Call us on 020 3286 4122
April 18, 2016
The idea of Colombia becoming a budding hub for any dynamic industry would have been laughed off as recently as 10 years ago. Colombia has battled against its notorious drug trade and other worldwide held stigmas in order to prove that those who ever doubted its ability were wrong. At the turn of the century, most observers had it that the tropical, Andean country of Colombia was on the edge of becoming a failed state. This is as far-removed from the truth that is Colombia in the present day which boasts one of Latin America’s strongest start-up environments with its full potential still to be reached. For those looking to tap into Colombia’s rapidly growing tech market the figures are more than promising. By 2018, the government wants to have 63% of the country connected to broadband. According to GSMA’s 2013 mobile economy figures, there are already 43.9 million mobile connections and 24 million mobile users. Colombia has the third largest population in Latin America and is the world’s third largest Spanish-speakingnation. This push for a stronger internal technology culture will provide the much needed foundations for Colombia’s own innovation-fuelled aspirations.
To begin the laying down of the foundations to become a technology hub, Colombia’s government set about rebranding the country, drawing in IT services with tax incentives and professional training programmes. As a result of these initial foundations, a U$6.8 billion industry has developed in Colombia with 1,800 software development and IT service companies currently registered in the country. The IT and investments used to promote this scheme and rebranding of the country will be able to be used at a later date to diversify into a broader innovation environment. Colombia’s government has spurred a number of initiatives in order to address the lack of venture capital in Colombia which is currently the biggest ceiling on start-up growth and development. There is no doubt that Colombia has changed in more ways than one and where as there was once nothing of the sort, now 38 private equity, venture capital or seed funds can be found in the country. This success as well as other efforts by the government has led to big technology names such as Facebook and Google investing in the country and subsequently opening up permanent offices. There is however an area in which Colombia has fallen short with its homegrown Colombian companies not seeing the same successes as their international counterparts. While the start-up scene is maturing, the investment backing is still in its early stages and therefore creates a problem for local Colombian businesses.
It remains to be seen which Colombian city will eventually be seen as the start-up centre however, up until now, Bogota retains the title. With the capital home to the government, most of Colombia’s corporate and financial institutions as well as the largest and most diverse ex-pat and immigrant community in the country, this comes as no surprise. Colombia has witnessed for many years and across all industries an epic ‘brain drain’ with many of its best and brightest looking abroad for a better life. The government is working hard to put a lot of that knowledge back into Colombia and put into action in Bogota, unlocking more of the country’s innovation potential.
In 2012, Medellin won innovative city of the year which is of little coincidence as the city’s residents are known in Colombia for their business savvy and entrepreneurial flair that has as much promise and light for the future as it did darkness in the past. While the start-up environment in Medellin still falls behind Bogota, the better climate and business-friendly atmosphere have given it its own unique dynamic as the Silicon Valley of Latin America. Many believe that whilst Medellin does not have the same start-up company success as Bogota, that it will overtake the capital to become the nation’s technology centre. Since 2013, this has been spurred on by the city government committing U$389 million over 10 years to investment in technology and innovation. Nevertheless, Medellin finds itself in quite a predicament because it doesn’t have a number of success stories as Bogota does meaning that investor confidence that is needed to create new start-ups is low. Public and local government initiatives have done all that they can to breathe new life into this up-and-coming technology hub however, the current system is a weak substitute for much needed private equity.
While Colombia has a long road ahead to become a legitimate global player, this could in fact have a number of advantages. In 2014, Colombia’s GDP has grown faster than any in Latin America and is currently the fourth fastest growing economy in the world. Inflation remains low and poverty, extreme poverty and unemployment levels have all fallen due to part tech-based programmes designed to address inequality and labour formalisation. Colombia therefore has competitive incentives and the general structural growth that is attracting immigration, more so than the other emerging Latin America tech hubs such as Buenos Aires, Sao Paolo and Santiago de Chile. Brazil is currently enduring stagnation, while Argentina and Venezuela are in a critical condition with immigration to the United States proving increasingly difficult. Colombia therefore finds itself fighting for prevalence with Mexico which has a better relative location to the United States but is currently facing its own battle of escalating drug violence. Meanwhile, Colombia is making all the right moves to end its 50-year armed conflict with FARC and the only major obstacle it faces is building on what is already there and letting the rest of the developed world know how much opportunity is held within its borders.
Thanks for visiting the Latin Link blog! Contact us today for your free translation quote!