08 February 2021
Over the last 50 years, Colombia has been the fastest growing country in Latin America. Prior to the pandemic, it already stood out for its sustained economic growth.

According to estimates by international organizations and private analysts, the country’s growth was on track to accelerate in 2020 had it not been for the effects of COVID-19. Even so, the measures taken by the Government are aimed at recovering previous years’ upward growth.

In order to boost the economy, the Government has provided support packages to the business sector and households, making Colombia one of the countries in the region that has provided the most incentives for economic reactivation, with an investment of resources estimated at 9.6% of GDP.

In addition, Colombia is expected to be one of the countries leading economic recovery in 2021. According to World Bank estimates, the national economy would shrink by 7.2% in 2020 and grow by 4.9% in 2021, performing better than the average for the region (which would shrink by an average of 7.9% in 2020 and grow by 3.7% in 2021).

This translates into great opportunities for Colombia, given that a more dynamic economy will better attract large companies around the world as a result of its relocation strategy and thus recover foreign direct investment flows.

Additionally, forecasts from entities such as the International Monetary Fund and The Economist Intelligence Unit show that in the medium term (2022-2025), Colombia has better economic growth prospects than Mexico, Brazil, Argentina, and Chile.

In fact, signs of recovery were already evident in the third quarter of 2020. With positive economic growth of 8.7% compared to the second quarter of the same year, there was an expansion in all the economic activities and in all the spending brackets.

With this in mind, ProColombia made a brief review of the economic outlook for 2021 in the different sectors, as well as investment and business opportunities to continue supporting the country’s reactivation.


The rise of the creative industries

The virtualization of many services has allowed technology to serve as a bridge to maintain interaction that was previously only possible physically.

Given that this is a booming trend, the use of services such as virtual education, telemedicine, psychology, physical training, and remote technical services, among others, is expected to grow.

In the case of Colombian software and IT services, which already had shown potential and growth in foreign trade, they have been given a new impetus in North America, where Colombian companies have gained market share with e-commerce solutions, cybersecurity and web development.

The BPO sector has also played an important role. The measures adopted in Colombia in the outsourcing industry have allowed call centers, contact centers, technical support centers, and data processing centers to continue providing services throughout the health contingency.

In fact, the sector has reported an increase in calls to address health issues, Internet connectivity, and to explore financial relief from the banking sector. Approximately 603,000 direct jobs were estimated at the close of 2020, an increase of 20,000 new jobs compared to the previous year, according to BPro.


The agribusiness sector continues growing

During the third quarter of 2020, the Colombian agricultural sector was one of the few that registered a growth in GDP, increasing 1.5% compared to the same period of the previous year, according to DANE figures.

This growth was driven by the positive dynamics of agricultural production, including support and related activities (+2.2%), livestock (+1.9%), forestry and timber extraction (5.3%), and fishing and aquaculture (27%).

Between January and November 2020, Colombia’s agri-food chain was the only one to record a positive trend in its exports, reaching US $6.988 billion, 4.7% more compared to the same period in 2019.

Some of the products that drove this growth were: green coffee (+7.0%; +US $139 million); fresh fruit such as hass avocados, plantains, mangos, Tahiti limes, oranges, and blueberries (+22.8%; US $59 million); palm oil (+14.5%; +US $54.7 million); and beef (+58.8%; +US $38.9 million).

Spain, Brazil, Mexico, South Korea, and Egypt were the destinations with the highest growth in purchases of Colombian products, exceeding the amount reached in 2019 by US $182.4 million.

Moreover, Latin America forecasts are also encouraging. According to Euromonitor, an annual growth of 8.5% in the demand for packaged foods is projected. This is above the world average and would make the region a market of interest that can be served from Colombia.

Similarly, fruit and vegetable purchases in the region could register a growth of 9.4%, confectionery products could grow by 7.2%, fresh food by 1.2%, fresh fruit by 1.7%, and fresh vegetables by 1.4% between 2019 and 2025.


A commitment to sustainable and safe tourism

Beyond the exceptional conditions of 2020, the Colombian tourism sector is well positioned to play a crucial role in the recovery of the national economy.

Statistics from recent years make this evident.

First, it was one of the fastest growing industries in Colombia, with a compound annual growth rate of 9.7% in terms of non-resident foreign visitor arrivals between 2013 and 2019.

