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The most competitive free trade zones in the region

Article - July 27, 2011
Colombia’s economy is on the rise giving foreign investors many reasons to be a part of its growth and Proexport is helping investors get the most out of its free trade zones
Colombia has gone to great lengths to improve its business environment. In the past five years, the economy grew by 4% each year and in 2009 the country’s GDP registered an increase of 0.4%, a positive growth in the time of recession.

In addition, Colombia is also an ideal export platform, with the advantage of having signed trade agreements. This gives a company preferential access to markets that extend to more than 1.5 billion consumers, a circumstance that is only enhanced by Colombia’s ideal location.

Lastly, Colombia provides incentives for investors. In its 2011 Doing Business Report, the World Bank ranked Colombia as the third most business-friendly country in Latin America and the first country in the region that best protects investors. Some of these incentives for investors include: free trade zones, a 50% tax break on sales in the local market, legal stability contracts, and a 125% income tax deduction over investments in scientific and technological developments, to name but a few.

The most competitive free trade zones in Latin America are in Colombia. Permanent free trade zones are geographical areas of no less than 20 hectares, where various companies can establish themselves to operate.

Free trade zones serve very specific purposes, all of which must be used for the development of industrial goods and services or commercial activities. These zones must be an instrument for job creation and attract new capital investments. They must develop highly productive and competitive industrial processes, within the parameters of security, transparency, technology, clean production and sound corporate practices.

Under new regulation, free trade zones are conceived not only as mechanisms to attract new investments and create jobs, but as an incentive to develop highly productive and competitive industrial processes with a substantial technological innovation component.

The free trade zone in Bogota is likely one of the largest zones that helps to generate investments and provide jobs. Presently, the 226 companies that make up the Bogota Free Trade Zone generate 16,000 direct jobs for call center positions. This particular free trade zone has contributed to employment generation and the arrival of new foreign and domestic firms belonging to this service sector.
One agency that has been very versatile in working with interested investors in free trade zones is Proexport.

Proexport is in charge of promoting non-traditional exports, international tourism, and foreign investments in Colombia. With a network of national and international offices, Proexport provides support and integrated financial services and advice for international trade activities, while facilitating the design and execution of each investor’s strategy that aims to generate, develop and close business deals.

They promote the effective insertion of Colombian companies into international markets and seek international trade opportunities through: identifying market opportunities, designing market penetration strategies, assisting in the design of action plans, contact with both sellers and buyers, and specialized services to foreign companies interested in acquiring Colombian goods and services.

Proexport supports foreign investors by serving as a contact with the public and private sectors and organizing agendas and accompanying the potential investor while in Colombia. The agency also escorts investors through the installation process. Proexports provides all their services free of charge and keeps all information confidential.

Foreign investors that went through Proexport were divided into six sectors in 2009-2010. Financial investors made up 35%, manufacturers 25%, commercial, restaurants and hotels 23%, and construction 11%. Community services and agriculture made up 4% and almost 2% respectively.

With the help of Proexport, companies like Starwood Hotels, Hewlett Packard (HP), SEB, and Siemens have all been a success in Colombia.

Starwoods Hotels and Resorts has begun construction on their Ocean Towers project in Cartagena, a large Caribbean beach resort city on the northern coast of Colombia, and opening is slated for next year.

HP has launched Center Global Services, a project with the most important investments that have been made in Colombia in a company by a multinational leader in technology.

SEB, a French company that sells home products bought 68% of the Colombian Firm IMUSA, also a home products store. With this transaction the French company is waiting to make an aggressive move into the national market through its recent strategy in purchasing a local market player.

Siemens opened a technology factory with high-speed productivity after a €70 million investment.

Proexport deals with promoting international tourism, direct foreign investments and direct foreign exports. Today there are more than 2,500 multinational businesses operating in Colombia with openings for more. The agency has identified 14 hotel projects in Bogota, Girardot, Pereira, and Cartagena that need investors.

Despite the fact many economies have taken hard hits, Colombia’s economy has demonstrated its resistance. In September 2010, the U.S. made up 34.4% of the total foreign investments in Colombia. That said, 40% of investment from the U.S. is in the industrial sector.