Invest in Colombia 2010 - Proexport

September 2010

AGENDA ¿Where are we coming from? ¿What are we doing? ¿Where are we going next?

Colombia’s Leadership…

Colombia ranks First in… • Emeralds Production • Variety of Palms (244 Species) • Production of Bamboo in America Second in… • The Biggest Coal Open Mine to Export of the World • Banana Production • The Most Important Gold Museum • Varity of Butterfly (300 Families and • Variety of Orchids (3500 Species) 14.000 Species) • Exotic Birds (1815 Species) • Flower Production • Frog Varieties (764 Species) • Blackberry Production • ˆ Quality of Coffee • ˆ Exporter of Flowers • Arabian Coffee exports • Exporter of Coal in Latin-American • Biodiversity per Km2

Outstanding performance of the Colombian economy

Colombia: A dynamic economy Colombia and world GDP growth (%) 2000 – 2010 8% 7.5% 6.8% 7% 6% 5.7% 5% 4.6% 4.7% 4.4% 4% 3.1% 3% 2.2% 2.5% 2.5% 2% 1% 0.4% 0% -1% -0.4% -2% -3% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2009 2010 (I Q) (I Q) Colombia World Source: DANE (National Accounts), EIU (Market Indicators & Forecasts) Note: * EIU forecast to the World and Latin Focus to Colombia Note: Last update July 12rd, 2010

FDI in Colombia is three times greater than nine years ago FDI, 2000 – I Q 2010 Main investors in Colombia US$ Million Stock 2000 – I Q 2010* 12,000 United States 10,252 10,564 10,000 • Stock US$ 11,251 M • Share 30.9% 8,000 7,201 6,656 Great Britain 6,000 • Stock US$ 4,491 M • Share 12.4% 4,000 2,134 2,230 2,037 Anguilla 2,000 • Stock US$ 3,051 M • Share 8.4% 0 Panama • Stock US$ 2,735 M • Share 7.5% Variation 2008 - 2009: -32% Variation I Q 2009 - I Q 2010: - 9% *Participation by country positive accumulated inflows, it doesn´t includes investment or reinvestment of profits in the oil sector. Value 2009: US$ 36,364 million •Source: Banco de la República (Balance of Payments)

In nine years Colombian exports tripled Exports, 2000 – July 2010 Colombian exports by country, 2009 US$ Million 40,000 37,626 United States 35,000 32,852 • US$ 12,879 M 30,000 • Share 39.2% 25,000 22,404 20,000 18,384 Venezuela 13,158 • US$ 4,050 M 15,000 • Share 12.3% 10,000 5,000 Netherlands 0 • US$ 1,345 M • Share 4.1% Ecuador • US$ 1,257 M • Share 3.8% Variation 2008-2009: -12,7% Variation Jan-Jul 2009 Vs Jan-Jul 2010: 22% Source: DANE (Departamento Nacional de Estadísticas)

In nine tears international visitors in Colombia doubled. While tourism in the world fell 4% in Colombia it increased 10.2% in 2009* Tourism, 2000 – July 2010 Internationals visitors in Colombia Thousand Visitors** by country 2009* 2,000 1,700 United States 1,600 • 314,870 Visitors • Share 23% 1,069 1,200 973 Venezuela 800 • 238,082 Visitors 732 668 • Share 18% 400 Ecuador 0 • 101,833 Visitors • Share 7.5% Spain • 77,922 Visitors • Share 6% Variation 2008–2009: 17,2% (includes cruise) Variation Jan-Jul 2009 Vs. Jan-Jul 2010: 10% (includes cruise) *No Includes cruise **Includes cruise Source: DAS (Departamento Administrativo de Seguridad)

During 2009, Colombia was one of the best economic performers in the region Exports FDI -12.7% Colombia -16% Chile -16.7% Peru -31% Peru -20.2% Chile -32% Colombia -20.6% Argentina -42% Brasil -21.2% Mexico -50% Argentina -22.7% Brazil -51% Mexico -35.9% Venezuela -990% Venezuela Tourism Colombia 10.7% Perú 3.9% Chile 1.9% Source: Official sources of each country, World Tourism Brasil -4.9% Organization, LatinFocus and EIU México* -6.7% Export: Variations in FOB between 2008 and 2009 FDI: Variation FDI flows between 2008 and 2009 Argentina* -13.1% Tourism: Variation number of foreign visitors between 2008 and 2009 (do not include cruise) Venezuela* -17.5% *Variation between January-August 2008 and Jan-August 2009

