FZW talks to Mr Felipe Jaramillo about the new Free Zone Act, Colombia’s unique incentives, and export growth in Colombia’s diverse free zones
Did Colombia’s free zones meet their export and employment targets in 2016, on a national level?
According to figures reported by the Technical Secretary of the Intersectoral Commission of Free Zones, in Colombia there are more than 108 declared free zones, of which 40 are permanent and 68 are special permanent free zones.
Between 2007 and 2016 the investment undertaken in these zones has totalled COP$40.1 billion, and 163,000 jobs have been created directly and indirectly as a result. Between January and November 2016, free zone exports totalled COP$2.816 billion. There is no doubt free zones have played a very important role in Colombia’s exports, and will continue to do so.
How does the newly passed Free Zones Act (Decreto de Zonas Francas) affect the incentives for investment in Colombia’s free zones?
Free Zones Act 2147 (Decreto 2147) of 2016 represents a new opportunity to affirm the requests of businesses that wish to operate under the free zones regime, and further unifies norms and expectations for free zones across the entirety of the country. The act establishes clearer rules for businesses that wish to set up their operations in a free zone and thereby obtain tax and customs benefits. This increased stability of norms will allow Colombia to better position itself as an investment destination for foreign enterprises, with the aim of undertaking productive projects that generate development and linkages with local providers. It further creates the conditions to take advantage of the tariff benefits Colombia has as result of its 15 currently implemented trade agreements, which consolidate Colombia as an export platform.
In which sectors do Colombia’s free zones expect to see export growth and new foreign investment in 2017?
The Government of Colombia is focused upon attracting investors interested in generating production supply chains with local providers. The objective is, through the acquisition of inputs, products, and services from national companies, to push forward the creation of jobs, innovation, and development in each region of the country.
As the largest entity charged with promoting non-mineral and non-energy exports, and with attracting foreign direct investment and international tourists, ProColombia presents the unique advantages of setting up in Colombia to potential investors who can grow exports in the non-mineral and non-energy sectors. The strategy behind promoting the arrival of new companies to free zones is to consolidate Colombia’s position as a major exporting platform for non-mineral, non-energy goods and services, such as value-adding manufacturing and services like business process outsourcing and information technologies.
How much is Colombia committed to free zones and liberal trade policy in the long run?
At ProColombia we promote the arrival of new investors to free zones, as it represents an opportunity to generate employment and innovation in our priority sectors, and thus to develop the country economically. The actions which we undertake from here, in order to take advantage of the 15 active commercial trade deals which Colombia has in place, demonstrate that the country is looking to position itself as a key player in international trade, and that we present an offer of high value-added quality capable of meeting the requirements of international buyers.
According to the AZFA (Association of Free Trade Zones in the Americas), Colombia is the leader in terms of number of free trade zones, with 108 free zones. Since 2008, the number of free zones has more than doubled, from 40 to 108, and the number of jobs has increased threefold in the last seven years. What is more, according to the National Administrative Department of Statistics DANE, from January to November 2016, Colombian exports from free zones increased 52.2% and reaching US$2.8 billion FOB (taking into account the same period of time in 2015).
What can Colombian free zones offer to foreign investors that the zones of other countries in the region cannot?
The free zones regime in Colombia offers companies the possibility of selling their products to the national and international markets. Additionally, those who comply with all norms can take advantage of the tariff benefits resulting from our active trade agreements. Individual companies, however, are responsible for deciding, according to their own priorities, whether their products will be commercialised in Colombia or abroad. That is to say, exporting is not a requirement.
With respect to operating costs, those goods which come into a free zone are exempt from the value-added tax (VAT [Spanish: Impuesto al Valor Agregado, IVA]). Further, they can count upon a reduced income tax.
Colombia also offers different types of free zones, according to the necessities and activities of individual companies. We presently have more than thirty permanent free zones that operate as industrial parks, to attract certain companies. There are also our special permanent free zones, which permit a company to consolidate and incorporate itself fully after meeting the zones’ norms and standards.
Finally, there is the temporary free zones regime which allow the creation of a free zone for a short period of time, as well as specialised offshore free zones dedicated to the hydrocarbons sector.