Clean Technologies Sector - Proexport

Colombia: Destination of Clean Technologies May 2009

Content • Where are we coming from? • What are we doing? • Overview: Investment in Clean Technologies in the World and Latin America • Why Colombia is attractive for developing Clean Technology Projects? • Because of its natural resources. • Because of its Environmental investment backlog. • Because of its Market access and Strategic location • Because of its Legal Incentives 9. Conclusions

The country has been growing steadier and faster than the Latin American average GDP Growth: Colombia (2000 – 2008) % 2009 2010 Forecasts Col L.A. Col L.A. President Latin Focus 2.1 1.1 3.0 2.9 Uribe EIU -3.0 -1.2 1.5 1.7 IMF 3.5 3.2 5.0 4.1 Source: DANE (National Accounts), DNP, EIU (Market Indicators & Forecasts) Note: * Last update April 7th, 2009 4

933 Striking performance in FDI, Exports and foreign visitors US Million President Exports 2002/2008 Increases Uribe 214% US Million FDI 395% Million of visitors Tourism 120% Source: DNP, Central Bank (Banco de la República) Note: * Forecast (pr) Preliminary 5

Important results in social indicators President Uribe Unemployment Rate fell by 4.2 points. 02/08 Poverty fell by 13 points Income Distribution GINI (0= equitable distribution; 1=high concentration of income) Source: DNP, Estimates MERPD- ENH and ECH Note: * Average January- February 6

Market Confidence: recovering our investment grade (soon) Debt in Foreign Currency Risk Analysis Agency 2003 2008 Outlook STANDARD BB BB+ & POOR’S Moody’s Ba2 Ba1 Fitch BB BB+ Source: Standard & Poor’s, Moody’s, Fitch 7

Security has improved along with sustained economic growth The recipe is simple: Democratic Security = Confidence = Investment = Growth March 22 de 2007 In 2008 -Investment as proportion of GDP went to 30% - GDP grew 3,5% - Murders continue to go down 8

Three main Colombian´s cities safer than Washington D.C. Homicides per 100.000 inhabitants per year 2007 Source:Crime Observatories 9

Market Confidence 10

Trade agenda: Preferential access to 1.2 billion consumers From preferential access to 233 million consumers in 2002 to access to 1,200 million consumers in 2010 2002 2010 12

Investment Agreement Agenda: 19 BIT´s with 42 countries, and 21 DAT´s with 23 countries Double Taxation Agreements (DTA) – Investment Agreements (BIT) Both instruments will be available to all commercial partners 2002 2010 13

Second most “business friendly” country in Latin America Doing Business 2007-2009 Two years in a row as the first reformer in Latin America (2009) Country Ranking Ranking 2007 2009 Chile 28 40 Colombia 79 53 México 43 56 Colombia Perú 65 62 improved 26 El Salvador 71 72 positions Panamá 81 81 in two República Dominicana 117 97 years! Argentina 101 113 Costa Rica 105 117 Brazil 121 125 Ecuador 123 136 Venezuela 164 174 Source: Top reformers report. World Bank 14

Increasing investment projects on Environmental Technologies Worldwide The world environmental needs have created the demand of this environmental technologies. During the last 5 years, investment growth of this projects has been aprox. 834%. Investment Projects and New Employment in Clean Technologies (2003-2009) New Employment Generated Source: FDI Markets

The main Sources of Investment are Developed Countries Investment projects in clean technologies had come from US, Europe and Japan mainly. Source of Investment Projects by Country 21% 39% 13% 1.916 Projects 9% 5% 7% 6% Estados Unidos Alemania España Reino Unido Francia Japón Otros Source: FDI Markets

Renewable Energy Leads the activities of MDL Projects More than ¾ of the new projects have the intention to develop renewable Energy and secondly the idea of manipulating and eliminating residues Distribution of activities from the registered projects (MDL) 2008 Energy Industries (Renawable - Non renawable) 6% 5% Waste Managment 5% 7% Emisiones fugitivas de combustibles (sólidos, petróleo y gas) u Agriculture 59% 18% Manufacturing Industries Other Source: United Nations Framework Convention on Climate Change (UNFCCC)

