The Business Year

Foreign Attraction

COLOMBIA - Industry

Foreign Attraction

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The arrival of foreign multinationals in Colombia in recent years has had a knowledge transfer effect that has vastly increased the country's productivity and competitiveness. 

The arrival in Colombia of international companies that are leaders in their markets is a fundamental piece in understanding the increase in competitiveness in the country. In two decades, its economy has undergone a profound transformation thanks in part to the arrival of multinationals that have produced a spillover effect by transferring best practices and international knowledge to local entrepreneurs.

Colombia is the Latin American country that has experienced the largest percentage increase in net foreign direct investment inflows between 2009 and 2019, the year before the COVID-19 pandemic. In that period, foreign investment has gone from USD1.51 billion to USD13.99 billion, an increase of 826%, higher than Brazil’s 143% or Mexico’s 111% in those 20 years, according to World Bank data. The result of these inflows is an increase in the economic openness and productive capacity of Colombian industry.

In the last four years, different regions of the country have received important investments to strengthen their industrial muscle, such as the USD158 million invested by PepsiCo to expand its production capacity in the departments of Antioquia and Cundinamarca, or the USD100 million to be invested by the Chinese pharmaceutical laboratory Sinovac to install a vaccine production plant in Bogotá. These types of projects filter into the industry by requiring local suppliers to produce products that meet the highest international quality standards.

In this way, Colombia has managed to raise its production standards above those of its regional competitors.  Factories such as the General Motors subsidiary, GM Colmotores, created in 1956, have allowed the progressive emergence of local auto manufacturers that must produce parts for one of the largest companies in the world. This type of investment has caused SMEs in the sector to compete at the highest level. And nothing indicates that this situation will change, since GM has announced in 2022 an investment of USD50 million for the modernization of this light vehicle production plant.

In many cases the relationships established between SMEs and multinationals are long term, as evidenced by a study by the Business School of the Universidad del Norte that analyzes the impact that foreign companies have had on local businesses in Barranquilla. Through a survey with local entrepreneurs, respondents considered that the arrival of multinationals has been very positive for the region because, among other things, the establishment of strategic business relationships with them allows access to technology that helps develop the competitiveness of their SMEs.

One example is flat steel producer Acesco, a company that over the past 52 years has made significant investments in technology to stay at the highest level. With the intention of further expanding its business, the company has announced a USD20 million investment to catch up with global and national sustainability efforts. “We not only want to create new products, but also improve on the current products in the market right and be aggressive with technical solutions. Current needs are closely related to sustainability problems,” Felipe González, president of Acesco, said in an interview with this publication about the reasons for this investment.
Construction materials manufacturer Corona is another example of how a Colombian company, in this case more than 140 years old, has maintained its investments in order to compete in the global market. “What has made Corona successful is the combination of these elements. The element of long-term values, the work force and culture, and the international partnerships,” said Roberto Junguito, president of the Corona Organization in an interview with TBY. In the case of this company, it was not until 2004 that it began its international growth, explains Junguito. It was then that the company decided to take its most popular products, kitchens and bathrooms, and explored building production plants in the US, Central America, and Mexico. “We knew we had a functioning business model and began to grow in these countries, to the extent that Corona is rated as the 5th most known / most sold product worldwide. There are few companies that start up in a country like ours and attain a global presence”, he said.

Another success story is that of the manufacturer of architectural glass and aluminum products Tecnoglass, whose shares have been listed on the New York Stock Exchange since May of this year. This company, which is the first Colombian company to be directly listed on the world’s most important stock exchange, has announced this year a USD50 million investment to automate its manufacturing processes and increase its production.  
This company from Barranquilla, founded in 1994, exports its products to more than 25 countries, an example that demonstrates how the arrival of multinational companies can be an important factor for the growth of local Colombian companies into relevant international players. 

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