors in Colombia may also benefit
  from additional, existing incentives
• Access to Free Zones with tax, duty and exchange
  incentives.
• Access to Special Economic Zones similar
  incentives for new, export-oriented projects.
• Special financing facilities.
• Availability of Large Exporter preferential
  treatment.
• Import-Export duty-free treatment programs.

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OUTLINE

• INVESTMENT
• COMPETITIVENESS
• FINANCIAL SERVICES
• TOURISM
• PROFESSIONAL
• Software
• Health Care
• Engineering

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COLOMBIAS COMPETITIVENESS
Despite recent improvements, a large group of
countries still out-ranks us.
Source World Economic Forum
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SELECT COUNTRY ADVANTAGES
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REDUCTION OF RED TAPE
10 Leading Reforming Countries (2003)
Source World Bank, International Financial
Corporation
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RISING EXPORT TREND
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HISTORICAL FIXEDCAPITAL FORMATION
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OUTLINE

• INVESTMENT
• COMPETITIVENESS
• FINANCIAL SERVICES
• TOURISM
• PROFESSIONAL
• Software
• Health Care
• Engineering

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FINANCIAL FACTS

• Colombia is not a major exporter of financial
  services. However, its financial sectors
  current solidity and profit potential bode well
  for a renewed inflow of private capital, a
  precondition to any export strategy.
• Colombias financial sector overcame its
  1998-2000 crisis, and is currently back on the
  track of soundness and growth
• Demand for credit is on the rise following
  annual average decline rates nearing 10 during
  the crisis, demand grew 10 in 2004 (13,3
  recorded on April 2005).

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FINANCIAL FACTS (CONT.)

• Financial asset quality has improved
  significantly.
• Sustained increase of profitability.
• Reversal of negative growth rates in the returns
  on equity after falling 30 in 1998-2000, they
  grew 22 in 2004.

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COLOMBIAS FINANCIAL SYSTEM
The Systems Financial In-Depth
M3bonds-cash/GDP
Total loans/GDP
40
38
36
34
Percentage
32
30
28
26
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
Source IMF, Asobancaria
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COLOMBIAS FINANCIAL SYSTEM
Evolution and Annual Growth of Gross Total Loans
TOTAL BALANCES (Col Billones)
ANNUAL GROWTH ()
Source Superintendency of Banking
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Total Asset Quality and Coverage
COLOMBIAS FINANCIAL SYSTEM
Quality Indicator Past due/Total loans
Coverage Inicator Loss reserves/Past due loans
Source Superintendency of Banking
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Capital Adequacy Index
COLOMBIAS FINANCIAL SYSTEM
Source Superintendency of Banking
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COLOMBIAS FINANCIAL SYSTEM
Profundización financiera en el 2003 (M3/PIB)
Colombia positioned 83 in the world rank
Latin America
Source IMF, Asobancaria
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Public Participation as of Total Assets
COLOMBIAS FINANCIAL SYSTEM
April 2005 Source Superintendency of Banking
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Profitability and Efficiency (ROE) Return on
Equity Net Earnings/Equity (ROA) Return on
Assets Net Earnings/Assets
COLOMBIAS FINANCIAL SYSTEM
Source Superintendency of Banking
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OUTLINE

• INVESTMENT
• COMPETITIVENESS
• FINANCIAL SERVICES
• TOURISM
• PROFESSIONAL
• Software
• Health Care
• Engineering

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TOURISM A BUSINESS OPPORTUNITY
There is a great potential for tourism to
increase its share in Colombian economy
Source National Tourist Registry
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TOURISM LODGING CAPACITY
Yearly upturns in the amount of incoming tourists
point to the adequacy of lodging capacities.
Source National Security Department
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TOURISM DIVERSITY

• A world leader in destination diversity
• Ecological
• Sun and beaches
• Sports and adventure
• Rural
• Agrarian

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PRODUCT DISTRIBUTION
Source National Tourism Registry
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TOURISM IN NUMBERS
Source Central Bank, National Planning
Department, Tourism Police
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GUESTS COUNTRY OF ORIGIN (2003)
Source National Tourist Registry
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INVESTMENT INCENTIVES

• Income tax exemption for ecotourist services
  providers
• 30 year income tax exemption for new hotel
  developments and refurbishing to be conducted in
  the next 15 years.
• Tourist Duty Free Zones
• Duty free treatment on imports for lodging
  facilities

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SELECT INVESTMENT PROJECTS

• Pereira Natural theme park (Design and
  Construction)
• Barú Island Tourism development
• Armenia Cultural Center (Construction)
• La Virginia Turistical Promenade (Construction)
• San Andrés, Cali and Popayán Convention Centers

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OUTLINE

• INVESTMENT
• COMPETITIVENESS
• FINANCIAL SERVICES
• TOURISM
• PROFESSIONAL
• Software
• Health Care
• Engineering

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COLOMBIAS SOFTWARE INDUSTRY - OVERVIEW

• Infrastructure

• 2004 Cross-Border IT Exports US 13 mill.
• 65 companies registered IT services contracts in
  2003, totalling US 14.086.000.
• 82 companies totalling US10.001.905 (Jan.-Jul.
  2004).

