The Colombian Opportunity
Recently, we have been spending time in Bogotá on a client assignment. A mere 3:40 hours from Miami and 6 hours from New York by air, Bogotá is the third-highest capital city in the world at 2,700 meters of altitude.
During our first visit, we walked around Casa de Nariño, the Presidential Palace where President Uribe officially resides. We talked with entrepreneurs, professionals, taxi drivers and bankers, ate out several times, walked the crowded aisles of shopping malls, and observed the economic and social activity of this busy city of 7 million people. Back in New York, my colleague Marko Turcinov and I spent time researching for and writing the “information memorandum” describing our client, a leading online advertising technology company in the region, and the opportunity to invest in the Colombian market.
Comeback Story
Considered a failed nation state by many during the 1990s and 2000s, Colombia now exhibits some attractive characteristics for foreign investment. The country experienced accelerated growth between 2002 and 2008, chiefly due to advancements in domestic security, rising commodity prices, and promarket economic policies. Foreign investment in Colombia has historically centered on the country’s abundant natural resources and agricultural sector. During 2008, $10.6 billion came into the country. International companies including SAB Miller, Drummond, Votorantim, Phillip Morris, GE Money were among the many to invest in multimillion dollar projects.
Foreign Investment in IT and BPO Sectors
Industry analysts have observed, more recently, an increase in direct investments in Colombia’s Telecom, Media and Information Technology sectors. An interview we found here quoted a Frost & Sullivan analyst as saying that Colombia's overall IT services market is set to increase 17% this year, with some of the most sought-after IT services including infrastructure outsourcing and IT security. In particular, the growth of the business process outsourcing (BPO) sector in Colombia, with exports that totaled 650 million dollars in 2009, has made foreign companies look at the country as a good investment option in which to expand their businesses. In fact, the Shared Services & Outsourcing Summit recently brought together Colombian and international companies that are providers and users of BPO services to encourage business deals. CapGemini and two Spanish BPOs are expected to make some announcements in the near future, according to an article published by newspaper La República in February 2010.
TMT Infrastructure and Internet Usage
Telephony and Internet trends also show interesting dynamics with 7 million fixed lines and 42 million cellular phones (see here), and 20 million Internet users. Mobile Internet usage grew 45% year over year in 2009. The Cisco Broadband Barometer reported a 51 percent growth in the number of fixed broadband connections in Colombia during 2008. The growth can be attributed to service providers' investment in infrastructure and an increase in computer penetration. The growth in broadband penetration was led by the home market segment, 80 percent of total connections. Techcrunchies reported here that Colombia ranks 10th globally in terms of numbers of hours per week spent on online social networks.
Colombia has made enormous progress in the last decade and is diversifying away from a natural resources and commodities dependent economy. Knowledge based companies are starting to flourish in the country, as more Colombians become more technologically inclined and enjoy the benefits associated with a more robust Telecom and Internet infrastructure.
GroupArgent looks forward to helping Colombian IT and Internet entrepreneurial corporations attract value-added investors and strategic partners in the next years.