Boomtown Bogota

In April 2011, The Independent cited Colombia as one of the two new countries in Latin America with the best investment and development prospects. 'Security is no longer a problem as the government seems to be gaining ground in the fight against crime, and its economic and demographic growth expectations for the next few years are amongst the best in the region,' wrote the newspaper’s Alex Duffy. Colombia is one of the 'new BRIC' locations, or CIVETS (Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa), offering large populations, dynamic and diverse economies, political stability and a bright future. Michael Geoghegan, former president of HSBC, commented in 2010: 'Any company with global ambitions has to act immediately in these markets.'

In 2009, while the world GDP decreased by 2.1% during the financial crisis, the Colombian economy actually grew by 1.5% … and increased again in 2010 by 4.3%, a figure that was actually higher than the growth expectations of the world economy of 3.4%. The country is currently at its highest level of international reserves ($28,400 million) and the lowest in terms of inflation (3.2% in 2010), one of the lowest in all Latin America. With a burgeoning internal market, and a dynamic and rapidly evolving foreign sector, Colombia is becoming an increasingly attractive destination for companies and organizations in the food, functional food and nutraceutical sectors.

The competitive advantages of the agribusiness industry in Colombia make it a country prone to receiving investments in this sector. According to the Food and Agriculture Organization of the United Nations (FAO), the country ranks number 22 in land availability with 12.7 million hectares, eighth in rainfall with 2078 mm/y and offers a high potential for exporting products such as palm, cocoa, rubber, fruits and vegetables. Colombia also has one of the widest varieties of soil types and climates in the world, making it an ideal environment in which to grow fruit and produce. Owing to its tropical climate and equatorial location, the territory benefits from permanent sunlight, which allows for year-round farming. Equally, there is the possibility of farming on terrain from sea level up to 2800 metres above sea level, which includes close to 95% of the country.

Compared with other countries in the subtropics, Colombian fruit and produce are of greater quality in terms of their organoleptic properties — colour, taste and scent — and contain a higher content of soluble solids and Brix levels. Additionally, with the benefits of the non-industrial duty free zone, opportunities can be found in several subsectors, including biofuels, beef and fish, oil and grease, dairy products, coffee and threshing, vegetables, preserved fruit, soups, broths, vinegar, sauces and yeast.

In the biofuels sector, for example, 7.3 million hectares are said to be 'adequate for the development of agrofuels,' according to the United Nations Organization. The country offers high sugar cane productivity (9000L of ethanol per hectare-year), surpassing Brazil and Ecuador, according to studies by the Mining and Energy Planning Unit, and income tax exemption for 10 years from the time of production (for all new tardy yield crops planted until 2014). In dairy, Colombia is the fourth largest milk producer in Latin America (6538 billion L/y), according to the Food and Agriculture Policy Research Institute (FAPRI), of which 2.6 billion litres is available for processing. It’s ranked number three in dairy sales — equivalent to $2862 billion per year — and is free from foot and mouth disease.

Why Colombia?

Companies that have already established themselves in Colombia include Nestlé, Parmalat, Danone, Kellogg’s and Mars, a number of which have taken advantage of the benefits offered by the country’s Free Trade Zones (FTZs). These were created to stimulate investment, create jobs, promote trade and regional competitiveness, and develop economies of scale. The FTZs are geographical areas within the national territory that have been authorized by the relevant competent authorities for commerce and the production of goods and services according to a special regime regarding taxes and customs regulations.

Within the boundaries of an FTZ, any commercial activity can be done — except for those that have been specifically restricted — which grants participants access to a 15% income tax rate, participation in the local market, international free trade agreement terms and no customs tax charges or payments (duty free import of machinery and raw materials; purchase of raw materials, capital goods and services with no VAT). As an international trade platform, Colombia currently has 11 free trade agreements in place with 48 countries, gaining preferential access to more than 1.5 billion consumers. There are plans to instigate a further 18 international investment agreements with 50 countries and 16 agreements to avoid double taxation in 18 countries.

