Argentina Chile Etc Ebook 2015dec04

Handbook - 38/2015
Argentina, Chile, Colombia, Peru, Paraguay and Uruguay

Business Handbook 2015
Suhayl Abidi
GoG-AMA Centre for International Trade

Argentina, Chile, Colombia, Peru, Paraguay and
Uruguay Business Handbook 2015
Compiled by
Suhayl Abidi
For any queries, please contact: library@amaindia.org
First Published: December 2015
Published by
GoG-AMA Centre for International Trade
Ahmedabad Management Association
Torrent-AMA Management Centre
Core-AMA Management House
ATIRA Campus, Dr. Vikram Sarabhai Marg
Ahmedabad 380 015
Phone: +91-79-2630 8601 • Fax: +91-79-2630 5692
Email: ama@amaindia.org • Website: www.amaindia.org
Contents
Click on country to view contents
Argentina 1
Chile 23
Colombia 41
Paraguay 65
Peru 79
Uruguay 101
ARGENTINA
Highlights 2
Introduction 2
Argentina — Key Economic Factsheet 2014 3
Economic Highlights and Forecast 3
Laws and Policies Relating to Foreign Investment 5
A Magnet for Investment 6
Focus Areas for Investment 7
Infrastructure 11
International Trade 13
Services Industry 15
Investment Risks, Barriers and Challenges 18
Indo-Argentinian Economic Relations 21
Highlights
• Argentina is Latin America’s third-largest economy.

• More than 2,000 multinational companies operating in diverse sectors
• Vast extension of fertile land for agriculture
• Ranked 3rd worldwide in shale oil and shale gas reserves.
• Highest level of public investment in education in the region (equal to 6% of GDP).
• GDP growth paltry 0.5% in 2014
Introduction
Argentina is a country in South America bordering the Southern Atlantic Ocean. Neighbouring
countries include Bolivia, Brazil, Chile, Paraguay, and Uruguay. Argentina’s continental area
is between the Andes mountain rage in the west and the Atlantic Ocean in the east. Diverse
geographical landscapes produce varying climates from tropical in the north to tundra in
the far south. The government system is a republic. The President is the chief of state and
head of government. Argentina has a mixed economic system in which the economy includes
a variety of private freedom, combined with centralized economic planning and government
regulation. Argentina is a member of the Latin American Integration Association (LAIA) and
Mercosur.
Argentina is one of Latin America’s largest and wealthiest countries, possessing abundant
human and natural resources, highly-diversified industries, and a 43 million person market.
It has been facing many economic and financial troubles these past few months. Future
predictions are now showing a poor outlook for its economy, as the country is struggling
with high inflation, a major decline in the value of the peso against the U.S. dollar, and
more trouble involving disputes with hedge fund and holdout creditors. For a country that
has had a history of economic troubles in this century, none of these things spell anything
good for Argentina’s future, and it only seems to be getting worse from here.
It’s an election year, Argentina will have a new president in December, and that creates
huge expectation among the investment community. Continuous high levels of inflation,
restriction on the foreign exchange market, import restrictions and the default generated
by the lack of agreement with the hold-outs, have all positioned Argentina among the Latin
American countries with lowest investment in terms of GDP. While countries like Brazil,
Chile, Uruguay, Paraguay and Colombia have benefited from the liquidity in the financial
markets due to low rates, Argentina has had to struggle on. Now this will change. The new
administration will have to solve these imbalances to attract local and foreign investment.
Argentina, Chile, Colombia, Peru, Paraguay

and Uruguay Business Handbook 2015 Argentina — Introduction 2
Argentina — Key Economic Factsheet 2014
KEY ECONOMIC FACTS

Income Level (by per capita GNI) High Income
Level of Development Developing
GDP, PPP (current international $) 720.49 billion (2011)
GDP Growth (Annual %) 2.93% (2013)
GDP per capita, PPP (current international $) 17,674.37 (2011)
External debt stocks, total (DOD, current US$) 136,271,863,000.00 (2013)
Manufacturing, value added (% of GDP) 15.27% (2013)
Current account balance (BoP, current US$) -4.81 billion (2013)
Inflation, consumer prices (annual %) 10.03% (2012)
Labour force, total 19,092,526 (2013)
Unemployment, total (% of total labour force) modelled ILO estimate) 7.50% (2013)
Imports of goods and services (current US$) 90.47 billion (2013)
Exports of goods and services (current US$) 88.52 billion (2013)
Economic Highlights and Forecast
Argentina entered recession at the beginning of 2014, although activity had already started
to contract towards the end of 2013. Following a slowdown in 2013, household consumption
fell slightly at the beginning of 2014. Real wages are falling and confidence among the
population is declining. Exports have fallen steeply, with the reduction in sales of vehicles
to Brazil and new cereal export quotas. As occurred at the end of 2013, the drop in imports
was much less marked and the external sector posted a negative contribution to growth.
Investment is also falling because of strict import controls and restrictions on foreign
currencies operations. Inflation is moving upwards, partly because of the devaluation of
the peso: on the basis of the price index as calculated by university institutions, it is likely to
exceed 30% in 2014.
Fragile External Accounts, Loose Budgetary and Monetary Policies

The current deficit, which increased in 2013 as a result of rising energy costs, continued to
worsen into 2014 because of the weakening of the surplus in merchandise trade. This
surplus can no longer offset the deficit in services and income (debt service and repatriation
of profits by foreign owned companies), limited in the latter case by foreign exchange
controls.

and Uruguay Business Handbook 2015 Argentina — Economic Highlights and Forecast 3
Monetary policy has tightened since the beginning of 2013 in an attempt to counter
inflationary pressures arising from the sharp depreciation of the peso in January (-15%).
The government used its foreign currency reserves to try to limit the fall of the peso and
these dropped from US$43 billion in January 2013 to US$26 billion by the end of May
2014. The decline of the peso on the black market in recent months points however to
expectations of further depreciation among many Argentines. The exchange rate risk
therefore looks substantial, connected with a possible new Argentinean debt default (see
below) and the worsening of the current balance.
The fiscal balance has also declined at the beginning of 2014: the budget deficit has worsened
as a result of wage increases granted to some government employees at the end of 2013.
The reduction in the scale of subsidies (5% of GDP) benefiting the energy and transport
sectors is hypothetical. The budget deficit is largely financed through money creation because
the government cannot access international financial markets. It is also financed through
borrowings on the domestic market: as a result, public debt will exceed 50% of GDP at the
end of 2014. The government has been attempting to regain access to the international
financial markets since the end of 2013: an agreement was signed with the public creditors
of the Paris Club and the government compensated Spanish oil and gas company Repsol
following the nationalisation of YPF (national oil and gas operator).
Gross Domestic Product (GDP)
Economic Indicators

and Uruguay Business Handbook 2015 Argentina — Economic Highlights and Forecast 4
Laws and Policies Relating to Foreign Investment
The GOA has signalled its desire to see continued foreign direct investment (FDI) flows to
enhance the nation’s productive capacity and GDP growth potential, and it took actions in
the past year to improve the investment climate in Argentina. To regain investor confidence,
the GOA settled several outstanding international arbitral awards, engaged with the IMF to
improve economic reporting data, and compensated the Spanish-firm Repsol for the partial
expropriation of YPF in 2012. Argentina also reached agreements with the Paris Club group
of creditors to repay US$9.7 billion in arrears over the next five years, including US$642
million owed to the United States. Argentina has already made two payments in the first
year. The GOA revamped its hydrocarbon regulations in 2014 with the aim of attracting
new investments to develop Argentina’s world class oil and gas resources.
According to a Presidential decree governing foreign investment in Argentina, foreign

companies may invest in Argentina without registration or prior government approval, and
on the same terms as investors domiciled in Argentina. Investors are free to enter into
mergers, acquisitions, green-field investments, or joint ventures. Foreign firms may also
participate in publicly-financed research and development programs on a national treatment
basis. Central Bank restrictions (both formal and de facto) on the purchase of foreign
currency limit the ability of a company or investor to remit profits, dividends, or investments
out of the country.
Government incentives apply to both foreign and domestic firms alike. The federal
government, as well as provincial and municipal, offers several incentives to attract
investment to specific economic sectors such as capital assets and infrastructure, innovation
and technological development and energy. More details of these programs can be found
here: www.inversiones.gov.ar/es/incentivos-la-inversion or www.prosperar. gov.ar/
The GOA has established a number of investment promotion programs. These programs
allow for Value-Added Tax (VAT) refunds and accelerated depreciation of capital goods for
investors and offer tariff incentives for local production of capital goods. They also include
sectorial programs, free trade zones, and a Special Customs Area in Tierra del Fuego Province,
among other benefits. A complete description of the scope and scale of Argentina’s
investment promotion programs and regimes can be found at www.industria.gob.ar,
www.inversiones. gob.ar and www.mecon.gob.ar/. Information about programs that
specifically apply to small and medium businesses may be found at www. industria.gob.ar/
secretaria-pyme.
The Argentine Ministry of Economy (www.mecon.gov.ar), the Investor’s Information Service

for Argentina (www.infoarg.org), the Undersecretariat of Investment Development and Trade
Promotion (www.inversiones.gov.ar), the Embassy of the Argentine Republic in the United
States of America (www.embassyofargentina.us/en/invest-in-argentina.html), and the
Central Bank of Argentina (www.bcra.gov.ar) have additional detailed information on
investment policies in Argentina.

and Uruguay Business Handbook 2015 Argentina — Laws and Policies Relating to Foreign Investment 5
FOREIGN DIRECT INVESTMENT (FDI)
The IMF does not have recent direct investment data on Argentina. Argentina was censured
by the IMF in February 2013 for reporting unreliable economic data.
According to the United Nations Conference on Trade and Development (UNCTAD) World
Investment Report 2012, the latest information for Argentina, the total stock of FDI in
Argentina at the end of 2012 was estimated at US$110.7 billion. The stock of U.S. FDI in
Argentina in 2012 was estimated at US$14.4 billion by the U.S. Bureau of Economic Analysis.
In 2012, according to UNCTAD, total FDI inflows were estimated at US$12.5 billion and
outward FDI flows amounted to US$1.1 billion.
A Magnet for Investment
After several years of mismanaged economic and monetary policies that drove investment
away from the country, the situation is changing. There are several things that make investors
very optimistic.
Argentina has a highly diversified economy. The primary sector is internationally renowned
for its high productivity levels and use of advanced technologies. The country’s well-
developed industrial base showcases key sectors such as agribusiness, automotive,
pharmaceuticals, chemicals and petrochemicals, biotechnology and design manufacturing.
The traditional service sectors are well established in the country, gradually developing
niche expertise in the most sophisticated segments of the value chain, with notable growth
in software and IT services as well as a wide variety of high added-value professional
services.
Investor confidence remains low in the short-term and is more optimistic with regards to
the medium- and long-term. Argentina’s investment climate is dampened by concerns
with Argentina’s currency controls, deteriorating macroeconomic conditions, and unresolved
sovereign debt dispute with litigating U.S. hedge funds. Many established companies in
Argentina reported that they are planning to expand investment in Argentina in the
immediate or near future, with more economic stability and policy certainty. Sectors of
heightened interest are energy, mining, agribusiness, telecommunications, technology,
financial and infrastructure development. In early 2015, the City of Buenos Aires and national
oil company YPF raised about US$500 million each through bond issuances, demonstrating
significant investor demand for Argentine bonds. The bonds were bought mostly by European
and U.S. fund managers and hedge funds.
Argentina has a managed float exchange rate policy. Conversion of the peso into foreign
currency is limited.

and Uruguay Business Handbook 2015 Argentina — A Magnet for Investment 6
Focus Areas for Investment
MANUFACTURING
One of the main drivers of Argentina’s growth over the past ten years. One sector that has
transformed as a result of this productive wager on the country´s future is capital goods. In
addition, the sector´s export performance, which has accompanied output, indicates great
potential moving forward.
Argentina is undergoing the most important economic growth cycle in its history, concurrent
with a strong increase in investment (22.8% of GDP in 2012). Agriculture, manufacturing,
infrastructure development and a wide array of services constitute dynamic economic hubs
that demand increasing quantities of goods and durable equipment items to sustain
productive growth.
A highly qualified workforce is the foundation for growth in the industrial sector. Argentine
workers have the highest educational level and labour productivity in Latin America
(according to data provided by ECLAC - United Nations). Trained in the 119 universities and
higher-education institutes throughout the country, Argentine technicians and engineers
are recognized worldwide for their creativity, versatility and quality skills.
In 2012, the manufacturing industry contributed almost US$85 billion to Argentina’s GDP,
or 18% of the country’s total. The annual accumulated growth for the sector over 2003-
2012 was above 6%. Several public policies have fostered the expansion of industries that
have become increasingly strategic to Argentina in recent years, which will allow further
diversification of the productive matrix and significant competitive advantages. These activities
include chemistry and petrochemicals, plastic, pharmaceutics, aviation, naval and forestry
industries.
FOOD AND BEVERAGES

Argentina is a world leading producer and exporter of foodstuffs. Argentine products, which
are in markets on six continents, continue to earn the country the highest accolades based
on a wide range of attributes, including innovation and quality, and bring in annual export
sales of over US$25 billion. The sector is in full compliance with the highest international
health and environmental standards, positioned to meet the most sophisticated demands
from the worldwide consumers.
A Global Opportunity
Today’s global food market plays a role of paramount importance in world economies. The
demand for foodstuffs is expanding swiftly spurred by the increase in the global population,
the economic growth in emerging markets and the emergence of new high-end consumers.
In developed countries, the demand for specialty foods, including organic and gourmet
products, continues to grow. These structural trends guarantee both an expanding market

and Uruguay Business Handbook 2015 Argentina — Focus Areas for Investment 7
for Argentine food products and new business opportunities for the country’s premium
and high added value foodstuffs.
Argentina’s vast expanse of fertile lands, exceptional agro-ecological conditions, benchmark

productivity levels, highly qualified workers and well developed agro-industrial capabilities
are pillars of the country position as one of the world’s leading producers and exporters of
foodstuffs. The sector is comprised of local and foreign companies with global operations,
as well as small innovative companies exploiting attractive market niches.
Argentina has a highly competitive and well consolidated food industry. Sector growth in
Argentina is driven by innovative developments and the implementation of new technologies.
Furthermore, the country is a regional and global leader in terms of the application of
biotechnology in the food industry, an increasing trend.
RENEWABLE ENERGIES
Argentina has the resources, capacity and potential to supply the growing global demand
for renewable energies and become the regional leader in the sector.
Commitment
Clean energies is one of the most dynamic industries in the world, growing 36% per year
on average over the last six years with investments of US$257 billion in 2011 alone. Over
118 countries have set targets for use of renewable energies or have adopted incentive
policies to encourage the use of renewable energies in an effort to diversify the energy
matrix and reduce their dependency on fossil fuels. According to the United Nations, a
twentyfold increase in the production of renewable energies will be required worldwide
by 2050. Argentina has implemented public policies and incentives to promote the
development of renewable energy sources that are in line with world trends.
Local Response Capacity

Argentina is one of the world’s leading producers and exporters of biofuels. Moreover,
given the country’s wealth of natural and technological resources, Argentina has the potential
to continue expanding wind and hydroelectric energy production, as well as to develop
second and third generation biofuels, solar power, wave and geothermal energy, and energy
generation from biogas and biomass.
Extensive Experience and Qualified Workforce

The development of renewable and clean energies in Argentina is bolstered not only by
the country’s extraordinary natural resources and its long standing industrial tradition, but
also thanks to the highly qualified workforce in the areas of engineering and biotechnology.
Several local companies are exporting their expertise and experience in the production of
biofuels, wind energy generation, wind turbines, construction of turnkey hydroelectric and
biofuel production plants, and other related services.

BIOTECHNOLOGY
A highly qualified workforce and a solid industrial tradition support the industry´s pattern
of diversification and re-concentration in production. The biotechnology sector is comprised
of a conglomerate of local and multinational companies, including top global names such
as BASF, Bayer Crop Science, DOW Agrosciences, Monsanto and Pioneer, as well as successful
local companies with international growth potential. Many of these local companies—Amega
Biotech, Bioceres, Biogénesis-Bagó, Biosidus, Cassará, Gador, Indear, Pharmadn, Rizobacter
and Wiener Laboratories—are developing biotechnology applications aimed at promoting
competitiveness through innovation. The combination of increasing public-private efforts,
strong R&D capabilities and a pattern of diversification and re-concentration in production
place the country as one of the leaders in the biotechnology sector in Latin America, where
it excels for its scientific and innovative potential in agricultural application and human and
animal health.
World-class Scientists
Argentina’s scientific professionals are renowned for their outstanding skills and their capacity
for innovation rooted in a long tradition of scientific excellence. The qualities they embody
endow the country’s biotechnology sector with significant advantages for development. A
number of educational institutions recognized worldwide offer programs in biotechnology
at both post-graduate and post-doctoral levels. The country has the highest ratio of
researchers to the economically active population in Latin America.
Diversity and Specialization

Argentina offers competitive advantages in various segments of the biotechnology industry,
particularly in the fields of agriculture, food, and human and animal health. These advantages
result from a production pattern with an export profile and strong international presence
comprised of more than 120 companies, 8,000 highly qualified workers and excellent
technological institutions and poles, including Leloir Institute Foundation, the Experimental
Biology and Medicine Institute and the Biomedicine Research Institute of the Scientific and
Technological Pole of Buenos Aires.
Public and Private Sector Cooperation

Prestigious public institutions—including the National Institute for Agricultural Technology
(INTA), the National Institute for Industrial Technology (INTI) and the National Agency for
Scientific and Technological Promotion (ANPCYT)—are driving biotechnology development
in association with the private sector, contributing to innovation through research and
development projects. This synergy between public and private institutions is reflected by
more than 100 biotechnology projects co-financed by 40 companies, generating investments
of AR$ 150 million, as well as in the successful association between laboratories and
universities.

AUTOMOTIVE INDUSTRY
The automotive and auto parts industry represents 9% of the Argentina’s industrial gross
production value and is one of the most important and dynamic sectors in the domestic
economy. Front-line international automotive manufacturers—Fiat, Ford, General Motors,
Honda, Iveco, Mercedes-Benz, PSA Peugeot-Citroën, Renault, Scania, Toyota and
Volkswagen—have chosen Argentina as a production and export platform. Plants located in
the provinces of Buenos Aires, Córdoba and Santa Fe represent 29,000 direct jobs; while
the auto parts sector is growing every day and encompasses over 400 companies and
employs more than 65,000 workers.
Argentina offers investors an attractive domestic market with over 40 million inhabitants
with one of the highest purchasing power per capita in the region. The country also has
preferential access to Brazil—one of the main automotive markets in the world—and to
other Mercosur member countries.
Thanks to the important dynamism of demand and different national and regional programs
implemented throughout 2003-2012, automotive production grew 18% on average per
year, reaching a new production record of 829,000 units in 2011.
Tradition, Capacity and Innovation

With a track record of over 60 years, Argentina’s consolidated automotive and auto parts
industry ranks second in South America in terms of production volume. Both automotive
and auto parts manufacturers have the skills and industrial knowhow to meet the most
demanding international standards and to add new products and technologies in line with
the latest global trends.
Specialized, Skilled Workers

The sector’s workforce is comprised of highly skilled and experienced workers, representing
the diverse qualifications needed at every stage of the production process. In addition to
the wide range of graduate and postgraduate courses in science, industrial design and
engineering offered by public and private universities, there are other important training
initiatives in places, such as the National Institute of Technological Education and the National
Network of Professional Training, a joint initiative between the government and key labour
unions. These initiatives promote professional training at national, provincial and municipal
levels in the field of automotive mechanics.
From Argentina to Mercosur and the World

Six of every ten vehicles produced in Argentina are exported to Brazil, thanks to the industry’s
preferential access to Mercosur countries. In addition, the industry is benefitted by various
favourable trade agreements in place with other countries including Bolivia, Chile, Colombia,
Ecuador and Peru, which is why numerous multinational manufacturers have chosen
Argentina as their production and export platform for models such as Toyota Hilux, Ford
Ranger and Volkswagen Amarok.

