Doing Business in Colombia (2013)

The Republic of Colombia is the fifth largest economy in Latin America with the third largest population of approximately 46 million inhabitants. Aided by major security improvements, steady economic growth and moderate inflation, Colombia has become a free market economy with major commercial and investment ties to the United States, Europe, Asia and Latin America. The Colombian manufacturing sector is divided into 61 industry groups. The food processing and packaging industry (FPP) ranks among the top 14 manufacturing groups. The industry employs about 19.3% of the domestic labour force, concentrated in the five main metropolitan areas: Bogota, Medellin, Cali, Cartagena and Barranquilla. The Colombian Processed Food and Packaging Equipment market caters to an industry that produces approximately US$ 22 billion in revenue per year. The food industry is comprised of 10 sub sectors: Sugar mills, rice mill, cereal mills, oils and fats, dairy products, chocolates and candy, meat products, animal food products, bread and pasta and others. The beverage industry is also comprised of three subsectors: Beer, Carbonated Soft Drinks & Juices and spirits. In 2010 the Food Industry grew on a whole (+ 6.31% from ‘09) while the beverage industry decreased in sales (- 9.63%), driven in part by an unprecedented tax increase imposed on the beer market, to cover the cost of an emergency relief program. Within these industries, the Dairy, Animal Food and Carbonated Soft Drinks & Juices were the three markets highlighted as the most attractive in terms of supply machinery and equipment. To put into perspective the importance of the Food and Beverage import market, this industry accounts for 5.4% of all the Colombian imports. In other words, if Colombia imported approximately US$ 40 billion in 2010, US$ 2.16 billion is the amount of imported goods that came into the country to supply the food and beverage companies. Market Challenges The main obstacles that the Food, Beverage and Packaging industries face on a day-to-day basis are the poor logistics/transportation infrastructure, a cultural lack of innovation, and contraband. These are probably the key issues that foreign and domestic companies are challenged with. Nevertheless, the industry has been growing in average a 5 percent per year. Colombia’s implementation of Free Trade Agreements (FTAs) with United States, Europe and Canada will increase competition for UK manufacturers. The Free Trade Agreement between Colombia and the United States will significantly increase the competitiveness of US food machinery and packaging equipment into the Colombian market. Colombia is not a producer of this type of machinery; therefore the FTA will bring more opportunities for the US industry. Imports of FPP equipment from the United States are increasing despite the global economic crisis and are still one of the more robust sectors of Colombian industry. U.S. equipment is well positioned given its high quality and excellent technical and support service. It is also the fastest growing supplier, whose total share reached 30% of all imports in 2013. The strongest U.S. competitors include: Italy, Brazil and Germany. Market Opportunities The production of food and beverage goods have increased, mostly as a result of government support programs that encouraged technological advancement and export preparedness of small and medium companies, known as PYMES. It is expected that commercial relations with Venezuela will be re-established and will boost local exports and therefore the need of importing better and newer technology. Thus, PYMES remain excellent prospects to import Sauven printers that feature small/medium/large production capacity. Colombian food and beverage exports remain the second largest, as part of the agro industry macro sector which represented 30% of all Colombian exports as a result of government efforts and significant improvements in production and industry competitiveness. Competition from local equipment producers in this sector is modest. The quality of local technology has improved for basic equipment and spare parts manufacturing. Local production is still undeveloped, when compared to the UK and other countries, especially in terms of competing with the latest technologies such as nanotechnology and electronic/robotics used for production/packaging lines. Colombia is the third largest dairy products producer in Latin America, after Brazil and Mexico. The accelerated growth of the dairy industry has already surpassed projections for 2012. The dairy sub-sector offers the best market potential for exporters of printing and labelling equipment. Oils and fats processing is another promising industry segment, given that Colombia produces nearly 40% of total regional production and is listed among the top four producers of crude palm oil in the world. The sugars and syrup segment, followed by canned meat, poultry and fish products, as well as fresh vegetable and fruit packaging, are also promising industry niches for printing and labelling equipment. Other key prospects are the beverages and snack processing industries.