LATAM has become the new destination of MDL Projects With the new MDL registered projects, LATAM is starting to be one of the main actors as investment destination of this type of projects. Destiny MDL Projects MDL Projects Big Scale(56,47%) MDL Project Small Scale (45,53%) Source: United Nations Framework Convention on Climate Change (UNFCCC)

The investment in this kind of technology has grown 221% During the last 6 years investment projects have grown 221%, generating 9.418 direct employees in 2008 . Investment projects and Employees in Clean technologies LATAM (2003-2009) Employees Generated * Datos a primer trimestre de 2009 Fuente: Corporación Regional del Alto Magdalena

Latin America, the Second Region with more market share in MDL Projects In the new registered MDL projects, Latin America is the second region and Colombia is the fifth destination country within LATAM MDL Registered Projects by Country MDL Projects by Region (2008) (2008) Total Projects: 1390 Source: United Nations Framework Convention on Climate Change (UNFCCC)

Developed Countries are Investing in LATAM Spain and United States are the main countries which are developing Clean Technology Projects in LATAM Investment Project by source country in LATAM (2003-2009) 21% 26% 4% 5% 5% 7% 22% 10% España Estados Unidos Francia Japón Canada Alemania India Otros Source: FDI Markets

Colombia is the fourth Receiver Country of Green Field Projects in LATAM In terms of size of projects we are the Fourth LATAM country receiving Direct Foreign Investment Greenfield Investment in Clean Technologies in LATAM (2003-2008) Generated Investment AmountUS$ Number of Investment greenfield Country Employees 2003-2008 projects 2003-2008 Brazil 7.840.210.000 8.033 34 Chile 5.903.130.000 7.458 16 Mexico 5.881.050.000 5.535 21 Colombia 1.204.000.000 6.293 4 Peru 1.001.000.000 1.098 9 Dominican Republic 987.600.000 832 6 Panama 633.800.000 169 3 Argentina 565.700.000 1.075 9 Ecuador 320.000.000 64 1 Guadalupe 267.000.000 50 1 Uruguay 171.700.000 186 3 El Salvador 119.300.000 163 1 Source: FDI Markets

Colombia not only has opportunities in renewable energies Alternative/Renewable Colombia energy 100% Br a Peru zil e Chil

1. Biodiversity Colombia: world's leader in biodiversity. Colombia is the most biodiversity country per KM2 around the world Protection to Intellectual Property Rights Score/10 4,50 4,31 3,54 2,88 2,58 Colombia Brasil Peru Argentina Mexico Source: Earth Trends and IMD, World Competitiveness Year Book, 2008

2. Biofuels is a Growing Attractive Sector 28

2.Biofuels Colombia has more than 6 million hectares of available land to develop large scale projects This land does not compromise Colombia’s rainforests or other ecological reserves.. Zones with high Zones with high potential potential for for the production of palm ethanol production oil

Colombia’s sugar industry is the most productive worldwide and the palm oil industry is the most productive in the region Colombia surpasses Brazil’s and Ecuador’s sugar productivity levels by 50% and 55% respectively. The sugar industry in Colombia is a world leader in productivity being able to produce 9,000 liters of ethanol per year/ha.

Income Tax Exemption for 10 years: Colombia offers an Income Tax exemption for new late yield crops, like African palm, planted between 2003 and 2013. These plantations will have a 0% income tax rate for 10 years form the moment they are planted Palma Africana Cultivo de Palma Africana

3. Electric Power Potential 32

3. Hydro-Energy Potential Hydroelectric Potential Colombia ranks 33th in world Higher ranking of access to water and Upper-medium second in L.A. Lower -medium Low Lowest  742,725 watersheds Flow of 52,075 m3 /seg per year Annual rainfall :3,000 mm Precipitation of 1,313 km3 Yield: 58 lt/seg/ km2 Source: Sistema de Información de Eficiencia Energética y Energías Alternativas 33