Infrastructure
According to BMI Research, after a new government is inaugurated in 2016, we expect

gross fixed capital formation (GFCF) will return to real expansion. Businesses will begin
construction of fixed assets as expectations for more business-friendly policies, such as tax
incentives for investment, are implemented. Further, the end of Fernandez’s administration
will improve perceptions about the Argentine government. Reduced restrictions on imports
and a weakened peso will reduce the cost for foreign businesses looking to expand in the
country’s infrastructure sector. In this context, we forecast construction industry growth to
reach 3.7% in real terms in 2016.
Our Country Risk team forecasts Argentina’s economy to grow by a significantly stronger
2.5% in 2016, after an estimated 0.7% in 2015. Real gross fixed capital formation will
experience significant growth in the coming quarters, in line with our construction industry
forecasts.
Infrastructure – Construction Industry Forecasts (Argentina 2014-2020)
2014 2015f 2016f 2017f 2018f 2019f 2020f

Construction industry value, ARS billion 222.07 268.80 343.21 395.34 433.61 473.60 512.26
Construction industry value , Real Growth, % y-o-y 0.60 4.04 3.68 3.19 2.68 2.72 2.16
F = BMI forecast
Source: INDEC, BMI
Estimate of Infrastructure Needs

Argentina will need to invest US$290 billion over the next ten years in order to finance the
myriad large-scale infrastructure projects the country needs to either initiate or expand.
The estimates from Argentina consulting firm, E&R, which cautions: “reaching an agreement
(with the holdouts) would be critical in order to attract the foreign direct investment (FDI)
and secure financing for all of the infrastructure projects our country will need over the
next decade which will reach approximately US$290 billion.
The firm says US$250 billion or 86% of these investments should be channelled toward
the holy trinity of local infrastructure: highway construction, electric energy generation and
oil and gas exploration.
Specifically, the report says hydrocarbons alone will demand investment of US$107 billion.
Over the same period, electric energy generation will require US$38 billion of which US$25
billion is for generation and US$13 billion is for distribution. Updating and maintaining
these investments will require another US$50 billion.
The maintenance and expansion of Argentine highways over the next decade will require
another US$58 billion, railroads and subways will demand US$34.5 billion, water/sewer

and Uruguay Business Handbook 2015 Argentina — Infrastructure 11
projects will cost US$6.5 billion and cellular telephone network upgrades will exceed US$1
billion.
The report concludes with words of encouragement for short-term sacrifice and long-term
stability: “Reaching an agreement with the holdouts re-opens the possibility for us to return
to the global capital markets. Our country risk and financing costs would also come down
transforming the country into a good platform for direct foreign investment.”
FOREIGN TRADE ZONES/FREE PORTS/TRADE FACILITATION

Argentina has two types of tax-exempt trading areas: Free Trade Zones (FTZ), which are
found throughout the country; and the more comprehensive Special Customs Area (SCA),
which covers all of Tierra del Fuego Province.
Argentine law defines an FTZ as a territory outside the “general customs area” (GCA, i.e.,
the rest of Argentina) where neither the inflows nor outflows of exported final merchandise
are subject to tariffs, non-tariff barriers, or other taxes on goods. Goods produced within a
FTZ generally cannot be shipped to the GCA unless they are capital goods not produced in
the rest of the country. The labour, sanitary, ecological, safety, criminal, and financial
regulations within FTZs are the same as those that prevail in the GCA. Foreign firms receive
national treatment in FTZs.
Under the current law, the GOA may create one FTZ per province, with certain exceptions.
More than one FTZ per province may be allowed in sparsely populated border regions
(although this provision has not been fully utilized). Thus far, the GOA has permitted FTZs
in many of the 23 Argentine provinces. The most active FTZ is in La Plata, the capital of
Buenos Aires Province.
Merchandise shipped from the GCA to a FTZ may receive export incentive benefits, if
applicable, only after the goods are exported from the FTZ to a third country destination.
Merchandise shipped from the GCA to a FTZ and later exported to another country is not
exempt from export taxes. Any value added in an FTZ or re-export from an FTZ is exempt
from export taxes.
Products manufactured in an SCA may enter the GCA free from taxes or tariffs. In addition,
the government may enact special regulations that exempt products shipped through an
SCA (but not manufactured therein) from all forms of taxation except excise taxes. The SCA
program provides benefits for established companies that meet specific production and
employment objectives. The SCA program applies only to Tierra del Fuego Province and is
scheduled to expire at the end of 2023. In late 2006, the Economy Ministry through
Resolution 776 abolished the export tax exemption enjoyed by oil companies operating in
Tierra del Fuego Province. The Argentine Congress passed a law in November 2009
establishing value-added tax rates up to 21% on cell phones, televisions, digital cameras
and other electronic items not produced in the southern Tierra del Fuego foreign trade
zone. According to the government, the bill aims to increase government revenue through
higher tax collection, and encourage investment in Tierra del Fuego to promote local

and Uruguay Business Handbook 2015 Argentina — Infrastructure 12
manufacturing and job growth. Argentina’s import restrictions are often the primary reason
that foreign firms choose to assemble electronic products in Argentina.
International Trade
Argentina - Exports and Imports Data

2010 2011 2012 2013 2014
Exports (US$ billion) 68.2 84.1 80.2 81.7 71.9
Imports (US$ billion) 56.8 74.3 68.0 73.7 65.2
Latin Focus Consensus Forecast panellists expect exports to drop 13.1% in 2015 and they
see imports contracting 9.7%, thus pushing the trade surplus to US$3.6 billion. For 2016,
the panel expects exports to increase 4.9% and imports to expand 5.6%, with the trade
surplus narrowing to US$3.3 billion.
Top Argentina Exports 2014

(Value in US$ billion, figures in parenthesis % of total imports)
# Commodity Value
1. Food waste, animal fodder 12.8 (18.8%)
2. Vehicles 8.3 (12.2%)
3. Cereals 5.2 (7.7%)
4. Animal/vegetable fats and oils 4.3 (6.3%)
5. Oil seed 4.2 (6.2%)
6. Oil 3.2 (4.7%)
7. Other chemical goods 2.2 (3.2%)
8. Gems, precious metals, coins 2.1 (3%)
9. Meat 1.8 (2.7%)
10. Machines, engines, pumps 1.6 (2.3%
Top Argentina Imports 2014

(Value in US$ billion, figures in parenthesis % of total imports)
# Commodity Value
1. Oil 11 (16.9%)
2. Machines, engines, pumps 9.6 (14.7%)
3. Vehicles 8.8 (13.4%)
4. Electronic equipment 7.2 (11%)

and Uruguay Business Handbook 2015 Argentina — International Trade 13
# Commodity Value
5. Organic chemicals 3 (4.6%)
6. Plastics 2.6 (3.9%)
7. Pharmaceuticals 2.1 (3.3%)
8. Medical, technical equipment 1.6 (2.5%)
9. Other chemical goods 1.5 (2.4%)
10. Rubber 1.2 (1.8%)
Fastest-Growing Argentine Exports
# Commodity Growth (from 2010) Value in $

1. Silk 1,800% 38,000
2. Other manufactured products 503.7% 92.5 million
3. Clocks and watches 476.4% 8.4 million
4. Musical instruments 108.8% 3.6 million
5. Gums, resins 77.4% 6.2 million
6. Paper yarn, woven fabric 63.2% 111,000
7. Coffee, tea and spices 57% 220.8 million
8. Tin 54.2% 37,000
9. Cereal, milk preparations 50.5% 499.2 million
10. Cotton 48.7% 145.4 million
11. Food waste, animal fodder 46.3% 12.8 billion
12. Dairy, eggs, honey 44.6% 1.5 billion
13. Ships, boats 27.4% 48.7 million
14. Modified starches, enzymes 23.7% 310.2 million
15. Pharmaceuticals 22.8% 851.3 million
16. Furskins and artificial fur 22.4% 44.6 million
17. Fish 19.1% 1.6 billion
18. Inorganic chemicals 15.9% 330 million
19. Other chemical goods 14.4% 2.2 billion
20. Cereals 13.3% 5.2 billion

and Uruguay Business Handbook 2015 Argentina — International Trade 14
Fastest-Growing Argentine Imports

1. Railway, tram equipment 2,002% 716.7 million
2. Oil 146% 11 billion
4. Salt, sulphur, stone, cement 68.5% 221.9 million
5. Fruits, nuts 67.2% 304.3 million
6. Fish 46.5% 57 million
7. Other food preparations 45.6% 199.7 million
8. Modified starches, enzymes 42.6% 165 million
9. Copper 39.2% 409 million
10. Pharmaceuticals 36% 2.1 billion
11. Tobacco 32.3% 74.9 million
12. Knitted or crocheted fabric 31.8% 170 million
13. Medical, technical equipment 31.4% 1.6 billion
15. Special woven/tufted fabric 30.8% 30.1 million
16. Other chemical goods 29.8% 1.5 billion
17. Vegetable/fruit preparations 27.4% 126.6 million
18. Milling products 26.3% 16.4 million
19. Explosives, pyrotechnics 25.1% 26.5 million
20. Soaps, lubricants, candles 19.7% 371.1 million
Services Industry
FINANCIAL SERVICES
Argentina has a relatively sound banking sector. The largest bank is the Banco de la Nación
Argentina. In recent years, the GOA has imposed a range of policies that have negatively
affected business conditions and banks’ financial strength, including dividend payment
and foreign exchange market restrictions, caps on lending rates and fees, and lending
requirements to targeted sectors. However, non-performing private sector loans constitute
less than 2% of banks’ portfolios. The ten largest private banks have total assets of
approximately ARS 564 billion (US$64 billion). Total financial system assets are approximately
ARS 1.230 trillion (US$140 billion).

and Uruguay Business Handbook 2015 Argentina — Services Industry 15
HUMAN CAPITAL
Argentina has the highest English language proficiency in Latin America. English is mandatory
at state schools in the City of Buenos Aires and the Province of Buenos Aires. Many private
schools are bilingual and attract many middle class students.
4.9 million netbooks have been given to children through the government programme
‘Conectar Igualdad’.
There is demand for:
• educational software
• English Language Teaching (ELT) products
• joint ventures with local institutions for corporate and higher education programmes
HEALTHCARE
Argentina has one of the highest doctor to population ratios in Latin America (3.8 per 1000
inhabitants). The Argentine healthcare system is split into 3 distinct markets:
• Public Health Service for 17 million people

• Social Security for 18 million people
• Private Health Service for 4.6 million middle-high income users
Argentina is the second largest market in Latin America for medical devices. However, only
25% of the equipment is manufactured locally. There is demand for:
• imaging diagnostic equipment

• orthopaedic implants
• cardiology surgery supplies
• in-vitro and organ transplant instruments
• telemedicine and other top end solutions
TOURISM
Argentina’s tourism industry is booming, with the number of foreign visitors rising to over
six million in 2014. Currency devaluation seems to have contributed to the increase in
tourism, as the Argentine peso has decreased more than 60% against the dollar in the past
year. The tourism sector is the third biggest employer in Argentina, with foreign tourists
spending US$4.8 billion in the country last year.
Investors are waiting for elections in October 2015 for the present disastrous government
to go and then real estate and travel industry hope to recover.
INFORMATION AND COMMUNICATION TECHNOLOGY

A lattice of 3,800 firms, ranging from globally consolidated multinationals to a growing
network of highly innovative small and medium-sized enterprises, makes up the global

software and IT services sector. Argentine companies’ global projection is expanding as
one quarter of its production is exported to international markets.
Professional Talent
Argentina’s IT workforce is comprised of highly qualified professionals and specialized
technical experts with excellent English-language skills. Some 85,000 students are currently
enrolled in IT courses at 79 education centres throughout the country. Education levels are
comparable to developed countries, surpassing standards in most other Latin American
countries. There is also an outstanding level of research in exact sciences.
Optimal Price-quality Ratio

A favourable relative cost structure helps to ensure advantageous costs in terms of
communications and other basic inputs required by software and IT companies (office
space, electricity, equipment, etc.). The cost-quality ratio of Argentine human resources is
particularly attractive in relation to regional and international competitors.
Encouraging Scenario
Argentina offers businesses a range of clear advantages over other emerging markets. Its
time zone (GMT-3) is highly valued by companies, especially those requiring real time
communications with clients or headquarters in North America and Europe. With one of
the highest rates of broadband penetration in the region, Argentina’s modern
telecommunications system ensures access to a technological platform needed to compete
on a global level.
Furthermore, the public sector is playing an active role to stimulate the development of
this industry with new funding and promotion efforts, while working towards greater
productivity and integrity, a commitment reflected by the country’s forefront position in
areas like data protection legislation.
Argentina is an early adopter of ‘big data’ and other sophisticated technologies. It has the
highest number of mobile phones per capita in the Americas and higher also than the UK.
Its fibre-optic broad band network will increase by 300% by end 2015.
There are opportunities for:
• supply mobile phone carriers with technology to improve network capacity

• provide content for the broadband networks
• enter joint ventures to develop software for processing big data
TECHNICAL AND PROFESSIONAL SERVICES IN ARGENTINA

Argentina offers unique opportunities for companies dedicated to offshore outsourcing of
professional services. Many international companies representing diverse areas of expertise
develop services in Argentina and export them. Today, companies work in several higher-

sophisticated sectors, earning Argentina a reputation as one of the most highly rated
outsourcing destinations in Latin America. Buenos Aires places 15th in the world ranking of
outsourcing cities and 7th among the top emerging developing countries (Tholons
Consulting).
Talented, Creative and High-qualified Technicians and Professionals

A growing highly qualified labour force is one of the key reasons for the success of this
sector in Argentina. Argentine professionals and technicians are internationally renowned
for the quality of their solid training, talent and creativity. Argentina has one of the highest
English-language levels in Latin America, while many Argentines are fluent in French,
Portuguese, Italian and German, among other languages.
Competitive Operative Costs and Excellent Communication Network

Operating costs in this local sector are highly favourable regionally and globally. In addition,
Argentina boasts a thriving telecommunications system developed within the framework
of a modern and highly competitive market. Argentina has the highest density of mobile
telephone lines in Latin America and one of the highest broadband and land line penetration
rates in the region. The city of Buenos Aires has the largest concentration of wireless hot-
spots in Latin America, reaching levels comparable to many European cities
Strategic Location
Argentina’s ease-of-access and cultural proximity to Mercosur (Southern Common Market),
a regional market with 279 million people and with a joint GDP of US$3.6 trillion, is another
important attribute. A similar time zone (GMT-3) to most cities throughout South and
North America is another key factor held up by companies in this sector when designing
their global location strategy. Argentina is repeatedly chosen as the top global destination
by multinational companies carrying out projects throughout Latin America.
Investment Risks, Barriers and Challenges
Strengths
• Abundant agricultural (soya, cereals, beef, fruit), energy (gas, oils, hydraulic) and mineral
resources (gold, silver, copper)
• Skilled labour force: Education level above the regional average
• Democratic political system
Weaknesses
• Dependence on agricultural raw materials and therefore on climatic conditions
• Pro-cyclical fiscal policy

and Uruguay Business Handbook 2015 Argentina — Investment Risks, Barriers and Challenges 18
• Mediocre business environment
• Poor financial intermediation
• Inadequate investment in energy and transport
• Controls on imports and capital movements
• Tenuous access to international financing
• Poverty, strong social disparities and social tensions
POLITICAL AND SECURITY

The popularity of the government is declining. A corruption scandal involving the Vice-
President exacerbated has made the matter even worse. The government is also facing an
increasingly structured political opposition (including parts of the ruling Peronist Party),
which is criticising the President Kirchner over her handling of the “vulture” funds crisis.
Social tensions are on the rise in spring 2014, resulting in strikes by workers of the crisis-hit
automobile and steel industries, as well as in other sectors (teachers, bus drivers, bank
employees, etc.). The popular discontent is being relayed by the powerful unions. It is
above all being stoked by rising inflation, which led to a reduction in real earnings since the
beginning of 2014. In this context, as the economy enters into recession, the possibility of
another social conflict is quite high.
GOVERNANCE
Longstanding concerns regarding the lack of transparency in government policymaking
also diminish the attractiveness of prospective investments in Argentina. Decisions that
affect both foreign and domestic companies are frequently made without industry input
and are rarely open to a consultation period. GOA actions to curb the remittance of profits
abroad limit foreign companies’ ability to repatriate earnings, causing some companies to
reconsider locating new business ventures in Argentina. Currency controls delay companies’
access to dollars to pay suppliers while recently amended laws allow the GOA to set profit
margins and the prices of goods in the private sector in certain circumstances. Businesses
and investors also report concerns about Argentina’s currency exchange rate policies, which
affect the competitiveness of Argentine goods internationally and delay investment decisions.
According to the World Bank’s worldwide governance indicators, corruption remains an

area of concern in Argentina. In the latest Transparency International Corruption Perceptions
Index (CPI) that ranks countries and territories by their perceived levels of corruption,
Argentina ranked 107 out of 175 countries. Lack of transparency, autonomy, and clear rules
in the selection of judges as well as inefficiencies and pervasive delays compromise the
judicial system and create the potential for political influence. According to Transparency
International, weak enforcement of anti-corruption measures remains Argentina’s greatest
corruption weakness.

ECONOMIC
Argentina is still dealing with issues related to its 2001 default on nearly US$100 billion in
debt, the largest sovereign debt default in history. In late 2013 and early 2014, the
government of Argentina (GOA) made some progress in normalizing its relations with the
international financial community. The GOA settled several outstanding international arbitral
awards, engaged with the International Monetary Fund (IMF) to improve economic reporting
data, and compensated the Spanish firm Repsol for the partial expropriation of YPF in
2012. Argentina also signed bilateral agreements to repay nearly US$10 billion in arrears
with the Paris Club group of creditors.
Argentina’s refusal to comply with a U.S. court ruling ordering the GOA to pay a group of
U.S. creditors who sued the country for the full value of their defaulted Argentine bond
holdings continues to restrict Argentina’s ability to service some of its sovereign debt both
at home and abroad. Argentina’s limited access to international financial markets will
continue to discourage investment until the issue is settled.
After several years of publishing non-credible statistics, Argentina’s official statistics agency
(INDEC) released substantially revised inflation and GDP growth data in 2014 and 2015
that are closer to private estimates. The IMF had formally censured Argentina in February
2013 because of the manipulation of inflation and GDP data, a breach of obligation to the
Fund under the Articles of Agreement.
The World Trade Organization (WTO) in January 2015 ruled that the GOA’s all-encompassing
import licensing system violated international trade norms. The GOA affirmed that it will
comply with the WTO decision, but did not specify a timeframe for adjustment. In the
meantime, the system remains in place and reportedly causes shortages and complicates
the operations of businesses that are reliant on the importation of goods for production
and distribution. Factories and distributors occasionally sit idle while the GOA delays granting
approval to move inputs through customs, a process that can be restrictive and unpredictable
ARGENTINA’S STATUS IN GLOBAL ECONOMIC RANKINGS
The World Bank “Doing Business Ranking” 2015

Doing Business 2015 is the 12th in a series of annual reports benchmarking the regulations
that affect private sector firms, in particular small and medium-size enterprises. The report
presents quantitative indicators on 11 areas of business regulation for 189 economies.
Argentina 124 out of 189 countries

India 142 out of 189 countries

Other Rankings
Index Rank
Corruption Perceptions Index 106/173
E&Y Globalization Index Score 53/60
Global Competitiveness Report 103/147
Global Enabling Trade Report 87/138
Global Manufacturing Competitiveness Index (GMCI) 26/38
Global Services Location Index 38/51
Index of Economic Freedom 169/178
International Logistics Performance Index (LPI) 60/160
Inward FDI Potential Index 60/139
KOF Index Globalization 85/186
Networked Readiness Index (NRI) 97/145
Open Budget Index 25/102
Indo-Argentinian Economic Relations
Bilateral trade for the last 6 years is as follows:
Year Export to Growth Export from Growth Total Trade Growth

India India Turnover
2010 2033 — 496 — 2529
2011 1214 -40% 561 13% 1174 -30%
2012 1264 4% 573 2% 1837 -4%
2013 1105 -13% 695 21% 1801 -2%
2014 2032 84% 602 -13% 2633 46%
Source: Mercosur on Line
India’s Exports to Argentina

Organic Chemicals, Vehicles and Auto parts, Lubricants, Machinery, Sound and Image Devices
and Garments, among others.
India’s Imports from Argentina

Soybean oil, Petroleum, Copper, Sunflower oil, Leather, Wool, Ferroalloys among others.
Investments, Joint Ventures and Business Delegations

Almost thirteen Indian Companies have established operations in Argentina with investment
totalling to US$930 million. Indian companies include TCS, CRISIL, Bajaj, Cellent, Cognizant
Technologies, United Phosphorus Ltd. (UPL), Sintesis Quimica, Glenmark, Godrej etc.

and Uruguay Business Handbook 2015 Indo-Argentinian Economic Relations 21
Argentinian investment in India stands at US$120 million. TECHINT, which is one of the
largest seamless steel tubes manufacturers in the world, has offices in Delhi employing
about 200 people.
ONGC (OVL) has signed a MoU with ENARSA, their Argentine counterpart for possible joint
ventures in Argentina for oil exploration. Indian company, Sonalika Pvt. Ltd. has signed a
joint venture with Argentina company Apache of Santa Fe for manufacturing tractors and
Indian Bajaj motorbikes has signed a joint venture with Corven Argentina to produce and
sell motorbikes in the local market. During 2014, IMPLATEC Argentina developed a strategic
alliance with the Indian company Appasamy Associates, a global leader in the
ophthalmological market and both companies have inaugurated the first producing plant
of intraocular lenses in Argentina with a manufacturing capacity of 20,000 lenses monthly.
Halal India and Halal Argentina have started a joint venture for production and exportation
of halal meat. Ishka Renewable Farms Private Lt from Kerala signed a joint venture with
Cooperative Al Caparras to cultivate 1000 acres of capers in the next 10 years in the Argentine
province of Santiago del Estero Argentina.

and Uruguay Business Handbook 2015 Indo-Argentinian Economic Relations 22
CHILE
Highlights 24
Introduction 24
Chile — Key Economic Factsheet 2014 25
Infrastructure 32
Indo-Chilean Economic Relations 39
Highlights
• Largest copper producer in the world

• World’s third largest fruit and nuts exporter
• World’s fourth largest seafood exporter
• Strongest sovereign bond rating in South America.
• Chile and 11 other countries reach deal on Trans-Pacific-Partnership
• First South American country to join the OECD
• World’s 11 largest recipient of FDI in 2012.
• Stable political environment
• 15/144 in Global Competitiveness Index
• $7 billion. opportunities in infrastructure projects
Introduction
Chile is a country in South America that borders the South Pacific Sea. Neighbouring countries
include Argentina, Bolivia, and Peru. Chile has a strategic location relative to sea lanes
between Atlantic and Pacific Oceans including the Strait of Magellan, Beagle Channel, and
Drake Passage. Chile occupies a long, narrow coastal strip between the Andes Mountains
to the east and the Pacific Ocean to the west and thus the geography is varied. The
government system is a republic. The chief of state and head of government is the President.
Chile has a market-oriented economy in which the prices of goods and services are
determined in a free price system. Chile is a member of Asian Pacific Economic Cooperation
(APEC) and Latin American Integration Association (LAIA). Chile and 11 other countries
reached an agreement on the Trans-Pacific-Partnership (TPP) deal, which aims to liberalize
and boost trade among the member countries. The deal still needs to be approved by
lawmakers in all countries before implementation.
The economy of Chile is ranked as a high-income economy by the World Bank, and is
considered one of South America’s most stable and prosperous nations, leading Latin
American nations in competitiveness, income per capita, globalization, economic freedom,
and low perception of corruption.

and Uruguay Business Handbook 2015 Chile — Introduction 24
Chile — Key Economic Factsheet 2014
Population 17,762,647 (2014)

Population Growth Rate 1.057 annual % (2014)
Age Dependency Ratio 45.27 % of working-age population (2014)
Urban Population 89.356 % of total (2014)
Infant Mortality Rate 7 per 1,000 live births (2015)
Life Expectancy at Birth 79.837 years (2013)
Total Area 756,102 sq. km
Land Area 743,812 sq. km
Water Area 12,290 sq. km
Coastline 6,435 km
Capital Santiago
Key Economic Facts

Unemployment, total (% of total labour force) (modelled ILO estimate) 6.00% (2013)
After a sharp slowdown in 2014 the economy is projected to gradually recover in 2015 and
2016. The pick-up in activity will initially be driven by higher public spending, but will
increasingly be supported by stronger external demand for industrial goods from the United
States and Europe. Growth of 1.9% in 2014 was the lowest since the global financial crisis
erupted.

and Uruguay Business Handbook 2015 Chile — Economic Highlights and Forecast 25
As the exchange rate has stabilised, inflation is moderating, although it remains above the
central bank’s target band. Since inflation expectations remain well anchored, monetary
policy can continue to support growth in the near term, before moving to a more neutral
stance as growth strengthens. The underlying stance of fiscal policy is expected to be
expansionary in 2015, but then to become neutral in 2016 as the government remains
committed to achieve a zero structural balance by 2018.
The large decline in copper prices in the aftermath of the commodity super-cycle has
affected the investment plans of mining companies, which have significantly reduced
investment since 2012. This decline is perceived to be to a large extent permanent, and
mining investment is therefore not expected to recover very strongly, even in the medium
term. Therefore, advancing the Productivity Agenda, which is meant to broaden the base of
the economy, is essential. Structural reforms to open market further to competition will be
particularly important to boost investment outside the mining sectors, increasing and making
growth more inclusive.
The Central Bank sees year-end inflation at 2.8% in 2015. Panellists participating in the
Latin Focus Consensus Forecast expect inflation to close 2015 at 4.5%, which is up 0.2
percentage points from last month’s forecast. For 2016, the panel sees 3.4%.
Panellists also expect the peso to trade at 685 CLP per US$ at the end of 2015. Next year,
the panel sees the currency trading at 680 CLP per US$.
The government announced an abrupt downward revision in economic growth estimates

to 2.5% for 2015, having initially predicted 3.6% in this year’s budget. Latin Focus Panellists
Consensus Forecast project Chile’s economy to grow 2.2% in 2015 and 2.6% in 2016.

