Colombia ‘rediscovers’ the Pacific

2012 saw Colombia overtake Mexico as the third largest recipient of foreign direct investment (FDI) in Latin America and the Caribbean, reaching $15,823 million, according to the United Nations Economic Commission for Latin America and the Caribbean (CEPAL). Their report indicated that Colombia’s new position as a leading FDI recipient was due to an 18% increase in foreign investment in Colombia, while Mexico’s FDI dropped 35%.
 
According to Ms. Lloreda there are four factors that explain how Colombia has overtaken Mexico as an FDI recipient, the first of which is an increase in confidence thanks to improvements in security, while Mexico has seen a deterioration in its safety. A greater level of trust has been fostered by good governance, a clear vision and “a structured and technical cabinet of ministers.” In addition to this, the free trade agreements (FTAs) signed with several countries have opened up large markets for new investors and allowed Colombia to achieve a foothold in the region with further reaching agreements such as the Pacific Alliance. Last but not least, there has been a boom in mining and energy which has generated greater investment flows. Ms. Lloreda points out however that they hope for a more diversified FDI influx.

The Pacific Alliance and the FTA: a new vision for the Valley

Within this positive context, Cali held the VII Presidential Summit of the Pacific Alliance amid aspirations that it might turn into a preeminent organization in the region and boost trade with Asia. In Ms. Lloreda’s opinion “the most important aspect of the Pacific Alliance is that it finally identifies Colombia with the Pacific” and she reveals how “throughout its long history, Colombia has focused on the Atlantic and has not realized the importance of the Pacific; or it has noticed it, but has relegated it to a secondary position.”
 
The Pacific Alliance currently groups Chile, Colombia, Mexico, Peru and Costa Rica, the latter received approval to become a permanent member from all founding members after signing an FTA with Colombia during the summit. The Alliance therefore links Colombia with countries “with which it identifies economically and ideologically,” according to Invest Pacific’s executive director.
 
The Cauca Valley is also one of the regions that can benefit the most from the FTA with the United States. According to Invest Pacific: “The important thing is that Colombia also has to look towards the western part of the U.S. We are not known by the west and we do not know the west yet but California is the seventh economy in the world so the potential is immense.”
 
The Valley has a rich industrial heritage, home to 1,100 companies with foreign capital and its geostrategic location played a key role in attracting this FDI. In fact Ms. Lloreda believes “Cali owes everything to Buenaventura”. As Colombia ‘rediscovers’ the Pacific, the Valle del Cauca Department and the coastal seaport city of Buenaventura, Colombia’s fastest growing port, are set to benefit.
 
“The Valley positions itself again as the destination of choice for large multinationals which arrived in the 30s and 40s to supply Colombia and the Andean states,” states Ms. Lloreda.
 
The region’s privileged geostrategic location is boosted by three regional airports, a fourth for international cargo and, last but not least, the Alfonso Bonilla Aragon International Airport, Colombia’s third largest in terms of passengers. The U.S.’s Ascendant Program Services, LLC, has been hired by the U.S. Trade and Development Agency to conduct a Definitional Mission to assist in evaluating funding for a modernization and expansion plan at this airport. In this sense, Ms. Lloreda points out how Cali “is the only city in Colombia which could have direct flights with Asia, because if you compare it with Medellin or Bogota a direct flight would not be possible due to the altitude issue.”

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The Valley aims to be the motor of Colombia’s conversion into a gateway to Latin America on the back of 5.7% annual growth in shipping over the last 10 years and there are various port projects. Ms. Lloreda sees potential for a second pacific port in the naturally deep waters of Malaga Bay. In addition there are projects under way such as the Aguadulce port which is expected to start operating in the last term of 2013, the dredging of Puerto Solo or the “Terminal Maritimo del Rio Dagua” that will allow the arrival of deep-draft Panamax and Post-panamax vessels. Invest Pacific’s executive director believes “all these projects are very feasible and necessary due to the growth in cargo which is taking place”.

 

More than the new Silicon Valley of Latin America
Cali was one of the four Colombian cities that achieved important positions in the 2013-2014 ranking by the Financial Times’ Intelligence Unit. This ranking is comprised cities with the most promising prospects from a group of 127 applicants. Invest Pacific has detected FDI opportunities in the region around I.T., BPO, logistics, packaging and agro-industry.
 
“The availability of human resources prepared for the BPO and IT sectors, vis-à-vis the number of existing companies related to the sector, is one of the lowest of the country, which means there is still a lot of talent available,” notes Ms. Lloreda.  This potential has already been noticed by Latin American investors such as Zonamerica that has associated itself with the local Carvajal group to begin construction in Cali of a private free trade zone for which the total investment will be of $300 million.
 
Having such an important port in Buenaventura, another area in which Invest Pacific identifies interesting opportunities for Americans is in logistics. “We need a lot of investment in logistics, logistics platforms are needed, more ports, everything you want to imagine in terms of logistics,” Ms. Lloreda. “There are many American packaging companies or companies that are suppliers to those already installed here for which relocating to the Valley would be a strategic move.”
 
Invest Pacific is immersed in creating a mapping of the multinationals based in the Valley, to identify where they buy their packages and supplies and from which U.S. company they buy these in order to find out whether these north American companies could be interested in settling in the Valle del Cauca to continue supplying these companies and expand to the rest of Colombia and Latin America.
 
Up to 1910 the region gravitated dramatically around large country estates; this was a period during which the economy was mainly based on agribusiness. In fact 22 kilometers away from Cali is the city of Palmira, known as the Agribusiness Capital of Colombia. Ms. Lloreda believes that “the Cauca Valley can be a global food basket and can be very complementary to the U.S., not only in horticultural products but beyond that. We have potential in fruits and have the sugar necessary for confectionery, sweets, biscuits and juices.”

 

The Valle del Cauca Department: poised for educational excellence

The arrival of multinationals spurred the education of the local workforce and encouraged the foundation of bilingual schools in Cali, a city that rivals Bogota in bilingual education leadership. The Valley’s newest universities were also born under the shade of multinationals, and thus the region’s unique human talent formed an asset “that is now exported throughout the world,” as Ms. Lloreda explains.
 
Colombia was the third most present country in the QS Latin American university ranking, where 42 Colombian institutions appeared, with eight of its best climbing the list. Ms. Lloreda notes a shift in the dominant tendency of her parent’s era as more of Cali’s secondary school graduates are choosing local universities ahead of international and domestic competitors. The local Universidad del Valle ranks sixth in Colombia’s QS Ranking and the ICESI University took the fifth position in the performance evaluation exams carried out by the Colombian Institute for the Promotion of Higher Education.
 
The region’s universities are looking to deepen their relationship with North American universities, and in this sense, Mr. Piedrahita Plata, Dean of ICESI, explains they have an “intense collaboration with the University of Tulane” and have designed a program that allows students to acquire global and regional knowledge with academic and professional experience in China and France. ICESI also has a relationship with the Massachusetts Institute of Technology and offers 30 scholarships to “create a better world through technology” and carry out MIT’s  'Advancing Information Technology Innovation' program aimed at promoting entrepreneurship and software-predicated business development.

Ms. Lloreda mentions that “on the subject of medicine there is certainly immense potential in the Valley: if you analyze the scores of the national performance tests, you will discover that the best scores are found in the Valle del Cauca.”
 
Ubeimar Delgado Blandon, the Department’s Governor, plans to invest a portion of the $240 million of oil royalties through the government’s committee on science, technology and innovation between 2013 and 2015.