3: Solar-Energy Potential Map of Global Solar Radiation Average multi-anual Colombia has a great opportunity to generate clean energy for its geographical position and diverse climatic conditions. Average daily of 4.5 Kwh/m2. Solar Energy [ Kwh/m2/year ] Guajira 2.190 Costa Atlántica 1.825 Orinoquia 1.643 Amazonia 1.551 Andina 1.643 Costa Pacífica 1.278 Source: Atlas de Radiación Solar de Colombia 34

3: Thermal- Energy Potential More than 300 hot springs deposits Stock of Hot Springs in Colombia Map of Potential Geothermal Parameters N° Location Temperature Thermal Areas 298 Cundinamarca - Boyaca >200 150-200 Chemical 178 Nevado del 240-260 C° 130-150 100-130 Characterization Ruíz 90-100 80-90 Water neutral 17 Purace 220 C° 70-80 60-70 colors 50-60 40-50 Bicarbonate 102 Doña Juana 200 C° 10-40 <10 Sulphate 37 Azufral 230 – 250 C° Parameters N° Surface Maximum Temperature Temperature Sulphated waters 24 30-50°C 115 Presumption of magnetic 6 50-70°C 43 contribution Presumption of deep fluid 29 70-95°C 15 contribution Source: Utilización de la Energía Geotérmica – UPM 35

3: Wind- Energy Average wind speed at surface More than 7 regions showed wind intensities equal or greater than 5 m/seg throughout the year  Potential of wind power: Peninsula de La Guajira, San Andres Island, Boyacá and central sectors of the Caribbean Coast  16 sites to use the wind Resource Source: Atlas de Viento y energía eólica de Colombia 36

4. Forestry 37

Three Potential Regions for Forestry Development in Colombia Caribbean and Upper Magdalena: Altitudes 300-2500 ft Species: Teak, Melina, Ceiba, Acacia and Eje Cafetero and South Eucalyptus West Region: Altitudes 3500–7000 ft Species: Nogal, Eucalyptus and Pine. Priority Orinoquia Region: Departments Altitudes 300 – 1600 ft Municipal Species: Eucalyptus and Districts with the largest planted Pine. area Pacific Ocean Source: MADR

The Industry is Only Using 1.5% of the Forestry Potential in Colombia Colombia has 17 million hectares (42 million acres) with soil suited for forests, but today 1.5% of that potential (253.066 hectares – 625.326 acres) is in use. Source: CONIF.- MADR

Less than 5% of 1044 municipalities of the country treat their sewage Just two major Colombian cities are developing projects for sewage treatment waters. City Emission CO2 (Ton) # Potential (USD) Reduction Reductions years annually Cali 55.493 388.451 7 554.930 Bucaramanga 28.226 197.580 7 282.257

Colombia with a production exceeding the 16,000 ton / day of solid wastes The country produces around 16,999 tons of solid wastes daily. The principal cities produce around 10.093 tons per day. Bogota, Medellin, Cali and Bucaramanga produce 59.4% from the Colombian total wastes. Source: IDEAM

Our principal solid wastes are plastics and Organic Material • The principal components from the solid wastes are materials which mostly applies in clean technologies. Bogotá Medellín Barranquilla Cali COMPONENTS % % % % Paper 19.0 17.5 11.0 7.6 Glass 4.3 4.6 1.7 0.7 Metal 2,2 2.6 4.1 0.7 Plastics 13.4 10.3 14.4 2.4 Leather 2.2 0.4 1.5 19.9 Wood 2.3 3.3 2.4 1.7 Textile 3.5 52.3 1.1 7.9 Organic Material 52.3 2.9 60.4 52.4 Others 0.9 6.1 3.5 6.8 Source: Javeriana University, Enviornmental Department 2008

Colombia has a strategic location for international patients 5:30 New York 3:00 Miami 4:30 Mexico City 1:40 Caracas Bogotá, only 3 hours of 2:30 Lima flight to Miami and 5 hours to São Paulo and New York City 5:45 São Paulo 5:00 Santiago 6:10 Buenos Aires 45