Violence levels are decreasing surprisingly

Homicide rate per 100 thousand inhabitants reduced to a half Homicides per 100.000 75 Inhabitants, 2000-2009 64.6 65.8 65 62.7 55 52.8 44.6 45 39.3 36.7 35.4 35 33.0 33.0 25 15 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Source: Ministry of Defense

Bogotá, safer than Washington, Atlanta and Miami Homicides per 100,000 Inhabitants 2008 120 107 100 80 60 40 40 29 17 18 18 19 20 21 22 20 10 3 4 5 0 Source: Bogotá Chamber of Commerce, based on information issued by AméricaEconomía Intelligence and the Bogotá Metropolitan Police; FBI

The best thing about Colombia is its human capital

We have the second most qualified labor available in the region Availability of Qualified Labor, 2009 World Chile 5.66 Country Ranking Colombia 5.49 29 Chile Argentina 5.04 32 Colombia Mexico 4.6 37 Argentina Brazil 4.58 45 Mexico Peru 3.92 46 Brazil 55 Peru Venezu… 2.67 57 Venezuela 0 1 2 3 4 5 6 Source: IMD World Competitiveness, 2009. Ranking among 57 countries.

Colombia is the country with the best quality education in science and mathematics in the region High Quality Education in Science and Mathematics in Latin America, 2009 World Country Ranking Colombia 3.56 39 Colombia Argentina 3.35 44 Argentina Venezuela 2.95 48 Venezuela Chile 2.91 49 Chile Brazil 2.71 51 Brazil Mexico 2.58 53 Mexico Peru 2.23 54 Peru 0 1 2 3 4 Source: IMD World Competitiveness, 2009. Ranking among 57 countries. World Economic Forum, Executive Opinion Survey 2008, 2009

Privileged geographical position

Just 3 hours from Miami and 5:45 hours from São Paulo 5:35 Nueva York 3:00 Miami Frec. 19 / Week Frec. 31 / Week 4:45 Ciudad De 1:20 Caracas México Frec. 47 / Week Frec. 14 / Week Since 2000, international flights to Colombia increased 120% 3:00 Lima Frec. 30 / Week 5:45 São Paulo Frec. 12 / Week 5:00 Santiago Frec. 7 / Week 6:15 Buenos Source: Proexport Aires Frec. 7 / Week

A country that protects the environment. In addition, environmental laws in Colombia does not affect the competitiveness of enterprises

Colombia is the tenth country in the world and the first in the region in protecting the environment Environmental Performance Index, 2010 World Country Ranking Colombia 76.8 Chile 73.3 10 Colombia Peru 69.3 16 Chile Mexico 67.3 31 Peru Brazil 63.4 43 Mexico Venezuela 62.9 62 Brasil Argentina 61 64 Venezuela 70 Argentina 0 20 40 60 80 100 Rating Source: Environmental Performance Index 2010, Yale University

¿Where are we coming from? ¿What are we doing? ¿Where are we going next?

In 2010, Colombia will be negotiating 12 free trade agreements (FTA) with 48 countries obtaining preferential access to over 1,500 million consumers In Force Signed In Negotiation Future IN FORCE SIGNED IN NEGOTIATION FUTURE • CAN (Peru, Ecuador y Bolivia) • • MERCOSUR (Argentina, Paraguay, Uruguay and Brazil) Chile •United Stated •European Union •Japan • • G2-Mexico North Triangle (Honduras, Guatemala y El Salvador) •EFTA •South Korea (Iceland, Liechtenstein, N •Panama orway and Switzerland) •Canada

