Our comprehensive assessment of Colombia's operating environment and the outlook for its leading sectors are formed by bringing together a wealth of data on global markets that affect Colombia, as well as the latest industry developments that could impact Colombia's industries. This unique integrated approach has given us an impeccable track-record for predicting important shifts in the markets, ensuring you’re aware of the latest market opportunities and risks in Colombia before your competitors.

Country Risk

Colombia Country Risk

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Core Views:

  • We believe that Colombia's economy will expand at robust growth rates in the coming years, benefitting from strong private consumption and rising gross fixed capital formation (GFCF). That said, with the oil sector set for slower growth, this will prompt larger net exports deficits, such that we anticipate slightly slower growth over the next decade than in the last.

  • The infrastructure, telecommunications and power sectors are particularly well positioned for growth.

  • After President Juan Manuel Santos won re-election in May, we anticipate broad policy continuity throughout the next administration.

Major Forecast Changes:

We have tempered our optimism on Colombia's long-term growth outlook. While the country remains one of our favourites in the...

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Colombia Operational Risk Coverage (9)

Colombia Operational Risk

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BMI View: Colombia's relatively large population, low bureaucratic hurdles to setting up a business, and developed financial markets increase the attractiveness of the country as an investment destination. However, an inflexible and costly labo u r market, high levels of crime in urban areas, and terrorism threats to extractive industrie s in rural parts of the country pose significant operational risks.

Overall, while Colombia is a relatively attractive investment destination, we highlight several risk factors that result in a score 47 out of 100 in the BMI Operational Risk Index. Despite significant improvements in recent years, a poor security environment remains Colombia's largest operational risk. Terrorism attacks by left-wing insurgent groups, poses threats to businesses...

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Colombia Crime & Security

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Despite significant improvements in the last decade, Colombia still presents considerable security risks for foreign business travellers, expatriate workers, and tourists in comparison with other Latin American countries. There are significant differences between the main cities and the more isolated rural areas, both in terms of the type and intensity of security risks. Crime is comparatively high in the main cities, while terrorist attacks are more targeted towards critical infrastructure such as oil pipelines. Colombia receives a score of 36.3 in the BMI Crime And Security Risk Index, placing 16th out of 28 Latin American countries in the regional comparison, next to Suriname and El Salvador.

As such, those in greatest danger of being victims of kidnapping and extortion are contractors and employees of companies in the extractive industry, particularly in the oil and gas sector. In the main cities, Colombia's weak...

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Colombia Labour Market

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BMI View: Colombia offers a large, urbanised and relatively healthy labour force which is particularly suited to businesses in labour-intensive, low skilled sectors. The country's labour market also benefits from a strong tertiary education sector which improves the skill set of a segment of the labour force. However, high labour taxes and social security contributions, powerful trade unions which have driven significant labour strikes in recent years, and poor school enrolment rates, weigh on Colombia's overall Labour Market Risk score. We give Colombia a total Labour Market Risk score of 52.8 out of 100 in the BMI Operational Risk Index, ranking the country 11 th out of 28 states in the Latin America region.

Although the education system in Colombia has seen significant improvement, school enrolment rates and the quality of teaching remain poor...

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Colombia Logistics

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BMI View: Colombia, boasting Latin America's fourth largest economy and the region's third largest population, will continue to attract investors. The country's most developed industries of oil and gas and mining offer well - developed supply chains, but the overall transport network quality, relatively high utilities and trade costs will be key entrance risks for new sector investment. The country's investor opportunities ensure an above - average score of 54.4 out of 100 in the BMI Logistics Risk Index, but risks to supply chains mean that the country is placed just ninth in a regional comparison of 28 Latin American and Caribbean states.

As the region's fourth largest economy, Colombia offers a robust...

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Colombia Trade & Investment

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BMI View: While Colombia boasts relatively high marks for low bureaucratic hurdles to setting up a business, and shows strong signs of continued banking sector growth, potentially benefiting international financial firms, we highlight that a number of fairly serious challenges remain that may prove problematic for investors. For one, trade and investment flows are relatively low by the standards of other large economies in the region. Additionally, corruption remains a serious problem, and the tax burden is fairly high. Overall, these factors leave Colombia in the middle of the pack in our Trade and Investment Market Risk Index, scoring 47.3 out of 100, a score that puts the Andean nation in 14th place out of 28 Latin American and Caribbean countries we rate, one position ahead of Brazil and two spots below Mexico. The middle-of-the-pack rating reflects strengths in some areas, such as recent efforts to reduce red tape...

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Colombia Industry Coverage (19)

Agribusiness

Colombia Agribusiness

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BMI View: Colombia's agricultural sector will face a number of challenges in the medium term. Key export crops - such as coffee and cocoa - have underperformed in recent years owing to a lack of investment in infrastructure and outbreaks of disease. Although regeneration work is under way, it will take time to bear fruit. The strength of the Colombian peso against the US dollar is also posing challenges for the agribusiness sector , as the competitiveness of Colombia's exports is being eroded. Finally, there is still unrest among dairy, livestock and grain producers who fear that the entry into force of the Colo mbia-EU free trade agreement will further erode their profitability. The Ministry of Agriculture has taken steps to support these sectors to adapt to the arrival of...