Logistically, as well, Colombia also offers a number of benefits: it is equidistant from Canada and Argentina, and has several trade agreements in place with both countries. And, with more than 3700 ocean freight (from four large ports that cover both the Atlantic and Pacific markets) and 1000 air connections, it also offers excellent export opportunities. During the past 10 years, for example, exports have grown by about 500%, reaching $682.5 million, according to the National Industrials’ Association (ANDI). The country is a forced corridor for ocean shipping companies covering the American north-south-north routes, and its proximity to the Panama Canal facilitates east-west interconnections and access to both oceans.

Staffing is not an issue, either. Colombia boasts the second most highly qualified labour force in South America and, reportedly, the region’s most productive one. Many have agronomic training or degrees in technical/technological professions and post-graduate programmes, with more than 15,800 graduates qualifying between 2007 and 2010. The country also claims to have the most effective labour relations in Latin America and offers the least obstacles to doing business in the area.

Colombia boasts the second most highly qualified labour force in South America

Destination Bogotá

Although data regarding the nutraceutical sector were difficult to obtain, Invest in Bogotá (www.investinbogota.org) were able to supply information about fruit and vegetable production in the Department of Cundinamarca. Cundinamarca is one of the departments of Colombia; it covers an area of 24,210 km², has a population of 2,280,037 and completely surrounds the country’s capital, Bogotá. Ranging in elevation from 300–3000 m, Cundinamarca produces 42% of the vegetables and 9% of the fruit produced in Colombia, which equates to more than 370,000 tons of vegetables and 300,000 tons of fruit per year. The area also offers the greatest production of herbal and medicinal plants in Colombia, equivalent to more than 2500 tons per year and 545,000 cultivated hectares.

The produce is processed through Bogotá’s central market, Corabastos, which is also South America’s second largest fresh produce centre, handling up to 1.4 millions tons a year (2010). At the time of writing, Bogotá’s development plans also included the construction of three new food logistic centres with high quality standards. From the market and distribution centres, Cundinamarca offers impressive road infrastructure advantages (95.5 km per 100 km²) and abundant water resources — derived from the Magdalena and Meta rivers. According to physical and chemical analyses, the underground water in Cundinamarca is suitable for crop irrigation; the department already has five mechanical watering districts in place, with a further seven soon to be under construction. Because of these natural advantages approximately 600 companies involved in harvesting and processing fruit and vegetables have based themselves in the Bogotá/Cundinamarca region, 11 of which are multinational players. In fact, the food and beverage industry in this area accounts for 18% of the sector’s total sales and has experienced 5% annual growth during the last 5 years.

Benefits and Incentives

Bogotá itself benefits from being the most important consumer centre in Colombia, with 7.3 million residents, 50% of the country’s retailers and an ever-increasing number of institutional clients. Its strategic location also makes it convenient for export; El Dorado Airport, for example, is the largest Latin American airport in terms of cargo volume and has special facilities for refrigerated cargo. Invest in Bogotá was keen to point out that the city has a young, solid workforce of 4 million professionals and an unemployment rate of 9.7%. Its human resource is highly qualified, mainly in economic and administrative sciences, social sciences and engineering, with a yearly turnout of 167,000 tertiary graduates (approximately 36,000 are graduate students).

And, despite having 50% of the country’s PhDs and 80% of the professional technicians and technologists, Bogotá’s labour costs are highly competitive compared with other South American cities. Add in the abundance of available space for FTZs and industrial parks for investors, the fact that the city is a natural logistics hub for the region and the investment incentives, Bogotá becomes and attractive business proposition. Income tax deductions of up to 175% for science, technology and innovation projects, and up to 20% for investments that control and/or improve the environment, are available. Incentives for formalization and employment generation are also on offer for any enterprise whose assets don’t exceed $1.5 million or have less than 50 employees, such as discounted income tax, contributions, levies and other contributions from payroll, according to specific requirements.

With various sources citing Colombia as the third best country for “ease of doing business in Latin America” compared with Mexico, Argentina and Brazil, the fifth most competitive country in Latin America and a country that displays competitive strengths in macroeconomic environment quality, large market size, sophisticated business quality, successful technology adoption and enhancing innovation, there’s never been a better time to visit, research, resource and invest. More than 1300 multinational corporations have already decided to locate in Bogotá. And having been recently recognized as the fourth 'city of the future' and the fifth most attractive for investment in Latin America, Bogotá — as well as the rest of Colombia — is very much open for business.