At one point in time, Colombia was marred by its reputation for violent drug cartels and government corruption. The synopsis was not unearned: For nearly 25 dark years, Colombia was terrorized by the most notorious drug lord in history.
But Pablo Escobar has been dead for nearly three decades. Now, Colombia is shaking off the ashes of its war-torn past and emerging as one of Latin America’s rising stars.
In the years that followed Escobar’s death, Colombia took one of the most critical and important steps in its history and finalized a peace agreement with the Revolutionary Armed Forces of Colombia (FARC). This officially ended the 52-year armed conflict between the guerilla group and the Colombian government in 2016.
Finally at peace, the country has undergone a rapid transformation in the past decade, with the government pumping more than $70 billion into infrastructure projects. And now the Agencia Nacional de Infraestructura (ANI), Colombia’s infrastructure agency, plans to forge ahead with a $20 billion infrastructure plan over the next decade, beginning with a wave of new projects dedicated to improving and expanding roads and transportation infrastructure. At the same time, the Colombian government is developing a national strategy for promoting peacebuilding, rural development, migration, and sustainable agriculture.
Colombia and its rapid growth have not gone unnoticed, and it’s catching the eye of international investors. In the third trimester of 2019 alone, foreign direct investment (FDI) from the U.S. rose 25 percent. Even during the pandemic, FDI has remained steady: The Colombian government has set a target of drawing in $11.5 billion in foreign investment by the end of 2022. According to President Ivan Duque, the country is already nearing $10 billion.
As the economy reopens in the aftermath of the COVID-19 pandemic, this tenacious Latin American nation offers an increasing array of diverse investment opportunities across different cities, regions, and sectors. These are five reasons Colombia is ideal for foreign investment.
1. A welcoming, stable legal environment.
One of Latin America’s most business-friendly nations, Colombia has introduced more than 37 reforms designed to improve the ease of investing and doing business since 2005. The country was named a regional frontrunner in terms of ease of doing business by The World Bank, and is in the top 5 countries in the world and best in Latin America in terms of foreign investor protection. The U.S.-Colombia Trade Promotion Agreement ensures foreign investors in Colombia are held to the standards that they already enjoy in the United States, and includes the promise that the Colombian government will treat foreign investors with the same protections offered to domestic investors. For example, the Colombian government cannot illegally seize investors’ property or illegally destroy the value of their investments, and will permit investors to safely move their money into or out of the country. In addition, the agreement allows investors access to key industries, such as construction, telecommunications, and energy.
If an investor feels that the Colombian government has failed to honor any agreement rules, then that investor has a right to neutral, transparent, and binding international arbitration.
2. An open economy.
One of the region’s most open economies, Colombia has completely opened all sectors to foreign capital participation—with the exception of TV broadcasting, where foreign ownership is capped at 40 percent. In addition, Colombia currently has 17 Free Trade Agreements (FTAs) with countries and groups of countries, including the U.S., the U.K., Canada, and the E.U. Granting preferential access to more than 60 countries and 1.5 billion consumers around the world, these trade agreements are designed to give investors markets, increase the quantity and diversity of the country’s exports, and improve the quality of their production processes.
3. Compelling investor incentives.
To further spur foreign investment, the Colombian government has rolled out a number of legal and tax incentives to invest across virtually all sectors, from agriculture to tourism to science.
These are just some of the primary legal and tax benefits for investors in Colombia:
- A progressive reduction in corporate income tax—from 33 percent to 30 percent—for businesses from different industries that invest in Colombia
- A 50 percent discount on the Industry and Commerce tax (ICA) for foreign investors who start or continue a business in Colombia
- A ten-year income tax exemption for businesses that invest in agriculture, fishing, and rural development in Colombia
- A ten-year income tax exemption for businesses that invest in housing projects
- 0 percent tariff on the importation of capital goods and raw materials not produced in Colombia
- A 27 percent tax rate and other benefits for 20-year mega-investment projects that create 250+ direct jobs and invest a minimum of $342 million USD in Colombia.
In addition, Colombia has a competitive free trade zone regime that allows investors to construct, establish, and execute commercial activities within eligible zones and receive a number of benefits, including:
- A single income tax rate of 20 percent (the 2021 rate in the National Customs Territory is 31 percent for 2021)
- Customs tax exemption on goods imported into the free trade zones
- VAT exemption for raw materials, parts, inputs, and finished goods sold from the National Customs Territory to industrial users of the zones’ goods or services
4. Geostrategic location.
As the only country in South America with access to the Pacific, Atlantic, and Caribbean oceans, Colombia’s geostrategic location creates easy access to international markets. The strategic regional hub has nine modern ports and 11 international airports with daily nonstop flights to major cities across the Americas. Colombia is located within a six-hour plane ride of major American cities, including New York (5.5 hours) and Miami (3 hours), and is also strategically close to Mexico City (5 hours), Santiago de Chile (5 hours), and Buenos Aires (6 hours). In addition, during part of the year Colombia shares time zones with other business hubs like New York, Toronto, and Miami.
5. Abundant natural resources.
Colombia’s diverse topography and climate zones give it access to an abundance of natural resources, including reserves of gold, coal, and petroleum. In the heart of the equatorial region, the country gets abundant rainfall and sufficient sunlight to produce crops year-round. Already the world’s second-largest exporter of coffee, Colombia is focusing its efforts on coffee, banana, coconuts, and Haas avocado production. In addition, the nation is the world’s fastest-growing exporter of limes, having increased its exports by an impressive 449 percent since 2015.
A welcoming, stable investment environment, open economy, and compelling investor incentives and protections are only a handful of the many characteristics that make Colombia prime for foreign investment. If you are interested in learning more about how to invest in this dynamic emerging market, get in touch with the team at Farmfolio.