One of the most competitive Workforce in the Region. Competitive Workforce Avaliable Puntaje/10 6.28 5.79 4.72 4.41 3.58 3.52 Colombia Chile México Brasil Argentina Venezuela Competitive Senior Manager 6.89 Score/10 5.08 4.94 4.26 4.13 2.48 Chile Brasil Colombia México Argentina Venezuela Fuente: IMD, World Competitiviness Year Book, 2008

Colombia with one of the best high education levels in Latin America Faculties in the TOP 100 universities in Latin America Faculties of Electronic Engineering 8 5 5 5 4 1 México Colombia Chile Brasil Argentina Venezuela Faculties of Industrial Engineering 11 7 5 4 0 0 México Chile Colombia Argentina Brasil Venezuela Fuente: Top 100 de América Latina – Shangai http://www.webometrics.info/top100_continent_es.asp?cont=latin_america

Human Resources: The best asset of Colombia Managers Credibility Entrepreneurship of managers (0= weak; 10= strong) (0= weak; 10= strong) 6 Chile 6,95 11 Colombia 6,39 10 Colombia 6,75 16 Chile 6,26 22 Brasil 6,4 21 Brasil 6,09 36 Venezuela 5,44 28 Argentina 5,79 39 Mexico 5,33 46 Venezuela 5,2 42 Argentina 4,72 54 Mexico 4,4 Ranking (55 países) Source: The World Competitiveness Yearbook 2008-IMD

Almost 50,000 Engineers graduated (2001- 2007) 26,111 27,693 22,461 17,964 13,513 13,925 12,712 10,540 8,605 8,353 7,842 7,895 6,671 5,526 5,044 4,097 3,482 1,426 3,722 2,497 1,182 2001 2002 2003 2004 2005 2006 2007 Ingenieros Industriales Ingenieros Electrónicos Ingenieros Mecánicos Source: Ministry of Education

The most competitive FTZ’s in Latin America: 15% income tax and allows sales to the local market Goods 15% income tax Investment in million And Direct Jobs US$ 29.81 150 No import duties Services No VAT tax Investment in million And Direct Jobs US$ 1.99 – 9.14 500 Benefit from international agreements Agrobusiness Biofuels investment or Can also sell in domestic market employment Investment in million Or Direct Jobs US$ 14.91 500 51

56 Free Trade Zones Number of Approved Free Trade Zones New FTZs in Figures Total new Investment (USD 4,668 Million) Total new Direct Jobs 39,620 52

Colombia offers legal stability contracts to guarantee investment projects. Investments over USD 1,500,000 Conditions Investor pays 1% premium based on the amount of the investment. Period Up to 20 years maximum. Contracts 41 legal stability contracts, approved February 2009 53

Income Tax Exemption for 10 years: Colombia offers an Income Tax exemption for new late yield crops, like African palm, planted between 2003 and 2013. These plantations will have a 0% income tax rate for 10 years form the moment they are planted Palma Africana Cultivo de Palma Africana

Legal Stability Agreements for up to 20 years • Colombia offers investors the opportunity to sign a Legal Stability Agreement for a period of up to 20 years. This mechanism allows the investor to insure that the laws and their interpretation will be applicable from the moment they sign the contract for up to 20 years Guarantees legislation and current Objective administrative interpretation of that legislation Minimum investment requirement of USD Requirements 1,690,000. Payment of a premium equivalent to 1% of the investment made Term Up to 20 years

The Colombian environmental legislation allows the competitiveness of companies. Environmental Laws Index (2008) The accomplishment of environmental laws doesn't hinder the competitiveness from companies Source: The World Competitiveness Yearbook 2008

Content • Where are we coming from? • What are we doing? • Overview: Investment in Clean Technologies in the World and Latin America • Why Colombia is attractive for developing Clean Technology Porjects? • Because of its natural resources. • Because of its Environmental investment backlog. • Because of its Market access and Strategic location • Because of its Legal Incentives 9. Conclusions

Conclusions  The sources of investment in clean technology projects are developed countries  Asia and Latin America are becoming the main destination for these investment projects  Colombia has a high potential in the renewable energy of all types  Colombia has the need (market) for clean technologies in wastewater treatment and solid waste treatment  Companies and laws that allow the development of such technologies.

Clean Technologies Sector - Proexport

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