CHILE’S ECONOMY BRIGHTENS AMID POLITICAL GLOOM
Financial Times, London 20 Apr 2015
While most countries in Latin America are still struggling to adjust to the end of the boom
in commodity prices that propelled growth in the resource-rich region over the past decade,
there are signs that Chile’s economy may be turning the corner.
“If Chile’s recovery turns out to be sustainable, then there is light at the end of the tunnel
for some of its neighbours who are just entering the adjustment, like Colombia,” says Luis
Arcentales, an economist at Morgan Stanley.
“Chile has undergone the bulk of the adjustment,” Mr Arcentales says. He adds that after a
period of weak domestic demand when business confidence was hit by Ms Bachelet’s
reforms, the economy is now improving, helped by a weak currency that has boosted
exports and easing inflation that has spurred consumption.
After gross domestic product growth fell to 1.8% in the fourth quarter of 2014, which saw
Chile’s slowest growth since the global financial crisis, well below an average of 4.2% over
the past decade, economists at Barclays expect 2.8% growth this year, and potential growth
of 3.5% in the medium term.
Chile, the world’s top copper exporter, was the first country in the region to be hit hard by
the end of the so-called commodities “supercycle”, because copper prices began to fall
earlier than prices of other commodities like oil. So it makes sense that Chile’s economy
should also be the first to recover, says Mario Castro, an economist at Nomura.
But the health of Chile’s economy, often regarded as the best run in the region, is also
attributed to the strength of its institutions and its free trade model, untrammelled by the
heavy-handed state interventionism that has distorted the economies of countries like
Argentina and Venezuela.
“Chile is an example of how credible institutions can smooth the economic cycle and make
adjustments less traumatic,” said Mr Castro, pointing to its widely respected and independent
central bank and a well-established “fiscal rule” that gave officials the freedom to implement
counter-cyclical policies.
The resulting depreciation of the peso, as Chile adapts to lower potential growth rates after
the commodity boom, has provided a boost for exporting industries outside the mining
sector. Mr Castro expects this boost in competitiveness for “tradable” sectors such as Chile’s
successful wine and salmon industries to be permanent.
Nevertheless, if Chile’s economy is indeed on the upswing, the benefits have yet to be felt
either by the president or the average citizen.
“If you look at the newspapers here, the story is not about economic recovery, it’s about
political corruption,” says Robert Funk, a political scientist at the University of Chile. In any
case, he says that “Chileans have become used to a certain level of economic stability that

other countries are jealous of”, so Ms Bachelet will need more than good economic results
to boost her wilting popularity.
Furthermore, Mr Funk says that there is still “a lot of nervousness” about the effect of the
government’s tax reform approved last year, which aims to collect an extra $3 billion each
year mainly from businesses, and pending labour market reforms expected to make trade
unions more powerful. “We just don’t know what will come out of this process. It may be
very healthy, but it may also have unpredictable effects,” he said.
Indeed, many local economists question the optimism held by Wall Street analysts. “There
are signs of the green shoots of recovery, yes. But it could turn out to be a dead cat
bounce,” says Michèle Labbé, chief economist at Econsult in Santiago, referring to market
jargon for a temporary recovery in a declining stock. She worries that without enough
spare capacity in the economy, expansive fiscal and monetary policies could end up fuelling
only inflation, not growth as well.
Crucially, investment remains low because of uncertainty over the outcome of Ms Bachelet’s
reforms, which are aimed at reducing inequality. Until the reform process has been completed
— and many fear that it is being stalled by the political crisis — businesses may continue to
refrain from making serious investment commitments. And even if Chile’s economy is
outperforming the rest of the region, for many Chileans that is not enough.
“We are always going to look good if we compare ourselves to the rest of Latin America,
which always makes the same old mistakes,” says Ms Labbé, who adds that Chile does not
come off so well when comparing itself to the world’s best-performing countries. “It’s best
to compare Chile with itself, and the truth is we could be doing a lot better.”
On June 16, 2015, Chile enacted Law 20,780, on foreign investment. The law originated as
Bill 9899-05 and was sent to the legislature by the administration on January 30, 2015. The
new legislation replaces the statute on foreign investment enacted as Decree Law 600 of
1974, which will be abolished as of January 1, 2016. (Carlos Gutiérrez, Chile: New Statute
for Foreign Investment Enacted, TAX NEWS SERVICE (June 18, 2015), International Bureau
of Fiscal Documentation online subscription database; Boletín 9899-05: Establece una ley
marco para la inversión extranjera directa en Chile y crea la institucionalidad respectiva
(Bulletin 9899-05: Establishing a Framework Law for Foreign Direct Investment in Chile
and Creating Related Institutions) (Jan. 30, 2015), Chilean Senate website; Foreign
Investment Statute: Decree Law 600 (unofficial translation, Dec. 2010), CIE CHILE.)
The new Law establishes a Committee of Ministers for the Promotion of Foreign Investment,
to give the President strategic advice on foreign investment. The legislation also creates an

and Uruguay Business Handbook 2015 Chile — Laws and Policies Relating to Foreign Investment 28
Agency for the Promotion of Foreign Investment, which will advise the Committee and
implement the Committee’s strategies. (Gutiérrez, supra)
The Law also prescribes that foreign investors will be guaranteed:
• access to the exchange market once they have fulfilled tax obligations;
• free repatriation of both capital and profits, once tax obligations are met; and
• protection against arbitrary discrimination. (Id.)
• Any rights and obligations of a foreign investor established in existing contracts with
the government, under the provisions of the 1974 Decree Law, will continue to be
guaranteed. (Id.)
Foreign investors will have the opportunity after January 1, 2016, to sign four-year contracts
with the government. They may then opt to pay a fixed overall tax rate of 44.45%. Previously
this rate for foreigners was 42%; the general non-resident income tax rate for those not
signing four-year contracts is 35%. The new law also specifies that new procedures will be
adopted to exempt from value-added tax the imports of capital assets by foreign investors.
(Id.)

The flows of foreign direct investment (FDI) in Chile, which had been growing since 2010,
have now reached the country’s record levels. In 2014, FDI flows increased to US$23.3
billion, a 15% increase compared to 2013. Chile is the second most attractive country in
South America in terms of FDI, after Brazil. However, foreign investment is very irregular
because it is often linked to projects in the mining sector. According to UNCTAD, in 2014
Chile ranked 17th in terms of FDI attractiveness, which represents a loss of 6 places. Chilean
economic policies, which are founded on the principle of capital transparency and non-
discrimination against foreign investors, comprise one of the country’s strengths. Investors
are also attracted by the richness of Chile’s natural resources, the stability of its macro-
economic system and its growth potential, its juridical security, the country’s low level of
risk and the high quality of its infrastructure. The country ranks 41 out of 189 countries in
the 2015 Doing Business report issued by the World Bank. Chili ranks fifth among the
countries that are the most open to imports and foreign investments in the world. The
United States is the largest investor in the country.
Foreign Direct Investment 2012 2013 2014

FDI Inward Flow (mn. US$) 25,021 16,577 22,949
FDI Stock (mn. US$) 191,280 198,628 207,678
Number of Greenfield Investments 88 99 65
FDI Inwards (in % of GFCF****) 39.4 25.0 40.3
FDI Stock (in % of GDP) 72.2 71.8 80.5

and Uruguay Business Handbook 2015 Chile — Laws and Policies Relating to Foreign Investment 29
According to the Business Environment Rankings of the Economist Intelligence Unit (EIU),
Chile is one of the 20 most attractive economies in which to do business between 2010
and 2014 and leads Latin America in this field. Chile is also an attractive country in which to
do business because of its high level of free trade. It is, indeed, one of the world’s ten freest
countries, according to the Index of Economic Freedom 2013, published by the Heritage
Foundation and the Wall Street Journal. With a score of 79 points, it took 7th place in the
ranking, ahead of all other Latin American countries. Between 2012 and 2013, Chile’s score
increased by 0.7 points, due principally to progress as regards investment and freedom to
do business.
The significant increase in FDI seen in recent years has made a decisive contribution to
boosting the growth of the Chilean economy and its gains in productivity.
• Growth of FDI explains over 18% of the acceleration of GDP growth between 2010 and
2012.
• Around 15% of the growth of employment in Chile since 2010 – or, in other words,
119,600 new jobs – was thanks to higher FDI.
Details of projects are available at: http://www.ciechile.gob.cl/en
MINING
• Chile accounts for 28% of global copper reserves (USGS).
• It is the world’s principal producer of copper (32%), nitrates (100%), iodine (58%) and
lithium (45%) and the sixth largest silver producer.
• Mining companies plan to invest US$104,000 million in Chile over the next eight years.
• Mining companies spent over US$21,000 million in Chile in 2011.
• Chile has some 4,000 mining suppliers who include world-class companies.
Opportunities
• Equipment and spares
• Engineering and consultancy services
• Construction
• Production support services
• Establishment of regional offices by mining suppliers as base for exporting and diversifying
areas of activity.

and Uruguay Business Handbook 2015 Chile — Focus Areas for Investment 30
ENERGY
• Chile has an installed capacity (net power) of 17.6 GW. In 2012, gross electricity generation
in the SIC and SING (the two main transmission systems) reached a total of 65,547
GWh, up by 5.8% on 2011.
• In 2012, hydroelectricity (excluding mini-plants of less than 20 MW) accounted for
29.3% of generation, coal for 41%, gas for 19%, diesel for 5.9% and alternative renewable
energies (ARE) for 4.8%. As a result, 65.9% of the country’s electricity was generated
from fossil fuels.
• The country’s projected economic growth implies increased demand for electricity which
is forecast to rise by around 5% a year through to 2020, creating opportunities for
investment in generation and transmission.
Opportunities
• Generation: Over 8,000 MW in new projects will be required by 2020.
• Chile offers advantageous conditions for the development of alternative renewable
energies.
• The country has pending transmission challenges.
AGRICULTURE AND FOOD

• In 2012, agribusiness exports reached US$13,775 million, with foods accounting for
more than 17% of the country’s total exports.
• Chile has a range of advantages for food production:
• Its location permits counter-season supply of the large consumer markets of the Northern
Hemisphere.
• Chile contains one of the world’s only five macrozones with a Mediterranean climate,
offering excellent conditions for fruit growing. In addition, the country’s length and
diversity of climates permit year-round production as well as supporting the different
forms of animal and vegetable life that underpin the diversity of its agricultural industry.
• It is a pest-free country thanks to the natural barriers that protect it and transform it
into a phytosanitary and zoosanitary island – the Atacama Desert in the north, the
Andes Mountains to the east, the Pacific Ocean to the west, and the ice fields of the
south.
• A coastline that stretches for over 4,300 km offers a variety of conditions for aquaculture,
including Chile’s emblematic salmon of which it is the world’s second largest producer.
International Market
Chilean products are present in markets around the world and each day:
• 16.9 million people drink a glass of Chilean wine;

• 6.0 million people eat a piece of Chilean salmon;
• 8.6 million people drink a glass of Chilean fruit juice;
• 8.5 million people eat canned Chilean fruit and vegetables;

and Uruguay Business Handbook 2015 Chile — Focus Areas for Investment 31
• 4.9 million people eat a piece of dehydrated Chilean fruit;
• 1.7 million people eat frozen Chilean fruit.
Opportunities
Fruit: Chile is the world’s leading exporter of grapes, plums and blueberries and among
the three leading exporters of avocadoes, kiwis, raspberries and apples.
New Opportunities
• Berries
• Cherries
• Walnuts
Wine: Chile is the world’s fifth largest wine producer.
New Opportunities
• Organic wine
• “Functional” foods based on grape by-products.
Salmon: Chile is the world’s second largest producer of farmed salmon.
New Opportunities
• Salmon feed
• Caging services
Infrastructure
• Over the past thirty years, Chile has achieved an important leap forward in connectivity.
This is largely the result of public efforts accompanied by the private sector’s participation
through the Concessions System created in 1991.
• Chile’s Concessions System has become a reference internationally, offering 71 tenders
of which 66 have already been awarded.
• The concession company builds and operates the infrastructure.
PUBLIC WORKS CONCESSIONS SYSTEM (PUBLIC-PRIVATE PARTNERSHIPS, PPP)

• The concession company finances the infrastructure and recoups the investment over
the long term through:
• charges to users
• and/or state subsidies.

and Uruguay Business Handbook 2015 Chile — Infrastructure 32
Opportunities
Chile has a portfolio of public tenders worth US$7,000 million that includes highways,
airports, hospitals and urban infrastructure.
SPECIAL ECONOMIC ZONES

Chile boasts three FTZs which provide excellent manufacturing infrastructure for foreign
companies willing to incorporate in Chile. There are several incentives available for companies
in Chile’s free trade zones.
Duty free zone of Iquique free trade zone (ZOFRI)

Punta Arenas free trade zone
Arica free trade zone
Iquique free trade zone is Chile’s most ambitious tax-free zone. It is located the northern
part of the country, with an area of 240 hectares, providing large warehouses, serviced
area, and financial area; Companies operating in Iquiqe enjoy i) 100% exemption from
corporate tax ii) 100% exemption from custom duties iii) 0% VAT on their first sales iv) and
0.8% import tax; This free zone invites multinationals from both commercial and industrial
sectors such as imports, exports, retail, assembly, manufacturing, and industrial processing.
International Trade
Chile — Trade Statistics
Exporter Rank 40/124

Importer Rank 36/124
Balance Trade Rank 56/124
2010 2011 2012 2013 2014

Top 10 Export Goods (by HS Code) Top 10 Import Goods (by HS Code)
# Commodity Export Value ($) # Commodity Import Value ($)

74 Copper 22,077,902,126 27 Oil & Mineral Fuels 15,328,259,636
26 Ores 19,756,843,052 84 Industrial Machinery 8,729,472,991
08 Fruit & Nuts 5,765,783,888 87 Motor Vehicles & Parts 7,962,535,910
03 Seafood 4,954,010,675 85 Electrical Machinery 6,869,672,984
47 Wood Pulp 2,891,710,500 39 Plastics 2,434,566,267
44 Wood 2,502,552,218 40 Rubber 1,547,927,771

and Uruguay Business Handbook 2015 Chile — International Trade 33
22 Beverages 1,897,594,368 62 Apparel: Non Knit 1,445,138,826
28 Inorganic Chemicals 1,596,183,714 73 Iron & Steel Articles 1,382,326,708
71 Precious Stones & Metals 1,279,608,371 61 Apparel: Knit 1,367,157,723
84 Industrial Machinery 986,398,169 72 Iron & Steel 1,265,288,652
Top 10 Export Partners Top 10 Import Partners

Country Export Value ($) Country Import Value ($)
China 18,218,437,909 United States 18,203,691,811
United States 9,629,779,824 China 14,432,125,565
Japan 8,384,025,735 Argentina 5,283,345,763
Korea, South 4,551,494,722 Brazil 5,186,180,536
Brazil 4,294,356,174 Germany 2,861,679,563
Netherlands 2,738,538,401 Mexico 2,607,575,932
India 2,586,434,912 Korea, South 2,603,951,641
Italy 2,012,960,941 Japan 2,596,367,384
Peru 1,812,783,786 Colombia 2,184,752,167
Spain 1,615,721,005 Ecuador 2,154,892,722
Fastest Growing Chilean Exports 2014

1. Nickel 6395% 3.9 million
2. Zinc 839.3% 1.1 million
3. Railway, tram equipment 281.6% 4.3 million
6. Animal/vegetable fats and oils 183.9% 244.6 million
7. Aircraft, spacecraft 109.6% 30.5 million
8. Wool 99.9% 65.7 million
9. Fish 94.9% 5 billion
10. Cereal, milk preparations 85.3% 266.6 million
11. Raw hides excluding furskins 77% 57.5 million
12. Rubber 76.4% 427.4 million
13. Modified starches, enzymes 76.3% 31.7 million
14. Pharmaceuticals 69.9% 205.6 million
15. Lead 64.9% 28.6 million
18. Cork 47.7% 12.3 million
19. Aluminium 46% 120.7 million
20. Vegetable/fruit preparations 46% 724.9 million

Fastest-Growing Chilean Imports 2014

1. Dairy, eggs, honey 183.5% 203.2 million
2. Live trees and plants 121.4% 29.4 million
3. Gems, precious metals, coins 120.7% 90.4 million
4. Fish 86.2% 61.3 million
6. Arms, ammunition 82.8% 14.3 million
7. Explosives, pyrotechnics 81.8% 63.2 million
9. Alcoholic beverages 77.4% 379.6 million
10. Fruits, nuts 76.6% 183.4 million
11. Food waste, animal fodder 71% 1.2 billion
12. Copper 69.4% 103.9 million
13. Meat and seafood preparations 65.7% 172.6 million
14. Headgear 64.2% 49.1 million
15. Oil seed 62.8% 152.2 million
17. Pharmaceuticals 57.6% 1.2 billion
19. Other animal-origin products 48.1% 37.4 million
CHILE’S BILATERAL AND MULTILATERAL ECONOMIC AGREEMENTS

Chile’s open economy, combined with an active policy of bilateral, regional and multilateral
trade agreements, has underpinned a sustained increase in foreign trade in goods and
services and in the country’s international competitiveness, consolidating its position as an
active international partner.
Internationally integrated Free Trade Agreements: Australia, Canada, Central America,

China, Colombia, EFTA (Norway, Switzerland, Iceland and Liechtenstein), Malaysia, Mexico,
Panama, Peru, South Korea, Turkey and the United States.
Economic Association Agreements: European Union (EU), Japan and P4 (New Zealand,
Singapore and Brunei Darussalam as well as Chile).
Economic Complementation Agreements: Bolivia, Ecuador, MERCOSUR (Argentina, Brazil,

Paraguay y Uruguay) and Venezuela.
Partial Scope Agreements: India and Cuba.

Agreements negotiated (but not yet in force): Vietnam, Hong Kong and Thailand.

Services Industry
FINANCIAL SERVICES
Chile’s banking sector has a rising likelihood for merger and acquisition activity, which
could consolidate some of the country’s middle-tier banks, says Fitch Ratings. The maturity
and quality of Chile’s banking sector, the opportunity created by the possible sale of smaller
banks, and a shifting landscape in the country’s consumer financing market may bring
more investment from regional and international foreign banks, which Fitch believes could
be a positive for target banks.
The Chilean market is viewed as attractive due to its history of stability and steady growth,
as well as a solid regulatory framework and strong supervision. Chile’s middle tier banks
face some competitive disadvantages with larger peers given their weaker funding and
increasing competition from non-bank lenders and large retailers that offer banking services.
Chile has the second-highest banking penetration in Latin America, behind Panama;
nonetheless, Fitch still sees solid long-term growth prospects for the Chilean market.
HUMAN CAPITAL
Foreign investors often highlight human capital as one of Chile’s main comparative
advantages, drawing attention to the high standards achieved by the country’s universities
and, particularly, its business schools.
According to the National Education Council (CNED), Chile’s higher education system
currently comprises a total of 163 institutions of which 60 are universities, 44 are professional
training institutes and 59 are technical training centres (offering two-year courses). As of
2012, a total of 74,888 teachers were working in the higher education system of whom
27% held a master’s degree and 13% a PhD.
Chile is also noted for the quality and tradition of its universities. In the Academic Ranking
of World Universities (ARWU), published since 2003 by the Centre for World-Class Universities
(CWCU) of Shanghai Jiao Tong University, two Chilean universities – the Universidad Católica
de Chile (PUC) and the Universidad de Chile – ranked among the best 500 in the world in
2012, taking 8th and 10th place, respectively, in Latin America.
In the specific case of MBA programs, Chile has ten business schools with leading positions
in the 2012 MBA Ranking of Latin American Business Schools published by the América
Economía business magazine. Three are, moreover, among the top ten in the region –
those of the Universidad Adolfo Ibáñez (1st), the Universidad Católica de Chile (7th) and
the Universidad de Chile (10th).
In line with Chile’s progress as regards educational indicators, the country’s labour force
reached a total of 8.2 million people in the first quarter of 2013 out of whom 93.8% were
employed, including over 64% in the services sector.

and Uruguay Business Handbook 2015 Chile — Services Industry 36
On the quality of its labour force, Chile took 31st place out of 60 economies in the Global
Talent Index 2011-2015 used by the Economist Intelligence Unit (EIU) and Heidrick &
Struggles to measure support for talent and entrepreneurship.
HEALTHCARE
The principal healthcare delivery service is
TOURISM
• 3,554,279 overseas tourists visited Chile in 2012, up by 13.2% on 2011.
• Spending by overseas tourists in Chile rose by 17.1% to US$2,712.6 million.
• In the last ten years, the portfolio of investment projects in the sector reached US$528
million (2003-2013 according to FDI Markets).
• Chile ranks 57th internationally (out of 139 countries) on tourism competitiveness (WEF,
2013) and second in South America after Brazil.
Opportunities
• Opportunities and tourist attractions across all the country’s regions
• Development of hotel and leisure projects in areas of interest
• Development of sustainable tourism in protected areas under state concessions
• Development of special interest tourism projects.

