colombia presentation april 2016

Investment environment and business opportunities in Colombia

April 2016

A dynamic and stable

economy

Multiple development

centers and regions coupled

with a growing middle class

securing greater product

and services demand.

A growing pool of qualified Colombian companies able to partner with international

investors to reach out to regional markets.

Diverse Opportunities

for investment in a

wide variety of sectors

A trade platform with over

10 Trade Agreements

enabling investors to reach

third markets with

preferential access

A growing market

located strategically

to facilitate business

transactions with the

region.

Colombia Offers:

24

30

35

57

102

134

180

193

204

215

237

240

263

312

579

11,385

1.187

1.673

Estonia

Paraguay

Bolivia

Uruguay

Ecuador

Venezuela

Peru

Greece

Portugal

Vietnam

Finland

Chile

Colombia

Israel

Argentina

Turkey

Mexico

Brazil

*Estimated.Source: IMF, 2015

GDP current prices 2016* (US$ billion) Latin American Economies

Colombia is the 38th largest economy in the world and the 4th in Latin America

Gross Domestic Product, average growth2010 – 2015*

4.5%

Co

lom

bia

5.2%

Peru

3.2%

Mex

ico

4.3%

Ch

ile

3.7%LA

TAM

2.2%

Bra

zil

3.7%

Arg

enti

na -0.7%

Ven

ezu

ela

Source: IMF, 2016* Biggest economies in the region .

Number of years of recession 1966– 2015

1

7

7

7

15

6

Colombia has a stable economy

Source: 1966 – 2014: World Bank - 2015: IMF

Gross Domestic Product

Estimated growth 2016

Image taken from: http://www.agenciadenoticias.unal.edu.co/typo3temp/pics/e16bc4deb4.jpg

Colombia, one of the top

growing economies in 2016 among the

largest Latin American

countries

2.5%C

olo

mb

ia

3.7%

Per

u

2.4%

Mex

ico

LATA

M

Bra

zil

1.5%

Ch

ile

Ven

ezu

ela

Source: IMF, 2016.

-1%A

rgen

tin

a

-3.7%

-8%

-0.3%

206,1

122,5

64,5 61,250,8 48,8 46,3 43,6

32,4 31,6 31,4 24,4 18,2 16,5 11,7 11,4 10,9 10,4 10,0 9,9 8,6 8,5 5,6 5,3 3,4

Population 2016* (million)

* Estimated.Source: IMF, 2015.

Latin American Economies

Colombia is the 27th most populated in the world and the 3rd in Latin America

49.7%

30.6%

27,8%

16.3%

29.9%

30,5%

2002 2003 2004 2005 2008 2009 2010 2011 2012 2013 2014 2015

A growing middle class

Colombia has

continuouslydecreased its

poverty levels

Source: Poverty: National Administrative Department of Statistics – DANEMiddle class: The gained decade: the evolution of the middle class in Colombia between 2002 and 2011. Document CEDE # 50. Universidad de los Andes. And RADDAR for 2013 data.Middle class 2015: DNP

Percentage of people in poverty 2002 – 2015

PovertyMiddle Class

Middle class boosts consumer

expenditure

Gross domestic product by intended purpose – CAGR* 2010 – 2015

9,79%

9,77%

9,02%

8,98%

8,91%

8,47%

7,54%

7,53%

7,46%

7,28%

7,27%

6,55%

Apparel and footwear

Entertainment and culture

Restaurants & hotels

Transport

Different goods and services

Education

Home furniture

Home lease and utilities

Communications

Health

Food and non-alcoholic drinks

Alcoholic drinks and tobacco

In the last 5

years,

consumer

expenditure

grew

8.27%Source: DANE, 2016*CAGR: Compound Growth Annual Rate

Source: S&P Ratings; Dinero magazine, Colombian Treasury.

