From Chile with love

In the past two years, Chile's trade office in Bogotá has had lots of meetings with Chilean businessmen interested in selling in the Colombian market or settle in the country. Ignacio Fernández, the director, says that last year this office (similar to Proexport Colombia) received a record number of private projects to run in Colombia. "I have to confess, Colombia is very popular in Chile," says Fernández. During the first two months of this year, missions, meetings and visits have increased 25 percent compared to the same period last year.

Due to the massive Chilean companies that have arrived to the country, Colombia has moved to the first place as a destination for direct investment from Chile, replacing Argentina for the last two years. In 2008, Colombia was the third destination of direct investment from Chile and, in 2009, the fourth after Peru, Brazil and Uruguay.

Bilateral trade has doubled annually over the past three years, reaching 2,800 million dollars in 2008, but with a decline in 2009 as a result of the global crisis. surprisingly, in January Chile was the second destination of Colombian exports, after the United States. It means that for the first time, the Chilean market displaced Venezuela, the traditional trading partner of Colombia.

To deal with this investment trade wave, a year ago appeared the Cámara de Industria y Comercio Binacional (Chamber of Bilateral Industry and Trade). José Palma, its director, says that in only one year the entity already has 50 member companies. Specialized business newspapers talk every day of Chilean companies that settle in the country.

Although Chilean investment reached the country in the nineties with the first energy companies (Chivor, Codensa Emgesa and Betania), the truth is that for Colombians, the highest degree of proximity with the austral companies was confined to wine or fruits, products which have been imported from long ago.

But now everything has changed. In recent years, to the country have arrived stakeholders interested in different sectors: health and financial services, sea transportation, trade, forestry, paper and biofuel projects. The whole direct investment of Chile in Colombia reaches 6,161 million dollars, which represents 13 percent of the total invested by the southern country in the world.

What's happening? Fernando Robledo, Banmédica president in Colombia, a leading health care company in Chile, with major investments in the country, says it is the result of multiple factors that have mounted up over the past six years.

The Chilean businessmen began to see Colombia as a country with the best economic projection in the region and, therefore, as a great opportunity to expand their companies, beyond Peru, Brazil and Argentina.

But the biggest trigger for the current investment wave in Chile is undoubtedly the Free Trade Agreement that both countries signed last year. This is a last generation treaty, because it includes much more than trade, such as services and state purchases, which gives a great potential to this bilateral relation. Also, double taxation agreements have led many employers to seek more alternatives.

There are several examples in all areas. In the department stores field (retail), Chileans want to conquer the Colombian market. Falabella, which began operations in Bogotá in 2006, has spread to other cities and plans to open eight additional stores for the next four years. The Group is partner of Corona in Colombia, through Homecenter stores. Now the Falabella Group will also have a bank in Colombia. Cencosud, the largest Chilean business consortium, opened Easy stores (stores specialized in construction products) and La Polar is building its first department store in Bogotá.

It wouldn’t be unusual for Chilean to bring to the Colombian market the strong competition of department stores. Ripley, a large department store, will probably arrive to the country, while Cencosud wants to settle its subsidiary Almacenes París. Likewise, Alvi, which sells groceries and food, already registered its trademark in Colombia.

Chilefilms Group just Arrived to start the construction of a film laboratory in March.

The health sector is also very important for Chileans. The Banmédica holding has made several investments in recent years. It owns 50 percent of the Clinical Society of the Country; has the EPS Colmédica and the prepaid medical Golden Cross company. Right now is building the Portoazul Hospital in Barranquilla with an investment of 35 million dollars. The project was awarded to the Tecsa firm, also from Chile. Chilean investment has also found attractive the construction sector. Parque Arauco, a company focused on acquiring, developing and managing shopping centers, began the construction of a mall in Barranquilla in partnership with the local group Conpropiedad, belonging to Inverandino.

La Compañía Manufacturera de Papeles y Cartones (The Paperboard Company), a leading producer of disposable diapers, bought its own plant in the country. The experience of Chilean forestry companies has moved to Colombia. Masiva, a company that produces wood panels worldwide, will open a plant.

Double track

Colombians are not behind. The problems with Venezuela are driving markets to look over opportunities in other countries. As the Trade Minister, Luis Guillermo Plata, states, businessmen now are doing its duties and traveling to the South of the continent.

In the Chilean market there are already Manuelita, Colombina, Cartones América, El Círculo de Lectores, Terpel, SaludCoop, Ursus and Legis. Two sections of TranSantiago (the Chilean TransMilenio) are operated by Colombian firms.

Internexa, one of the subsidiaries of ISA which offers data transmission through optical fibers, has just entered the Chilean market with the purchase of 90 percent of the company Comunicaciones Intermedias. This will allow it to connect the main cities of the southern country. With this business Internexa strengths a fiber optic network of 13,000 kilometers, which makes it the largest in South America. Internexa currently connects Venezuela, Colombia, Ecuador, Peru and Chile.

ISA entered the area of road infrastructure in Chile and became the largest operator of that country. The Colombian company bought 60 percent of Cintra Chile, a subsidiary of the Spanish Ferrovial, which controls more than 900 kilometers of highways in the country. One of the most interested companies is Nacional de Chocolates (a candy company), which is searching for a partner. Colombian businessmen are very enthusiastic about Chile. Everybody is looking for options. They know that this is the opportunity for Colombia to extend a bridge to Asia-Pacific, taking advantage of Chile, which belongs to this block.

And if previous years have been successful in business matters, the future is even more promising. The Colombian employers are encouraged by the new president, Sebastián Piñera, and his cabinet, that already expressed that trade will be in the first place of the Chilean agenda. It seems that this relation has a long way to go.