COLOMBIA:An Upcoming Emerging Market for International

InvestorsJuly 2011

About Us

EXPORTSINVESTMENTTOURISM

Proexport promotes International Tourism, Foreign Direct Investment and Exports

Strategy 2011: Search Opportunities

Proexport promotes Colombia worldwide as a supplier of goods and services, Foreign Direct Investment destination and International Tourism.

•Search Opportunities in the International Markets.

•Conducive to diversification with innovation.

•Contributing to Sustainable Development and employment generation

Canada

UK

United States

Mexico

Germany

SpainFrance

Russia

Chile

Peru

Brazil

Ecuador

North Triangle

South Central America

Venezuela

Caribbean

China

India

UK

Proexport Around the World

Arab Emirates

TurkeyJapan

South Korea

Shanghai

Hong KongSingapore

NEW OFFICES

Colombia among the markets with “easy access” and high growth rates according to HSBC and World Bank

Source: HSBC: World in 2050- World Bank: Doing Business Report 2011

“The new BRICs are Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa (CIVETS). They are countries with major populations, dynamic, diverse economies, political stability and each of them has a brilliant future. Any company with global

ambitions will have to take immediate action in these markets.”

Michael Geoghegan, CEO HSBCApril 26, 2010 in his speech to AmCham Hong Kong

Colombia, The C in the CIVETS

Colombian shares as a reference of international capital markets

Source: Standard & Poor’s

The stock behavior of the CIVETS group is much better than reported by the BRICS group since 2008.

EAGLES: “Emerging And Growth-Leading Economies”

Each one of these countries is expected to contribute more to the global growth in the next 10 years than the average of the developed countries. Colombia is on the waiting list to

become an Eagle.

According to BBVA Research, EAGLE’s Group will be responsible of the half of world growth in the next 10 years. In change, G7 Group just contributes a 14% of this growth

Colombia

BrazilRussia

China India

South Korea

Indonesia

Egypt

Mexico

Argentina

South Africa

Taiwan

TurkeyPeru

Vietnam

Malaysia

Bangladesh

Nigeria Pakistan

Philippines

Poland

Thailand

31st May 2011

The three raters agree on the good economic and financial performance of the country, highlighting:

Its ability to deal with internal and external shocks Country's long history of timely debt payments Increased macroeconomic policy credibility Security concerns have been waning

Three of the most important qualification agencies have granted the “Investment Grade” to Colombia

“Yet against all odds Colombia has become the country to watch in the hemisphere.”

Newsweek, July 2010.

“Yet against all odds Colombia has become the country to watch in the hemisphere.”

Newsweek, July 2010.

The World is talking about Colombia…

“Whether on security, democratic stability, or vibrancy, the strength of Colombia’s democracy is there for all to see”

Eric Farnsworth, vice president of the Council of the Americas.

“Colombia has increasingly become a bright star in the Latin American constellation,”

Walter Molano, Emerging-market analyst of BCP Securities

Beyond BRICs: New investment hotspots The BRIC economies have paid out handsomely, but where will you find the next global opportunities?

Colombia is a potential investment hot spot: "It is rated as the most business-friendly Latin American country by the World Bank and after several delays is due to sign a free-trade agreement with the US in the coming year,” "Safety and security is less of an issue now as the government seems to be winning its battle against crime and its expected economic growth rates and demographics in the coming years are among the best in the whole region."

Alex Duffy, Fidelity´s Latin America Fund The Independent, 30 April 2011

Secu

rity Percep

tion

Source: ANDI (Asociación Nacional de Industriales)

World Crisis

Enhanced economic performance has come hand in hand with improved security

Source: EIU (Economist Intelligence Unit)(23 May 2011)

Colombian Economy: Bigger than Chile, Ireland, Malaysia, Egypt, Singapore and New Zealand

GDPUS$ Thousand Millions – 2010

Note: GDP fixed to prices under Power Purchasing ParitySource EIU (Economist Intelligence Unit)(23 May 2011)

The 28th largest world economy when adjusted by PPPand one of the largest non-OECD

Source: EIU (Economist Intelligence Unit)*Forecast (23 May 2011)

The third largest population in Latin America and the second largest Spanish speaking population in the world

GDP Per-Capita has doubled since 2004

Source: EIU (Economist Intelligence Unit)(23 May 2011)

140%

5.851 6.016 6.175 6.3596.820

7.2057.851

8.4568.747 8.800

9.276

4.000

5.000

6.000

7.000

8.000

9.000

10.000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

GDP per- capita is reaching US$10,000 when adjusted by PPP

GDP at purchasing power parity (PPP), divided by populationSource: EIU (Economist Intelligence Unit)

(23 May 2011)