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Autos

Colombia Autos

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BMI forecasts vehicle sales in Colombia to increase 6% in 2014 on the back of steady improvements in the economy and low base effects from declining sales in 2013. We expect this positive momentum to continue into 2015, predicting another year of 6% growth. In terms of Colombia's vehicle production, we forecast growth of 4.5% and 4.0% in 2014 and 2015 respectively.

In April 2014, the Colombian government announced plans to cut tariffs on imported autos components in a bid to make domestically-produced cars competitive with imported vehicles. The domestic autos industry is relatively nascent, relying chiefly on imported components and CKD assembly, with little high value-added manufacturing taking place in the country. BMI believes that, while the reduced tariffs may help reduce costs somewhat, a number of structural inefficiencies remain in the market, hindering automakers. These will therefore be unlikely to compete...

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Commercial Banking

Colombia Commercial Banking

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Commercial Banking Sector Indicators
Date Total assets Client loans Bond portfolio Other Liabilities and capital Capital Client deposits

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Consumer Electronics

Colombia Consumer Electronics

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BMI View: Conditions in the Colombian consumer electronics market are set to deliver strong growth throughout our five-year forecast period, as improved labour market dynamics and stronger private consumption will lead to rapid uptake of smartphones and tablets. Similarly r ising credit growth to bolster private consumption levels will benefit consumer electronics products at the higher end of the market. This will allow vendors to tap into the relatively low penetration rates in key device categories such as PCs, smartphones and flat-panel TVs. One potential risk we highlight is the our expectation that oil revenues are set to head lower in the coming years, ...

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Defence & Security

Colombia Defence & Security

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BMI View: T alks between the Fuerzas Armadas Revolucionarias de Colombia (FARC) and the Colombian government continue on. However , with little real progress made on this front, along with the scandal of the FARC capturing and subsequently releasing a military General, these are unlikely to be resolved in the near future. BMI expects that the defence budget and the subsequent increase in GDP will be used mostly to improve/maintain the Colombian government's military and security forces rather than for new procurements .

...

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Food & Drink

Colombia Food & Drink

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BMI View:   We forecast that a continued decline in unemployment levels and rising access to credit will support strong ongoing real private consumption growth in 2015. Despite the country ' s fairly inflexible and costly labour market, the lack of bureaucracy involved in setting up a business and well developed financial markets continue to make Colombia an attractive investment destination across a number of sectors including food and drink.

Headline Industry Data (in local currency)

  • 2014 per capita food consumption = +7.4% year-on-year (y-o-y); forecast compound annual growth rate (CAGR) 2013-2018 = +8.5%.

  • 2014 alcoholic drink sales = +6.1% y-o-y; forecast CAGR 2013-2018 = +6.4%.

  • 2014 soft drink sales = +9.7% y-o-y;...

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Freight Transport

Colombia Freight Transport

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Growth across the Colombian freight mix is set to remain relatively strong in 2015. This trend follows the news that Colombia's real GDP growth is poised for a robust expansion in the coming quarters, though cooling slightly from the 5.4% year-on-year (y-o-y) growth recorded in H1 2014. However, while Colombia will continue to outpace much of the rest of Latin America in the coming quarters, this will be in the context of modestly slowing real GDP growth.

This year we expect the port of Cartagena to see more muted y-o-y growth compared to recent years (between 2010 and 2012 inclusive, growth came in at double figures), but it will still outperform domestic rival the port of Buenaventura in terms of annual gains (4.50% compared to 3.31%, respectively). Rail freight will also see healthy growth of 7.00%, ahead of the road and air freight modes (5.23% and 5.00% respectively).

Headline Industry Data...

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Information Technology

Colombia Information Technology

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BMI View:   The extension of the Vive Digital program to encompass 2014-2018 demonstrates the government's continued commitment to improving the ICT sector. Government spending will therefore be a key driver of the IT sector in Colombia over our forecast period, from improvements in internet infrastructure, c onstruction of Vive Digital Kiosks , making Wi-Fi available in every municipality, as well as the distribution of tablets, computers and other connected devices. President Juan Manuel Santos has promised to prioritise social spending since his election victory , especially education, so we expect to see similar levels of spending on the IT sector to support this. For consumers, i mproving labour market dynamics and expanding...

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Infrastructure

Colombia Infrastructure

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BMI View:   We have upwardly revised our construction industry forecast for Colombia to 15% y-o-y real growth in 2014 and maintained a strong 9.6% for 2015. This is on the back of strong momentum in the transport infrastructure sector, particularly road projects . Our positive outlook for the country is supported by a maturing PPP framework, diverse sources of project finance , and an improving business environment .

Key T...

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Insurance

Colombia Insurance

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BMI View:   Both the general environment and specific recent developments remain very germane for the steady development of insurance - in both of the major segments - in Colombia. This remains one of the most exciting and dynamic of any national insurance markets monitored by BMI.