In 2010, Colombia will be negotiating 22 international investment agreements (IIA) with 48 In Force Signed In Negotiation IN FORCE SIGNED IN NEGOTIATION • Peru (Agreement) • China (Agreement) • Kuwait, Japan, UAE, Germany and • Mexico (Agreement) • Belgium-Luxembourg (Agreement) France (the last two countries • Spain (Agreement) • India (Agreement) negotiations are suspended because the • Switzerland (Agreement) • United Kingdom (Agreement) implementation of the Lisbon agreement) • South Korea (Agreement) (Agreement) • CAN (Ecuador and Bolivia) (Chapter) • EFTA (Iceland, Liechtenstein and • Chile (Chapter) Norway) (Chapter) • European Union (Chapter) (excludes • North Triangle (Honduras, Guatemala • United States (Chapter) those countries with agreements) and El Salvador) (Chapter) • Canada (Chapter) Note: The International investment agreements (IIA) include Agreement Investment Treaties (BIT) (agreement) and Free Trade Agreements (FTA) with investment section (chapter).

In 2010, Colombia will be negotiating 16 double taxation agreements (DTA) with 18 countries In Force Signed In Negotiation IN FORCE SIGNED IN NEGOTIATION • CAN – Peru, Ecuador and • Switzerland • United Bolivia • Canada States, Germany, Czech • Spain • Mexico Republic, Holland, Belgium, In • Chile dia, South Korea, Japan, France and Venezuela (suspended)

Colombia: the most “Business Friendly” country in Latin America, according to the world bank (2010) Doing Business Ranking Variation, 2007-2010* World Country (Change in positions) Ranking (2010) 37 Colombia Colombia 42 Peru 9 49 Chile Panama 4 51 Mexico Mexico -8 56 Peru Brazil -8 Paraguay -12 77 Panama Venezuela -13 114 Uruguay Ecuador -15 118 Argentina Costa Rica -16 Argentina -17 121 Costa Rica Chile -21 Uruguay -50 124 Paraguay 129 Brazil -60 -40 -20 0 20 40 60 138 Ecuador Source: Top Reformers Report, World Bank *Positive figures show improvements in business environment 177 Venezuela

World Bank: Colombia is the Latin American country that most protects investors Strength of Investor Protection, 2010 Colombia 8.3 World Country Ranking (2010) Peru 6.7 5 Colombia Mexico 6.0 20 Peru Chile 6.0 41 Chile Brazil 5.3 41 Mexico 73 Brazil Panama 4.7 109 Argentin Argentina 4.7 a Venezuela 2.3 109 Panama 178 Venezuel 0 2 4 6 8 10 a Rating Ranking made up by 183 countries Source: Doing Business, 2010 (World Banck)

The most competitive FTZ’s in Latin America: 15% income tax and allows sales to the local market  15% income tax rate.  No import duties.  VAT exemption for goods sold from Colombia to FTZ  Benefit from international trade agreements. (Except Perú)  Allow sales to the local market. Permanent (PFTZ) Free Trade Zones Single-Company (SCFTZ)

New single company FTZ in twelve regions of the country Characteristics Putumayo, Cauca, Huila, Nariño, Caquetá, Boyacá, C esar, La Guajira, Norte de Santander, Arauca, Guainía and Vichada. • Equivalent requirements between the different types of Single Company Free Trade Zones. • 2 year limitation for the execution of 100% of the investment and employment commitments. • Application must be filed before the Tax Authorities (DIAN) prior to: December 30th, 2010 for Putumayo, Cauca, Huila, Nariño, Caquetá regions; December 31st, 2011 for Boyacá, Cesar, La Guajira, Norte de Santander, Arauca, Guainía and Vichada regions. Requirements Not all the municipalities in the regions Investment (approx.) and Direct Jobs bordering Venezuela are included. Refer to USD 1.29 Million 50 Decree 2555 of 2010. Ex/rate COP 2000 = US$ 1

