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Colombia Innovation Opportunities

by: Tatjana Guznajeva, Technopolis Group

 

Why should I read this document? 

 

When confronted with the differences between your own market and the market of Colombia you will likely feel that you have to adapt your product/service significantly to make it fit the preferences and expendable income of local people. While many may see this as a challenge this can also proof to be a great opportunity for your company! Adapting to a new market, like Colombia, will allow your company to innovate. Not only will operating in Colombia lead to new insights to be more successful in Colombia, you will most likely also pick up on ideas to be more successful in your home market. 

 

This document provides a short overview of innovation aspects, business opportunities and challenges in Colombia. It will also give advice on best practices for starting and developing an innovative business venture, considering Colombia’s country context. May it help you to explore Colombia, to innovation and success.

 


Opportunities and tips for innovation and doing business in Colombia

 

  • Colombia has large natural reserves, however, currently there is a stagnation in extraction and production. Hence, new technologies are needed to increase recovery and production, particularly in the oil fields. 
  • E-commerce is rapidly growing in Colombia; the purchase of airline tickets, hotel reservations, coupons, clothing, footwear and electronics is conducted through Internet most commonly. Hence, companies working in associated sectors may benefit from e-commerce in Colombia.
  • The supply of Internet and telephone connection is much smaller than the demand, therefore telecommunications companies may find business opportunities in the Colombian market.
  • Colombia has a fertile land and has a diverse climate, which allows to produce a large variety of products. The demand for Colombian tropical fruits, beans, dairy products, poultry, eggs and pork is growing both domestically and internationally, therefore there are opportunities for companies within the food industry. 
  • The agricultural sector covers a large part of the employment in Colombia (17% of population) and it is a core sector for the entire economy. In efforts to stimulate Colombian agricultural sector, the government is offering subsidies to farmers for purchase of new agricultural equipment. Hence, the market of agriculture-related technologies is likely to grow.
  • Colombia is the Latin American leader in production of cosmetics and beauty products. Considering low production costs and good quality of natural products, there are opportunities for companies in cosmetics and health industry.
  • Due to steady economic growth, there is a large demand in construction, architecture and transport services in Colombia.
  • Colombia has signed several free trade agreements with Central, South American and Caribbean countries, the US, and with the trade bloc MERCOSUR and the EU. Hence, Colombia is a good location for international trade.
  • Colombians appreciate customer and after-sales service. Many local companies try to increase the number of sales through partnerships with other (at times, foreign) companies which can provide services to their clients.

 

On Level 2 you can find information about innovation climate in Colombia, while Level 3 will tell you more about business activities in Colombia.

 

 

This page will tell you about innovation ecosystem, major technology sectors, innovation and business practices in Colombia.

 

Innovation ecosystem

 

Innovation and science are relatively underdeveloped in Colombia, due to small R&D expenditure, relatively low education standards and tertiary attainment. Colombia lacks resources, particularly human resources, for enhancing innovation capacity. At the moment, only 10% population are working within science and technology sectors. In 2010, the government has formulated the strategic plan for science, technology and innovation. The progress in the areas of innovation, technology and entrepreneurship has been slow so far, however, Bogota, the capital of Colombia, is gradually emerging as a startup centre. 

 

Aiming to stimulate innovation and address social challenges, the Colombian government launched three social innovation programmes that are expected to strengthen public-private partnerships and assist companies in realising business ideas that are beneficial for local communities. Due to public financial support for innovative firms the collaboration among stakeholders, as well as, business and innovation climate are gradually improving.

 


Innovation sectors and technology

 

Colombia has not yet developed dominant innovation and technology sectors, but the extensive public support in sectors of energy and natural resource, bio-technology, ICT, electronics and logistics is expected to make these sectors the most innovative. The IT technologies and education are in a particular focus of the Colombian government: training programmes on data science, cybersecurity are being launched throughout the country, while the government is trying to attract investments for the development of these technologies. 

 

In efforts to promote scientific development in medical and IT sectors, the Colombian government is investing in creation of the genome sequencing centre, development of bioinformatics and computation biology. The technology development centre in Bogota has already produced several innovations, like software applications for existing technologies, thereby stimulating the growth of digital industry. 

 


Innovation culture and practices

 

In Colombia, innovation and entrepreneurship are seen with a degree of scepticism and caution. Colombian people lack trust in banks and governmental institutions, therefore financial risks associated with new products or business models are perceived to be very high. To overcome cultural stereotypes and societal prejudices about business risks, in 2012 the Columbian government created the agency iNNpulsa Columbia, which seeks to stimulate innovation and economic competitiveness, encourages a change in this mindset through public campaigns and trainings. 

 

Currently, those companies in Colombia which are involved in development of innovative products and services in Colombia prefer to take low risk business decisions. The most successful local entrepreneurs are trying to design simple, but very practical products, which are oriented towards a broad customer base. 