Ra

tin

gTe

rm

Long Term –Foreign

currency

BBB BBB Baa2


currency


currency

COLOMBIA,an investment grade countryIn July 2014, Moody´s was the last rating agency in improving Colombia´s rating due to two key drivers:

1. Positive growth forecast thanks to 4G infrastructure.

2. A sound fiscal management that will continue in the future.

0,00

0,05

0,10

0,15

0,20

0,25

0,30 FDI Regulatory Restrictiveness Index 2014

Closed = 1 - Open = 0

COLOMBIA Low barriers to FDI

Source: OECD

Latin America economies

Average

OECD Average

Colombia was officially

invited on may 2013 to

initiate the process to become full member of the

OECD

“The OCDE investment policy

review examines Colombia's

achievements in developing

an open and transparent

investment regime and its

efforts to reduce restrictions

on international investment”

OECD

Colombia is implementing

the roadmap to become

full member of the OECD

OECD already approved 15 out of 23

Colombian committees

• Competition• Statistics• Health• Consumer policy• Financial markets• Scientific and

TechnologicalPolicy

• Regulatory Policy• Fiscal Affairs

• Education• Territorial Development

Policy• Information, Computer

and CommunicationsPolicy

• Working Group onBribery in InternationalBusiness Transactions

• Investment CorporateGovernance

Source: World Bank. Doing Business 2016.

*Positive numbers indicate an improvement in the business environment

In 2016, the World Bank changed its methodology including new variables for 5 topics: Dealing with construction permits, getting electricity,

enforcing contracts and labor market regulation.

Photo taken from: http://orig12.deviantart.net/1026/f/2008/176/b/4/brick_road_2_texture_by_jay_b_rich.jpg

ColombiaHAS THE MOST REFORMS IN

LATIN AMERICA TO IMPROVE BUSINESS

ENVIRONMENT

Country Ranking 2016# de reforms2006 - 2016

Colombia 54 30Mexico 38 23Ecuador 117 23

Peru 50 21Chile 48 13

Panama 58 13Brazil 116 11

Argentina 121 5

Ranking Doing Business*

2007-2016

Change in positions

25

23

12

6

5

5

3

-20

Colombia

Panama

Chile

Ecuador

Mexico

Brazil

Peru

Argentina

Developed economies 2014

Developing and transition economies 2014

Colombia remains as one of the top 20 destinations for FDI

Source: UNCTAD – World Investment Report 2013 and 2014

Top 20 host economies in 2014 (USD billion)

129

103

16

72 7168

62

54

3430

23 23 23 23 22 21 19 16 15 14

Rank

18

Non-mining sectors accounts 70% of FDI inflows in 2015

Source: Balance of Payments - Banco de la Republica.

Share of all countries with positive cumulative investment, The information includes reinvested profits or investments in the oil sector

Note: the list of the top countries investing in Colombia does not include Panama. Last values available by country at 2014

Top Investing countries in Colombia 2000 – 2015

FDI Inflows. 2008 to 2015US$ million

4,197

7,095 8,12010,011

8,511

5,722

7,9458,089

6,313

3,596

Average 2008-

2011

2012 2013 2014 2015

16.20915.039

9,919

16.325

12.108

Oil and mining

Other sectors 22%

SPAIN

8.6%

UK

13%

SPAIN

8.4%

SWITZERLAND

6.2%

TOTAL 2000-2015

US$ 137,179 M

70%

No import duties. VAT exemption for goods sold from

Colombia to FTZ.

Benefit from international trade agreements.

Allows sales to the local market.

Free trade zones for different investor styles.

Reduced Income tax and VAT Exemptions allowing access to local market

Total number Free Trade

Zones:102

Number of Special

Standing Single

enterprise: (62)

Number of

permanent Free

Trade Zones(40)

3.652

47,779

1994 - 2002 1994 - 2015

The stock of investment flows from Colombia to the world has grown

12-fold since 2002

Source: Banrep, 2015.

Source Top Latin American investors: EIU, 2015.