In addition, between 2011 and 2019, 64 new foreign direct investment projects were developed in different regions in Colombia, which have generated close to US $2.4 billion and more than 15,500 jobs. The compound growth rate of invested capital between these years is 5.8%.

On the other hand, a diversification of the national tourism offer is expected, thanks to the opportunity that nature, adventure, and wellness products have in a post-pandemic scenario.

In this sense, ProColombia has worked in a coordinated manner so that businesses in the sector are prepared to receive tourists again.

The first guide for nature tourism in Colombia was recently launched, a tool for the country to take advantage of its potential as an international tourist destination with sustainable and responsible practices. This initiative was led by the Ministry of Trade, Industry, and Tourism, and ProColombia, with the support of USAID’s Natural Wealth Program, the Humboldt Institute, and the Wildlife Conservation Society (WCS), with Punto Aparte Editores’ endorsement.

ProColombia has also worked to facilitate returns and improve connectivity, support businesses through market refocusing tools, and promote interinstitutional and intra-regional alliances.


Manufacturing export platform

This sector is characterized by its diversity of opportunities in different economic segments.

On the one hand, freight and electric vehicles were the mobility segments with the best sales performance in 2020. There were initiatives that promoted this sector’s investment, such as the renewal of the freight vehicle fleet and incentives for electric mobility. Likewise, the growing demand for different transportation alternatives was an excellent opportunity for companies assembling SUVs and motorcycles.

As for the machinery industry, local production, nearshoring, and input supply diversification are expected to gain importance in 2021 and will increasingly position Colombia as an ideal destination for foreign capital.

Something similar occurs with the production of some industrial and household goods in Colombia, where figures also indicate that opportunities for growth are expected. According to BVVA, the growth of private consumption in the country could grow 5.8% this year, well above the growth of public consumption (3.6%) and fixed capital investment (3%).

On the other hand, construction materials and manufacturing are other subsectors that show good prospects for this new year.

According to FitchConnect, in 2021 the construction sector could grow 7.7%, and between 2022 and 2024, it could maintain an average annual growth of around 3.3%.

Notably, the new concessions to be launched in the future could be an opportunity for investors, to the extent that public-private partnership (PPP) schemes are used, to obtain diversification of sources of debt and equity investment in infrastructure projects.

In this sense, 5G road concessions will be an excellent alternative to invest and continue to attract resources to this sector.

Similarly, the execution of 4G projects, some airports and ports expansion and renovation projects, and the construction of the Bogotá metro will be decisive in the reactivation of the sector in terms of demand for construction materials and products from the manufacturing sector.

Finally, regarding housing construction, according to Camacol figures, more than 195,000 homes are expected to be sold in 2021, 7.5% more than in 2020.


Positive outlook for the Chemicals and Life Sciences chain

Another industry that presents excellent opportunities to supply local and regional markets is the production of medical supplies.

The growing demand of these products, expected to remain high throughout the pandemic, has increased the consumption of materials such as resin and polypropylene, which are produced in high quantities in Colombia.

It is also important to highlight that, for the health sector, important pharmaceutical companies developing studies on the fight against COVID-19 have chosen Colombia for research. According to the Colombian Association of Clinical Research Centers, there are 121 research centers in the country, and 366 clinical studies have been approved since 2014.

Colombia also has specialized production plants for chemically synthesized drugs with high quality standards and the capacity to manufacture a wide variety of pharmaceutical forms.

All these conditions will be essential for foreign companies seeking to relocate, in search of markets closer to their end customers. In the Americas, Colombia presents itself as an outstanding option, particularly for hand and body protection supplies, disposable examination gloves, vaccine-related supplies and surgical gloves.

In addition to the healthcare sector’s needs, in 2020, other possibilities for the chemicals and life sciences chain have emerged that will boost economic reactivation.

The plastics industry, for example, one of the industries that has been most touched by the pandemic, has benefited from the safety and security offered by this material, which customers prefer in their regular purchases packages.

Something similar has happened with certain cleaning products. Latin America leads the world in bleach sales with 35% of the global market, and sales are expected to grow even more in the region due to the pandemic, as it is a low-cost but effective multi-purpose product.