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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  • With the oil sector set for slower growth as global crude prices plunge, this will prompt larger net exports deficits and weigh on gross fixed capital formation, such that we anticipate slower growth over the next decade than in the last.

  • Hydrocarbon sector weakness will also weigh on Colombia's balance of payment position. Indeed, faltering oil prices and production will temper investment into Colombia and cool export growth. Meanwhile, slower oil production growth combined with increasing pressure to spend on social programmes and infrastructure development will feed through to fiscal slippage in the years ahead. While the country is well positioned to withstand the storm, with low external debt and a sizeable stock of foreign reserves, the potential for deterioration in the country's macroeconomic buffers will temper investor perception of...

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Colombia Operational Risk Coverage (9)

Colombia Operational Risk

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BMI View: Colombia offers considerable potential as an investment destination, with one of the largest populations in Latin America and a sizeable economy based on hydrocarbons and mining. Reforms enacted by the administration of President Santos have improved the operating environment, streamlining bureaucratic procedures, providing incentives for investment, and lowering trade barriers. Ongoing peace negotiations with the Revolutionary Armed Forces of Colombia are also improving the security outlook. Nevertheless, Colombia continues to pose significant challenges to investors, as the rule of law remains weak, facilitating criminal and terrorist activity and allowing corruption to flourish. In addition, trading costs remain extremely high due to an inadequate transport network, and burdensome employment regulations further weigh on profit margins. Consequently, Colombia is a regional underperformer in...

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Colombia Crime & Security

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BMI View: 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 34.6 out of 100 in the BMI Crime And Security Risk Index, placing 30th out of 42 Latin American countries in the regional comparison, between...

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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 performance. Colombia therefore receives a total Labour Market Risk score of 53.7 out of 100, ranking the country 19th out of 42 states in the Latin...

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Colombia Logistics

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BMI View: Colombia's large and growing economy, as well as its considerable population, requires a well developed logistics network in order to sustain growth. The country offers an extensive and reliable utilities supply, and its ports enable strong connections to maritime trade routes, facilitating speedy trade times. However, the expansion of the mining and oil and gas industries has placed pressure on Colombia's utilities sector, particularly the security of the country's water supply. In addition, while growth of these sectors has helped to develop Colombia's transport network, creating extensive road, rail and sea connections, all would benefit from further...

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Colombia Trade & Investment

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BMI View: Colombia offers one of the largest markets for investment in Latin America, with an economy driven by the hydrocarbons and mining sectors, and a significant consumer market which is benefitting from rising incomes. Economic reforms, bureaucratic efficiency, and the ongoing peace process with the Revolutionary Armed Forces of Colombia (FARC) have attracted increasing foreign direct investment (FDI) inflows. In addition, trade barriers are few and the government has pursued a policy of making free trade agreements with key economic partners. Nevertheless, significant risks remain to be overcome by investors, mainly stemming from the legacy of internal conflict, which has resulted in a weak rule of law and widespread institutional corruption. Nevertheless, in the overall BMI...

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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 Colombia-EU free trade agreement will further erode their profitability. The Ministry of Agriculture has taken steps to...

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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: We lowered the growth outlook for the Colombian consumer electronics market in 2015 in the Q315 update, with peso depreciation expected to result in a contraction of both PC and AV demand. However, with our in-house Country Risk team expecting the exchange rate to stabilise from 2016 the Colombian consumer electronics market should move back to a strong growth trajectory for the remainder of our five-year forecast period. A more supportive economic environment 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...

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Defence & Security

Colombia Defence & Security

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BMI View: Talks 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.

As one of the...

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Food & Drink

Colombia Food & Drink

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BMI View: Our real private consumption growth forecasts remain unchanged since last quarter, at 3.9% in 2015 and 3.7% in 2016. Earlier this year, we downgraded our growth forecast, as we expect lower global oil prices to negatively affect GDP growth over the coming years. The weak performance of the hydrocarbon sector, which accounts for around half of the country's exports, will weigh on real GDP growth and government revenues over the coming years. Tightening fiscal policy is likely to result in lower transfers and higher taxes. In addition, we expect inflation to accelerate in 2015, which will weigh on consumer confidence. 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...

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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: We have downgraded the growth outlook for Colombia's IT market in 2015 due to a weaker outlook for the peso exchange rate with the US dollar, resulting in a marked slow-down in the overall IT market growth rate from 2014-2015. However, with our in-house Country Risk team envisaging a stabilisation of the peso from 2016 we maintain a bright medium-term outlook, with strong economic performance and a supportive policy environment meaning it is expected to be a regional outperformer over the medium term. The extension of the Vive Digital programme to encompass 2014-...