Chile is a country that, from primary schools through to businesses and public services, is
ready to adopt new technologies. Numerous studies, in fact, identify Chile as a “wired”
country that has already achieved important progress as regards digital connectivity and
information and communications technologies (ICTs).
Network readiness: In the Networked Readiness Index 2013, published by the World
Economic Forum (WEF), Chile took 34th place out of 144 economies and, with a score of
4.59 points, ranked ahead of all other Latin American countries. It was, moreover, among
the top 20 countries globally on indicators that included mobile network coverage, ICT use
and government efficiency and e-participation. This Index assesses a country’s degree of
preparation to benefit from the development of ICTs as reflected in its regulatory and
economic climate, the level of use of these technologies and their socioeconomic impact.

and Uruguay Business Handbook 2015 Chile — Services Industry 37
Strengths
• Mining (leading copper producer), agricultural, fishery and forestry resources
• Climatic diversity and seasonality opposite to that of developed countries
• Numerous free-trade agreements
• Satisfactory budget situation
• Free floating currency
• Favourable business situation and political and institutional stability
• International companies operating in distribution, air transport and paper
• Member of the OECD and the Pacific Alliance
Weaknesses
• Small and open economy, vulnerable to external shocks
• Dependent on copper and the Chinese economic situation
• Structural external deficit
• Vulnerability of road network and electricity grid, and high energy prices
• Exposure to climate and earthquake risk
• Income disparity and poor education system
• Relatively high private debt

Chile’s economic recovery is faltering as business confidence is undermined by President
Michelle Bachelet’s reform programme and a political crisis triggered by corruption scandals,
one including her son. That only quickened the slide in Ms Bachelet’s popularity, which has
also been hit by discontent over Chile’s sluggish economy. Her approval ratings reached a
new low of 27% in June according to local pollster Adimark, after declining from 54% at
the beginning of her second presidential term over a year ago.
GOVERNANCE
In Transparency International’s 2012 Corruption Perceptions Index, Chile obtained a score
of 72 points, ranking among the 20 best-placed economies out of the 176 countries included
in the Index. In recent years, Chile has steadily improved its score, leading Latin America
and enjoying the transparency standards of a developed country.
A key step in that process is improving relations with the business sector, which was a
vocal critic of a big rise in corporate taxes last year to fund increased spending on education.
Businesses have also been deeply unnerved by plans to initiate a constitutional reform

and Uruguay Business Handbook 2015 Chile — Investment Risks, Barriers and Challenges 38
process in September, as well as a labour reform bill being discussed by the senate that
would give greater power to trade unions.
ECONOMIC
With exports representing one third of GDP, of which primary products, either unprocessed
or relatively unprocessed account for 70% and a banking system 40% owned by foreign
(mainly Spanish) institutions, Chile is very exposed to the global economy.
THE WORLD BANK “DOING BUSINESS RANKING” 2015

Chile 41 out of 189 countries

Other Ranks
Index Rank
Corruption Perception Index 21/173
International Logistics Performance Index (PLI) 42/160
KOF Index of Globalization 39/186
Indo-Chilean Economic Relations
Bilateral trade has grown substantially to reach record levels each way. Chilean exports to
India had grown steadily from 2009 to 2012. Indian exports to Chile have also grown by
36.9%, 22.6% and 40.9% respectively over the same period. In 2012, Indo-Chilean bilateral
trade was US$3.29 billion. In 2013, bilateral trade was US$2.88 billion and in 2014 it was
3.19 billion. Following table gives the bilateral trade between India and Chile in million US
Dollars:

and Uruguay Business Handbook 2015 Indo-Chilean Economic Relations 39
Year Exports from India (CIF) Imports from Chile (FOB) Total Bilateral Trade
2009 278.07 908.35 1186.42
2010 380.91 1581.95 1962.86
2011 467.03 1964.99 2432.02
2012 658.45 2636.82 3295.27
2013 693.90 2182.70 2876.60
2014 619.84 2571.74 2191.59
The above bilateral trade figures do not include India’s exports to the Free Trade Zone of
Iquique, which amounted to US$39.2 million in 2010, US$42.9 million in 2011, US$60.8
million in 2012, US$45.4 million in 2013 and US$34.18 million in 2014; and India’s service
exports, which too amount to some US$20 million, Six percent of the companies working
in Zofri Zone in Iquique are of Indian origin.
Top 10 Chile Exports to India Top 10 Chile Imports from India
Chile’s exports to India amounted to India’s exports to Chile amounted to

$2.6 billion or 3.5% of its overall exports. $619.9 mn. or 0.9% of its overall imports.
1. Ores, slag, ash $2.3 billion 1. Vehicles $190.6 million
2. Copper $91.9 million 2. Pharmaceuticals $47.2 million
3. Wood pulp $60.9 million 3. Clothing (not knit or crochet) $36.7 million
4. Inorganic chemicals $52.4 million 4. Leather, animal gut articles $34.8 million
5. Fruits, nuts $35.7 million 5. Organic chemicals $32.6 million
6. Oil $32.5 million 6. Machines, engines, pumps $29.3 million
7. Ships, boats $6.5 million 7. Other textiles, worn clothing $27.5 million
8. Iron and steel $5.7 million 8. Electronic equipment $22.5 million
9. Oil seed $4.8 million 9. Footwear $17 million
10. Organic chemicals $2.7 million 10. Iron or steel products $14.4 million
High value-added Indian items such as commercial vehicles (Telco, Mahindra), motor cars
(Tata Motors, Suzuki Maruti, Hyundai), two wheelers, and bulk pharmaceuticals have entered
the Chilean market. Other traditional items being imported by Chile are garments, handicrafts,
textiles, carpets, and hand tools. India’s imports from Chile are predominantly copper,
iodine, chemical wood pulp, molybdenum concentrates, and fresh apples.
The Godrej Group recently approved the acquisition of the balance 40% stake in Cosmetica
Nacional, a market-leading hair colour and cosmetics company in Chile. GCPL had acquired
a 60% stake in Cosmetica Nacional in January 2012.
Indian Chile Free Trade Agreement is near conclusion and signing. To the Preferential Tariff
Agreements operational with Chile and the five-nation Mercosur, India´s Ministry of
Commerce is seeking to add Colombia, Peru and perhaps Mexico. These countries are
seeking to conclude economic and commercial agreements with India to avail of its stable
regime and steady growth for their mineral and agricultural products, as well as their
processed goods.

and Uruguay Business Handbook 2015 Indo-Chilean Economic Relations 40
COLOMBIA
Highlights 42
Introduction 42
Columbia — Key Economic Factsheet 2014 43
Infrastructure 52
Indo-Colombian Economic Relations 62
Highlights
• Third largest economy in Latin America

• GDP growth 4.8% in 2015
• Rose to 34th place from 53 in ‘Doing Business’ ranking
• Largest coal reserves in Latin America
• Over 200 foreign companies registered in last 5 years
• IMF Endorses the Country’s Economic Direction
• Per capita GDP tripled in last decade
• 4th largest producer of palm oil
• Invited to become full member of OECD
· To invest $50 billion in infrastructure
Introduction
Colombia is a country in north-western South America that borders the Pacific Ocean and
the Caribbean Sea. Neighbouring countries include Brazil, Ecuador, Panama, Peru, and
Venezuela. The geography of Colombia is diverse with flat lowlands and high Andes
Mountains. The government system is a republic in which the executive branch dominates
government structure. The chief of state and head of government is the President. Colombia
has a pro-market economic system in which the prices of goods and services are determined
in a free price system. Colombia is a member of the Andean Community (CAN) and the
Latin American Integration Association (LAIA).
Colombia’s reputation as a gateway to the South and launch pad to the North is becoming
cemented in a country that has long lived in the shadow of the drugs lord Pablo Escobar.
More than two decades after Escobar was shot dead by police on a Medellín rooftop, the
stereotype of a country ridden by drugs, cartels, kidnapping and violence is finally starting
to fade.
Colombia’s middle class is on the rise, climbing from 16% of the population in 2002 to
27% in 2011. The poverty rate – defined by the World Bank as anyone living on less than
$1.25 (81p) a day – has fallen from almost 50% to 34% over the same period. While
policymakers have more to do, Colombians are lifting themselves out of poverty.
In the past too, Colombia had many strengths – a well-educated labour force, a strong
business class – but they were not visible, because of the veil of terrorism and violence.
Today, Free trade agreements have been pursued aggressively. The country has secured a
dozen deals around the world, including with the UK through the EU, America and
Switzerland.

and Uruguay Business Handbook 2015 Colombia — Introduction 42
Columbia — Key Economic Factsheet 2014
Key Economic Facts
Income Level (by per capita GNI) Upper Middle Income

Unemployment, total (% of total labour force) (modelled ILO estimate) 10.50% (2013)
Oil is Columbia’s chief export, and the 14-month crude-price collapse has pushed the peso
down 37% and the COLCAP stock index down 53%. Obscured by these devastated markets,
though, there’s evidence to suggest that Colombia, with a population greater than Spain’s
and more land than France, is the dark horse among international investors. Colombia
remained the growth leader among the biggest Latin American economies even while
expansion slowed to 4.6% in 2014 from 4.9% in 2013. Its growth is estimated to decline to
a 3.2% rate this year before rebounding in the following two years, according to data
compiled by Bloomberg.
The relative stability of peso-denominated debt, which shares none of the weakness of a
currency that has lost most of its purchasing power since June 2014, shows there is still
confidence in Colombia’s prospects. The yield on benchmark government 10-year bonds is
little changed from early 2014. That investor confidence suggests that the currency debacle
is likely to abate, exports should rebound and the current economic setback will be
temporary. The unprecedented infrastructure and housing development policies of President
Juan Manuel Santos Calderon, and his commitment to secure peace with FARC
revolutionaries, also augurs well. Colombia’s central bank has kept inflation – which currently
stands at 3.8% – close to its target of 3% for more than half a decade.

and Uruguay Business Handbook 2015 Colombia — Economic Highlights and Forecast 43
Growth remains dynamic in 2014, slightly exceeding its potential (4.5%). Household
consumption (65% of GDP), facilitated by falling unemployment and the rise in credit, has
retained its dynamism, as has investment (23%). Exports of coal and agricultural products
are rising, whereas those of oil are affected by guerrilla attacks on the oil pipelines and
conflicts with the indigenous people. At the same time, imports of capital goods required
for mining investments are increasing more rapidly, the contribution of trade to growth will
remain negative. Construction (9% of GDP) is greatly benefiting from this favourable
environment due to the development of social housing and the acceleration in infrastructure
spending. Manufacturing (13% of GDP), mining activity (9%), and services (39%) are not
far behind. Agriculture (7%) would have benefited more, if its potential had not been
reduced by the presence of armed groups in the countryside, which has dissuaded farmers
from investing.
A Low Public Deficit and Declining Debt

Despite the increase in infrastructure, education and healthcare spending, the public sector
deficit will remain weak. The central government structural deficit is expected to fall gradually
to 1% by 2022, in order to comply with the 2011 Balanced Budget Act. Accomplishing this
should be easy and the overall balance is likely to be achieved well before this. Public
sector debt (41% of GDP) is expected to continue to fall.
Close to 20% of this corresponds to public companies’ liabilities whose operating is profitable
overall. Government debt is distributed between the domestic market (60%) and the
international market. This satisfactory state of public finances has been achieved despite
low revenue (17% of GDP), 20% of which comes from oil. These weak resources and the
authorities’ desire to improve fiscal ratios have resulted in low levels of public investment
(3% of GDP) and the need to make use of private sector partnerships to develop the
inadequate infrastructures.

A Repetitive Current Account Deficit Funded by Foreign Investments
The current account deficit has stabilised above 3% of GDP, due to a small trade surplus
(0.5%) achieved thanks to oil (50% of exports), coal (15%), gold and coffee (each 5%).
With sugar, commodities represent 80% of sales, 37% of which were to the United States.
China and Venezuela absorb respectively 6% and 4%. Because of their composition, exports
are highly sensitive to the state of the world economy. This sensitivity must, however, be
seen in perspective because exports account for only 17% of GDP. Conversely, imports of
capital goods, intermediate products, foodstuffs and textile articles are buoyed by the vigour
of domestic demand. Revenue exchanges are in deficit by 4%, reflecting the extent of
dividend repatriations by foreign companies. The current account deficit is amply funded
by massive foreign direct investments (4% of GDP), incidentally making it possible to beef
up the foreign currency reserves covering 8 months of imports. This funding, which does
not lead to debt, explains why the country’s foreign debt represents only 22% of GDP, 60%
of it issued by the public sector. Like tourism income, foreign direct investments are expected
to increase as the security situation improves and as the infrastructure develops. However,
though the level of foreign investment is pretty stable, investment flows are likely to slow if
there is a fall in the price of the raw materials in which they are concentrated.
There’s similar underlying strength in the stock market, where Colombia has been among
the worst in emerging markets. While compared with 201 companies in Latin America,
Colombian companies are expected by analysts to have the greatest return during the next
12 months. Investors are also showing renewed interest in the largest U.S.-based exchange-
traded funds focusing on Colombia.
Among Colombian companies, banks are the most important in determining the outlook
because there is no economy that can prosper without a robust financial industry. While
the nation’s banks have underperformed their Latin peers the past three years, they benefit
from the fastest-growing interest income, loan and mortgage growth during the last four
quarters and they have the lowest debt-to-assets ratio among their Latin peers.
There’s similar underlying strength in the stock market, where Colombia has been among
the worst in emerging markets. While compared with 201 companies in Latin America,
Colombian companies are expected by analysts to have the greatest return during the next
12 months. Investors are also showing renewed interest in the largest U.S.-based exchange-
traded funds focusing on Colombia.
Among Colombian companies, banks are the most important in determining the outlook
because there is no economy that can prosper without a robust financial industry. While
the nation’s banks have underperformed their Latin peers the past three years, they benefit
from the fastest-growing interest income, loan and mortgage growth during the last four
quarters and they have the lowest debt-to-assets ratio among their Latin peers. Bloomberg,
18 Aug 2015
For 2016, the Focus-Economics panel projects economic growth of 3.0%.

Foreign capital investments are allowed in Colombia, including the acquisition of real estate.
However, certain specific sectors are forbidden for foreign investments, for example: foreign
investments in the national security or defence activities or in activities related to the
processing and disposal of toxic, hazardous or radioactive waste produced abroad.
MAJOR REGULATIONS
• Law 9 of 1991 (Known as ¯ “Framework Law”)
• Law 31 of 1991 (Central Bank)
• Decree 1735 of 1993 for currency exchange purposes).
• International Investment Code – Decree 2080 of 2000 and its modifications.
• Exchange Regime Code – External Resolution 8 of 2000 issued by the Central Bank and
its modifications.
• Exchange Regime Manual – External Circular DCIN-83 and its modifications (includes,
among others, exchange forms and exchange item numbers to identify transactions).

A boom in foreign direct investment (FDI) between 2010 and 2013 has come to an end as
the government announces an expected drop in foreign investment for both 2014 and
2015.
During 2013, while the FDI of Latin America decreased 6%, flows to Colombia increased
8% due to cross-border merges and acquisitions in electricity and banking industries,
according to the United Nations Conference on Trade and Development.
Between 2010 and 2013, foreign investment grew from $6.8 billion to $16.8 billion. According
to economic newspaper Portfolio, experts said that FDI to Colombia could drop to between
$10 and $13 billion in 2015, at best 23% less than last year. Experts cited by the newspaper
blame the steep drop in oil prices for the drop in investment.
According to the Central Bank, oil investments represent up to 70% of the total FDI.
• A country with investment-grade rating awarded by Standard & Poor’s, Moody’s and
Fitch on Colombia’s sovereign debt in 2011.
• In July 2014, Moody´s was the last rating agency in improving Colombia´s rating due to
two key drivers: 1. Positive growth forecast thanks to 4G infrastructure. 2. A sound fiscal
management that will continue in the future

and Uruguay Business Handbook 2015 Colombia — A Magnet for Investment 46
• It has the second lowest perceived risk in the region, measured by the behaviour of 5-
year Credit Default Swaps.
• Technology infrastructure supported by five underwater cables and a national fibre-
optic ring that connects 300 municipalities in the country.
• Easy access to global markets thanks to its privileged geographical location and developed
logistics infrastructure.
In 2015, Colombia’s economy is expected to triple its size from a decade ago, according to
the International Monetary Fund. Other nations in Latin America have made similar progress,
but they don’t have the notorious background Colombia has had to wrangle off its back.
Colombia’s murder rate is still high, but it’s at its lowest point in a decade, the government
reports.
Colombia’s middle class grew by 50% last decade, according to a World Bank report. That
growth is attracting corporate America’s attention.
Starbucks (SBUX) opened up its first cafe in Bogota last July with plans to open 50 more in
five years. Car companies like Ford (F) and GM (GM) see sales surging in Colombia. The
Fords, the GMs, Mitsubishis see Colombia as a growth market. People have money to
spend.
Between 2007 and 2012, Colombia’s tech industry grew 177% to $6.8 billion, according to
the government. Along with big-name arrivals such as Microsoft, Facebook and Google,
Colombians are also leading their country’s tech surge.
Many say the country’s diversifying economy and open policy to foreign investment is the
secret sauce to the turnaround. U.S. exports to Colombia have increased nearly 400%
since 2003. It’s signed trade agreements with America, Canada and Europe. The country is
part of the Pacific Alliance, a Latin American trade group that promotes ties with Asia.
Like other regional economies Colombia still relies on oil, coffee and sugar exports to
support its economy. But, experts say, the growth of tech and other service sectors is why
American businesses are going to Colombia.
AGRIBUSINESS
Biofuels: Ethanol and biodiesel production in Colombia has been increasing over the past
years due to the mandatory blend policy. Ethanol production reached 368 million litres in
2012; meanwhile in the same year the output of biodiesel was 489 thousand tons. The
permanent increase in the production of biofuels will be conducive to a surplus market;

and Uruguay Business Handbook 2015 Colombia — Focus Areas for Investment 47
Colombia could meet the needs of those countries which don´t satisfy their domestic
demand.
Horticulture: Colombia is a tropical country with a variety of ecosystems where over 95

different types of fruit are grown. This includes native species and other species introduced
from other continents and other equatorial areas.
Colombian Fruit and Vegetables compared with those from other subtropical countries, in
the northern and southern hemispheres, are naturally better in terms of physical quality
regarding the organoleptic characteristics, principally, colour, flavour, aroma, higher contents
of soluble solids, and Brix grades.
According to the FAO, Colombia is the third country in Latin America with the largest number
of hectares allocated to the production of fruits accounting for 10.5% the equivalent of
748,604 hectares while being the fifth largest producer in the region with 7.2% the equivalent
of 7.5 million tons.
According to FAO, Colombia is the seventh largest producer of vegetables in Latin America,
consisting of 4,2% of the cultivated area, representing 107,694 ha; and 4,2% agricultural
production an equivalent of 1,738,662 tons.
Colombia is the third country in Latin America with the largest precipitation rates, (2.612
mm per year).
Cocoa: Colombia has a potential for 2 million hectares for growing cocoa crops according
to a study of various regions (scale: 1:100.000) based on edaphic and climate criteria.
(Corpoica, Fedecacao y el Ministerio de Agricultura y Desarrollo Rural, 2011)
Colombia has a strategic geographical position. As an equatorial tropical country, Colombia

enjoys strong sunlight all year round. In addition, Colombia boasts a variety of climates and
abundant water resources.
MARS Incorporated has forecasted an international deficit of 1 million tons of cocoa for
2020. Investing in Colombian cocoa represents a business opportunity to meet the world
demand for fine and flavoursome cocoa. (MARS Incorporated, 2012)
Colombian Cocoa is grown in regions with an altitude between 0 and 1,100 meters, at
temperatures within 24-28°C, and with annual rains among 1.800-2.600 mm. With an
average of 2.612 cubic meters of water per capita per year, the country sits above the South
American average and above other regions such as North America, Europe and Asia. (FAO
and Instituto Geográfico Agustín Codazzi (IGAC)
Aquaculture: During the 1980s and 1990s, Colombia’s shrimp harvesting industry reached
peak levels, pushing the country into the world’s spotlight as a major shrimp producer and
exporter. Colombia has increased both in the productivity levels of fish breeding and its
fish culture areas. Fish breeding production focuses mainly on tilapia, trout, and cachama.

• In 2012, shrimp production yields in Colombia reached a total of 8,500 tons, mainly in
the states of Sucre (65%), Bolivar (32%), and Nariño (5%). (Ministry of Agriculture and
Rural Development)
• Colombia’s fish production has shown a steady growth over the last 10 years, rising
from 28,956 tons in 2002 to 80,609 tons in 2012, showing a total increase of 278%.
(Ministry of Agriculture and Rural Development)
• Geographical Location: The area is free from hurricanes and typhoons and is close to
the main consumption hubs.
• Lack of Seasons: Weather and water temperature are fairly constant, making production
possible all year round.
• International Recognition: Stemming from the sector’s wide experience in foreign
markets, its high quality products, qualified expert personnel and the genetic
enhancement program it has received widespread international acclaim.
• Available Lands: Aquaculture regions include an estimated area of 370,658 acres available
for production.
MANUFACTURING
Automotive: Colombia is the ideal destination to develop a platform for manufacturing
and for the assembly vehicles, trucks, buses and automotive components destined to supply
both the domestic and regional markets.
Presently, Colombia has a fleet of around 3.5 million units of vehicles, of which 57% are
imported. It is expected that by 2020 this fleet will double (BBVA, 2012).
• Colombia is the fourth largest vehicle producer in Latin America using 2.5 % of the
country’s workforce in the manufacturing industry.
• Colombia ranks second in the production of motorcycles in the region, behind only
Brazil, with an annual production of 515,000 units (BBVA, 2012)
• In 2012, vehicle sales for the second year running exceeded 300 thousand units. A total
of 315 968 vehicles were sold in 2012 (ANDI, 2013).
• The automotive industry and related businesses account for a workforce of 22,705
graduates ranging from technicians and professionals. There are competitive salaries
for staff positions within the industry.
• The industry enjoys tax benefits and incentives in businesses working with deposits
and in assembly and manufacturing.
Cosmetics and Toiletries: Colombia offers excellent conditions for development within
this sector and transforming it into a world class player. As a result, foreign investors can
take advantage of several opportunities to establish research and development centres,
distribution centres and manufacturing plants.