Stock of outward FDI

1994 – 2015 US$ million

Top Latin American

investors to the world (2014) US Billion

MEXICO

US$8.3COLOMBIA

US$3.9

US$12.05CHILE

US$26.05BRAZIL

Colombia has access to 47 countries and more than 1.5 billion consumers through its network of trade agreements

Source: Colombian Ministry of Commerce, Industry and Tourism. 2015.

*These are Partial Scope Agreements (PSA)- - - The dotted line refers to member countries of The Pacific Alliance other than Colombia. – Chile, Peru and México.

Canada

United States

Mexico

GuatemalaHonduras

El Salvador

Ecuador

BrazilPeru

Argentina

Paraguay

Uruguay

EFTA

EuropeanUnion

Turkey

Israel

Japan

Panama

Chile

Bolivia

Costa Rica

Venezuela

South Korea

Cuba*

Nicaragua*

Pacific Alliance

In force

Signed

In negotiation

Caricom*

Colombia, less than 6 hours away by

airplane from the main cities in the

americas

* This information takes into account the

routes departing from international airports

in Barranquilla, Bogotá, Cali, and Medellín.

Source: Routes and Tariffs - Tools for the

Colombian Exporter, processed by

ProColombia.

New York

(5hr 35min)Los Angeles

(9hr 25min)

Mexico City

(4hr 20min)

Paris

(13hr 20min)Madrid

(9hr 40min)

London

(14hr 05min)

Tokyo

(25hr 05min)

Beijing

(24hr 40min)

Dubai

(19hr 40min)

Moscow

(17hr)

Miami

(4hr 30 min)

Lima

(3hr 10 min)

Santiago de Chile

(6hr 55 min)

Berlin

(14hr 10 min) Hong Kong

(24hr 15min)

Toronto

(8hr 54 min)

Mumbai

(24hr 30min)

Seoul

(23hr 35min)

Sao Paulo

(5hr 50min)

1,017 international direct frequencies per week.

Istanbul

(15hr 25 min)

More than 6,052 domestic frequencies per week

Colombia:

A gateway to the Pacific Alliance

Source: IMF – UNCTAD, 2015.

Mexico

Colombia

Peru

Chile GDP of US$2,129 billion

The members generate 37%

of the region´s GDP

Population of 219 million

More than Brazil´s

population

FTAs with 60 countries

Access to

86% of the World GDP

MILA is the first cross border initiative to

integrate equities markets, without any

sort of merger or global corporate

integration, using only technological tools

Listed companies:

59044% of the regional FDI

Total FDI of US$69,608 million

(2014)

Major multinational corporations have chosen

Colombia as an investment project destination

Sectors of opportunity – Infrastructure:

A major driver for growth

Airports Ports

Roads Fluvial National

plan

Step railways

US$ 900 million in improvements for 47 airports (2015 – 2018)

US$1.4 billion between 2015 and 2018 to improve ports infrastructure

US$ 17 billion to increase road infrastructure: 7.000 Km of Highways1.400 Km of Double Lane Highways141 tunnels1.300 Viaducts

US$ 1.8 billion to improve the navigability of Magdalena riverUS$ 53 million: More than 900 km railways under adjustments

Projects focus on renewable energy will have special VAT exemptions, deduction from taxable income and customs exemptions

Source: Ministry of Transport - Exchange rate US$=COP$3.000

Some niche opportunities:

Sectors of opportunity - Infrastructure:

A major drive for growth

In 2014, Iridium awarded

two road concession

projects in the

government’s “highway

concession program

(4G)”.

Those projects total 78Km.

Strabag will be in

charge of 75 Km of new

highways, the

modernization of a 65

km section

Shikun & Binui awarded the

project “Corredor

Perimetral de Oriente de

Cundinamarca = 153 km

length ”

Spain Austria Israel United States

Source: Procolombia based on national press

AECOM works on:

• Magdalena River

navigations conditions

• Buga Buenaventura rail

corridor

• The resettlement of the

town of Gramalote

Source: World Economic Forum 2014 and UPME / * UPME (Colombian Planning Unit of Mines and Energy). MW approx.