57%

Colombian GDP per Capita (PPP)2000 – 2010 US$

Source: Ministerio de Hacienda y Crédito Público

Per-Capita National Income – Atlas Methodology (Current USD)

According to international standards, Colombia is part of the group of upper-middle-income countries since 2005

Variation 2008 - 2009: -32%Variation 2009 – 2010: -5%Variation I Quarter 2010 – I Quarter 2011: 132%*FDI by Exchange Balance**Participation by country positive accumulated inflows, it doesn´t includes investment or reinvestment of profits in the oil sector, Value 2000 - 2010: US$ 32.462 million Source: Banco de la República (Balance of Payments) (Central Bank)

Main Investors in Colombia2000 – 2010**

Annual FDI net inflows have multiplied by four

Natural Resources exploitation gathers 70% of FDI flows to Colombia

Participation by country positive accumulated inflows, it doesn´t includes investment or reinvestment of profits in the oil sector Accumulated Value 2009-IQ 2011 US$ 16,203 millions

Source: Banco de la República

FDI Inflows to Colombia by No Traditional Sectors, 2009 – I Quarter 2011

FDI Inflows to Colombia by Sector2009 – I Quarter 2011

Exports have tripled in nine years

Variation 2008 - 2009: -12,7%Variation 2009 - 2010: 21,2% Variation Jan Apr 2010 – Jan Apr 2011: 37% Source: DANE (Departamento Nacional de Estadísticas) ( National Department of Statistics)

Colombia Exports by Country2010

In nine years international visitors in Colombia doubled. While tourism in the world increased 6,7%, in Colombia this trend increased 8,9% in 2010*

Variation 2008–2009: 17,2% (includes cruise)Variation 2009 - 2010: 8,1% (includes cruise)Variation Jan Apr 2010 – Jan Apr 2011: 15,9%*It doesn't Include cruise**Includes cruiseSource: DAS (Departamento Administrativo de Seguridad) (National Department of Security)

International visitors in Colombia by Country – 2010*

9.006 10.245 10.844 10.921 13.540 14.957 15.440

20.955 24.041 25.365

28.445

0

10.000

20.000

30.000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

International Reserves Colombia, US$ Millions 2000-2010

The Highest level of international reserves and the lowest level of inflation on record

Source: Banco de la República (Colombian Central Bank)

8,8%7,7%

7,0% 6,5%5,5%

4,9% 4,5%5,7%

7,7%

2,0%

3,2%2,2% 1,9%

0,0%

2,0%

4,0%

6,0%

8,0%

10,0%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2.010 Apr. 2010

Apr. 2011

Inflation Rate Colombia, 2000- April 2011

In terms of Globalization, Colombia is ranked 3rd among Latin America countries, performing better than world economies such as Japan, Brazil, Russia and Indonesia.

Source: Ernest and Young – The Globalization Index 2010, Ranking among 60 countries.

Globalization Index, 2010

Emerging Markets Bond Index Plus (EMBI+), basis point spread over US treasuries. Source: JPMorgan - Central Bank of Peru

Declining spreads on Sovereign Debt -Lower than Latin America as a region-

MILA (Integrated Latin-American Market): Merging of the Chilean, Peruvian and Colombian Stock Exchange Markets

Over 500 Companies

46 dealing over US$ 1 million daily

58 dealing between US$500 thousand and

US$ 1 million

Source: Top Reformers Report, World Bank*Positive figures show improvements in business environment

Doing Business Ranking Variation, 2007-2011*(Change in positions)

Colombia: the third most “Business Friendly” country in Latin America and top reformer in the region

Latin-America Ranking

Country

Mexico 35Peru 36

Colombia 39Chile 43

Panama 72Argentina 115Costa Rica 125

Brazil 127Ecuador 130

Venezuela 172

Ranking made up by 183 countriesSource: Doing Business, 2011 (World Bank)

World Ranking

Country

5 Colombia

20 Peru

28 Chile

44 Mexico

74 Brazil

109 Argentina

109 Panama

179 Venezuela

Strength of Investor Protection, 2011

Rating

Ranked among the top countries on investor protection

Source: OECD – Colombia Economic Assessment, 2010

Colombia vs. OECD Countries (Doing Business Indices - World Bank)

In ForceSigned

In NegotiationFuture

Positioning Colombia as an export platform: 11 free trade agreements (FTA) with 48 countries allowing preferential access to over 1,500 million consumers

Note: The International investment agreements (IIA) include Agreement Investment Treaties (BIT) (agreement) and Free Trade Agreements (FTA) with investment section (chapter).