Some of the advantages in investing in this sector include the demand for natural ingredients,
the existence of government policies aimed at developing biotechnology, an outstanding
market dynamic and the possibility of using Colombia as an export platform.
• Colombia has a strategic location which enables access to more than 1.500 million
consumers across the world.
• Colombia has a vast amount of protected areas and is the second most bio diverse
country in the world.
• Colombia has financial and tax incentives in place that not only promote research and
development projects, but also protect intellectual property.
• Colombia’s Commercial Balance is in surplus within the sector.
• There is a significant growth of the Colombian market and one of the highest female
labour markets within the Latin American region.
• This is one of the priority sectors for the government and the private sector in Colombia.
Building Material: During the last five years the demand for materials increased by an
average of 5.8%, driven principally by building construction and accounting for approximately
42% of production, with infrastructure requiring about 32% (DANE, 2013).
Exports of construction materials grew 8% in 2012 compared to the previous year reaching
values of U.S. $ 370 million.
The construction industry in Colombia is the third largest in Latin America and the Caribbean.
Over the last five years the size of the construction sector grew at an average rate of 16.8%
per year, well above the average growth in the region, which was 10.2%.
• Construction has increased in the country driven by investment in infrastructure

• The government hopes to double the investment budget for infrastructure projects in
2014, reaching a budget of over U.S. $ 6,500 million.
• Housing construction grew 12.7% per year while non-residential building construction
reached annual growth rates of 9.7%.
• The Government is committed to addressing the national housing shortage; in that
sense it has begun the breaking ground of 1 million new homes by 2014.
Fashion Systems: The Colombian Fashion Sector reported dynamic export growth at an
annual rate of 8.4% over the past ten years, with the third highest rates of exportations in
the region after Brazil and Peru, and higher than those of countries like Chile and Mexico.
TradeMap (2013).
• 13 free trade agreements that provide tariff benefits and stability for long-term
investments.
• Potential access to over 1,500 million consumers given the easy access to markets due
to the country’s geographical location and the various free trade agreements in force
with the countries of the Andean Community, NAFTA, Mercosur, the United States, the
European Union, the Northern Triangle and Canada.

• 10 Agreements for the promotion and reciprocal protection of Investments. Ministry of
Industry, Trade and Tourism, (2013).
• Colombia is strategically located on the continent, with easy access to world markets
through more than 700 direct international flights per week, and over 4,900 domestic
routes per week.
• Competitive access to the U.S. market with transport costs on average 3 times lower
than those incurred from China.
OIL AND GAS SUPPORT SERVICES

Colombia ranks alongside the first twenty oil-producing countries in the world producing
over a million barrels of oil per day, making it a great place to invest in oil goods and
services firms that cater to the extraction, exploration and production processes in the oil
sector.
Oil is the global energy economy’s driving force, boosting economic growth and increasing
demand. Nonetheless, this is a limited resource and is becoming more scarce.
In Colombia, over 30% of explored wells are successful, and more than 50% of the total
territory is as yet unexplored. Colombia is the only country in South America with access to
both the Atlantic and the Pacific oceans allowing international firms to reach different
countries worldwide.
• From 2007 to 2012, Colombia increased its daily oil production by 77%. ANH 2013.
• The 2012 Colombia Round (Ronda Colombia 2012), organized by the National Agency
of Fossil Fuels (Agencia Nacional de Hidrocarburos, ANH), yielded positive results after
50 concessions were allocated, of which 5 concessions belonged to non-conventional
fossil fuels and 6 belonged to offshore concessions. This will represent 2.600 billion
US$ in investments to conduct explorations in the coming years.
• Colombia became the 4th largest oil producer in Latin America, above Argentina, Ecuador,
Peru, and Chile. International Energy Agency, 2013 & BP Statistical Review of World
Energy 2013.
• The priority for Colombia is to increase its confirmed oil reserves. In 2012, 133 new
exploratory wells were drilled versus 126 in 2011. This surveying activity is a key element
to ensure a long-term supply.
• In 2014, 570 new exploratory wells are expected to be drilled. Ministerio de Minas y
Energía, 2012.

Infrastructure
Colombia President Juan Manuel Santos encouraged investors this year when he started
awarding contracts for the first road projects in the $25 billion highway plan, a building
program Moody’s Investors Service cited when it increased the nation’s credit rating to
Baa2, the highest ever. Partnerships between the government and private sector for
improvements to ports, roads and airports may need an additional $25 billion, according
to Ricardo Jaramillo, head of investment banking at Bancolombia SA, the nation’s biggest
bank by assets.
Road Quality
Colombia ranks 130th out of 148 economies judged by the quality of roads, behind
Venezuela and Madagascar on the World Economic Forum’s global competitiveness index.
Santos’s road program, known as the Fourth Generation, will try to cut travel times between
major population canters by as much as 47% while reducing the cost of transporting raw
goods and finished products between industrial zones in the Andes Mountains and major
ports.
Fundraising for Colombian infrastructure got a boost last year with new rules allowing the
$75 billion pension industry to invest in debt funds and join banks in syndicated loans to
finance projects. Large infrastructure concessions have the potential to boost gross domestic
product growth to between 5% and 5.5% during the next five to 10 years, compared with
an estimated 4.8% currently, Moody’s said when it raised Colombia’s rating in July.

Extensive range of free trade zones with more than 100 authorized permanent and special
permanent zones.
Multi-company Free Trade Zones (called “special permanent free trade zones” in the
regulation) are areas within the national territory, managed by an operator user, in which
new companies that establish their projects are benefited with a special tax and customs
treatment.
The Single Company Free Trade Zone regime enables the declaration of a FTZ in favour of
a specific new company, in any location within the country, for the development of an
investment project with high economic and social impact.

and Uruguay Business Handbook 2015 Colombia — Infrastructure 52
International Trade
Colombia - Exports and Imports Data

2010 2011 2012 2013 2014
Panellists participating in the Latin Focus Consensus Forecast expect that exports will fall
15.5% in 2015 and expand 8.6% in 2016.
Top Colombian Exports to the World

(Value in US$, figures in parenthesis % of total imports)
# Commodities Value
1. Oil 35.8 billion (65.5%)
2. Coffee, tea and spices 2.5 billion (4.6%)
3. Gems, precious metals, coins 1.8 billion (3.4%)
4. Plastics 1.6 billion (3%)
5. Live trees and plants 1.4 billion (2.5%)
6. Fruits, nuts 918.8 million (1.7%)
7. Sugar 819.6 million (1.5%)
8. Iron and Steel 772.5 million (1.4%)
9. Vehicles 550.1 million (1%)
10. Pharmaceuticals 524.2 million (1%)
Top Colombian Imports from the World

(Value in US$, figures in parenthesis % of total imports)
# Commodities Value
1. Machines, engines, pumps 8.2 billion (12.8%)
2. Oil 7.6 billion (11.8%)
3. Electronic equipment 6.6 billion (10.5%)
4. Vehicles 6.2 billion (9.7%)
5. Plastics 2.7 billion (4.2%)
6. Pharmaceuticals 2.4 billion (3.7%)
7. Organic chemicals 2.4 billion (3.7%)
8. Aircraft, spacecraft 2.4 billion (3.7%)
9. Iron and steel 2 billion (3.1%)
10. Medical, technical equipment 1.9 billion (2.9%)

and Uruguay Business Handbook 2015 Colombia — International Trade 53
Fastest Growing Colombian Exports 2014
1. Railway, tram equipment 1038.5% 1.7 million
2. Collector items, art, antiques 927.5% 4.1 million
3. Tin 800% 54000
5. Cereals 346.4% 21.9 million
6. Paper yarn, woven fabric 318.3% 435000
7. Meat 279.2% 50 million
10. Other animal-origin products 195.1% 16.7 million
11. Furskins and artificial fur 167.2% 5.3 million
12. Live animals 162.7% 58.3 million
13. Wood pulp 124.2% 1.9 million
15. Musical instruments 118.9% 116000
17. Fertilizers 103.3% 133.6 million
18. Cocoa 102.2% 145.9 million
19. Milling products 85.7% 43.4 million
20. Raw hides excluding furskins 75.5% 216.1 million
Fastest Growing Colombian Imports 2014

1. Diary, eggs, honey 965.3% 121.1 million
2. Meat 387.7% 242.1 million
3. Oil 263.3% 7.6 billion
4. Cork 237.8% 1.8 million
5. Fish 186.9% 262.6 million
7. Knitted or crocheted fabric 159.2% 161.1 million
8. Clothing (not knit or crochet) 144.8% 404 million
9. Coated textile fabric 144.7% 69.9 million
10. Lead 132.7% 31.5 million
11. Knit or crochet clothing 132.2% 383.7 million
12. Headgear 125.6% 48.7 million
14. Collector items, art, antiques 114.7% 1.9 million
17. Gems, precious metals, coins 105.1% 100 million
18. Leather, animal gut articles 103.6% 193.1 million
19. Paper, yarn, woven fabric 93.5% 11.2 million
20. Feathers, artificial flowers, hair 91.1% 12.4 million

and Uruguay Business Handbook 2015 Colombia — International Trade 54
Services Industry
FINANCIAL SERVICES
One of the Colombian banking sector’s biggest economic strengths is a near-oligopolistic
grip on the local market. Grupo Sura’s biggest local rival, Bogotá-based Grupo Aval, with
$72 billion of assets, has nearly a third of local market share alone, while Bancolombia
holds nearly 25% of Colombia’s market.
The sector’s concentration has prompted the criticism, even from officials at the finance
ministry, that there is still not enough competition in Colombia. There are a few new
foreign entrants such as Canada’s Nova Scotia bank and Chile’s Corpbanca, but they have
a smaller market share than the locals.
In a December report on Andean banks, Fitch Ratings says that although Colombian banks
have to “digest their latest acquisitions”, something that could put pressure on capital
ratios, they “have sustainable profitability, which, coupled with ample loan loss reserves
and adequate capitalisation, constitute a cushion against unexpected losses”.
For some, this international diversification is a sign that Colombian financiers believe their
golden days at home can only exist for so long before they face greater competition and
deepening domestic capital markets that allow local companies to raise bond finance
more easily.
Private Equity
According to the 2013 LAVCA Scorecard on the Private Equity and Venture Capital
Environment, Colombia maintained its fourth place among 12 Latin American and Caribbean
countries due to its favourable conditions for development of the PEF industry.
There is government support with the Bancóldex Capital program, created to promote and
develop the private equity industry in Colombia, and with the Colombian Association of
Capital Funds (COLCAPITAL), created by Bancoldex and the Multilateral Investment Fund of
the Inter-American Development Bank, to promote and strengthen the private equity industry
in Colombia.
Private Equity funds are clearly a very important financing alternative for Colombian
entrepreneurs.
• In 2012, Colombia accounted for 1% of all total funds raised in Private Equity and
Venture Capital in Latin America, and this in turn accounted for 5% globally.
• According to LAVCA, one of Colombia’s strengths is its attractive regulatory framework
for the establishment and management of private capital funds.
• There is an excellent opportunity to procure local equity resources from institutional
investors such as in pension funds and insurance companies, which have shown great
returns in the last few years.

and Uruguay Business Handbook 2015 Colombia — Services Industry 55
• The Latin American Integrated Market (MILA), formed by the stock exchanges of
Colombia, Chile and Peru, has become an excellent exit strategy for private equity
funds, offering a greater diversification to investors and access to the capital market.
HUMAN CAPITAL
One of the countries with the largest annual increase in availability of human resources
according to the 2012 IMD Workforce Growth Rate. More than 200 thousand students
graduated every year from higher education, 53% undergraduate and 28% post-graduates
of the country’s universities are amongst the best in the world.
R&D
Colombia is betting on innovation as a cross-cutting component for the transformation of
products and services that generate added value and skilled employment. For that reason,
the national government has included innovation as one of the driving engines in its 2010-
2014 National Development Plan.
HEALTHCARE
In terms of healthcare, Colombia boasts high standards. The 2010 World Health Report
ranked its healthcare system 22nd in the world, and it claims 8 of the top 35 most highly
ranked medical institutions in Latin America. Medical tourism from the USA to Colombia is
on the rise due to the perceived high quality care for a fraction of the domestic price. No
wonder, therefore, that Colombia is increasingly catching the eye of pharmaceutical
companies wishing to leverage this dynamic and growing market. For example, the recently
departed CEO of Sanofi, Chris Viehbacher, remarked in 2012, “Places like Colombia have
become extremely interesting in terms of growth”.
The Healthcare Environment

Today, Colombia’s healthcare system broadly follows the Bismarck model, based on
insurance systems funded by employers and employees through salaried contributions.
Universal healthcare was written into the constitution in 1993, with the landmark ‘Law
100’ which aimed to expand the provision of healthcare to cover all citizens. Just over 20
years on, 96% of Colombia’s population are estimated to have some form of coverage.
‘Law 100’ unified private and public systems and aimed to stimulate competition and
prevent monopolies by enabling a large number of private and public providers to administer
healthcare. These health promoting entities (‘EPS – Entidades Promotoras de Salud’)
compete for the enrolment of the population onto their respective insurance schemes.
There are currently 70 active EPS organisations, which contract delivery of healthcare to
their designated health providers (‘IPS – Instituciones Prestadoras de Salud’).
On top of these is privately funded healthcare, which often involves ‘top up’ plans offered
by EPS in addition to the basic schemes, expanding benefit entitlements and enabling
access to leading private facilities. As Colombia’s middle classes have grown, so too have
the numbers purchasing such plans.

An essential drug list (‘POS – Plan Obligatorio de Salud’) is drawn up to cover the medicines
to which Colombians are entitled under the EPS. However for those subsidized ‘EPS-S’
patients, they may only access a restricted subset of this list. Another special government
scheme, FOSYGA, has been set up to directly reimburse the healthcare providers for certain
high cost treatments not included on this list.
Colombia is firmly establishing itself on the radar of pharmaceutical companies as a ‘second

tier’ Latin American market, given its growing proportion of middle classes and rapid
economic growth, which in recent years has consistently outperformed the continental
average. While poverty and inequality remain key challenges, decline in armed FARC rebel
conflict and organized drug crime have facilitated an increasingly favourable environment
in which to do business.
TOURISM
The main benefits for investments in this sector include an income tax exemption for a
period of 30 years. This exemption applies to new hotel projects and also for those of
remodelled and/or expansion projects which began between 2003 to December 2017.
Colombia’s tourism industry is dynamic and is growing at a fast pace. The arrival of foreign
tourists in Colombia rose from 600 thousand in the year 2000 to 1.7 million in 2012,
showing an average annual growth of 10%. This figure is three times higher than the
world’s average, and is among the most impressive in the region. (Immigration Department
of Colombia – Ministry of Trade, Industry and Tourism, 2013).
• The impressive performance of the Colombian economy.

• The increase of international tourism arriving to Colombia is above the world’s average.
• Appealing incentives for hotel project investments.
• Strategic location and accessible air connectivity.
• Increasing hotel demand and supply.
• Committed workers with outstanding training and education.
• Colombia’s tourist destinations are renowned around the world and provide unique
experiences.
• More hotel project ventures as a result of the arrival of more multinational companies.

The Government is committed to support and advance the services sector through the
Productive Transformation Program. This is a consolidated strategy for growth and
development, which in recent years as a result of the adequate environment it has created,
the program has earned a global recognition.
With the online government programs, the strengthening of the IT Industry and Vive Digital
-through the Ministry of Information and Technology - the Colombian government is working
to promote the use of these tools and networks. These programs open up a wide range of
opportunities for the Hardware and IT Services in the country thanks to the large use of
technology, industry and population growth that look for these goods and services.

• Between 2007 and 2012 the revenue of the IT sector in Colombia grew by 177%,
reaching U.S. $ 6,803 billion, according to IDC.
• Between 2007 and 2012, the software industry in Colombia grew 3.79 times due to the
strengthening of the sector as a result of the government programs (IDC, 2013).
• Hardware continues to lead the technology market with 58% of the total market share,
followed by software with 12% and lastly services with 30% (IDC, 2013).
• Over the last 10 years, 1.9 million professionals have graduated from a higher education
degree in Colombia. 22.8% have an engineering degree, of which 58% have a university
degree, 12% a postgraduate degree (specialization, master’s or doctorate) and 30%
with technical training (Ministry of Education, 2013).
• The Government has earmarked through its Digital Talent initiative (Iniciativa Talento
Digital) U.S. $19 million so that Colombians can study for free technical, technological,
professional and related postgraduate degrees that are related to Information Technology.
Up until 2012, close to 1,277 non-repayment loans have been granted and in 2014 a
total of 4,661 loans will be given (MinTic, 2013).
• Colombia has an infrastructure capable of handling world-class operations, with 6
submarine cables that allow the use of 4G technology (MinTic, 2013).
Colombia-received-173-BPO-Software-and-IT-Investment-Projects-between-2010-2014
Based on information from the Central Bank of Colombia Balance Of Payments, the sector
gathers 22% of the foreign investment share in Colombia during the last five years with
$7.23 billion US$, and is one of the main drivers behind job creation with a total of 368,282
jobs created.
According to FDI Markets, Spain is the top foreign investor, with 29.5% of the foreign
companies operating in the sector, followed by the United States with 21.48%, France with
7.38%, and the United Kingdom and Argentina with 6.04% each.
“Foreign investment in BPO, Software and IT grew by 28% in the last five years. Starting in
2010, ProColombia’s efforts brought 80 new BPO, Software and IT initiatives with business
operations worth $949 million US$ that, according to entrepreneurs, are expected to create
53,433 new jobs”, stated Maria Claudia Lacouture, President of Pro Colombia.
A survey by MVS-Tholons revealed that 71% of investors chose Colombia encouraged by

the quality and qualifications of its professionals, as well as the incentives and costs available
in the country.
Success stories about new investors in this sector include Holcim, IBM, and AIG, companies
that installed shared service infrastructures or expanded their Data Centres.
Lacouture said that Colombia, in addition to its call centre capabilities, is creating custom
products thanks to its highly qualified work force. “Human talent in Colombia is prepared
to provide E-Commerce services, credit management, risk and collection services, helpdesk,
back office, telemedicine as well as engineering and market surveys”.

BPO and Outsourcing
These factors illustrate to foreign investors about the investment opportunities that are
available in Colombia in regards to the BPO sector, offshore, nearshore, KPO and shared
services in this growth market that has an abundant competitive workforce and a strategic
location to provide regional and global services.
By 2012, according to the Colombian Association of Contact Centres and BPO (ACDCB)
and ANDI, the operating revenues in the sector were U.S. $ 2,513 billion; this represented
an increase of 78% over 2010. BPO exports grew 77% between 2010 and 2012.
In 2012, the main sectors include telecommunications (43.06%), banking and financial
services (15.35%), government (5.12%) and insurance (4.88%), among others, according
to the Colombian Association of Contact Centre and BPO (ACDCB) and the National
Association of Entrepreneurs in Colombia (ANDI).
• According to official figures from the Ministry of Education, in the last 10 years, over 1.9
million professionals have graduated from a higher education degree in Colombia.
30.69% have business, economics and / or accounting experience, of which 48% have
a university degree, 26% a postgraduate degree (specialization, master’s or doctorate)
and 26% have technical training.
• Through the Productive Transformation Program, the Government has designed a plan
to strengthen the industry by providing an emphasis on high value-added activities
through human capital development, conducting business matchmaking forums and
acquiring sectorial studies that can help in the development of strategies.
• The National Learning Service (SENA) is the government institution in charge of technical
training to every citizen; it provides free education in technical and skills related to the
industry that is in demand where software and services are relevant areas of the training
curriculum.
Strengths
• Facing two oceans
• Big population (nearly 50 million)
• Abundant natural resources (agricultural and mineral)
• Considerable tourism potential
• Prudent economic policy
• Institutional stability
• Sound banking system

and Uruguay Business Handbook 2015 Colombia — Investment Risks, Barriers and Challenges 59
Weaknesses
• Sensitivity to raw materials prices and the American economy
• Inadequacies of road and port infrastructures
• Problematic security situation linked to drug trafficking
• Shortcomings in education and health
• Large informal sector (60% of jobs)
• Lack of skilled labour and low productivity
• Slow legislative, judicial and administrative procedures and corruption
• Structural unemployment, poverty and inequality

After decades of bloody conflict Colombia’s government may finally be close to brokering
a peace agreement with the leftist FARC guerrilla army. The peace process is significant
both for Colombia’s residents and for companies looking to do business in one of South
America’s biggest economies. The government has announced that a peace deal would be
completed within six months by March 23, 2016.
GOVERNANCE
Colombian legal and regulatory systems are generally transparent and consistent with
international norms. The commercial code and other laws cover such broad areas as banking
and credit, bankruptcy/reorganization, business establishment/ conduct, commercial
contracts, credit, corporate organization, fiduciary obligations, insurance, industrial property,
and real property law. The civil code contains provisions relating to contracts, mortgages,
liens, notary functions, and registries.
Enforcement mechanisms exist, but historically the judicial system has not taken an active
role in adjudicating commercial cases. The 1991 Constitution provided the judiciary with
greater administrative and financial independence from the executive branch. Lack of
coordination among government entities as well as insufficient resources complicate timely
resolution of cases.
Many multinationals have ceased production in Colombia and moved elsewhere, especially
to Mexico. It’s precisely with regard to the tax burden that Colombia stumbles. Every company
must pay 75.4% of their annual earnings, while in Latin America the average is 48.3%, and
41.3% for OECD countries.
This is not the only obstacle for Colombian wealth creators. The ranking puts Colombia 93
out of 189 countries in terms of ease of international trade. As such, another reason is
presented for the exodus: companies are leaving Colombia to avoid exorbitant import and
export costs.
Yet the Colombian government insists on making the same mistakes. To allay consumer
fears, President Juan Manuel Santos spreads the partial falsehood that the companies are
leaving simply due to cyclical occurrences in the business world. It’s true that these are

everyday decisions for large companies, but it’s false that this is the simple law of the
market in action, independent of any action or omission by the authorities.
ECONOMIC
Colombia’s greatest challenge today is not its internal conflict with the FARC, which is
winding down, but the global macroeconomic situation including a weakening Chinese
economy, rising US dollar, reduced commodity prices and a political-economic disaster in
neighbouring Venezuela that threatens Colombia, one of its key trading partners. These
macro issues have placed downward pressure on the value of Colombia’s currency, today
among the weakest in the world in recent years.
Still, Colombia’s growth levels remain as one of the highest in the region with GDP targets
for the close of 2015 still pushing 3%, compared with less than 1% for Latin America as a
whole. At the UN General Assembly meeting in NYC earlier this month, President Santos
said that conservative estimates calculate a peace deal could boost growth by at least
1.5%.
GLOBAL ECONOMIC RANKING

