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:

  • 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 will feed through to fiscal slippage toward the latter half of our 10-year forecast period. 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'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, poorly educated and costly labour market, high levels of crime in urban areas, and terrorism threats to extractive industries 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 48.5 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....

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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 36.5 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...

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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 11th 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...

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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 52.2 out of 100 in the BMI Logistics Risk Index, but risks to supply chains mean that the country is placed just tenth in a regional comparison of 28 Latin American and...

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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 the country performs relatively well on a regional bases, with a Trade and Investment Market Risk score of 52.6 placing Colombia 7 thout of 28 countries in Latin America. This score reflects strengths in some areas, such as recent efforts to reduce red tape for businesses and financial market...

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Colombia Industry Coverage (19)

Agribusiness

Colombia Agribusiness

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 rising 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, which will force the government into a decision...

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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: We have downgraded our real private consumption growth forecast to 3.9% in 2015 and 3.7% in 2016, down from 4.5% and 4.7% previously, as lower global oil prices will 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. 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 (local currency)

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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

Infrastructure

Colombia Infrastructure

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BMI View: Cuts in the Colombian government's budget for 2015 on the back of weak oil prices will have a negative impact on infrastructure growth. While we maintain a positive view on Colombia's construction industry, we expect the infrastructure segment to grow at a slower pace as a result of weakening government revenue.

Key Trends And Developments

  • With continued strong backing from the Colombian government for the sector, we maintain our outlook of a healthy annual average real construction growth of 7.5% between 2015 and 2020.

  • Lower, but still strong economic growth - with real GDP growth of 3.9% forecast for 2015 - coupled with the multiple signed free trade agreements are creating significant demand for new capacity and better quality infrastructure. Improved access to ports and...

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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

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: Continued expansion in the mining and manufacturing industries will contribute to strong electricity consumption growth in Colombia over the next decade, reinforcing our positive outlook for the country's power sector. Owing to a vast project pipeline, hydropower will remain the dominant source of electricity in the country, but we see upside risk to our 10-year growth forecast for gas-fired generation. Despite the introduction of a new renewable energy law, we have maintained our muted forecasts for Colombia's renewables sector due to slow progress in the development of an already limited project pipeline.

Our forecast for strong power consumption growth over the next 10 years and a significant power project...

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Retail

Colombia Retail

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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