Nearshore Americas

Leadership, Digital-Positivity Fire FDI Momentum in Colombia

The post-pandemic marketplace is offering Latin American countries Nearshore opportunities that simply weren’t available this time last year. Stronger Nearshore markets are jostling to capture business from the pandemic’s fallout – particularly from companies exiting Asia. But one country, Colombia, stands head and shoulders above regional competitors.

A long-term plan from the Colombia government to position the country as the region’s foremost market in the new digital economy and a strong private-public relationship in the country is paying dividends. Multiple international companies have recently chosen the country as their new Latin America location and jobs are being created during a period of of mass global layoffs.

According to Javier Urrutia, Director of FDI at the Colombian Ministry of Commerce, Industry and Tourism’s investment promotion agency ProColombia, the success derives from a simple mantra. “We aim to please,” he said.

Leadership Makes the Difference

At the official announcement of Transcom’s return to Colombia via its new location in Bogotá, Executive Vice President for North America Don Berryman explained that the quality of the local workforce was a central reason behind the company’s choice to land in the Colombian capital. “Bogotá people have strong English skills, strong work ethics and are just a very talented pool of people,” he said.

That Colombia produces 100,000 highly-educated graduates a year, 15% – 20% of whom are fully bilingual adds to the countries value proposition for Nearshore-related activities. “There is a renaissance happening in Colombia,” said Peter Ryan, Chief Analyst and Principal of Ryan Strategic Advisory.

Global BPO and call center service companies TDCX and Alorica have moved into Colombia recently. TaskUs and Cocentrix also have operating centers in the country, while multinationals including Johnson & Johnson, Schlumberger and AIG have a presence too. Auxis, a consultancy, outsourcing and back-office services company also picked Colombia for its second location in Latin America over competitor markets like Mexico as client interest in the Nearshore piques.

Government initiatives have created an investment-friendly environment said Corredor

“The price point makes Colombia slightly more attractive than, for example, Costa Rica. But a real difference was big steps that the Colombian government has taken to create good incentives and developing a strong environment to attract multinationals to come and set up their shared-services in the country,” Fabiana Corredor, Senior Sales Marketing Manager at Auxis, told Nearshore Americas. “The Colombia government and the investment agencies are awesome and helpful. It’s the opposite story in Mexico,” she added.

Colombia’s President Ivan Duque is a firm believer in the need for his country to be an active member of the new digital economy. One of the president’s key proposals has been the promotion of what he terms the Orange Economy – effectively Colombia’s creative economy – on which he has published two books.

Digital preparedness is central to the Orange Economy, and the government has led the charge to expand the country’s capabilities in digital connectedness. The aim is to have the Orange Economy represent 10 percent of the country’s GDP from the 3.3 percent it represented in 2018. Fabio Osorio, Director at JA Del Rio Colombia explained that the country is pushing ahead with 5G expansion: “The government has put aside a sizeable amount of its budget for this development,” he said.

Free tax zones have helped attract FDI, said Osorio

Aside from this, investment has been attracted by the consolidation of 12 Free Trade Zones across separate regions of the country. “The Free Trade Zones offers a single income tax rate of 20% rather than the usual 30% everywhere else in the country,” Osorio explained, while the country also has 17 free trade agreements in force. Measures like these have helped the country climb the rankings in the annual World Economic Forum Global Competitiveness Report. In 2013 and 2014, Colombia was placed 69th. Today, it is 57th.

The country has also taken strong action to kick-start its economy following the pandemic. It has spent 9.6 percent of its GDP attempting to mitigate the economic impacts of the arrival of COVID-19 – the highest of any Latin American nation. Measures introduced included cash transfers to the most vulnerable of society, financial support for SMEs and tax reductions in key industries, says KPMG Colombia. At 8.6 percent of its GDP, Brazil also offered large fiscal support to the economy, while at the other end are countries including Jamaica (1.1 percent) and Mexico (0.6 percent), with the latter sticking to its austerity plan.

Though the IMF and World Bank forecast the country’s economy to contract by 7.9% and 7.5% respectively in 2020, the economy did better than expected with a drop of 6.8% GDP by the end of the year. Growth in 2021 is expected to rebound between 4% and 4.9%, the two institutions predict.

“Colombia recognizes that we are international players and we need to evolve. The style of leadership is definitely felt. It trickles down through ministers to the different agencies and across cities. This is especially true in ProColombia,” Javier Urrutia said.

Entrepreneurial Spirit

As a parallel to the Orange Economy, the creativity of Colombia’s entrepreneurs is being harnessed and realized with the help of a series of interconnected government-led initiatives. ProColombia evaluates entrepreneurs and companies within the iNNpulsa unit, an initiative for mentoring entrepreneurs, and evaluates them on their preparedness for meeting the international market. Another nationally-focused entrepreneurial mentoring program, The Champions, allows up-and-coming business leaders be advised by those with more experience. ProColombia has also reached an MOU with Northeastern University, which is currently going through the review process here in Colombia, to guide the country’s business leaders and take them to the next level.

“In all, there are 12 programs and initiatives in the Orange Economy and IT space,” said Urrutia. “We believe we are in a strong position to be the regional leader in these areas. We want to create another Silicon Valley.”

This year, the Colombian government launched a draft bill for a proposed Entrepreneur Law, which offers preferential tax rates for small businesses, implements a Sandbox-approach for certain regulations on innovation, and offers increased financial support for businesses among other aspects.

Bright Future in Colombia

Javier Urrutia believes Colombia will become the region’s IT leader

The race to capture business from companies showing new Nearshore interest is on, and Colombia appears to be streaking ahead. The pro-business environment has been successful in pulling investment into the country and diversifying away from traditional extractive industries towards the new digital economy sectors. According to UNCTAD’s World Investment Report 2020, Colombia saw US$14.5 billion dollars in FDI flow into the economy in 2019, an increase of 25.6%, while in investment flows into non-mining sectors grew by 30%. Clearly, the Orange Economy plan is having some success.

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ProColombia’s 430 personnel are spread across 32 countries. This year, they’ll be kept busy attracting investment during a period that experts agree with see foreign governments and businesses tightening their purse strings and hunkering down as they attempt to weather the harshest effects of the deepest global recession since World War II. But Urrutia knows his colleagues will be working their hardest.

“ProColombia is geared to work as a private entity even though we manage public resources – we are part of the Ministry of Trade,” he said. “We have people with the experience, the knowledge and the desire to do good. We have been evolving as time changes and that makes a difference. As I said, we aim to please.”

Peter Appleby

Peter is former Managing Editor of Nearshore Americas. Hailing from Liverpool, UK, he is now based in Mexico City. He has several years’ experience covering the business and energy markets in Mexico and the greater Latin American region. If you’d like to share any tips or story ideas, please reach out to him here.

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