Colombia 34 out of 189 countries

Other Rankings
Index Rank
Global Manufacturing Competitiveness Index (GMCI) 31/38

Indo-Colombian Economic Relations
In the recent years, India has become one of the bigger destinations for Colombia’s exports.
Similarly, Indian exports have also increased. India-Colombia business organizations have
been interacting on regular basis and number of business delegations mainly from India
from export promotions councils such as EEPC, EPCH, TEXPROCIL, SRPTC, CHEMEXIL,
PLEXCONCIL, Spice Board of India, Electronic and Software Council, CAPEXIL and AEPC
and Chambers of Commerce like CII have visited Colombia in the last 5 years. With the
support of the Embassy a Colombia-India Chamber of Commerce [CICC] was formed in
Bogota in September 2008 by Indian and Colombian firms to promote bilateral business
interest.
India-Colombia Trade: Trade between India and Colombia has increased consistently. India’s
total trade with Colombia which was about US$946.95 mn in 2009 has reached US$4036.33
million in 2014. In 2014 Colombian export to India was US$2.738.97 million and import
from India was 1.297.36 million.
Main Export Items: The main items of export consisted of Motorcycles in CKD form, Vehicles
other than railways, Cotton yarn and woven fabrics of cotton, Organic chemicals and Iron
and Steels.
Main Import Items: The main items of import were Mineral fuel, minerals oils, Natural or
Cultívated Pearls, Natural or Cultivated Pearls, Plastics articles thereof, Wood and Steel
articles of wood.
Top 10 Colombian Exports to India Top 10 Colombian Imports from India
Colombia’s exports to India amounted to India’s exports to Colombia amounted to

$2.6 billion or 4.7% of its overall exports $1.4 billion or 2.1% of its overall imports
1. Oil $2.5 billion 1. Vehicles $158.4 million
2. Gems, precious metals, coins $37.6 million 2. Cotton $130.7 million
3. Iron and steel $21.3 million 3. Organic chemicals $114.1 million
4. Plastics $14.8 million 4. Iron and steel $82.6 million
5. Wood $14.4 million 5. Electronic equipment $66.5 million
6. Machines, engines, pumps $2.1 million 6. Pharmaceuticals $65.4 million
7. Aluminium $1.2 million 7. Aluminium $42.9 million
8. Other base metals $1 million 8. Machines, engines, pumps $42 million
9. Sugar $800,000 9. Plastics $41.2 million
10. Raw hides excluding furskins $614,000 10. Manmade staple fibres $36.1 million

and Uruguay Business Handbook 2015 Indo-Colombian Economic Relations 62
Indian Companies in Colombia:
Many Indian Companies have established operations in Colombia. Some of the known
companies which are present in Colombia are:
• IT (TCS, Mahindra Conviva and Mann India),

• Pharmaceuticals (IPCA and CIPLA, Aurbindo, Dr. Reddy´s)
• Agro-Chemicals (United Phosphorus),
• Automobiles and tractors (TVS, Bajaj, Hero, Sonalika and Mahindra),
• Mining (Renuka energy).
In oil exploration, ONGC Videsh has on-going exploration and production operations in
Colombia. It´s joint venture with Chinese company SINOPEC called Mansarovar Energy
owns a producing asset which produces around 40000 barrels per day.
Praj industries have constructed 6 ethanol plants in Colombia with capacity of 1.05 million
litres per day. It is constructing now it´s 7th plant. Hero Moto Corp. has laid the foundation
stone for the plant to manufacture motor-cycles in Cali on 06 July, 2014. The plant which
will have investment of US$70 million will be producing 78,000 motorcycles initially and
will lead to direct and indirect employment of 2500 persons.
India and Colombia provide model for increased trade between Asia and Latin America
For three years, India and Colombia have been responsible for an exponential increase in
their bilateral commercial relations. Experts have classified this growing trade as an ‘example’
of the increasing economic integration between Latin America and Asia.
During this period, a dozen Indian businesses have moved to Colombia each year, which
has increased and diversified Colombian exports to the Asian nation.
Currently, a total of 36 Indian companies — from the automobile, information, and energy
sectors — can be found in Colombia. Before 2010, the country was home to less than half
a dozen Indian companies.
One of the most recent large businesses to establish itself in Colombia is the technology
firm Genpact, an outsourcing outfit, which opened its offices in Bogotá a year and a half
ago.
‘We are in other Latin American nations like Brazil, Mexico, and Guatemala, but due to its
geographic location and stable political climate we have chosen Colombia for our
headquarters in the Americas,’ said Genpact founder, Pramob Bashin.
Alongside the increased number of Indian firms, Colombia has doubled its exports to the
Asian subcontinent. The total value of exports to India increased from US$632 million in
2009 to over $1.3 billion in 2012.
While oil still accounts for the vast majority (90%) of these exported products, Colombia
has begun to introduce other goods to the Indian market, including flowers and coffee.

This increase in exports has allowed Colombia to possess a trade surplus with India, which
sells around US$1.055 million in products to Colombia each year.
According to Ash Naraim Roy, director of the New Delhi Institute of Social Studies, these
trade relations should serve as ‘a model for other countries’ in Asia and Latin America.
‘The two countries have discovered a network of trade relations that is very fruitful for
both,’ Roy asserted.

PARAGUAY
Highlights 66
Introduction 66
Paraguay — Key Economic Factsheet 2015 67
Infrastructure 72
Indo-Paraguay Economic Relations 78
Highlights
• GDP growth rate over 5-6% since 2002

• Highest economic growth in South America.
• Least violent country in Latin America-UN
• 94% literacy
• World’s third biggest electricity exporter
• Most stable currency in Latin America
• Second highest return-on-investment for the private sector in Latin America.
• Lowest tax burden in the region
• Upgraded by Moody’s from Ba3 to Ba2
• Assessed at first place in the Latin America Economic Climate Index
• World’s fourth largest producer of soybeans
• World’s seventh largest exporter of meat. Aims to become No.5 by 2018
Introduction
Paraguay is a country in South America. Neighbouring countries include Argentina, Bolivia

and Brazil. Paraguay lies on both banks of the Paraguay River, which runs through the
centre of the country. The government system is a constitutional republic. The chief of state
and head of government is the President. Paraguay has a free market system in which the
prices are set by the market. Paraguay is a member of the Latin American Integration
Association (LAIA) and Mercosur.
With nearly 7 million inhabitants, Paraguay is a country of vast natural resources. It is

crisscrossed by several rivers that form the River Plate Basin, enabling clean energy to be
produced by the binational hydroelectric plants of Itaipú and Yacyretá, a leading economic
activity in the country. Other key activities include highly automated agriculture and livestock
production.
The Paraguayan economy is small and open, with an average growth rate of 5% over the
past decade, despite the volatility of that period. This growth has been based mainly on the
heavy dependence on agricultural production and foreign trade, particularly soybean and
beef, which comprised 38% of exports in the first eight months of 2015.

and Uruguay Business Handbook 2015 Paraguay — Introduction 66
Paraguay — Key Economic Factsheet 2015
Population 6,552,518 (2014)

Population Growth Rate 1.334 annual % (2014)
Age Dependency Ratio 57.304 % of working-age population (2014)
Urban Population 59.416 % of total (2014)
Infant Mortality Rate 17.5 per 1,000 live births (2015)
Life Expectancy at Birth 72.273 years (2013)
Key Economic Facts

External debt stocks, total (DOD, current US$) 13613,429,752.00 (2013)
Current account balance (BoP, current US$) 0.62 billion (2013)
In June 2015, the Central Bank of Paraguay adjusted economic growth forecasts downward
for 2015, to approximately 4.0% annually rather than the 4.5% originally estimated. This
reduction mainly reflects the decline in international commodity prices, which directly affects
the value of Paraguayan exports. Another contributing factor is the lower volume of beef
and electric power production due to adverse weather conditions, in addition to the fall in
re-exports to Brazil given that country’s currency devaluation and increased border controls.
Moreover, China and Latin America are experiencing an economic slowdown and growth
forecasts for many countries in the region are now lower than they were six months ago.
Although economic growth is expected to approach its potential (between 4% and 5%),
the deceleration of emerging economies and the less dynamic regional performance pose
major challenges for the Paraguayan economy in the coming years. The weight of Brazil

and Uruguay Business Handbook 2015 Paraguay — Economic Highlights and Forecast 67
and Argentina in Paraguayan exports (totalling 39% in August 2015) and foreign direct
investment in the country could have a significant impact on growth.
Over the past decade, the country has made significant progress on the macroeconomic
front to address these challenges with the implementation of major social reforms. For
example, international reserves continue at historically high levels, totalling more than
US$6.8 billion in late August 2015. Noteworthy social reforms include free access to primary
health care and basic education and the expansion of conditional cash transfer programs
to benefit vulnerable populations. World Bank, Sep 2015
Panellists participating in the Latin Focus Consensus Forecast see the economy growing
3.7% in 2015, which is down 0.2 percentage points from last month’s estimate. For 2016,
the economy is expected to grow 4.1%.
The Government of Paraguay (GOP) encourages foreign investment and most sectors are
open for private investment. Paraguay guarantees equal treatment of foreign investors
under law 117/91 and permits full repatriation of capital and profits under law 60/90.
Paraguay has historically maintained the lowest tax burden in the region, with a 10%
corporate tax rate and a 10% Value-added Tax (VAT) on most goods and services.
60/90 Investment Law

• Nil Import tariff of Capital Goods (machinery, equipment) raw materials and other inputs)
• Nil Value Added Taxes (VAT) On import and (local) acquisition of Capital Goods
• Nil Taxes on remittances and payments made abroad in terms of capital, interests and
commissions.(applied for investments of more than US$5 million)

and Uruguay Business Handbook 2015 Paraguay — Laws and Policies Relating to Foreign Investment 68
• Nil Taxes on dividends and delivery of profits abroad (applied for investments of more
than US$5 million for 10 years)
There are no restrictions on the conversion or transfer of foreign currency. Law 60/90
permits the repatriation of capital and profits. There are no controls on foreign exchange
transactions, apart from bank reporting requirements for transactions in excess of US$10,000.

FDI flows to Paraguay remain weak compared to flows towards its neighbours, but have
increased substantially. After dropping in 2013 due to an institutional crisis, which rocked
the country, FDI inflows rebounded in 2014, increasing by 230% compared to 2013. They
reached US$236 million, which remains far below their 2012 level (US$738 million).
Most sectors are open to foreign investment; however, several remain under public
monopoly. Paraguay offers a total repatriation of capital. Moreover, real estate and energy
prices are relatively low. Despite reforms to the public sector and strengthened legal
protections, the business climate remains difficult due to high corruption and insecurity
linked to drug trafficking. The political climate, the poor condition of infrastructure and the
lack of transparency in regulations are major obstacles for investors. Paraguay ranks 92nd
in the 2015 Doing Business report published by the World Bank, up 17 places since last
year.
The 2013 election of President Horacio Cartes, a renowned entrepreneur, was seen as a
positive sign for foreign investors. New investments have been in the automobile, logistics
and manufactured goods sectors. Brazil is the primary market for these investments. In
addition, Paraguay is able to offer low cost electricity and seeks to become, in the long-
term, a centre of integration between the Pacific and the Atlantic. The reforms, recently
implemented by the government, such as the law regulated public-private partnerships
(PPP), should lead to greater investments. The majority of foreign investments go the food
industry. Paraguay’s main investment partners are the United States, Brazil and the
Netherlands.
Foreign Direct Investment 2012 2013 2014

FDI Inward Flow (million US$) 738 72 236
FDI Stock (million US$) 5,287.8 5,075.8 5,380.9
Number of Greenfield Investments 8.0 8.0 10.0
FDI Inwards (in % of GFCF) 19.5 1.7 5.3
FDI Stock (in % of GDP) 21.2 17.9 18.1

and Uruguay Business Handbook 2015 Paraguay — Laws and Policies Relating to Foreign Investment 69
Ironically, for a country that has not engaged in any significant infrastructure projects over
the past 30 years, it is home to the largest dam in the world in terms of electricity production,
surpassing the Three-Gorges dam in China. Sitting on the border, and shared 50/50 with
Brazil, the Itaipu Dam generated more than 98Twh of electricity in 2013 (83Twh for the
Three-Gorges). However, considering its size and needs, Paraguay only uses some 10% of
its 50% share in that production and exports the rest to its partner.
The same goes for the Yacyreta Dam, sitting on the border of Argentina and Paraguay.
Today the country is one of the world’s largest exporters of electricity (see Fig. 2). Considering
that another five areas have been identified as viable dam projects within the country itself,
clean energy production is not going to be an issue for the foreseeable future. Equally
important for the coming years, Paraguay sits on the second largest reservoir of fresh water
in the world, the Guarani aquifer, providing a reliable source of fresh water for responsible
farming.
Paraguay’s agriculture has the capacity to triple its food production output, having more
than eight million hectares still available for mechanised agriculture. However, more efforts
need to be put in land rehabilitation and implementation of the current environmental
laws to prevent more deforestation. Paraguayan agricultural successes can easily be
measured. In just under 10 years, it managed to become the first exporter of organic sugar,
the second largest exporter of stevia, the fourth largest exporter of soy, the fourth largest
exporter of starch, the fifth largest exporter of chia, the sixth largest exporter of corn, the
eighth largest beef exporter and the 10th largest exporter of wheat.
In addition to its agriculture potential, the country has not tapped its underground wealth
that, if we consider its geographical location between Bolivia, Brazil and Argentina, is likely
to be composed of significant mineral and energy resources. As a production centre, Paraguay
is getting more and more attractive to countries facing growing production costs and higher
taxes. A number of companies are expressing interests in relocating part of their operations
in Paraguay under some of the very attractive tax regimes offered to foreign investors.
Electrical parts manufacturing companies for the auto industry, for example, have already
installed production facilities in the country to serve the Brazilian market. Other industries
should follow.
The geographical location of the country, which can be a challenge for the movement of
goods in and out of the country, is also a blessing. In the heart of South America, it is a
natural hub between all its neighbours and beyond. It doesn’t suffer from natural disasters
such as tornadoes, hurricanes or earthquakes, and its topography makes it a country with
massive swath of land ready to use for production.
New investments have been in the automobile, logistics and manufactured goods sectors.
Brazil is the primary market for these investments. In addition, Paraguay is able to offer low

and Uruguay Business Handbook 2015 Paraguay — A Magnet for Investment 70
cost electricity and seeks to become, in the long-term, a centre of integration between the
Pacific and the Atlantic. The reforms, recently implemented by the government, such as the
law regulated public-private partnerships (PPP), should lead to greater investments. The
majority of foreign investments go the food industry. Paraguay’s main investment partners
are the United States, Brazil and the Netherlands.
FOOD PROCESSING
Meat Export
The country of Paraguay offers optimal conditions for efficient, cost effective, and secure
food production. There are abundant investment opportunities in beef production and
processing facilities in the country, but due to the region’s difficult history these available
opportunities have not gotten the attention they deserve, remaining mostly unrealized and
therefore completely undervalued. Meat is one of the most competitive sectors in Paraguay,
reaching to diverse international markets.
Poultry
The potential of investment in this sector is very important due to its low cost in production
and the expansion of local consumption.
Leather
Leather is the 7th main export item in Paraguay
Strengths
• Paraguay has abundant livestock resources - a) suitable areas for grazing and b) good
organization both in private and government sectors, contributing to the development
of the industry.
• Various Usage - leather is a product that is used in various sectors (e.g., production of
clothing, footwear, furniture, etc.).
• Also, during the process food animals; chemicals for cosmetics and photographic; and
fertilizers are obtained.
AGRICULTURE SECTOR
Meanwhile, agriculture has proven to be the most important sector in Paraguay, stimulating
50% growth for the country last year. The Minister of Agriculture, Jorge Gattini, confirms
that “we have two economies in agriculture. One is highly competitive, driven by prime
materials, grains and cereals, and the other is on a smaller scale, which, under suitable

and Uruguay Business Handbook 2015 Paraguay — Focus Areas for Investment 71
conditions, can also be very competitive. We are heavily backing our small-scale agriculture
through investment in production infrastructure in irrigation, with the funding of between
5,000 and 8,000 greenhouse constructions,” he says. “Irrigation is fundamental in increasing
productivity and minimizing fluctuation in supply caused by drought, flooding or torrential
rain. Currently we have a comparative advantage from the production of the prime sector
of grains, cereals and prime materials, which in turn makes the country more competitive
in the production of quality animal protein.”
Fruits and Vegetables: Fruit and vegetable sector is one of the largest generators of
employment, mainly at the level of small producers in Paraguay. Main products are n
bananas, pineapples and watermelons.
Forest Products: Paraguay has a comparative advantage in forest production. This sector
has been one of the most important sectors in development of the country . Paraguay has
many incentives as follows.
Know-how of the business: Paraguay’s know-how of the forest industry (especially in

wood flooring.)
Short payback period: Paraguay’s payback period in this wood industry is only 12 years
(In general, it takes over 40 years in other countries.)
Unique species of wood materials: Paraguay has unique wood material (e.g.: tajy - Tabebuia
Hepthapylla, yvyraro - Pterogyne nitens, ybyrapyta - Peltophorum dubium, kurupay -
Piptadenia macrocarda, etc.)
Natural Conditions: Ideal temperatures and high precipitation regime makes Paraguay an
excellent location for agriculture and forestry.
• Average yearly temperature is 24 degrees Celsius.

• Average yearly rainfall is 1,200 mm.
• Lower Risk of Natural Disasters (i.e., volcano eruption risk, earthquake risk, Tsunami
risk, etc.)
Infrastructure
Paraguay depends heavily on land and water transport, but both modes of transportation
require urgent investment in improvements, expansion and modernisation. Only 6.8% of
the country’s inter-urban network is paved, and waterways, especially the widely used
Parana– Paraguay waterway, require urgent dredging and continued maintenance. The
government has decided to structure a PPP model under a new law that will serve as the

and Uruguay Business Handbook 2015 Paraguay — Infrastructure 72
legal basis for future infrastructure projects. Little is known about the upcoming project
pipeline, but it is clear that Paraguay will rapidly become one of the markets to watch. The
Public and Private Alliance law (APP), designed to tackle infrastructural issues, is being
seen as a primary solution to funding of infrastructure projects. The country is proposing
$800 million worth of projects, more than four times anything that has been on the table
before. From 2015, the government intend to propose a budget of more than $1 billion a
year, which is expected to meets the requirements for the development of its infrastructure.
Hydropower - The largest exporter of clean, renewable energy, setting energy prices at half
the price of its neighbours for industrial clients. As Paraguay only uses about 10% of what
it produces, its capacity to provide competitively priced electricity in the future remains very
strong. Its ability to increase the volume and the quality of agro-industrial production with
the nascent, but fast growing, industrialisation of the country, provides Paraguay with a
strong growth outlook over the next few decades.

Paraguay is a landlocked country with no sea ports. However, it has been granted free
trade ports and warehouses in neighbouring countries’ sea ports for the reception, storage,
handling, transshipment, etc. of merchandise transported to and from Paraguay. The
Paraguayan Port Authority manages its existing free trade ports and warehouses, but
Paraguay has expressed interest in private sector concessions to develop and manage new
free trade ports. Paraguayan free trade ports are located in Argentina (Buenos Aires and
Rosario)~ Brazil (Paranagua, Santos, and Rio Grande do Sul)~ Chile (Antofagasta)~ and
Uruguay (Montevideo and Nueva Palmira). To date, only the Brazilian free trade ports and
one in Nueva Palmira, Uruguay, are operating normally. In early 1995, the government
approved a law permitting free trade zones in Paraguay, but its application depends on
ongoing discussions within Mercosur.
International Trade
Paraguay - Exports and Imports Data
2010 2011 2012 2013 2014

Trade Statistics

Trade Balance Rank 86/124

and Uruguay Business Handbook 2015 Paraguay — International Trade 73
12 Oil Seeds 2,445,829,152 27 Oil & Mineral Fuels 1,875,494,014
27 Oil & Mineral Fuels 2,222,077,172 85 Electrical Machinery 1,624,919,559
02 Meat 1,369,840,153 84 Industrial Machinery 1,549,494,919
23 Animal Feeds 1,139,941,275 87 Motor Vehicles & Parts 1,213,493,644
10 Cereals 614,696,893 31 Fertilizers 560,987,132
15 Fats & Oils 534,797,800 39 Plastics 393,366,360
41 Hides & Leather 195,891,132 38 Chemical Products 383,443,984
85 Electrical Machinery 111,365,931 95 Toys & Sport Equipment 340,231,126
39 Plastics 110,465,180 72 Iron & Steel 339,433,066
17 Sugar & Confectionery 80,222,804 40 Rubber 245,629,882

Country Export Value ($) Country Import Value ($)
Brazil 2,851,557,879 China 3,183,812,982
Russia 703,992,676 Brazil 2,714,512,050
Argentina 604,294,712 Argentina 1,895,705,946
Germany 430,450,106I United States 933,111,077
taly 234,601,092 Japan 311,216,416
Chile 187,187,997 Korea, South 276,497,276
Spain 179,599,479 Germany 207,048,210
Peru 161,267,623 Mexico 169,624,199
United States 154,739,246 Uruguay 168,296,552
Israel 142,130,249 Russia 165,370,310
Services Industry
FINANCIAL SERVICES
The country’s growth to-date has not been sourced through the government’s funding or
subsidies, but mainly through the development of the private financial sector. Bank assets
grew six-fold in the past 12 years, thanks to the solidity of the Central Bank of Paraguay and
its Superintendence for Banks. Strong regulation has allowed the sector to attract interest
from multilateral institutions as well as various development banks from the US and Europe
that have helped by providing long-term funding to the local financial institutions at a time
when domestic deposits would not average more than 12 months. Change in the funding
profile of the financial sector has been promised through pension fund reform.

and Uruguay Business Handbook 2015 Paraguay — Services Industry 74
Key aspects of the banking regulation have been centred on provisions and minimum
capital requirements. Paraguay is ahead of Europe in its implementation of Basel III rules,
especially in terms of solvency ratios. Local regulation has already established a minimum
of 12% for total solvency and 8% for Core Tier I capital.
HUMAN CAPITAL
The potential of the higher education business has led to the sprouting of universities in
Paraguay’s capital, although not all of the institutions offering masters and doctoral degrees
are accredited by the government. In the first four years after enactment of “very permissive”
legislation in 2006, more than 30 new universities appeared without being required to
submit their curricula and abide by the rules in effect under the previous legislation. Foreign
students from Portuguese speaking countries such as Angola are flocking to Paraguay.
TOURISM
Tourism is gaining greater prominence in the Paraguayan economy and general conditions
in the country are paving the way for a successful tourism sector. Infrastructure projects
being executed by the public sector, hotel investments, improved connectivity, and new
links being forged between tourism and culture, sports, and international events conducted
by scientific or professional associations are all factors elevating the level of tenders and
subsequent response from potential visitors.
From present half million visitors, the country is expecting one million visitors in 2018. Total
revenue is expected to rise from $240 million to $500 million. Increasing demand of not
massive tourisms linked to nature, ethnography and new experiences. Universal awareness
movement on environmental issues as favouring destinations with higher state natural
resources conservation.

