During the last two years, the government of Colombia has increased its efforts to reactivate the construction industry which has attracted new investment in this key sector. Construction activity has increased in urban areas, including new shopping centers, industrial plants and road infrastructure. This offers favorable conditions for U.S. companies exporting building products and equipment.
The total market of Building Materials has grown steadily during the last three years. In 2008, the market reached US$872.2 million representing 13.4% growth over 2007. Imports from the United States represent 17.9% of the total imports.
Some of the best prospects for building products imports into Colombia include: glazed ceramic; non-wired glass; unglazed ceramic; cooper tubes and pipes. The key players for building imports into Colombia are: China with 26.8% of the total imports (cheaper products), followed by the U.S. with 17.9%.
To a large extent, the Colombian economy's growth and development has been powered by the infrastructure segment. With considerable expenditure by both public and private players, the Colombian infrastructure, particularly the transportation and water infrastructure segments, has seen tremendous growth in recent years. Major infrastructure ventures in the country include the planned modernization of the El Dorado airport at a cost of US$500-600mm; an investment of US$180mm for the development of the Buenaventura port; and construction of the La Linea tunnel, valued at US$262mm.
Given these planned projects, the Colombian economy is still expected to grow – though at a declining rate – at an average of 3.9% during 2008-2012. Colombian Construction Chamber (CAMACOL) expects the country's construction sector to reach a value of US$ 19.5bn by 2013, which will contribute a sizeable 6.5% to the total GDP.
The construction sector reflects the growth of the Colombian economy which peaked in 2007 at 7.7%, showing steady increases in 2005 of 4.7% and 6.8% in 2006. This positive growth was due to improved security conditions and high commodity prices for principal exports, such as oil and coal, which attracted greater Foreign Direct Investment (FDI) and stimulated internal demand for goods and services. The global financial crisis began to affect the Colombian economy in 2008 when GDP growth dropped to 2.5% despite FDI reaching a record level of US$10.5 billion dollars. The outlook for GDP growth in 2009 is flat or even a negative one percent and FDI is expected to decline sharply as well.
The implementation of the U.S.-Colombia Trade Promotion Agreement (CTPA) will have a positive effect on the industry as costs related to U.S. imports will decline and thereby make building products even more competitive internally and externally. According to local trade sources, the CTPA, pending ratification from U.S. congress will likely result in a measurable increase in U.S. exports of building products to Colombia. The elimination of the five to 15 percent Colombian tariff on U.S. imports with the free trade agreement will be a major catalyst to this anticipated increase in exports. For building products, 58 percent of U.S. industrial exports will receive duty-free treatment immediately upon implementation of the Agreement. Tariffs on another 26 percent of exports will be eliminated over five years. Duties on the remaining 16 percent of U.S. exports will be eliminated over ten years. Therefore, given passage of this agreement, there is a significant opportunity for investment of U.S. companies interested in exporting building products to Colombia.
The demand for building materials will continue. Colombia’s statistics office (Dane) reported that permits, by construction area in 2008 totaled 16.9 million of square meters (1 meter = 3.28 feet). Such a figure represents a slowdown with respect to 2007 but still represents a strong growth in this key sector.
President Uribe has increased his efforts to reactivate the construction industry in Colombia with the implementation of a new subsidy for credits directed to low–income housing construction programs which has increase the demand for this segment of construction.
Construction activity has increased in urban areas, including new shopping centers, new industry plants and new road transportation system offering favorable conditions for importing building products and equipment.
By Julio Acero