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A Top Export Prospect for Colombia

Market Estimates

Colombia’s IT Market Overview

The Information Technologies (IT) sector presents numerous opportunities for those U.S. companies, willing and able to offer the products and services that Colombia needs to move to the forefront in terms of connectivity, IT services penetration, and even basic access to infrastructure and hardware. The Colombian Government would like their country to be at the forefront of IT, but as international rankings in the table below show, Colombia still has a long way to go both at the regional and global level in that regard.

WEF Network Readiness Index:   

 No. 73 / 142 countries.  

6th in region.

The Economist:        

No. 50 / 70 countries

3rd in region.

Doing Business:           

 No. 42 / 183 countries

3rd in region.

Source: Comisión de Regulación de Comunicaciones (CRC), ITC Industry Report.

Estimates regarding the size of the IT market in Colombia vary considerably by source, with figures ranging from USD 3 billion to over USD 7.6 billion by the end of 2011. For example, Colombia’s export promotion agency, Proexport, uses figures by IDC, the global market intelligence firm, to report on the country’s IT trends:

Source: ProExport graph, using IDC 2012 data-

However, in spite of the diverging concrete figures, all sources point to an upward trend for Colombia’s IT sector as a whole. This is closely associated to the vibrant growth of the Colombian economy, as well as to the effective public policies implemented by their Ministry of Information Technologies and Communications (MinTIC).

IDC’s figures show that Colombia’s IT sector revenues in 2011 were 4 times those of 2003, having grown at an average rate of 20% year-over-year (y-o-y). Pyramid Research estimates that the IT market closed 2011 at USD 7.6 billion by revenue.

Source: ProExport, using IDC 2012 data-

In terms of specific IT subsectors, it is possible to perceive how Colombia’s market continues to be concentrated mostly on hardware. While by 2011 software and services grew in revenues over 3 times their 2003 levels, hardware continues to make up more than 50% of total revenues, with over USD 3.5 billion in 2011.

IT services rank second, having shown a steady growth in revenues over the last 8 years to surpass USD 1.8 billion in 2011, made up by outsourcing (40%), deployment and support (26%), integration and development (20%), consulting (11%) and education and entertainment.

According to IDC figures, software revenues in 2011 stood at USD 698 million and held a share of 11% of Colombia’s IT market. Software revenues in 2011 can be further broken down into software operating systems (53%), security software (18%), systems and network management software (18%), and storage software (11%).

Local production in the IT sector consists of computer hardware assembly, repair, software development, and an expanding offer of IT services. These developments have helped the IT sector in Colombia become the third largest in Latin America in relation to per capita GDP, with approximately 3,000 companies operating in the sector (mostly retailers and distributors), and employing more than 32,000 people.

Source: Calculations by Commercial Service from ProExport presentation using IDC 2012 data-

Colombian International Trade in IT Equipment

In terms of international trade in IT equipment (Harmonized System Code- HS8471), Global Trade Atlas figures indicate that Colombia’s total imports in 2011 amounted to USD 1.36 billion, a 15% growth compared to 2010. Of this total, 57% of imports ( USD 780 million) came from China, followed by Mexico with 15% ( USD 205 million), and the United States with 12% (USD 157 million). It is worth noting how the value of Colombia’s IT imports from the U.S. has remained steady, leading to a drop in market share in comparison to China and Mexico.

Source: Graph by Commercial Service with Global Trade Atlas data.

Colombia’s IT exports to the world amounted to USD 3.8 billion in 2011, of which 44% went to the U.S., followed by Perú with 9%, the Netherlands with 8%, and Panamá and Ecuador with 7% each.

Since the FTA between Colombia and the U.S. went into effect in May of 2012, the slide in the U.S. market share of Colombia’s IT imports endured, at the same time that China’s advantage continued to increase. The latter is explained by the fact that not only do international and U.S. manufacturers have their production facilities there, but also as Chinese companies continue to expand aggressively in Latin America, through now familiar brands such as Huawei and Lenovo.

Nevertheless, as the IT market (computers, software, components, and related services) in Colombia is expected to continue growing well above GDP rates, there are good prospects for U.S. companies to take advantage of the benefits derived from the U.S.-Colombia Trade Promotion Agreement and reverse this trend.

This agreement not only locks in tariff reductions for a large number of U.S. IT goods, but it also creates a stable framework to do business, it establishes dispute resolution mechanisms, and provides tangible benefits such as U.S. companies getting the same treatment as Colombian ones in public procurement processes, where interesting opportunities lie in the short and medium term.

Colombian Government Policies on IT

A considerable share of the growth of the IT sector in Colombia during the past years is closely associated with various major public policy initiatives, many of which have been pushed by the MinTIC in general, and by the current Minister of Information Technology and Communications, Diego Molano Vega, in particular. The plans and reforms that have been passed served and are expected to fuel the growth of the IT and telecommunications sector over the next few years.

In particular, MinTIC’s Vive Digital program, which is Colombia’s technology plan for the 2010-2014 period, was crafted to increase the country’s internet penetration, reduce unemployment, and raise technology appropriation and overall competitiveness.