The local CC and BPO industry now employs close to 5,000 people. The number of local
executives is also expected to grow by around 15% during 2015. Still, most of the outsourcing
services (at least 80% overall) are being demanded by local clients, while there is a portion
that are being exported (primarily to Argentina).
Growing its offshore participation seems to be the greatest opportunity for Paraguay in the
short and medium term. By leveraging its very-cost-competitive offerings in Spanish, the
country will be in position to start seriously competing for basic voice-services outsourcing
in this language. As a matter of fact, some Argentineans’ calls are already being routed to
Paraguay, especially within the telecom segment.
While Paraguay’s major advantage seems to be its competitive and qualified workforce, the
nation’s technology infrastructure remains its biggest weakness. Government fiscal policies
and double taxation also remain an impediment for those exporting services, as many of
the existent players argued (including Avanza, CIDESA, Skytel, and Voicenter).

and Uruguay Business Handbook 2015 Paraguay — Services Industry 75
Strengths
• Agricultural sector (soya and beef)
• Abundant hydroelectric resources
• Prospecting for exploitation of world’s largest titanium deposits associated with iron
ore
• Discovery of oil
• Prudent economic policies
Weaknesses
• One of the poorest countries in the region (50% of the population is poor)
• Landlocked situation
• Inadequate infrastructures (waterways, roads, electricity lines)
• Dependence on agricultural sector and neighbouring markets (60% of exports)
• Weak governance (corruption and cronyism) and insecurity linked to drug trafficking
• Smuggling with Argentina and Brazil
• Scale of the informal economy (40%)

After two years of an interim government following the controversial deposition of President
Lugo, Horacio Cartes, a businessman, took over the functions of president in August 2013.
His party, the conservative Partido Colorado (PC), will have only briefly (2008 -2012) been
removed from the power that it had held since 1946. However, the PC holds only a relative
majority in the Senate while, in the Chamber of Deputies, the president needs the support
of the centrists of the Partido Liberal Radical Auténtico and of Avanza Pais on the centre-
left. The presidential programme is very ambitious commensurate with the shortcomings it
is intended to tackle: reduction of widespread rural poverty by improving health and
education infrastructures, enabling farmers to increase productivity by providing them with
fertilizer, assistance with irrigation, marketing and transport of their crops. It plans to restore
efficiency to the public sector by combatting cronyism (patronage appointments, fanciful
salaries) and by making use of the private sector. The publication of the salaries of public
sector employees has begun. The building of social housing has commenced. To increase
public revenues, which represent only 18.5% of GDP (4.5% of it from dues paid by the
dam operators), to increase the capacity for public action without degrading ratios, a 10%
tax on the profits of the big farmers and agricultural businesses has just been introduced,
as well as a 5% tax on their exports. Up to now, the sector’s contribution to the budget has
represented only 1% of GDP. However, fallow or under-exploited landholdings are exempt
at a time when access to land remains a major bone of contention in the countryside, to
the point of provoking at times lethal clashes with the security forces. Finally, opposition to
the reforms is appearing within the PC, reluctant to agree to privatisation, partnerships

and Uruguay Business Handbook 2015 Paraguay — Investment Risks, Barriers and Challenges 76
with the private sector and the transparency of public bodies, which could force the president
to negotiate or find short-lived majorities. However, even though the bills have been passed,
full implementation is far from assured, given the levels of corruption.
GOVERNANCE
Judicial insecurity hinders Paraguay’s investment climate. Many investors find it difficult to
adequately enforce contracts and are frustrated by lengthy bureaucratic procedures and
limited transparency and accountability. Regulatory agencies supervisory functions over
telecommunications, energy, potable water, and the environment are inefficient and opaque.
Politically motivated changes in the leadership of regulating agencies negatively impact
firms and investors. Corruption is common in these institutions as time consuming processes
provide opportunities for front-line civil servants to seek bribes to accelerate the paperwork.
ECONOMIC
Growth is highly dependent on agricultural production, which contributes 20% of GDP and
70% of exports, which themselves represent 60% of GDP. The economy is therefore very
sensitive to climatic conditions and to movements in world prices, as demonstrated in
2012 when production fell due to drought. The non-agricultural sector, services and industry
(respectively 46% and 11% of GDP) will be less dynamic, due to a less buoyant fiscal policy
in support of households, whose consumption accounts for nearly 70% of GDP. The sluggish
state of the economy in Brazil and Argentina, added to the depreciation of these countries’
currencies against the guaraní, does not favour the traditional clandestine exports to these
countries.
PARAGUAY’S STATUS IN GLOBAL ECONOMIC RANKINGS

Compares Business Regulations for Domestic Firms in 189 Economies
Paraguay 8 out of 189 countries

Other Rankings
Index Rank

and Uruguay Business Handbook 2015 Paraguay — Investment Risks, Barriers and Challenges 77
Indo-Paraguay Economic Relations
BILATERAL TRADE
Paraguay Exports to India -2014 Paraguay Imports from India -2014

Value in US$ ‘000
Code Product Label Value Code Product Label Value
Total All products 210,979 Total All products 115811
15 Animal, vegetable fats and 206,762 87 Vehicles other than railway, 33421
oils, cleavage products, etc. tramway
33 Essential oils, perfumes, 2,167 24 Tobacco and manufactured 15854
cosmetics, toiletries tobacco substitutes
72 Iron and steel 1,094 29 Organic chemicals 9434
41 Raw hides and skins (other 385 72 Iron and steel 8850
than furskins) and leather 30 Pharmaceutical products 8229
05 Products of animal origin, nes 298 85 Electrical, electronic equipment 7772
73 Articles of iron or steel 145 39 Plastics and articles thereof 5985
76 Aluminium and articles thereof 93 38 Miscellaneous chemical products 5256
79 Zinc and articles thereof 34 27 Mineral fuels, oils, distillation 3839
products, etc.
Crompton Greaves (CG), a Avantha Group Company, has signed a contract with
Administracion Nacional de Electricidad (ANDE), the national power utility of Paraguay, for
the design, manufacturing, testing and supply of 245 kV, 72.5 kV and 23 kV switchgear
equipment. Crompton Greaves has won orders from ANDE to the tune of over $ 25 million
since 2014, cumulatively. These include the supply of high voltage Power products and
Automation solutions, customised to enhance the reliability of ANDE’s transmission network.
The contract was won through a competitive international public bidding process. Crompton
Greaves was selected for this prestigious order due to its successful track record in Paraguay,
backed by global recognition of its technical expertise in manufacturing and supplying
diversified switchgear products under one roof.
Tata vehicles (light trucks, pick-ups, Tata Sierra vans) have been introduced in the Paraguayan
market by a local company.
Mahindra and the Indian two-wheeler company, Hero Motors have appointed distributors
in Paraguay.
A consortium of Indian edible oil companies is exploring the possibility of acquisition of

farm land in Paraguay to grow oilseeds and food crops.
An Indian IT Company, Flatworld Solutions, in collaboration with a local company, runs a

call centre employing around 1300 Paraguayans.

and Uruguay Business Handbook 2015 Indo-Paraguay Economic Relations 78
PERU
Highlights 80
Introduction 80
Peru — Key Economic Factsheet 2014 81
Infrastructure 89
Indo-Peruvian Economic Relations 99
Highlights
• Fastest growing economy in South America, averaging 6.4% GDP growth over the
last ten years.
• GDP growth 76% since 2010.
• GDP per capita highest in Latin America.
• Third-largest producer of copper and the sixth-largest producer of gold in the world.
• World’s top producer of fishmeal, fresh asparagus, paprika and organic bananas
• World’s second largest producer of grapes
• Poverty rate dropped by 23% since 2002.
• Second best country for doing business in Latin America (Forbes).
• Second best country in credit ratings in Latin America (Forbes).
• Ranked 42/189 countries in Ease of Doing Business (World Bank)
• GDP acceleration in 2016, 6%
• Peru will be the 26th largest economy in the world in 2050, Grant Thornton.
Introduction
Peru is a country in South America. It has a coastline on the Pacific Ocean and is bordered
by Bolivia, Brazil, Chile, Colombia, and Ecuador. The Andes Mountains run parallel to the
Pacific Ocean and many Peruvian rivers originate in the peaks and eastern lowlands contain
tropical forests part of the Amazon basin. The government system is a constitutional republic.
The chief of state and the head of government is the President. Peru has a mixed economic
system in which the economy includes a variety of private freedom, combined with
centralized economic planning and government regulation. Peru is a member of the Asian
Pacific Economic Cooperation (APEC), Latin American Integration Association (LAIA), and
the Andean Community (CAN).
From the beginning of the new millennium through 2013, Peru has achieved an impressive
cumulative growth of 113% of its Gross Domestic Product (GDP) accompanied by a
cumulative inflation during the same period of just 48%, the best rates of their kind in all of
Latin America. In monetary terms, poverty has been reduced by half in recent years, with
more Peruvians living in better conditions, with a brighter future. Nowadays, Peru is a true
economic miracle nearly 20 years after the end of its history of hyperinflation and terrorism,
which have given way to the best possible conditions of stability, respect, and promotion
of investment in the Region.
Peru’s economy reflects its varied geography. The abundance of resources is found mainly
in mineral deposits in the mountainous regions, while its extensive maritime territory has

and Uruguay Business Handbook 2015 Peru — Introduction 80
always traditionally yielded excellent fishing resources. Despite the fluctuations of the world
economy, the administration has resisted pressures for fiscal spending and has used the
savings generated by the high prices of commodities between 2006 and 2008, investing in
2011 and 2012 in infrastructure, paying off part of the public debt, and increasing assets.
Peru has achieved significant progress in its macroeconomic performance in recent years,
with very dynamic GDP growth rates, stable currency exchange rates, and low inflation. In
fact, over the past decade, the Peruvian economy has had the lowest annual average
inflation rate in Latin America, at 2.9%.
Peru — Key Economic Factsheet 2014
Key Economic Facts

After a considerable slowdown in 2014, a recovery in economic growth is projected for

2015 and 2016. This recovery will be driven by the reversal of the adverse supply shocks
that affected the economy in 2014 – climate factors caused temporary disruptions in mining,
fishing and agriculture – and by a fiscal stimulus. Meanwhile, it is expected that new mines
become operational as well as new important infrastructure projects which will boost
growth by the end of this year and the next one.

and Uruguay Business Handbook 2015 Peru — Economic Highlights and Forecast 81
Inflation is currently at the upper bound of the target band (2% +/- 1%). However, the
absence of demand pressures, a negative output gap and lower dynamism in the labour
market will contribute to a gradually decline towards the midpoint target. The exchange
rate pressures limit the scope for new reductions in the interest rate by the monetary
authority. Contrary, fiscal policy is projected to be expansionary in 2015 supporting the
recovery in activity.
The end of the commodities super-cycle poses the necessity to implement structural policies
to diversify the economy, boost productivity, sustain potential growth and continue moving
forward in social inclusion.
Economic activity has shown a poor performance mainly as a result of three factors. First,
private consumption slowed down due to lower dynamism in the labour market which
reduced job creation and increased the unemployment rate. Furthermore, food prices have
risen and some surveys have revealed that more households face difficulties to pay their
debts. Second, growth was adversely hit by the contraction in public investment, especially
by the drop of approximately 50% of sub-national government investments, which
implement more than half of all public investment. Finally, private investment also fell due
to the worsening of business expectations. This suggests that investment will continue
being sluggish in 2015.
The Central Bank decided to keep the reference rate at 3.50% at its 12 November monetary
policy session, meeting market expectations. The Bank hiked the rate from 3.25% to its
current level in a surprise move at its meeting in September, but refrained from making a
move in October and now in November amid expectations that inflation will moderate
going forward and an upcoming interest rate hike by the U.S. Federal Reserve.
The official currency of Peru is the Nuevo Sol (S/.). The country has a free-floating exchange
rate regime, with the government occasionally intervening for purposes of stabilization. As

and Uruguay Business Handbook 2015 Peru — Economic Highlights and Forecast 82
of December 31, 2013, banks were buying U.S. Dollars at S/.2.798 and selling them at
S/.2.800. The grey market has very similar exchange rates. According to estimates as of the
end of 2013, the Nuevo Sol is one of the least volatile currencies in the world, exhibiting
firmness in the face of international market and currency fluctuations. The Central Reserve
Bank of Peru (BCRP) implements fiscal stimulus and liquidity control measures. There are
no restrictions or limitations on the number of bank accounts in foreign currency or the
remittance of funds abroad that an individual or legal entity may make.
According to the Central Bank, inflation pressures have fallen somewhat and the impact of
higher prices for food and currency depreciation is diminishing. Inflation moderated from
3.9% in September to 3.7% in October, although this still exceeds the upper limit of the
bank’s target range of 1.0%–3.0%. However, the Bank stated that inflation expectations
converge toward the target and monetary authorities are confident that the current interest
rate will help reduce inflation further.
The longer-term outlook is more favourable, with investment and exports expected to
rebound in 2016. Focus-Economics Panellists see the economy growing 3.5% next year.
OECD & Focus-Economics, 2015
Peru seeks to attract both domestic and foreign investment in all sectors of the economy.
To achieve this, it has taken the necessary steps to establish a consistent investment policy
that eliminates any barriers that foreign investors may face. As a result, Peru is considered
a country with one of the most open investment systems in the world. Peru has adopted a
legal framework for investments that requires no previous authorization for foreign
investment. Additionally, it establishes the necessary regulations to protect the economic
stability of investors from arbitrary changes in legal terms or conditions applicable to their
projects and reduces government interference in economic activities. The Peruvian
government guarantees legal stability to foreign investors with regard to the legislation
governing income tax and distribution of dividends. Foreign investors with the right to
obtain legal and tax stability are those willing to invest in Peru for a period of no less than
two (2) years and for a minimum amount of US$10 million in the Mining and/or
Hydrocarbons sectors, or US$5 million in any other economic activity, or those who acquire
more than 50% of the shares in a company in the process of privatization. Peru’s laws,
regulations, and practices do not discriminate between domestic and foreign companies.
Foreign investors receive equal treatment. There are no restrictions on repatriation of profits,
international transfers of capital, or foreign exchange practices. The remittance of interest
and royalties is also not restricted in any way. Foreign currency may be used to acquire
goods or cover financial obligations, provided the operator complies with Peruvian tax laws.

and Uruguay Business Handbook 2015 Peru — Laws and Policies Relating to Foreign Investment 83
Special Regimes: Legal Stability Agreements Regime whereby the Peruvian Government
guarantees:
Stability of regulations regarding non-discriminatory treatment.
• Stability of income tax regime applicable to dividends.

• Stability to use freely the most favourable exchange rate available in the market.
• Stability of the free availability and remittance of foreign currency, dividends
• and royalties regime.
• Peru offers a favourable legal framework for foreign investment
• Non-discriminatory treatment: Foreign investors receive the same treatment as local
investors.
• Unrestrictive access to most economic sectors (Investments that require authorization:
Located within 50 km in the frontier line and those destined to arms, ammunitions and
explosive. Likewise, a principal local partner for investments in maritime sabotage as
well as in air transport is required.)
• Free transfer of capital.
• Free competition.
• Guarantee for Private Property.
• Freedom to purchase stocks from locals.
• Freedom to access internal and external credit.
• Freedom to collect royalties.
• Network of investments agreements and member of ICSID and MIGA.
• Peru participates in the Investment Committee of the Organization for Economic
Cooperation and Development (OECD) – It promotes the implementation of the
Guidelines for Multinational Enterprises.
• Granting the return of the Value Added Tax during the pre-productive stage of the
project (minimum 2-year term).
• Applicable to all economic sectors
• For agricultural activity it is not necessary to meet a minimum investment amount. For
other activities the minimum investment amount is US$5 million.
• The project can be divided into stages, phases or similar.

Historical high growth has attracted large amounts of foreign direct investment in the
country, totalling $22.6 billion in 2013. This has been led by Spanish investment, totalling
$4.5 billion, followed by British ($4.3 billion) and American ($3.9 billion).
The extractive industries account for 12% of the country’s GDP and are the principle
beneficiary of foreign investment; receiving $5.4 billion in 2013. Unsurprisingly China leads
the foreign investment in this industry; Chinese interests own 33% of the copper industry
in Peru. Chinese impact on this sector is illustrated by the acquisition of Las Bambas copper
mine in the Apurímac region by a Chinese consortium led by MMG Limited, partially backed
by Beijing, for $5.85 billion

and Uruguay Business Handbook 2015 Peru — Laws and Policies Relating to Foreign Investment 84
The Peru Investment Agency Proinversión’s project portfolio can be viewed at: www.
proyectosapp.pe/modulos/JER/PlantillaProyectoEstadoSector.aspx?are=1&prf=2&jer=
5892&sec=30
MINING
Foreign Investment Fuels Peru’s Mining Industry

Peru is currently the third-largest producer of copper and the sixth-largest producer of gold
in the world. Peru’s mining industry is booming and government officials expect copper
production to double by 2015. Forecasts indicate that by 2015, investment in the mining
sector will make up close to 50% of total investments in Peru.
Currently, China consumes the majority of Peruvian mineral exports, which raises some
concerns as China faces a potential economic slowdown. Executives, however, have
dismissed these concerns because they are confident in Peru’s diversification of its mineral
export destinations. Despite emerging market capital outflows in the region, specifically in
Venezuela and Argentina, Peru continues to grow economically at a steady rate. Interest
rates are likely to remain stable in 2014 and the mining and hydrocarbons sector is expected
to experience the highest percentage growth of all of Peru’s sectors over the next two
years.
AGRO-BUSINESS
Peru’s large biodiversity makes possible the development of various native crops that are
of interest to the international market. Many of these crops have found a position in the
market and they constitute niches for potential investments.
• Peru, especially in the Andes, produces various types of cereals, such as kiwicha, quinoa,
tarwi or cañihua, among others, which have high levels of proteins and nutritional
values.
• There is also a potential market for vegetables, such as broad beans and corns, as well
as for potatoes, with a diversity in the country of over two thousand varieties, most of
which are not known outside Peru.
• Another segment with great potential is aromatic herbs and native plants of medicinal
use and high nutritional value. Most of these come from the Andes and the Amazon
rainforest.

and Uruguay Business Handbook 2015 Peru — Focus Areas for Investment 85
• The rainforest also offers exotic fruits such as cocona, soursop, aguaje and camucamu,
that are becoming quite popular in Asian countries.
Back to Nature: Organic Food

• The growing demand for organic products in the international market has generated an
increase in the number of hectares destined for these types of crops in Peru. The demand
of certificates for these products is also increasing.
• Two of the most outstanding crops are coffee and organic banana. Both have become
star products, making Peru the top exporter worldwide.
• There are also other products, such as cacao, cotton, quinoa and mango. These products
are mainly delivered to the European Union and the US.
• The optimum natural conditions and an expanding market generate interesting business
and investment opportunities in this sector.
• Peru is the top exporter of asparagus, coffee, cacao and organic banana worldwide.
• Peru’s strategic location in the southern hemisphere allows it to supply off-season
products to European and North American markets before the competition.
• Peru’s excellent profitability per hectare is possible thanks to its pleasant tropical climate
and the Andes mountain range, which produces a natural greenhouse effect throughout
the coast.
• Fruit and vegetable crops can be scheduled to profit from seasons when international
prices are higher.
• Peru trades over US$4.000 billion in fresh and processed products to over 148 countries
(with many of which Peru has signed free trade agreements.), thanks to the local know-
how on crops and logistic networks.
Appetite for New Investments

• Peru is the third largest country in South America, and has 7.6 million hectares with
agricultural potential. According to FAO, 4 million of these hectares are not developed.
• Peru has 84 of the 117 life zones recognized in the world and 11 natural eco-regions,
which makes possible to produce a diversified food portfolio, with the possibility of all-
year-round production.
• Water prices for agriculture are competitive, even in the new irrigation projects.
Diversified Exports
• In Europe and North America, Peruvian products are beginning to appear in supermarkets,
specially mangos and asparagus “from Peru”.
• Peru has become world leader in the export of organic coffee, obtaining good recognition
due to the quality and variety of this product.
• Likewise, Peru’s diversity of climates and soils makes possible to grow foreign crops:
asparagus, mangos, grapes, artichokes, avocado and paprika. These products reach
high yields and have made Peru a renowned food exporter worldwide.

• Exports from agriculture exceeded US$4.000 billion, consolidating Peru as a reliable
supplier of vegetables and fruits to Europe and the US. The projection shows a large
presence in South America and Asia.
• The objective is to continue doubling the exports level every five years (which has
happened up to date).
• In order to achieve this objective, the rol that the big irrigation projects fulfil is important
like Majes (in the South Coast), Olmos and Chavimochic (in the North Coast),which
will give new hectares to the Agro-export sector.
MANUFACTURING
Manufacturing is the sector with highest weight (15.98%) in the formation of Peruvian
GDP. According to recent declarations of the president of the National Society of Industries
(Sociedad Nacional de Industrias) Luis Salazar, manufacturing generates 11% of employment
and is more than 70% of non-traditional exports with higher added value.
During 2013, period of January-November, it was this sector that registered the lowest
growth rate in the national production (1.4%) mainly affected by the International situation
that drastically reduced imports of textile products and clothing, parts and pieces for
automotive industry and several products of the metal mechanic industry, among others.
One of the emblematic sub sectors of our national production is textile and clothing which
has a long tradition of professionalism of workforce which has allowed the development
of an efficient comprehensive productive process, which includes activities of cotton crop
or vicuña and alpaca breeding and shearing, and spinning, dyeing, weaving, sewing and
finishing of garments.
Before countries which are focused in competing by volume, Peru differs for aiming to
compete in the segment of design garments, prepared in short periods of time and with
replacement capacity within a single season.
Greater Investments to Support Growth

Two important elements to foresee a recovery of the manufacturing production levels in
2014 and following years are: the recovery of the economies of the main countries of
destination of our exports and the greater demand of the internal market of intermediate
goods that shall supply requirements for the execution of great projects of infrastructure to
be developed.
The Central Reserve Bank (Banco Central de Reserva) in its publication Inflation Report –
December 2013 registers announcements of major investments in the industrial sector for
the period 2014-2015:
• Repsol YPF: Extension of the La Pampilla Plant.