81 Free Trade Zones Free Trade Zone Approved Single - Company Free Investment commitments Trade Zone Permanent Free Trade Total Investment (USD Zone 6.361 Million) Direct Jobs 45.926 Indirects Jobs 93.951 Investment executed so far Total Investment (USD 2.312 Million) Direct Jobs 5.509 Indirects Jobs 23.599 Source: Ministry of Trade, Industry and Tourism. The investment amounts required to obtain the Free Trade Zone status are calculated in Minimum Monthly Legal Wages (M.M.L.W). This information is presented in dollars using a US$1 = COP 2,000 exchange rate. For 2010, the M.M.L.W is COP 515.000. The M.M.L.W, as well as the exchange rate are subject to variations. 29

Colombia offers Legal Stability Contracts to guarantee investment projects Investments over US$1.84 million* (150.000 T.U)** Conditions Investor pays 1% premium based on the amount of the investment. 0.5% in unproductive periods Period From 3 to 20 years maximum Signed 70 legal stability contracts approved, 56 legal contracts stability contracts signed *The investment requirement is calculated with an exchange rate of COP $ 2000 = 1 USD. It is responsibility of the investor to calculate the investment requirement at the moment of submitting the application for the Legal Stability Agreement. ** One Tax Unit equivalent COP$ 24.555 or US$ 12,2

Other tax incentives  125% income tax deduction over investments in scientific and technological developments.  200% income tax deduction over salaries and social benefits paid to handicapped employees.

Other incentives by sector: Income tax exemption for up to 20 years • Exemption for 30 years for companies that build or Tourism restyle hotels before 2018. Eco-tourism • Exemption for 20 years starting from 2003. • Exemption for 10 years after the start of production in Late yield crops crops planted between 2003 and 2013. • Permanent exemption for investment in new forest Forestry plantations, sawmilling and timber plantations. • Publishing of books, magazines, booklets or collections Editorial of scientific or cultural characteristics are exempt until 2013. • Exemption for 10 years for products manufactured in New medicinal Colombia with high scientific and technological products and software research content, starting from 2003.c Renewable • Exemption for 15 years for sale (by the generators) of electricity based on wind resources, biomass or energy agricultural waste. • Exemption for 15 years starting from 2003 to provide River transport services in slabs and boats with net weight below 25 tons.

¿Where are we coming from? ¿What are we doing? ¿Where are we going next?

Potential World Class Sectors Productive Transformation Program “Government - Private sector" Encourage and improve production of Promote development of competitive products & services NEW & EMERGING ESTABLISHED SECTORES SECTORS 37

The business plans include initiatives along four key topics... HUMAN RESOURCE DEVELOPMENT Pertinence, improved skills, readiness and retention in buscar the industry. Bilingualism and promotion of university- industry partnerships... LEGAL AFFAIRS & REGULATION Adapt the regulatory framework to suit the industry’s needs. INDUSTRY AFFAIRS Put in place strategies to: attract foreign ACTION PLAN investment ,strengthen sector representation, bolster management capabilities . INFRAESTRUCTURE Ensuring adequate infrastructure is in 184 place to suit industry’s needs. Initiatives

By 2019, these world-class sectors will multiply their 2008 revenues by 3,4 times and their exports by 7,7 2032 2019 TODAY 2012 313.000 773.100 1.112.600 1.988.700 Jobs 2,5 X 3,6 X 6,4 X 20.126 39.670 69.100 215.800 Total sales US$ Millions 2,0 X 3,4 X 10,7 X Exports 4.397 18.090 34.023 126.462 US$ Millions 4,1 X 7,7 X 28,8 X

Concluding remarks In the last few years, Colombia has experienced a marked improvement in its macroeconomic performance, internal security and stability for businesses. As a result social indicators have improved dramatically.

Concluding remarks Colombia has achieved a solid structural growth, based on an increase in the investment rate and higher productivity levels

Concluding remarks The country has guaranteed its external funding for 2009 trough multilateral institutions such as IADB, WB and CAF.

Concluding remarks Colombia is aggressively negotiating trade and investment agreements expanding its markets and becoming more attractive to investors.

Concluding remarks The Colombian Government is committed to generating the most favorable conditions for domestic and foreign investment instruments such as the free-trade zones regime and legal stability contracts.

www.inviertaencolombia.com.co · www.colombiaespasion.com · www.mincomercio.gov.co

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Invest in Colombia 2010 - Proexport

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