The three pillars of this four year program include: multiplying the number of internet connections to 8.8 million (x4); increasing to 700 the number of municipalities connected to the information highway (x3, reaching 63% of the total); and connecting to the internet 50% of Colombian homes and ‘small and medium companies- SMEs’ (from a 27% and 7% baseline, respectively). A large part of the contracts to achieve these goals have already been awarded, but ongoing fulfillment of the contracts and outstanding bid processes over the next two present interesting opportunities for U.S. companies.

From 2010 through 2014, the Vive Digital program contemplates investments of approximately USD 3.1 billion, aimed at strengthening and activating IT supply (infrastructure and services) and demand (users and applications). Of this budget, U.S.$ 1.8 billion will be executed by MinTIC, while the remaining U.S. 1.3 billion will be at the head of various other ministries and public institutions.

Over the first two years of the program (2010-2011), Vive Digital provided internet connectivity to 5.5 million people; increased the number of municipalities with optic fiber connections from 200 to 325 (96% of physical territorial coverage); and raised the share of connected homes (from 17% to 32%) and SMEs (from 7% to 15%).

This improvement in infrastructure and connectivity is expected to sustain the growth in demand for hardware, software and IT services. Furthermore, with concrete mechanisms such as the SME Technological Modernization fund, set up by MinTIC and executed by government-run Bancoldex, local companies can tap resources of over USD 16.5 million dollars to invest in IT services and infrastructure modernization.

Another major factor that will have a positive effect on IT sector growth in Colombia has to do with major tax reforms passed over the last few years. Most recently, legislation approved in December of 2012 contemplates VAT exemption for desktops and laptops under approximately USD 1,186 (82UVT = COP$2,136,018 in 2012); intelligent mobile devices under approximately USD 622 (43UVT= COP$1,120,000 in 2012); as well as internet services for lower income households (“estratos” 1 and 2).

Previous legislation had already achieved income tax exemption for software development companies based in Colombia; as well as a general tariff reduction from 5% to 0% for all devices with internet connectivity (laptops, tablets, and smartphones). Most recently, decree 2499 of 2012 reduced withholding tax from 11 percent to 3.5 percent for locally based companies involved in software development, website design, software consulting services, licensing services and software usage rights. Thanks to the U.S.-Colombia free trade agreement and the national treatment provisions, U.S. companies should be subject to these same benefits.

It is worth mentioning one last Government initiative fostering IT growth in Colombia, which is the Productive Transformation Program, crafted by the Ministry of Trade and executed by government-run Bancoldex. Under this program, the Colombian government seeks to take various sectors to world-class status, including Business Process Outsourcing and Software Development.

For the BPO sector, Colombia has sought to attract the establishment of Call Centers within its territory by offering attractive investment conditions and strengthening human capital, particularly in language skills. It has also sought to become more attractive in Knowledge Process Outsourcing, Information Technology Outsourcing and Added-Value Services.

In the last couple of years, Colombia has been successful in attracting large multinationals such as HP, Unisys, and Teleperformance, who have established large data and call center facilities throughout the country. These operations, which require large investments in computers, servers, software and components, are expected to continue as policymakers at the local and national level remain adamant about consolidating BPO as a driver of economic growth and employment in Colombia.

As progress is made on all these fronts, interesting opportunities will emerge for U.S. companies capable of identifying emerging demand for more sophisticated products and services from local and foreign companies operating in in these sectors Colombia.

Best Prospects/Services Return to top

Best prospects for:

1. Cloud Computing and Virtualization: Infrastructure as a service (IaaS); Platform as a service (PaaS); Software as a service (SaaS); Network as a service (NaaS); Communications as a service (CaaS)

2. Applications Software: Enterprise Resource Planning (ERP) Solutions; Supply Chain Management Systems (SCMS); Business Intelligence Solutions; Advanced Security Software Solutions

3. Hardware:

a. Medium and Large Corporate: Upgrading of equipment compatible/enabled for cloud services

b. SME and Domestic: Computing and mobile devices, particularly for 4G/LTE services

4. Mobile Applications

Opportunities Return to top

Opportunities for U.S. companies in the Colombian IT market are associated to three main drivers: 1) increased connectivity and affordability of equipment; 2) multi-sector economic growth; and 3) government programs for institutional, regional and SME modernization.

Nationwide improvements in infrastructure along with increased connectivity for the population and the businesses, associated to the successful implementation of the Vive Digital program during its first two years, are expected to impact the supply and demand of IT hardware and software in a positive way.

Household demand for internet-ready computers and mobile devices, such as tablets and ultra-books, is expected to increase due in part to improved infrastructure, but also in association to decreases in the cost of computing equipment derived from key tax and customs reforms. By the end of 2012, Colombia could boast that IT equipment in the country was the most affordable in the region, stirring up competition as lower prices lead to increased demand from a growing middle class that can now purchase previously inaccessible goods.

With the expected rollout for 2013 of 4G/LTE services, demand for equipment capable of taking advantage of this new technology should also benefit.

A second major source of opportunities for U.S. companies in Colombia relates to sustained IT hardware and services demand, expected from the ever growing number of new and existing companies operating in the country’s dynamically growing sectors of the economy.