Source Central Bank, World Bank, Ministry of
Trade, Industry and Tourism.
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INTERNATIONAL STANDING
Source Chudnovsky, D., López A. y Melitsko S.,
(2001)
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MORE FACTS ABOUT THE INDUSTRY
Constant innovation and accelerated development
yield state-of-the-art solutions
Source DANE EAM. EAC, Encuesta anual de
servicios
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A MULTI FUNCTIONAL INDUSTRY
Source Conectivity Agenda
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EXPORT PRODUCTS POTENTIAL

• Development of software for the following
  sectors
• Telecomunications and domestic public services
• Fixed and mobile telephone network, Cable
  television and Internet
• Financial institutions
• Personnel Management.
• Customer service mobile and wireless solutions
• Information systems
• Financial management and administration of
  physical resources
• Accounting for the financial sector
• Management of mutual, investment and retirement
  funds
• Geographical information systems - GIS
• Management evaluation systems
• Consulting services in
• IT Project management, IT infraestructure
  diagnosis, computer centers.
• SAP implementation in the education sector
• Software manufacturing services, transfer of
  physical information contained in documents to
  electronic media
• Content managers, intranets and extranets

Source Proexport - Colombia
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ANTI PIRACY LAW ENFORCEMENT

• Colombia reduced software piracy from 74 in 1994
  to 53 in 2003. (International Data Corporation
  (IDC))
• Piracy rate is below the average in Latin America
  - 63. (Business Software Alliance)

• Bucaramanga
• Cali
• Tulúa
• Bogotá
• Eje Cafetero

Only country in Latin America featuring a network
of software development clusters (Parquesoft),
where highly innovative technological projects
are being pursued. Each regional cluster is
composed by companies exclusively engaged in
software development for different economic
sectors.
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INCENTIVES FOR INVESTORS

• Companies licensing software products with high
  national research content may benefit from a 10
  year income tax exemption. (Law 788 of 2002)

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OUTLINE

• INVESTMENT
• COMPETITIVENESS
• FINANCIAL SERVICES
• TOURISM
• PROFESSIONAL
• Software
• Health Care
• Engineering

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COLOMBIAS PRIVILEGED STANDING

• The countrys health care system was ranked first
  in Latin America and 22nd in the world (World
  Health Organization, 2000).
• The industry is also credited by its Latin
  American peers as a leading regional provider.
• Competitive costs and quality excellence.

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HEALTH CARE - ADVANTAGES
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A PROMISING POTENTIAL

• Areas of Expertise
• Kidney transplant
• Bone marrow transplant
• Endovascular transplant
• Pediatrics
• Obstetrics
• Cardiovascular
• Plastic surgery
• Aesthetic dental practice
• Fertilization
• Ophthalmology
• Cardiology

• Recipient Markets
• Costa Rica
• Panama
• Dominican Republic
• Aruba and Curacao
• Venezuela
• Ecuador
• Peru

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OPPORTUNITIES
O P P O R T U N I T I E S
LOW COMPARATIVE COSTS FOR HIGHLY COMPLEX
TREATMENTS AND INTERVENTIONS.
ELECTRONIC TRANSMISSION OF DIAGNOSES AND MEDICAL
OPINIONS.
SIZABLE REGIONAL DEMAND FOR HEALTH CARE
SERVICES
SPECIAL DUTY TREATMENT FOR IMPORTS OF
HEALTH-RELATED GOODS AND INPUTS
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OUTLINE

• INVESTMENT
• COMPETITIVENESS
• FINANCIAL SERVICES
• TOURISM
• PROFESSIONAL
• Software
• Health Care
• Engineering

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ENGINEERING SERVICES
HIGHLY COMPETITIVE ENGINEERING SERVICES
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ENGINEERING ABILITIES
Development of Infrastructure projects
Study and design preparation supervision of
construction projects quality management of
energy, transportation, irrigation, mining and
manufacturing projects.
The industrys abilities - in brief
Tariff estimation for specific projects, e.g.,
public services and toll systems.
Variable size-scale development of
telecommunications projects.
Air photography, geodesy and topography,
photogram try, cartography, photo interpretation,
propriety surveys, evaluation and cadastre.
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FACTS

• Participation in foreign high-tech projects adds
  on to this record
• Costa Rica Hydroelectric projects, feasibility
  studies.
• Peru Roads design and rehabilitation,
  transmission lines and basic sanitation.
• Dominican Republic Roads concessions,
  environmental studies
• Mexico Design of transmission lines systems.
• Venezuela Hydrocarbon and gas transportation
  networks.
• Puerto Rico Electrical installation designing.

The development of strategic domestic projects
over the past years has put to test Colombias
engineering abilities, while strongly positioning
its industry to compete internationally. A
180-kilometer long highway (US 50,3 million)
connecting several cities in the Colombian
plainlands is only one example.
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www.mincomercio.gov.co