PIPE 2.0, the new investment opportunity in Colombia

What is PIPE 2.0?

Last April Colombian president Juan Manuel Santos launched the PIPE 2.0 Plan (Plan to Boost Productivity and Employment), the second local initiative aimed at generating investment in areas such as educational infrastructure, public infrastructure, urban and country housing, industrial, tourism and mining. The ultimate plan is to boost growth and development in Colombia.

The plan involves measures regarding tax, custom, tariffs and credits which the government hopes will foster industry, achieve greater competitiveness, facilitate port operations, provide more and better tools to control contraband, enhance cross-border trade, guarantee higher financing tools and drive innovation and business continuity of small, medium and large companies.

What results are expected? 

President Santos hopes the new projects will generate an increase of 3.5% in the Colombian economy during 2015. However, the International Monetary Fund and the Central Bank of Colombia estimate growth will be less than this (3.4% and 3.2% respectively). Other actions to be taken and expectations are detailed below:

• Increase of USD 5 billions in savings of foreign currency

• Relief in cash flow

• Launch of a financing program in support for the industrial sector

• Establishing the Financiera de Desarrollo Nacional (FDN), a new development bank model to efficiently finance the infrastructure 

• Higher benefits for key sectors such as the iron and steel industries, which are essential to developing infrastructure

• Creating 322,900 jobs

• Strengthening the Directorate of National Taxes and Customs (DIAN, by its acronym in Spanish) through programmes against contraband and issuing port statements to ease foreign trade operations, among other things

• Implementing an electronic system for VAT refund requests, which will shorten the terms upon reimbursement 

• Eliminating the gas surcharge of 8.9% for the industrial sector

• Implementation of the programme iNNpulsa Mipyme to encourage the innovation of Colombian micro, small and medium businesses 

• Developing the third National Agriculture Census, with the purpose of making better political decisions, optimising the distribution of resources according to the necessities, taking advantage of the strength of production and taking care of the regions in a targeted manner

• Developing programmes to foster the mining exploration and to keep current levels production.

Taking advantage of the opportunities

PIPE 2.0 will generate numerous changes in the local economy and will also benefit many companies of different sectors and types in the short and long term. In this regard, many companies are making the necessary moves to take advantage of the benefits immediately. For example, according to La Republica newspaper Siemens is already analysing the Colombian industry to decide how to focus investment; some small businesses are already having meetings to establish support networks to help competitiveness; and some medium-sized Caribbean traders already enrolled in the Colombia National Union of Merchants (Undeco, by its acronym in Spanish) are speaking with the Minister about their tax needs. 

There is no doubt that these efforts will drive basic financial development in Colombia; as a result, many business opportunities will arise. It is expected that economic boost will reach all levels of related services and products providers, increasing the direct consumption in the market. Furthermore, the magnetism for foreign investment that has characterised the economy in recent years will increase.

On the other hand, the search for the simplification and improvement of the port process for imports and exports will help to develop the international trade in a more efficient way. However, an administrative simplification has not been implemented yet, which represents one of the highest challenges that companies face in their daily operations.

Colombia is a complex country and it is not simple to clearly specify all the opportunities that its development is offering. It is important for multinationals to have the support of a local expert gain the highest benefit that can be derived from this and other growth and development programmes.

The PIPE 2.0 will change business in Colombia. Some businesses will globalise, others companies will cross borders to bring their operations into the country and will grow and adjust themselves to new markets, new clients and new opportunities. The use of a unique strategic provider with local knowledge during that process will help the investors to identify better opportunities and to provide consistency through the processes and standards once it enters the market.

Read more about how we can help your business grow in Colombia

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