As Colombia’s security situation improved over the last 10 years, so have the flows of Foreign Direct Investment into the country, with oil, energy and mining being sectors with intense activity and potential for continued growth. As major national and international companies such as Ecopetrol, Cerrejón, ISA, Chevron, Pacific Rubiales, BHP Billiton, and AngloGold Ashanti, continue to expand their operations in Colombia, U.S. IT companies with experience and specific value-propositions tailored for these sectors could benefit greatly.

Other sectors with a natural demand for IT hardware and services, where growth in IT investment or refreshment cycles are expected to take place, include Business Process Outsourcing, Financial Services, Transportation and Aviation, and Retailing.

BPOs continue to be a big bet by policymakers at the national and local level, with Medellín, Barranquilla and Bogotá positioned to continue attracting local and foreign investment into the sector. Local banks are expanding throughout the region, with some regional banks and specialized financial institutions deploying operations in Colombia.

Colombia’s international trade is expected to continue growing at a fast pace, as the multitude of Free Trade Agreements signed by the country enter into force. This will drive up demand for transportation and aviation services, as local goods enter new markets, and foreign goods and brands enter or expand throughout Colombia, which in turn will benefit consumer retail at the local level.

Dynamic economic activity in these sectors should prove a boon for U.S. IT companies capable of adding value to new and existing companies operating in Colombia, both foreign and local. Services such as Cloud Computing and Virtualization are likely to be of interest both for large multinationals seeking to reduce IT costs, as well as for SMEs looking to build computing capacity without incurring in considerable expenditures.

Specific opportunities may also be found in these sectors for companies seeking more sophistication in terms of IT architecture and applications. For example, Enterprise Resource Planning (ERP) Solutions and Supply Chain Management Systems (SCMS) should be of particular interest to companies operating in manufacturing, logistics, transportation, aviation and trade. Business Intelligence Solutions and Advanced Security Software Solutions should also be of interest for retailing and financial services companies.

Note on Telecommunications and the U.S. - Colombia FTA Return to top

General Overview

Colombia’s telecommunications market continues to be driven by Government programs aimed at increasing access and penetration. The broadest coverage can be found in the mobile telephony segment, where there are 46.6 million registered lines (in a country of approximately 46.5 million inhabitants), of which approximately 82% work through prepaid services.

In Colombia, mobile internet is also directly connected to prepaid users, which jumped from just 2.5 million at the beginning of 2010 to 10.4 million by the end of 2011. Subscription internet services grew very dynamically as well, reaching 2.8 million at the close of 2011, from just under 1 million the year before. It was estimated that in 2011 12.1 million mobile terminals were sold.

For fixed services, telephony lines continued sliding downwards by the close of 2011, with the total number of lines declining by 3% to 7.13 million. On the other hand, corporate dedicated internets subscribers increased by 27%, to approximately 394 thousand; whereas the rate of growth in residential subscribers was even more robust, standing at 35% and reaching 2.85 million. Television has continued to move in an upward trend, reaching approximately 4 million subscribers.

For 2013, Government-led processes will drive the sector, with the 4G/LTE spectrum auction at the lead, which is expected to be finalized during the first quarter of the year and drive up demand for 4G capable terminals. Furthermore, 2012 developments have opened up the possibility for a third nationwide public channel to be assigned in 2013; more frequencies may be allocated for local channels during the year; while the National Television Agency is promoting the establishment of new subscription TV companies to take advantage of the new fiber optic infrastructure.

Telecommunications and the U.S. – Colombia Trade Promotion Agreement

On May 15, 2012 the U.S. – Colombia Trade Promotion (FTA) went into effect, including a chapter dealing with telecommunication services specifically. This chapter regulates access to the use of public telecommunication services for both parties; it stipulates a series of obligations pertaining to suppliers of public telecommunication services, including interconnection, resale of services, number portability, and dialing parity; and obligations for major suppliers of telecommunications services, such as treatment by major suppliers, competitive safeguards, resale of services, unbundling of network elements, interconnection provisions, co-location, provisioning and pricing of leased circuits services, and access to poles, ducts, conduits and rights of way.

The FTA Telecommunications chapter also regulates operation of submarine cable systems; establishes conditions for the supply of information services; the operation of independent regulatory bodies and government-owned telecommunications suppliers; and the resolution of telecommunications disputes, among others. In general, the Telecommunications chapter fosters transparency, equal treatment and a clear framework for U.S. companies operating in Colombia and vice versa.

In September 2012, Colombia’s Communications Regulatory Commission (CRC) published a study of the regulatory and market effects of the U.S.-Colombia FTA on the telecommunications market. In general terms, the conclusions were that Colombia could expect to benefit from agreement both in the retail and wholesale markets, as new players enter the country, and new investments are required to improve network quality and broaden end-user services. The study further concluded that Colombia had taken all legislative and regulatory steps to comply with what was negotiated under the agreement.

Resources Return to top

CS Bogota contact:

Carlos F. Suárez

Commercial Specialist


Tel: 571-275-2814

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