Why Invest in Colombia

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Overview

Colombia - One of the countries that has improved the most in conditions for investors.

Colombia is one of the two countries of the world where the conditions to create companies and make businesses have improved the most, according to a report of the World Bank that analyzed the conditions of 145 countries and the changes that each has undergone with the purpose of becoming more attractive for investors.

The report, known as 'Doing Business in 2005: Obstacles to Growth', is sponsored by the World Bank and the International Finance Corporation and points out that Colombia, along with Slovakia, are the two countries of the world that have advanced the most in this last year in terms of improvement of conditions for investors. Colombia has been qualified as the second quickest country in implementing reforms.

The Nation's improvement is perceived in having far fewer procedures and requirements to create new companies. This ensures the accomplishment of contracts through justice, and a greater flexibility in labor regulation.

More Growth

According to 'Doing Business in 2005: Obstacles to Growth', these reforms might contribute in the generation of work opportunities for women and young people, incentive companies to enter a formal economy, and promote economic growth.

The report estimates that the improvement of these conditions is associated to the additional growth in 2.2 points in the annual economic growth because companies loose less time and money in unnecessary regulations, and assign more resources to the production and commercialization of their products. Moreover, governments expend less in inefficient regulations and more on social services.

The document assures that the register of new companies in Colombia rose 16% between 2003 and 2004, after simplifying the requirements of the income.

The time that was need to install a company reduced from 60 to 43 days, thanks to a call center.

The 10 most active countries in the implementation of reforms destined to improve investment were: Slovakia, Colombia, Belgium, Finland, India, Lithuania, Norway, Poland, Portugal, and Spain.

Challenges

Despite the positivism of the report, 'Doing Business in 2005: Obstacles to Growth', it indicates that in poor nations it is two times more difficult to start business than in rich countries. There is also less protection of intellectual property.

Michael Klein, Vice-president of the Private Sector Development of the World Bank, referred to the problems that poor countries would have if they do not improve investment conditions.

"Poor countries that are in need of new companies could be even more distant from rich countries, which are simplifying regulations and transforming the atmosphere of investments into a more favorable one," he affirmed.

On the other hand, according to Doing Business, property registries were first developed to help raise tax revenue. What was good for the tax authorities has since proven to be good for strengthening property rights - the registries strengthen incentives to invest, facilitate trade, and expand access to credit. New indicators cover the steps, time and cost to register property. Measures of the legal provisions that strengthen property rights and the efficiency of property registries are also developed.

Opportunities

'Doing Business in 2005: Obstacles to Growth' is the second in a series of annual reports investigating the scope and manner of regulations that enhance business activity and those that constrain it.

New quantitative indicators on business regulations and their enforcement can be compared across more than 130 countries, and over time. The indicators are used to analyze economic outcomes and identify what reforms have worked, where and why.

Doing Business constructs two sets of indicators on the regulation of operations. One measures the steps, time and costs of complying with licensing and permit requirements for ongoing. The other assesses the enforcement of regulations through two of the most common types of inspections-labor and tax.

Investing in Colombia is good business. Why? Here follow some of the reasons:

Colombia offers preferential access to a market of 800 million consumers in the European Union, USA, Mexico and the Andean Community for a number of products.
Colombia's excellent geographical position makes it ideal for strategic partnerships and joint ventures given that Colombia has free trade agreements with many countries in the region and the world and enjoys preferential tariffs to many markets.
Colombia's domestic market is the third largest in South America and ranks second among all Spanish speaking countries in the region.
A high urban population implies significant purchasing power for consumer goods.
Colombia is self-sufficient in gas, energy and natural resources.
Colombia's Special Export Zones on the Atlantic and Pacific coasts provide exemption from remittance tax, import duty and, until 2002, from income tax.
Colombia has a modern, simplified customs regime.
Colombia's long tradition of democratic stability is a source of confidence for investors.
Colombia provides extensive investment opportunities in telecommunications, mining and gas, transport, manufacturing and agriculture.

There are no provisions for expropriation by the government without going to court. Following constitutional reform, such legislation was abolished as it discouraged foreign investment.

Colombia has subscribed and is entering into further investment promotion and protection agreements with several countries in the world.
Colombia offers a competitive labour force (labour costs are lower than in other countries of the region).
Colombia is open to international markets. It is a member of the World Trade Organization, duly fulfils its functions in this major multilateral forum and plays an active part in all its negotiations.
Colombia has a stable economy and is very rich in natural resources.
Some of the largest oil companies in the world, including BP, have investments in Colombia. In 2001 Colombia signed 32 new oil exploration contracts whereas previously only 8 to 10 contracts had been signed in a single year.
Colombia offers investors major trade opportunities. In addition to a domestic market of 42 million inhabitants, Foreign markets for Colombian goods are expanding following Latin American integration and preferential schemes in the Western Hemisphere which altogether account for 500 million consumers. In addition, the tariff benefits it enjoys in the European Union extend its preferential scope even further.
Colombia belongs to the Latin American Integration Association (ALADI/ALAIA) and the Andean Community (CAN). Colombia has free trade agreements with Mexico, Venezuela, Chile and CARICOM. At present, it is negotiating a far-reaching agreement with MERCOSUR and one with Central America and playing an active part in the FTAA negotiations