Employing Workers

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Alejandro Pelaez, First Secretary (Commercial) Embassy of Colombia

What makes Colombia a hot destination for investors?
Firstly, the Colombian government’s commitment to help investors and secondly, the rich human resource. Colombia is also very cost-effective for investors. The country’s location in the heart of America is important. We are six hours away from New York, Toronto, Buenos Aires, and Santiago. According to World Bank’s Doing Business Report, Colombia is now the best country to do business in Latin America. The government has brought in several reforms in the tax regime and other areas of doing business. We are the first country in Latin America that now has laws relating to investor protection. We want to build the best business climate in the region. Colombia is a very stable country, both politically and economically. Hyperinflation never touched us. Since 1999, we have had one-digit inflation. Between 2002 and 2007, our GDP has grown at over five percent. This year we are expecting very modest growth. The manpower in Colombia is very well trained. The number of professionals is nearly 82,000 every year. That number is the third largest after Brazil and Mexico. We are most cost-competitive in terms of labor cost.

Do you see the possibility of Colombia becoming a hub to reach out to other destinations in the region?
Absolutely. Colombia is an open economy. It promotes free trade agreements (FTAs). It has FTAs with Canada, Chile, Andean countries, and Central American countries. An FTA with the US is being negotiated. We are waiting for Congress approval. We have a commercial agreement, that allows tax rebates on goods exported from Colombia to the US. We have three world-class ports in the Atlantic. We have one port in the Pacific. Colombia is rich in certain commodities. We are self-sufficient in petroleum. Last year, we exported nearly $9 billion worth of petroleum. The second is coal energy. Others are coffee and nickel. Manufacturing goods form 50 percent of our exports. Last year, we exported nearly $37 billion worth of exports. We were the fifth largest exporter after Brazil, Mexico, Chile and Venezuela. Our export basket is more diversified than many other countries’ in the region. We export wheat, coal, pharmaceuticals, textiles, garment, processed food, etc.

What are those sectors where Indian businesses can invest in Colombia?
There are six sectors. IT and BPO is one sector where India is a leader worldwide. Biofuels is a sector that could be lucrative for Indian businesses, as India is looking for alternative energy sources. The third is pharmaceuticals. Right now we are importing nearly $200 million worth of pharmaceutical products from India. Some of the large Indian pharmaceutical companies are in Colombia but mainly into distribution. We think that an Indian company can have a greenfield investment or an M&A. Colombia has a number of good pharmaceutical companies that are looking for new markets. The other sectors are petrochemicals, mining and there is opportunity in oil refineries sector as well. Even though we are the fifth largest coal exporter but that is energy coal. The opportunity is in the coking coal segment. We have reserves in emerald and gold and finally, the hospitality sector.

The government of Colombia has developed very attractive incentives for investment. One is the Single Enterprise Free Trade Zone.

Could you throw some light on Colombia’s journey in the last decade?
Ten years ago, Colombia was facing tough days in terms of security, recession, etc. After 2002, the government put security on top of the agenda. Now we have three pillars to safeguard investors. One is democratic security, which works very hard against the anti-social elements. Its efforts are showing results. The number of kidnappings and murders reduced drastically. It is now a much safer country to live in. The other pillar is investor trust and social distribution of wealth. We used to receive less than $2 billion worth of investments. Last year we received $10 billion worth of foreign investments, not only in natural resources but also in retail, hotels, etc. We now have investors in Spain and Chile coming into Colombia. Indian and Chinese investors are also looking at opportunities in Colombia.

Is your country pitching itself as a major tourist destination in Latin America?
Before 2002, we received nearly five hundred thousand visitors. Last year, we received 1.4 million people. The rise in tourist inflows shows that we need more rooms in order to accommodate those tourists. Colombia is becoming a big center for holding conventions and events. We think there is an opportunity in that. In the health sector, there is an opportunity too. Patients from Latin America and the US could come into Colombia for treatment.

How easy is it to start a company in Colombia?
According to the World Bank’s Doing Business Report, it takes 20 days to start a business and nine procedures. A foreign company does not require a local partner to start a business in Colombia. We have a skilled team in Colombia that can help Indian entrepreneurs to set up shop here. We also have a legal team that helps investors and also gives advice on labor resource, etc.

What opportunities exist for Indian importers and exporters?
In terms of exports, opportunities exist in auto components. In terms of imports from Colombia, there are opportunities in refined sugar, coking coal, emeralds, even though India has a very high import duty. The others are coffee, natural cosmetics, etc.

In the next six months to one year, can we hear of some announcements of Indian companies investing into Colombia?
We are expecting it in the next one year. We could see around four announcements, although we cannot disclose names. We are working on the details.

What are the language-related issues that the investors face?
Language is not a barrier. English is taught in schools as the second language. The first language is Spanish. The third language that is becoming popular is Portuguese because a lot of Brazilian companies are coming into Colombia.