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Infrastructure

Colombia Infrastructure

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BMI View: The government stimulus plan in Colombia called Pipe 2.0 presents an upside risk to our construction industry forecasts, particularly for the road subsector and the residential/non-residential building sectors. However, given the budget cuts in light of weak oil prices and reduced government revenue, we are sceptical over the government's capacity to fulfil this investment plan.

Key Trends And Developments

  • Should public spending from Pipe 2.0 materialise, it is transport infrastructure and housing...

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Insurance

Colombia Insurance

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BMI View: Growing household incomes, increased demand from companies for group products and increased capital of the leading insurers mean that life insurance continues to rise in importance as a conduit of organised savings. In the life segment, both penetration and density should rise over the next few years. However, slowing economic growth through 2015 and high levels of competition across some insurance lines mean premiums growth is likely to be moderate across much of the non-life market this year.

Colombia is a medium-sized market in global terms, and one whose expansion is being underpinned by both growing demand from households and firms, as well as growing supply as new entrants bring additional capital. We remain of the view that the major multi-national and regional insurers are correct to see Colombia as a market opportunity that is...

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Medical Devices

Colombia Medical Devices

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BMI Industry View: The Colombian medical 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 healthcare and regulatory developments will provide new growth opportunities for medical device companies in the long-term. Multinationals that already have a presence in the...

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Mining

Colombia Mining

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BMI View: Mining sectors across Central America and the Caribbean will see varying growth prospects in 2019. The region has significant untapped mineral potential, yet a range of business environments and operational challenges will lead to uneven growth. Overall, the mining sectors of Colombia and Panama will see the strongest longer-term growth, while Guatemala, and to a lesser extent Honduras, will underperform.

Colombia and Panama will outperform other countries in Central America and the Caribbean in terms...

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Oil & Gas

Colombia Oil & Gas

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BMI View : Colombia's energy sector has approached an inflection point. 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. Furthermore, sustained lower oil prices have threatened the development of upstream and downstream projects by both national and international investors....

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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 over2014, 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 produced polymer...

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Pharmaceuticals & Healthcare

Colombia Pharmaceuticals & Healthcare

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BMI View: The government's push for improvement to the Colombian healthcare sector, combined with the country's growing burden of chronic conditions and reliance on imported drugs will keep the healthcare and pharmaceutical markets on positive trajectories. However, the country's expanding counterfeit drug market along with government bailouts for local health insurance schemes will remain a risk in 2015.

Headline Expenditure Projections

  • Pharmaceuticals: COP8,643bn (USD4.3bn) in 2014 to COP9,109bn (USD3.5bn) in 2015; +5.4% in local currency terms. Forecast revised downward from Q215 due to historical data.

  • ...

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Power

Colombia Power

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BMI View: A vast pipeline of power projects under construction and our forecast for sustained growth in power consumption over the coming decade support our positive outlook for Colombia's power sector. While hydropower will remain the dominant source of electricity in the country, we see upside potential for our growth forecast for gas-fired generation due to Colombia's cyclical exposure to dry weather. The resurgence of FARC's attacks against power infrastructure has increased the country's risk profile, but we maintain that a peace agreement will eventually be reached....

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Retail

Colombia Retail

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BMI View: With the fourth largest economy in Latin America, measured by GDP, Colombia's retail sector presents many opportunities for international and domestic retailers, as well as investors. Years of economically sound policy have lowered barriers to entry for international firms, and sustained economic growth has brought lower unemployment rates and higher levels of affluence for a significant portion of the population. However, lingering poverty levels, a deficient physical and transportation infrastructure, and the slow rate of non-cash payment integration into the economy continue to remain a hindrance to achieving full economic growth potential. Nevertheless, significant opportunities remain. In particular, the continuing fall of the informal sector's market share and the continuing rise of e-commerce and...

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Shipping

Colombia Shipping

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BMI View: BMI forecasts an expansion in container and gross tonnage handling across all Colombian ports in 2015, cementing the strong growth seen in 2014. That said, domestic container demand will be more muted than we expected, and a weaker performance by Colombia's crucial hydrocarbon sector will weigh heavily on headline real GDP growth over the coming years. We have revised down our real GDP forecast for 2015 from 4.9% to 3.9%.

A weaker performance by Colombia's crucial hydrocarbon sector will weigh heavily on headline real GDP growth over coming years. As a result, after growth of an estimated 4.9% in 2014, we forecast real GDP expansion of 3.9% in 2015, rising only slightly to 4.0% in 2016...

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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. 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. LTE demonstrates the development of the market, with greater demand for higher-value data services, with the uptake of LTE services growing more than five-fold. New launches of 4G from Avantel and DirecTV hope to tap into this demand and shake up competition dynamics. The merger of Tigo and UNE-EPM will create a stronger player in the broadband market with a greater ability to offer converged services. Further, the relaunch of Vive Digital after a successful 2010-2014 run bodes well for mobile and fixed broadband growth over our forecast period.

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