In ForceSigned

In Negotiation

In 2011, Colombia will be negotiating 18 international investment agreements (IIA)

In ForceSigned

In Negotiation

In 2011, Colombia will be negotiating 16 double taxation agreements (DTA)

Encourage and improve production of competitive

products and services ESTABLISHED SECTORS

Promote development of NEW & EMERGING

SECTORS

Business Process Outsourcing and Off shoringBPO&O

Promote value added, innovation & development in

AGRIBUSINESS SECTOR

Chocolate Confectionery

Palm and vegetableOil

Shrimp Farming Cattle

Productive Transformation Program: A Public - Private Partnership to strengthen and build “world class sectors”

Health Services Exportation

Automotive

Tourism

BPO

Cosmetics and Personal Hygiene

Agribusiness/Biofuels

Colombia is a Country of Regions and Opportunities for Investment

Automotive Opportunities

This industry represents 6.2% of GDP. Colombia is the fifth largest producer of vehicles in the region, with great potential for growth.

• Opportunities in Automotive: Colombia features trade agreements covering vehicles.

•Opportunities in Bus and Truck Assembly: Colombia’s largest cities are developing Mass Transit Systems.

• Opportunities in Auto Part Manufacturing: Assemblers in Colombia require suppliers for both Original Equipment and replacement parts.

Tourism Opportunities

Multiple opportunities in recreational an business tourism.

• Opportunities for recreational tourism: “Colombia: Undiscovered Destination”Multi-destination country: Andean, Caribbean, Pacific and Amazon.Wide variety of tourism: Natural Tourism, History and Culture, Sun and Beach.

• Opportunities for business tourism (MICE): Seven cities with dynamic business activity and several more centers of growth.More than 2.500 multinational operating in Colombia.

ICT – BPO&O Opportunities

• Opportunities for creating shared services centers for Latam.

• Opportunities for outsourcing companies that provide BPO, KPO, ESO, F&A, HRO and R&D services.

• Opportunities for developing and integrating IT applications and services.

• Opportunities for providing telecommunication services to a growing markets, and strengthening telecommunication infrastructure.

• Opportunities for film studies and developing content for the film, TV and media industries.

Cosmetics and Personal Hygiene Opportunities

Colombian cosmetics industry is one of the region’s largest and fastest growing with significant competitive advantages.

• Opportunities for Production: Cosmetics production sector has doubled in the last 7 years, exceeding Latam average.

• Opportunities for Creating Logistics Hub: Outstanding geographic locationExcellent logistical capacity.

• Opportunities for Establishing Research and Development Centers: Colombia has the greatest biodiversity per Km2 of any country in the world.

Agribusiness Opportunities

Colombia has competitive advantages in agroindustrial sector as land availability, ample water resources and high export potential for this products.

• Opportunities in Biofuels: Colombia has 7.3 million hectares suitable for biofuel development.High levels of productivity for Sugarcane and Palm Oil.

• Opportunities in Reforestation: Colombia has certain species with high yields and short biological cycles.

• Opportunities in the Dairy Sector: Fourth largest milk producer in Latam. Third largest dairy market in Latam.

15% income tax rate.

No import duties.

VAT exemption for goods sold from Colombia to FTZ

Benefit from international trade agreements. (Except

Peru)

Allow sales to the local market.

Free Trade Zones

Single-Company (SCFTZ)

Permanent (PFTZ)

The most competitive FTZ’s in Latin America: 15% income tax and allows sales to the local market

Free Trade Zone Approved

40

Source: Ministry of Trade, Industry and Tourism. The investment amounts required to obtain the Free Trade Zone status are calculated in Minimum Monthly Legal Wages (M.M.L.W). This information is presented in dollars using a US$1 = COP 2,000 exchange rate. For 2011, the M.M.L.W is COP 535.600. The M.M.L.W, as well as the exchange rate are subject to variations.

Single - Company Free Trade ZonePermanent Free Trade Zone

Investment commitments

Total Investment (USD Million)

6,781

Direct Jobs 46,632

Indirect Jobs 95,831

Investment executed so far

Total Investment (USD Million)

2,436

Direct Jobs 6,289

Indirects Jobs 23,031

91 Free Trade Zones

Other incentives by sector: Income tax exemption for up to 20 years

Discount in the income tax and supplementary

contributions, and other contributions

from payroll(Do not include positions generated by mergers or

replacements)

New employees under twenty eight (28) years old. Length of benefit by employee: 2 years.

New employees certified in displacement situation, reintegration or disability. Length of benefit by employee: 3 years.

New women employees above 40 years old with more than 1 year unemployed. Length of benefit by employee: 2 years.

New employees with incomes lower than 1.5 SMMLV. Length of benefit by employee : 2 years.

Formalization and Employment Generation

• Information tailor made to your needs

• Facilitation of contacts with the public and private sector

• Setting up of agendas to Colombia

• Services for investors already established in Colombia

• Free of charge and confidential

• Investment specialists in New York, London, Beijing and Sao Paulo.

PROEXPORT’s services to Investors

www.proexport.com.co