Colombia manufacturing growth and opportunities

Colombia has a strategic advantage geographically, it is only three hours by plane and three days by ship to Miami.   It is in the middle point between North and South America, has Caribbean and Pacific coastlines with ports on both. 

Colombia Country Growth

In 2017, Colombia’s international trade accounted for 34.9% of the national GDP (Gross Domestic Product). The country has experienced a five times increase in foreign trade over the last ten years. According to the Economy Complexity Index (ECI), which makes Colombia’s economy the 53rd most complex in the world.

The country’s textile and apparel industry is alone accountable for the nation’s 7.5% manufacturing GDP, 0.8% of total GDP, 17% of manufacturing sector employment and 2.4% of the total exports. The United States is the main commercial partner, with a 33 % participation in the Colombian apparel exports, followed by Venezuela (19%), México (11%) and Ecuador (7%).

Between 2004 and 2014 the Colombian fashion industry grew at an average annual rate of 4.2%, reaching production of $8.7bn, behind only Argentina and Brazil in the region.  By 2017 ProColombia, which promotes Colombian exports abroad, estimates that the sector will be worth $9.9bn.

Colombia is also the No. 1 exporter of shapewear in the Americas and the third largest in the world.

Apparel sales for the country have grown at 9.9% CAGR (Compounded Annual Growth Rate). (Euro monitor International 2015)

The country’s clothing manufacturers are boosted by a buoyant domestic market. In 2015 local sales of fashion products were expected to grow over 6% to reach $5.2bn.

Opportunities and Challenges

Colombia is the fourth-largest country in South America; has taken on the title of being the fashion center of Latin America. Medellin city in Colombia has now become the center of the country’s integrated and widespread garment industry that exports apparel, leather goods, and footwear.

Sustainability and social responsibility are being taken seriously in Colombia as they are engaged in promoting proactive solutions. 

The South American country is number one in Latin America for sustainable development and ethical practices.  It is ranked second on social responsibility thanks to its support of single mothers, indigenous communities and national artisans; according to the IMD World Competitiveness Yearbook, 2015.

Colombia’s average labor rates are $2.50 per hour, compared to $2.20 per hour in Mexico and $0.60 per hour in Vietnam, according to Inexmoda, Colombia’s Institute for Export and Fashion, the industry may struggle to compete in international markets on a price basis.

The future of the export sector appears to rest in developing niche products with value-added. Sportswear is a case in point, with Medellín firms producing high-tech fabrics with antibacterial properties, UV protection, and intelligent fibers that mold to the athlete’s body.

Market Leader

Its industry supports equal opportunities as well as the development of better job practices and conditions. As a result, its industry creates more than 200,000 direct jobs and 700,000 indirect jobs.

Colombia also supports environmental initiatives and fair trade with companies earning international certificates (ISO 9000, ISO 14000, and BASC). 

At the end of 2015, the country had 13 trade agreements in force and a further eight under negotiation, in addition, to 10 international investment agreements. 

Shipping from Colombia to the USA is three times lower than China; it is a competitive location with easy access to global markets.

The U.S.- Colombia Trade Promotion Agreement entered into force on May 15, 2012. It is a comprehensive free trade agreement (FTA) between the United States and Colombia, which will eventually eliminate tariffs and other barriers in bilateral trade in goods and services.

Columbia’s top textile and garment suppliers are making big investment to boost manufacturing automation and innovation to win new orders from the USA and Europe.    

The country offers investment opportunities to foreign players to set up their textile and apparel production units to replace textile imports within the country

Colombia’s R&D push is also attractive to foreign players, as incentives like 175% of tax deduction of the R&D investment value and VATS exemption for import of equipment and other items used in R&D centers attract innovation.

Also, the income generated by companies to finance innovation projects is non-taxable.

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