 

 

This page highlights major economic sectors and iconic products, shows business trends and explains how easy it is to do business in Colombia. In addition, you will find the list of websites, which provide some hands-on information.

 

 
What is the country known for?

 

Sectors
The biggest sectors are: petroleum and natural gas mining, textile, food processing, clothing, chemicals, oil, beverages, gold. Service sector accounts for around 60% of GDP, while the industrial sector represents 32.6% and agricultural sector 7%.

 

Iconic products 
Coffee, tea, spices, refined and crude petroleum, coal briquettes, cut flowers, trees, fruits, nuts, gold, bananas, plastics, pesticides, raw sugar, palm oil.

 


How easy is it to do business in Colombia? 

 

Based on the World Bank ranking:

 

  Colombia EU average Emerging markets average
Overall - ease of doing business 53 30 83

 

Due to facilitated procedures in starting a business, dealing with construction permits, getting a credit and a protection for minority investors, it is relatively easy to do business in Colombia. In general, Colombia has a politically stable system and it has been a reliable partner for other countries, therefore many foreign companies do not experience large complexities in starting or doing business.  

 

Despite a relatively good business climate, which Colombia offers, consider the following points:
  • Colombia suffers from violent conflicts, as a result of a presence of drug cartels, violations of human rights, outlawed armed groups. Since the beginning of 2017, irregular armed groups in the Colombian Pacific Coast region have displaced 3.5 thousand people. Hence, it is relatively dangerous to reside in those areas at the moment. 
  • When drafting an employment contract, it is advisable to hire a local lawyer, as employment law strongly protects employees.
  • The local banks offer loans at a higher interest rate, therefore consider loans offered by foreign banks. In addition, due to this policy of Colombian banks, few people in Colombia have a credit card. 
  • Goods or services purchased online are subject to VAT tax and tariffs, which are levied on payment-processing companies. Hence, companies engaged in e-commerce in Colombia should account for additional costs.

 


Business trends in Colombia

 

The e-commerce still represents a relatively small business sector, due to the underdeveloped IT sector and infrastructure and the fact that many Colombians mistrust online platforms which enable electronic financial transactions. However, B2B e-commerce among small and medium-size enterprises grew by 41.3% between 2014 and 2015. This indicates that many entrepreneurs start to appreciate and utilise tools which facilitate business interaction. 

 

The collaboration with foreign companies has been developing due to growth of e-commerce, however, domestic business networks prevail. Most SMEs in Colombia are partnering with firms from the same industry to increase production scale and ensure financial stability. Hence, it is important to build relations with the local business community.

 

The average Columbian consumer spends most income on satisfying basic needs – food, housing and transport. The wealthier population is strongly influenced by fashion trends and is attracted to goods which are offered through promotion, therefore good advertising is essential. Colombians with an above-average income are technology-savvy, therefore there is a growing demand for electronics and electrical appliances, such as computers, TVs, refrigerators, audio equipment and washing machines. The rising income in Colombia is expected to stimulate the demand for clothing, jewellery and accessories.

 


More hands-on info

 

 

Bibliography

 

Level 1:
PWC. (2014). Colombia Oil & Gas Industry 2014: Gas Overview. Retrieved from: https://www.pwc.com/gx/en/oil-gas-energy/publications/assets/pwc-colombi...
Export.Gov. (2016). Colombia. Retrieved from: https://www.export.gov/article?id=Colombia
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Export.Gov. (2016). Colombia – Market Opportunities. Retrieved from: https://www.export.gov/article?id=Colombia-market-opportunities
CIA World Factbook. (2018). Colombia. Retrieved from: https://www.cia.gov/library/publications/the-world-factbook/geos/co.html
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Level 2:
IDB. (2017). IDB-MIF supports Colombia as pioneer of social innovation. Retrieved from: http://www.iadb.org/en/news/news-releases/2017-03-29/colombia-as-pioneer...
The Innovation Policy Platform. (2016). Colombia. Retrieved from: https://www.innovationpolicyplatform.org/content/colombia
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OECD. (2018). Colombia. Retrieved from: https://www.oecd.org/sti/outlook/e-outlook/sticountryprofiles/colombia.htm
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Centre for Public Impact: A BCG Foundation. (2016). Innovation Development in Colombia. Retrieved from: https://www.centreforpublicimpact.org/case-study/innovation-development-...

 

Level 3:
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Export.Gov. (2016). Colombia. Retrieved from: https://www.export.gov/article?id=Colombia
Societe Generale. (2018). Colombia: The Market. Retrieved from: https://import-export.societegenerale.fr/en/country/colombia/market-cons...
Chan, L. (2013). What Colombian consumers want. Retrieved from: http://economists-pick-research.hktdc.com/business-news/article/Research...
Last updated: 21.06.2021 - 09:56
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