In our first (Q414) report on Colombia's insurance sector, we suggested that it is one of the most exciting of any that we monitor worldwide. As of October 2014, the latest data from the regulator confirms that premiums have been growing in both the life and the non-life segments (in local currency terms, at least). This is partly because the economy is growing strongly and partly because the entire insurance sector has been strengthened as a result of corporate deals, in which leading multi-national groups have taken strategic stakes in local...

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Medical Devices

Colombia Medical Devices

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BMI Industry View:   The Colombian m edical device market   has benefitted from the country's increasingly political stability and GDP growth above the Latin American average in recent years. It now   ranks fourth in Latin America   and is projected to register the third fastest 2013-2018  CAGR in the region . Per capita medical device expenditure is low but continuing h ealthcare and regulatory developments...

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Mining

Colombia Mining

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BMI View: We expect uneven mining sector growth through 2018 across various countries within Ce ntral America and the Caribbean. The region has significant untapped mineral potential, though variations among countries' business environments and operational challenges will mean varied performance . Overall, we expect Colombia and Panama to see the strongest mining sector growth, while Guatemala, and to a lesser extent Honduras, underperform.

We expect Colombia and Panama to lead the region in terms of mining sector development, with the Dominican Republic not far behind. The former two lead in their overall business environments and mining sector regulatory framework, which should enable consistent investment and sector development...

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Oil & Gas

Colombia Oil & Gas

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BMI View :   Colombia's energy sector is approaching an inflection point over the next several quarters. While the past decade   has witnessed strong production growth due to improvements in the business   and security environment, we caution that the country will experience downward pressure on oil production over the longer term. The tendency toward smaller finds, as well as recent increases in pipeline attacks have begun to show signs of decreased investor interest in Colombia's resources, as witnessed in the 2014 licensing rounds. Given ongoing below and above-ground challenges, we maintain a cautious stance toward the future of Colombia's hydrocarbon productivity.

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Headline Forecasts (Colombia 2012-2018)

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Petrochemicals

Colombia Petrochemicals

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BMI View: In the wake of the stagnant growth rates seen in Colombian petrochemicals industry over 2014, reflecting poor domestic market performance , we expect a moderate improvement over 2015 due to strong overall economic growth . However we caution that the rate of petrochemicals consumption will see modest growth .

Growth in petrochemicals consuming industries such as the automotive and construction sectors has been strong, but has not benefitted the Colombian petrochemicals market. The automotive industry depends on imported kits and parts, which limits the amount of input from locally...

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Pharmaceuticals & Healthcare

Colombia Pharmaceuticals & Healthcare

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BMI View: President Juan Manuel Santos has continue d to successful ly reform the Colombian health care system, including price reductions to pharmaceutical medicines. However , financial problems, counterfeit drugs and a worrisome i ntellectual p roperty r egime still hamper progress .

Headline Expenditure Projections

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Power

Colombia Power

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BMI View: The outlook for the Colombian energy sector is broadly positive, with demand for electricity steadily growing and the government ha s taken several positive steps to encourag e investment in the sector . However, overshadowing this optimism are concerns about security, along with the country's continued over-reliance on hydroelectric energy . The distances between urban, electricity-consuming populations and sources of hydroelectric power are great, and the FARC considers many of these parts of the country to be under their control. Sabotage of power infrastructure projects is common and presents particular challenges for a country that is already struggling to keep up with its economy's growing demand for power.

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Retail

Colombia Retail

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BMI View:   Colombia's retail sector forecasts show strong potential for growth, specifically at the end of the projection period during 201 7 -201 8 . BMI forecasts that total GDP will increase 45 % from US D397 bn in 2014 to US D 5 7 5bn in 2018, creating growth in the national economy and increasing net income levels. BMI forecasts that total spending in retail will grow more   than GDP and will increase by 46...

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Shipping

Colombia Shipping

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BMI forecasts growth across the board at Colombian ports in 2015. Shipping sector growth over the medium term will be supported by growth in private consumption on the back of rising wages and the opening of the expanded Panama Canal, which would see more, and larger, vessels calling at the country's ports. This possibility has piqued the interest of international container terminal operators, such as International Container Terminal Services Inc. Throughput volumes will also be supported by the growing dry bulk export story, in particular coal. We expect that Colombia will export increasing volumes of coal to China through its Pacific ports and investment being pumped into infrastructure will enable this.

Headline Industry Data

  • The port of Cartagena will see total tonnage volume increase by 4.5% to 21.63mn tonnes in 2015, and will...

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Telecommunications

Colombia Telecommunications

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BMI View:   MVNOs and 4G services are having a significant impact on the trajectory of the Colombian mobile market, as both are experiencing strong uptake. Virgin Mobile in particular has continued its success across Latin America. This should help with competition dynamics, as well as result in downward pressures on ARPU spending. However, adoption of 4G demonstrates the development of the market, with greater demand for higher-value data services. New launches of 4G from Avantel and DirecTV hope to tap into this demand and shake up competition dynamics. The internet sector as a whole is due for a massive boost, and we have upgraded our forecasts accordingly. The merger of Tigo and...

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