0,66

0,67

0,67

0,7

0,71

0,72

0,72

0,72

0,73

0,75

Latvia

Costa Rica

Spain

Colombia

Denmark

Switzerland

Sweden

France

New Zealand

Norway

The Global Energy Architecture Performance

Index 2014

Colombia was ranked first in Latin America and seventh in the world according to the “Energy Architecture Performance Index 2014”. WEF, 2014.

103 Power Generation projects in different

stages: Installed capacity of 4,974 MW*

13 power transmission projects in different

stages*

High potential in Biofuels and alternative energies

Wind GeothermalSolar

Some niche opportunities

Sectors of opportunity – Energy: a diversified source base and

a pivotal location in the Americas

Sectors of opportunity - Energy:

A diversified source base and a pivotal location in the Americas

Endesa, the subsidiary of

the Italian group Enel,

acquired participation in

Emgesa and Betania

power generation

companies with 2,895 MW

of installed capacity. The

company has also

investment in Codensa,

the main power

distribution and trading

Company in Bogota and

other cities.

Union Fenosa bought

" Electricaribe and

Electrocosta “ and

became the main power

distribution and trading

company in the North

coast of Colombia.

Fenosa also manages

natural gas and currently

has more than 4 million

users through the

country.

Colombia subsidiary of

AES Corporation

(Applied Energy

Services). Chivor is one

of the country's largest

generator with a total

effective installed

capacity of 1,000 MW..

The low-grade coal-red

power plant

Termopaipa in Paipa

(Colombia) was the rst

power plant abroad

which was planned,

financed and built by

Steag.

Spain Spain United States Germany

Some key facts about Manufacturing in Colombia manufacturing for the local and foreign markets

Some niche opportunities:

Automotive Ceramics

Metalworking Architectural glass

Fertilizers Plastic Packaging

Natural ingredients for

cosmeticsPesticides

3rd largest labor force in Latin America.

2nd in the region for competitive industrial labor

(US$1.6/hour)

0% import tariff relief for key industrial inputs

75% indirect financial support for Innovation and

R+D+i projects

102 Free Trade Zones with 15% corporate tax

Colombia is 40% more competitive and 60% faster

than many ports in the Americas

Mexico

Its factory in Colombia is among

the three most efficient in the

world due.

The new factory is one of its three most modern factories inthe world, due to its modern approach

and care for theenvironment.

Foton invested more than US$12 million in

its new assembly plant for its SUV and

4x4 models

Whirlpool had a joint venture with Hacebto produce washing

machines.

Manufacturing plant: US$ 70 million

Germany Netherlands &

United KingdomChina

A regional platform for manufacturingactivities with high standards of productivity


United States

Its factory in Colombia is listed as one of the 'flagship

factories'in the group, which

hasoperations in more than 130 countries.

French company Saint Gobain set up in Colombia one of the most modern

plants in the region to supply glass to the

automotiveindustry.

The French cosmetic producer acquired the Colombian company LaboratoriosCósmeticos Vogue in 2013, and positioned its brand locally andregionally.

Since 2008 UPL Colombia

exports more than 95% of its production to the United States, Mexico, Brazil and Argentina.

Switzerland France France India

A regional platform for manufacturingactivities with high standards of productivity

Sectors of opportunity - Services

IT, BPO, ITO, Shared Services, Apps

Source: MinTic and IDC


Cloud computing

Big data

Software development

Innovation and

development centers

Aggregated shared services centers for diverse industries

Colombia is one the three major

providers of IT services in the region.

The broadband connections increased from 2.2 to10.1 million between 2010 and 2015.

In the next 4 years, broadband connections will be triplereaching 27 million connections.

Available labor force of more than 1,200,000 professionalsgraduated in fields related to financial and value addedshared service operations.

VAT exemption for service exports.

IBM opened its third Data

Center in Colombia

offering a processing

power of 5 petabytes.

It´s one of the most

advanced centers for

Cloud Computing and Big

Data Analytics companies

in the country.

