During the last ten years Colombia has substantially improved its business climate for foreign investments and international business. Nowadays, the country may offer in general terms, a predictable and transparent environment for business and an open regulatory framework for foreign investments.
In fact, the Organization for the Economic Cooperation and Development – OECD – recognized in the Investment Policy Review of Colombia in 2012, that the Colombian government has made great progress improving the country’s business environment over the past years, as reflected in the good rankings in the World Bank’s Doing Business report. Such report suggests that the regulatory restrictiveness index for foreign investment in Colombia is more favorable for foreign investors than the average of OECD countries.
The investment flows in Colombia reflects the result of the efforts of the country in increasing its position as an interesting country for foreign direct investments: while in 2002 and 2003 the country received 4,7 Million Dollars in investments, in 2013 and 2014 the numbers increased to 32 million. Likewise, foreign investors remain active in Colombia, contributing to the regular increase of FDI since 2011. Although the two main destinations of FDI are the hydrocarbon and mining sectors (they represented 50% of the FDI in 2013), a diversification has been observed in recent years, in particular in telecommunication and tourism sector.
There are several reasons of why Colombia is an attractive country for foreign investments, as determined by Forbes magazine, which placed the country on the top 7 of new destinies to invest along India, Indonesia and Poland.
Some factors are external, such as the slowdown in global foreign investment, particularly in China, Russia and Brazil, which years ago were called to attract large capital. Today, these countries have lower growth and macroeconomic difficulties that affects the international perception and gives the investors an opportunity to seek to other regions.
Other factors point out to the internal situation of the country, such as the improvement of security conditions in recent years, which has contributed to re-establish investors’ confidence in the country. Likewise, the country offers several incentives to investors in order to make it more attractive, such as Free Trade Zones, Special Economic Zones for Exports and labor and tax incentives.
In Colombia, FDI benefits from a very attractive legislative framework. The country ranks 34 out of 189 economies in the ‘Doing Business’ 2015 of the World Bank. In one year, it moved up by 19 ranks, notably thanks to major improvements in property registration and access to credit.
Nonetheless, one of the most important efforts placed out in the past year is the negotiation set out between the Colombian left wing rebels (“FARC”) and the national government. This will allow the government to deepen rural development and attract investors primarily concerned about safety.
Although the government of Juan Manuel Santos has made efforts in order to promote investment in the country, there are still challenges ahead. The country must keep working not only to improve and maintain a good investment climate in the country but also to maximize the benefits that FDI can give to the country in such a way that it can promote economic growth and development. Two main proposals have been placed on the table: The National Development Plan 2014 – 2018 which is an initiative that incentives FDI through a sustainable development between three primary dimensions: peace, equity and education and the ‘Plan to boost productivity and employment which intends to create more than 350 thousand jobs between 2015 and 2018.
*Disclaimer: The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of any entity or agency of the Colombian government or any other agency associated with it.