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Colombia


Total Workforce Size: 20 million

English Proficiency: Very Low

GNI Per Capita: $4,610

S&P’s Currency Risk Rating: BBB+

Regional Wage Savings Rank: 7 / 19

Cultural Compatibility Rank: 4 / 19

Technological Readiness: 7 / 19

Ease of Doing Business Rank: 39 / 183

Economist’s 2010 Democracy Index: 57 / 167                                                        Flawed Democracy

Selected as one of 8 LATAM countries to make the Gartner Top 30 Offshore Services Destinations

Colombia continues to rise as a BPO contender as the security situation improves. The government offers incentives for offshoring such as Zona Franca Bogota, Bogota’s free trade zone which reduces tax breaks from over 30% down to 15% and eliminates VAT requirements on imports. The government also developed initiatives that emphasize the importance of English language skills to the outsourcing industry with mandatory foreign language training with graduate courses and a number of programs to increase English training across the education system. While the English language skills are growing, it is difficult to communicate socially in English, so project managers should be fluent in Spanish to be effective leaders.  Also, the ITO and BPO operations are less mature than those in neighboring nations, so outsourcing in the area will require dedicated investments in ongoing training and process discipline.  

LINKS

OSAC 2011 Crime and Safety Report

Looking Forward: Top Nearshoring Trends for 2012


When Patrick Haller from Nearshore Americas asked ThinkSolutions for insight into how the nearshoring space will evolve in the next year, here's what we had to say:

Nearshoring Trends for 2012

1. India’s total cost of outsourcing (TCO) continues to increase and the advantage gap over Nearshoring continues to close especially due to inflation and attrition differences. 
2. Remote sourcing from LatAm, such as remote monitoring, will increase as technology continues to support it and India TCO rises.
3. There will be an added impact of the recent Free Trade Agreements (FTA) that improve upon the WTO’s General Agreement for Trade in Services, especially in Colombia.
4. Brazil will struggle to increase export of services due to internal demand from domestic growth as well as attention in preparation for the Olympics and other events.
5. Colombia will have an increased profile, a growing economy, free trade, improving security and stability.
6. Crime in Mexico will stabilize due to increased government pressure and US attention but will remain problematic in localized areas.
7. Small and mid-size US companies will exploit the advantages of Nearshoring.
8. There will be a trend towards consolidation of smaller LatAm IT firms into medium and larger firms to meet the needs of US based clients.
9. More firms will seek out LatAm for shared service centers as an alternative to offshore locations.
10. Indian firms will continue to expand into the LatAm region as global IT delivery strategies more frequently include Latin America.

Congress Approves Trade Agreements with Panama,
Colombia, and South Korea

October 13, 2011 
 The U.S. Congress approved trade agreements with South Korea, Colombia, and Panama 
in what creates the largest opportunity for exporters in decades.  This ends any fears that actions of the US government leaned toward protectionism, and the bills passed in light of opposition that these agreements will lead to job losses. 

The Colombia bill faced the most Democratic opposition, on the grounds that Colombia did little to protect union leaders from assassination.  According to Senator Sherrod Brown of Ohio, Colombia is the most dangerous place in the world for trade unionists.  Indeed, the Nation Union School, a labor rights organization in Medellin, reported that 51 union members were killed last year, an increase from 47 in 2009.   Under the agreement, over 80 percent of U.S. exports will become duty free immediately, and remaining tariffs will be phased out over the next ten years.  Key U.S. exports will gain immediate duty-free access to Colombia, including information technology equipment.

Last year, the U.S. exported $6 billion worth of goods to Panama and imported minimally from the country, but the new trade agreement will make it easier for the U.S. to compete for contracts in Panama's $5.25 billion expansion of the canal.  The FTA guarantees access to Panama's $20.6 billion services market, including priority areas such as financial, telecommunications, computer, distribution, express delivery, energy, environmental, and professional services.  Phasing out tariffs on imports and exports will benefit farmers in numerous ways, but will also allow for the duty-free export of information technology equipment.


Read the facts of the FTAs: Colombia, Panama

Bogotá Losing Competitiveness in IT Industry



Due to the recent lack of investment in the IT sector, Bogotá is no longer as competitive as other cities in Latin America.  Colombia's ICT minister, Diego Molano, said that the city has dropped from 5th place to 9th in competitveness among Colombian cities alone, and this lack of competitiveness has caused the Bogotá's internet penetration rate to drop to 12.78%.  Colombia as a whole demonstrates a weakness in internet penetration.  To compare, internet penetration is 63.5% in Buenos Aires, Argentina, 48% in Santiago, Chile, and 29% in Lima, Peru.  Molano calls for increased IT investment, which will in turn increase competitveness, create jobs, and reduce poverty.

Ankur Prakash Discusses TCS Latin America

As part of the Thought Leaders in Cloud Computing Series, Ankur Prakash, VP and COO of Tata Consulting Services Latin America, gives insight into the Latin American outsourcing market. To give a background on TCS Latin America, they began operations in Mexico City in 2003, and have since expanded into Ecuador, Colombia, Peru, Chile, Argentina. Brazil, and Uruguay.


Prakash gives his take on the talent in Latin America, the strategy behind seeking first tier cities, and recriuting from the Latin American labor pool.  When asked about the cost advantage of the region, he replied, "As for the Latin American cost advantage, cost arbitrage, I don’t think that any company that works just on cost arbitrage in Latin America can provide any kind of value additional and advantage to local customers."  He also explains that because of the vastly different economies that exist in the region, it is difficult to generalize on cost savings.  Indeed, companies will find most regional generalizations unhelpful when examining Latin America.


Read the full interview here.


Colombian Free Trade Agreement

In the 2010 "Doing Business Report", Colombia was ranked as the most business-friendly country in Latin America.  One of the ways that Colombia's government promotes business is the establishment of free trade zones. 


The following are the most relevant Free Trade Zone Benefits:

1. A single 15% income tax rate
2. The declaration granting FTZ status is valid for maximum 30 years, renewable for another equal term.
3. Goods introduced from the rest of the world into a FTZ (i.e. capital goods) do not accrue VAT or custom duties.
4. Goods exported from a FTZ benefit from the Trade Agreements signed by Colombia.(Except Peru)
5. Raw materials, parts and inputs sold from a national customs territory to FTZ users will be VAT exempt.
6. Exports may be made from the FTZ to the rest of the national customs territory.
7. Possibility of partial processing outside the FTZ for a period of up to six months.
8. Quick and simplified customs procedures.






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