AT&T acquired DirecTV Colombia

and it´ll increase the telecoms offer

Colombia through new services and

packages.

It has two operations centers in Bogota where it

manages a diversified portfolio

of blue ribbon clients, with the

capacity for up to a thousand positions.

United States United States Spain

Sectors of opportunity - Services

IT, BPO, ITO, Shared Services, Apps


Its BPO operation

currently has more than

1,400 credit processes,

customer service, and

document

management active

positions.

Japan

Sectors of opportunity

Agribusiness

Rubber Biofuels Forestry


Aquaculture Cocoa Cereals

Fruits and vegetables

Meat Processed food

Source: FAO, Ministry of Agriculture.

Colombia is the 2nd largest flowers exporterworldwide, with around U$1.285 million

Colombia is the 3th largest coffee producerworldwide and the 2nd of Latin America.

Colombia is the 4th largest producer of oilpalm over the world, with around 1 milliontonnes.

Colombia has one of the largest biodiversityby km2 in the world.

In 2018, there will be one million morehectares due to “Colombia Siembra Plan”

Investment Opportunities

Dole, the North American

multinational, opened a

salad plant and a distribution

center in Colombia, where

the company invested close

to US$15 million in both

projects.

Smurfit Kappa is one of the

leading providers of paper-

based packaging solutions

in the world, with around

43,000 employees in

approximately 350

production sites across 33

countries and with revenue

of €8.1 billion in 2014.

Established in 2007 as a result

of a joint venture with the

Colombian company Alquería,

combining the international

experience, innovation,

capacity and development of

Danone with Alquería’s

knowhow of the local market.

United States Ireland France


Agribusiness

Sectors of opportunity - Tourism Infrastructure, real estate and retail

Nature &

Adventure Wellness

City

HotelsEntertainment


*Inbound tourist includes: resident Colombians abroad, foreign non resident in Colombia,

special cross borders, and cruise visitors.

Source: Migration Colombia and MinCIT. ProColombia calculations.

2012 2013 2014 2015

3.5 3.7

4.2 4.4

Inbound tourists* 2012 – 2015

(million of people)

Investment Opportunities in:

Colombia ranks 25th in the ICCAranking (International Congress andConvention Association)

Luxury and wellness hotels can takeadvantage of the Colombian biodiversityto offer high quality services.

Corporate Tax Exemption for hotels withmore than 65% of their building byDecember 2017

VAT exemption for health tourismservices

This American

chain opened its

first hotel in

Bogota's financial

district (73rd

Street), with

approximately 240

rooms

Holiday Inn hotels

opened in Bogota

and Cartagena,

totaling 331 rooms.

The American company Marriott International

operates in Bogota with a 239-room hotel located in the southern section of El

Dorado Avenue.

Ibis Bogota is located in the International

Center (one of Bogota’s business

districts),Medellin also has an Accor hotel brand which has added

216 rooms to the city.

United States United Kingdom United States France


Tourism infrastructure, real estate and retail


Source: MinTic and IDC

Sectors of opportunity – Services

Capital FundsColombia offers several benefits

to invest in capital funds.

Colombia was ranked fourth inLatin American and theCaribbean due to its favorable

conditions for development of the PEFindustry.

19 International GeneralPartners in Colombia.

Capital funds such as Advent International

and Victoria Capital have chosen thecountry as a hub to serviceother countries in the region


Health

TIC Biotechnology

Agribusiness

Real Estate

Infrastructure

Banking

Energy

Source: ProColombia compilations

Canada

Mainly infrastructure

investments.

In Colombia its

investments have been

focused in companies such

as Intertug and Ocensa.

United States

Firm focused on investing in

the category of hotel assets

in Colombia.

Its largest investment in

Colombia has been the

Hyatt Regency Hotel in

Cartagena.

Investments mainly in the

sectors of infrastructure,

energy and real estate.

Investments in the

Colombian power

company SA as part of its

expansion plan in the

region.

United States


Services Capital Funds

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