• Vale do Rio Doce: Bayovar II.
• Hochschild Mining, Mitsubishi and Cementos Pacasmayo: Phosphates Project.
• Hochschild Group: New cement plant in Piura.

• Siderperú: Modernization of Rolling Mill Plant and Nuevo Horno.
• PilkingtonLimited Group: Plant for float glass manufacturing.
PETROCHEMICALS
• Resource availability allows the development of petrochemical activities in Peru, an
important industry due to the diversity of products that may be obtained from methane
and ethane and which are the base of several production chains.
• Peru has abundant hydrocarbon wealth (oil and gas) in diverse areas of its territory,
mainly the continental shelf and the rainforest.
• For petroleum, as of December 31, 2013, there were 74 valid contracts in an area of
30.38 million ha, with investment commitments that reach US$1.250.53 billion.
• Peru has over 15.4 quintillion cubic feet of gas in the basins within its territory. Camisea
is the main natural gas deposit, currently under exploration and exploitation.
• Natural gas production has increased at a sustained pace during the last 10 years,
reaching in total 430,559 billion cubic feet as of 2013. The factors that drove this growth
are the increase of the demand of the power generation plants and an increased
consumption of domestic and commercial vehicular natural gas (GNV).
• In order to address the high cost of transporting and transforming natural gas in
developed countries, petrochemical production has been moved to countries with their
own natural gas sources.
• Peru has a large natural gas reserve that surpasses 15.4 quintillion cubic feet proven
reserves, 10.6 QCF of those have been develop. Additionally, there are 7.7 QCF proven
reserves, 5.1 QCF possible reserves and 79.8 QCF resources.
• The Peruvian State promotes the development of the three Petrochemical Poles (in
Marcona, Ilo and Pisco). This will make Peru the only source of ethane in the South
American Pacific coast with enough capacity to supply petrochemical projects at an
international competitive scale.
• Its geographical location gives it advantage for supplying countries of the Pacific coast,
particularly the United States, Mexico and Central America, as well as Asia-Pacific
countries.
• Similarly, diverse transport routes have been developed (such as the Southern Inter-
Oceanic Highway) to facilitate trade of inputs and products with Brazil and other countries
of the Atlantic basin.
• The internal demand for petrochemical products (fertilizers and plastics) is met with
imported products, mostly urea—over 365,000 up to December 2013—and ammonium
nitrates, with approximately 44,000 up to August 2013. The imports for those products
exceed the US$155 billons CIF in 2013.
• The basic and intermediate petrochemical industry established in the Petrochemical
Poles has a legal framework for promotion that includes tax incentives and benefits for
plant installation, operation and maintenance.

ENERGY
Great energy potential: The wide availability of water resources and natural gas has enabled
to meet the growing electricity demand in the country.
• In 2014, 92% of the population had access to electricity.

• The 2013 energy matrix comes principally from hydro generation (52%) and natural
gas (46%). The remaining 2% comes from other renewable sources.
• Resources to be discovered and exploited: There are other renewable energy sources
to be explored such as solar, wind, biomass and geothermal sources.
• Energy production has grown at an average rate of 6.7% in the past 10 years, led by
thermal generation, which grew by an average annual rate of 14.6%, while hydro Energy
grew 2.7%.
• The main economic groups of power generation are: Endesa, GDF Suez, Globeleq,
Statkraft and Duke Energy
Infrastructure
It is estimated that Peru currently has a $90 billion infrastructure gap, which is the difference
between infrastructure needs and the resources that the government has historically invested
in meeting those needs. An infrastructure deficit of this magnitude can lead to lower
productivity and reduced competitiveness – two characteristics that repel investors.
TRANSPORT TO THE FUTURE

Peru has prioritized the development of an ideal infrastructure to increase competitiveness
and to form a geographic space that can be integrated to the world, specially the Asia-
Pacific economic region.
The Free trade Agreement (FTA), subscribed by Peru, has consolidated its opening and
economic integration toward new markets. During this process and simultaneously,
important investment to the development and modernization of the transport, railway,
port and airport infrastructure had been made.
Nowadays in the Transport Infrastructure given in concession, there are 31 projects with a
current investment commitments for US$13,755 billion dollars, (up November 2014).
Additionally it is planned to continue with the expansion of the sector, up until 2016;
implementing an investment program with new projects, for US$19,290 billion dollars
(between public works and PPP); producing attractive opportunities of investment for the
new contractors and operators.
In this new scene, Peru thanks to its modern transport infrastructure, will invigorate the
connectivity between the markets and will facilitate the movement of the transport of

and Uruguay Business Handbook 2015 Peru — Infrastructure 89
goods; acting as a productive commercial bridge between South America, Asia and the
United States; joining to the free trade zone that will soon form in the frame of the Trans-
Pacific Partnership (TPP).
In this framework, Peru’s strategic location as regional hub for trade has to be highlighted,
thanks to the development of new alternatives to bioceanic routes that link the South
American Atlantic coast to the Asia-Pacific region.
Integration Axes: See You in Brazil

• Northern IIRSA Highway (955 km, investments for US$510 million): connects the Peruvian
ports of Paita and Bayovar to the Brazilian ports of Manaus, Santarem, Macapa and
Belem.
• Southern IIRSA Highway (2,594 km – investments for US$2.261 billion): connects the
Peruvian ports of San Juan de Marcona, Matarani and Ilo to the Brazilian ports of Santos
and Paranagua.
• Central IIRSA Highway (section 2,377 km, investments for US$100 million): it will connect
the Callao port to Brazil through Cruzeiro do Sul.
Structuring Axes and Logistic Corridors: Development Routes

• Two structuring axes and 22 logistic corridors with multi-modal interconnection have
been identified. They will permit increasing logistic competitiveness, favouring a greater
exchange of goods to be delivered to national and international consumption centres.
• The multi-modal connectivity infrastructure links logistic corridors to duty-free areas
(CETICOS and ZOFRATACNA) located in Paita, Matarani, Ilo and Tacna. CETICOS,
demarcated geographic spaces, are currently a competitive platform to boost business
and generate new investments in Peru. The companies operating there enjoy preferential
regimes that grant tax and customs exemptions, entering at the same time, to a large
market of 4 billion people, thank to the FTA, in force with countries whose joint GDP
represents more than US$56 trillion.
Peru as a Hub: The World within Reach

• The infrastructure developed up until now, will be completed on 2016, with a new
investment program,(Public Works, public private partnerships, PPP); with an amount
that exceeds US$19,200 billion dollars; according to the Ministry of Transport and
Telecommunications. Its execution will count with the participation of the public and
private sector; producing important investment opportunities for contractors and
operators of infrastructure.
• Peru is thus positioned as a logistic hub in the South American Pacific coast, facilitating
transportation of cargo containers towards Asia and America’s west coast.

and Uruguay Business Handbook 2015 Peru — Infrastructure 90
International Trade
In the 12 months up to August, the trade balance posted a record deficit of US$2.9 billion.
The trade balance peaked at a record-high surplus of US$9.9 billion in February 2012. It has
narrowed almost uninterruptedly since then and shifted to deficit in April 2014. This trend
has been driven by falling global demand and decreasing prices for traditional Peruvian
exports, such as copper and gold.
Panellists participating in the Latin Focus Consensus Forecast see exports contracting 6.7%
this year. For 2016, the panel sees overseas sales expanding 8.0%.
Peru - Exports and Imports Data

2010 2011 2012 2013 2014
Trade Statistics

Top 20 Exports in 2014
Code Product label Value (US$ thousand)

Total All products 38459251
‘26 Ores, slag and ash 10558451
‘71 Pearls, precious stones, metals, coins, etc. 6078895
‘27 Mineral fuels, oils, distillation products, etc. 4753053
‘74 Copper and articles thereof 2417073
‘08 Edible fruit, nuts, peel of citrus fruit, melons 1536396
‘23 Residues, wastes of food industry, animal fodder 1517472
‘61 Articles of apparel, accessories, knit or crochet 1093034
‘09 Coffee, tea, mate and spices 854173
‘03 Fish, crustaceans, molluscs, aquatic invertebrates nes 805835
‘79 Zinc and articles thereof 633387
‘07 Edible vegetables and certain roots and tubers 595741
‘20 Vegetable, fruit, nut, etc. food preparations 576944
‘39 Plastics and articles thereof 566686
‘80 Tin and articles thereof 547351
‘15 Animal, vegetable fats and oils, cleavage products, etc. 489826

and Uruguay Business Handbook 2015 Peru — International Trade 91
‘25 Salt, sulphur, earth, stone, plaster, lime and cement 422857
‘16 Meat, fish and seafood food preparations nes 327319
‘84 Machinery, nuclear reactors, boilers, etc. 284107
‘28 Inorganic chemicals, precious metal compound, isotopes 270272
‘18 Cocoa and cocoa preparations 234171
‘10 Cereals 220820
Top 20 Imports in 2014

Total All products 42193570
‘84 Machinery, nuclear reactors, boilers, etc 6318773
‘27 Mineral fuels, oils, distillation products, etc 5983804
‘85 Electrical, electronic equipment 4590101
‘87 Vehicles other than railway, tramway 3983421
‘39 Plastics and articles thereof 2219734
‘72 Iron and steel 1494869
‘10 Cereals 1365477
‘73 Articles of iron or steel 1187854
‘38 Miscellaneous chemical products 812786
‘40 Rubber and articles thereof 765579
‘30 Pharmaceutical products 713915
‘90 Optical, photo, technical, medical, etc apparatus 706079
‘23 Residues, wastes of food industry, animal fodder 703425
‘48 Paper and paperboard, articles of pulp, paper and board 698232
‘29 Organic chemicals 570247
‘31 Fertilizers 550045
‘15 Animal,vegetable fats and oils, cleavage products, etc 456227
‘33 Essential oils, perfumes, cosmetics, toileteries 451488
‘64 Footwear, gaiters and the like, parts thereof 378370
‘52 Cotton 372193
‘94 Furniture, lighting, signs, prefabricated buildings 363931
‘62 Articles of apparel, accessories, not knit or crochet 363898

County Export Value ($) Country Import Value ($)
China 7,848,973,378 United States 8,020,504,095
United States 6,516,617,362 China 7,807,487,496
Switzerland 5,074,455,343 Brazil 2,581,026,748
Canada 3,445,338,660 Ecuador 2,012,396,315
Japan 2,575,332,389 Argentina 1,951,278,811
Chile 2,028,313,129 Mexico 1,675,051,248

and Uruguay Business Handbook 2015 Peru — International Trade 92
Germany 1,866,208,049 Korea, South 1,648,402,153
Spain 1,842,755,105 Colombia 1,567,001,549
Korea, South 1,545,351,975 Japan 1,503,229,965
Brazil 1,402,931,398 Germany 1,367,902,164
BILATERAL AND MULTILATERAL ECONOMIC AGREEMENTS

17 Free Trade Agreements and 29 Bilateral Investment Treaties. Most important one FTA
with European Union started in 2012.
Services Industry
FINANCIAL SERVICES
The high level of concentration in Peru’s banking sector is hindering market growth, according
to BNamericas’ latest financial services Intelligence Series report.
In Peru’s banking sector, four entities - Banco de Crédito del Perú, Banco Continental,
Scotiabank Perú and Interbank - account for over 80% of loans and deposits, while in the
insurance sector just two companies account for around 60% of premiums.
This high level of concentration is a legacy of Peru’s 1998 economic crisis, which saw the
number of banks in the country fall from 27 in 1997 to just 15 in 2006.
Nevertheless, growth in the sector has been robust over the last decade, keeping pace
with economic growth that has helped the middle class rise from 26% of the population in
2005 to 50% today.
Despite a slowdown in the economy last year, total direct loans expanded 14.8%, deposits
18.4% and equity 11.2%.
The high growth potential of the local market has spurred a number of foreign banks -
including Santander, Banco Falabella, Banco Azteca, Deutsche Bank, GNB Sudameris, Banco
Ripley, Banco Cencosud and the Industrial and Commercial Bank of China (ICBC) - to enter
or reposition themselves’ in the Peruvian market.
But the high level of concentration has inhibited direct competition with Peru’s major
existing banks.
“No player has decided to compete in all business segments with the biggest banks,” Leyla
Krmelj, head of financial analysis at rating agency Equilibrium in Lima, told BNamericas.

and Uruguay Business Handbook 2015 Peru — Services Industry 93
“That’s hard to do because these big banks already have a strong presence throughout the
country, and a new player that comes in and wants to start offering credit from scratch, and
not through the purchase of assets of an existing entity, would face a very difficult task that
would take time.”
That was the lesson learned by HSBC, which entered Peru in 2006, only to sell its local unit
to Colombian group GNB last October, with a 1.56% share of loans and 1.75% of deposits.
Another problem is that there is a lack of M&A regulation, allowing the big banks to acquire
more assets.
While concentration levels may decrease in future years because the two leading companies
plan to exit some unprofitable business lines, analysts agree that if this does happen it will
be a very gradual process.
HUMAN CAPITAL
Peru is a fast developing, tropical, Andean, and Pacific Rim country whose education sector
is going through a tectonic shift. Those changes, some of which raise constitutional questions,
have unsettled segments of Peruvian society, yet may signal opportunity for international
educators and agents to serve students’ needs.
At the secondary level, the country fell in the OECD’s 2012 PISA tests two places from 63 to
65, when measured against 2009 results. Peru also ranks poorly across all sectors in English
language proficiency (though higher than its Andean neighbours Chile, Ecuador, Venezuela,
and Colombia).
Peru does have several quality universities, including the privately-funded Pontificia
Universidad Católica del Perú, which QS University Rankings rates 30th in South America,
and the public Universidad Nacional Mayor de San Marcos, rated 57th.
For yet more encouraging news, one need look no farther than Peru’s economy. Economic
growth often means more money for the middle class to spend on education, as well as
more demand for quality education both at home and abroad. Peruvian growth rates once
topped 6%, and though the economy has cooled due to falling mineral exports, current
forecasts still predict 4% growth in 2014, not bad compared to many countries in the
region.
There are good opportunities in English language and vocational courses for boosting
employment opportunities.
HEALTHCARE
The government is encouraging private investment in healthcare facilities on PPP model.
Till today, over $3 billion has been invested in national, regional hospitals (36) and health
centres (170). The Government has opened the sector to foreign investment to Design,
build and equipping new Hospitals and Infrastructure and equipment Management. A list
of healthcare projects can be accessed at: www.geominsa.minsa.gob.pe/geominsa/

TOURISM
Thanks to its amazing archaeological monuments, its large biodiversity and internationally
renowned gastronomy, Peru has become a world-class tourism destination, attracting
growing numbers of investors. Eleven Peruvian attractions are classified by UNESCO as
world cultural and natural heritage. The citadel of Machu Picchu was chosen as one of the
“New Seven Wonders of the World”, an online contest organized by the New Open World
Corporation.
Country Brand Index listed Peru as the third world destination of inbound tourism, and
Spain’s INMARK consultancy firm highlights Peru as the most authentic destination in Latin
America due to its cultural wealth and history, as well as the warmth of its people.
The Latin American Travel Association (LATA) recognized PROMPERU as the Best Tourist
Board of Latin America, Reserva Amazónica Inkaterra (Cuzco) as the Best Jungle Lodge,
Aqua Expeditions (Amazon River – Loreto) as the Best Luxury Cruise, and Cadena Orient
Express (with hotels in Lima, Cuzco and Arequipa) as the Best Chain Hotel.
There are numerous investment opportunities in the development of new local attractions,
such as Choquequirao archaeological site, or the inclusion of new services in existing
destinations.
The greatest connectivity of the Peruvian aviation market with the rise of new weekly
frequencies in international flights allows more connections to the various tourist destinations
with more and better travel options.
An interesting option is the increase of the experience’s quality of the tourist: possibility to
include travel by helicopter, customized luxury services or participation in ancestral or mystical
activities.
The quality on the accommodation services for the commodity and satisfaction of the
tourist that visits Peru has been characterized during the last years by the arrival of major
hotel chains of international level, between them we have: Accor, Decamerón, Hilton, Orient
Express, QP Hotels & Resorts Westin, among others.
The number of tourist that visit Peru has doubled during the last decade, according to
estimated figures by MINCETUR, from 1,5 billion people in 2005 it reached 3.08 billion to
2013. This generated 3,641 billion dollars for receptive tourism in the last year. This
demonstrated that the country is growing as a touristic destination in the international
market, which opens opportunities for the promotion of tourist attractions.

The local market’s growth and dynamism, the availability of top-class labour, and a strategic
location to provide services to Latin America and Western Europe are some factors that

make Peru an excellent alternative for developing investments in the shared services, BPO
and KPO sectors.
The local capital and investment market has strengthened and become more sophisticated
thanks to investment growth, which exceeds US$40 billion annually.
Local and transnational companies located in the country increasingly demand more
specialized services. This encourages the creation of shared services centres and attracts
outsourcing service providers both for global and local clients.
Operating cost competitiveness, neutral accent (Spanish with no accent), quality, proactivity,
kindness of Peruvian personnel and technological infrastructure availability are some of
the features that favour investment in contact centres and BPO in Peru.
Over 50 contact centres from Spain, Argentina, USA, India and France, among others, have
already been installed. Consequently, over 36,500 jobs have been created.
During 2011 the exports made by call centres increased in 35% according to the previous
year.
Peru shows an average low cost labour for operator in comparison with other offices in
Latin America (380 dollars). This is a determining factor in the transaction of the call centres,
because it involves an area where 60% of the costs are spend in human resources.
Broad infrastructure and technological services availability, and low real estate costs.
Exports of contact centre services, data processing, IT applications, and similar activities are
exempted from VAT payment.
Peru’s location in the GMT -05 Time Zone allows communication with New York or Miami
using the same time. There is a 6-hour difference with Madrid, facilitating business with
Europe.
The implementation of the Data Protection Law (approved in 2011) will strengthen the
companies’ position and drive greater business relations.
There is a considerable human resources inventory for the sector’s development. 42% of
post-graduate students are related to business and engineering.
Inbound and outbound services supply, both local and international, is specialized in
customer service and multi-channel sales.

Strengths
• Strong growth potential
• Member of the Pacific Alliance
• Mineral, energy, agricultural and halieutic resources
• Low level of public debt and balanced budget
• Independent central bank and healthy banking sector
• Tourist appeal
Weaknesses
• Dependence on raw materials and Chinese demand
• Vulnerability to climate and seismic events
• Regional disparities (poverty in the Andean and Amazonian regions)
• Shortcomings in infrastructure, company credit, healthcare and education
• Scale of coca growing and cocaine production
• Huge grey sector (60% of employment), not favourable to training

Ollanta Humala, President and from a centre-left party, is facing criticism as the reforms
implemented have failed to satisfy popular expectations. In addition, Gana Perú, the
presidential coalition, does not have a majority in Congress although it does have more
seats than the leading opposition party Fuerza Populat. This lack of a majority could prove
to be a hindrance in particular in gaining approval for the government s proposed cut in
corporation tax. The guerrillas continue to make use of coca production to retain control in
the mountainous regions in the East of the country. The effectiveness of the civil service,
the police and the courts leave something to be desired despite a reduction in corruption.
The business climate has been improving with an easing in bureaucratic procedures and
the privatization being undertaken by the government is promising for attracting foreign
investors.
GOVERNANCE
Peru has been given good forecasts by the best-known risk rating agencies, which have not
only ratified the country’s investment grade but have also raised the Peruvian sovereign
credit rating. The factors that back this rating are the solid economic prospects reflected in
a minimum growth estimate of 5.0% of the GDP for 2013, and an estimated 6.0% for
2014. These economic forecasts are backed by the rapid growth in investment and the
significant drop in fiscal and external vulnerabilities, all within the context of several sources
of growth, with low inflation and strong macroeconomic fundamentals.

and Uruguay Business Handbook 2015 Peru — Investment Risks, Barriers and Challenges 97
Obtaining the investment grade has permitted Peru to attract a great deal of international
attention. Recently, an increasing number of multinational corporations have been looking
at Peru with greater interest. The subsequent increase in jobs and decrease in poverty will
predictably help improve social wellbeing.
Peru has recently achieved the position of the third most globalized country in Latin America,
according to the Globalization Index established by EY. Five elements are considered within
this index: openness to foreign trade, capital flows, exchange of technology and ideas,
international movement of workers, and cultural integration. Additionally, in early February
2012 Bloomberg Markets positioned Peru as the third emerging market with the greatest
international projection in 2012, based on the country’s advantages, such as low share
prices and their possible increase in the future.
ECONOMIC
The mining sector accounts for 56% of exports. The falling prices of copper and gold resulted
in a worsening in the balance of trade and the current account balance in 2014. There is a
deficit in the trade in services (despite satisfactory earnings from tourism) because of the
repatriation of profits by foreign companies. In 2015, there should be a reduction in the
current account deficit as copper production and exports increase following the opening of
new mines. This deficit is fully financed by foreign investments. Whilst the central bank is
able to make use of very considerable currency reserves (16 months of imports), it will
continue to monitor the normalization of rates in the United States, expected in 2015, in
order to prevent excessive exchange rate volatility. The risk for Peru of a major capital
outflow is not high as the capital financing is stable and long term.
Growth in 2014 slowed, mainly because of the knock-on of reduced Chinese demand on
the mining sector and the stagnation of private sector wages. The Peruvian economy should
get back to its growth rates of recent years in 2015, boosted by household consumption
(63% of GDP) and the mining sector. The start of production from new copper mines, the
country being one of the world leaders in copper (as well as silver, zinc, tin and lead),
should further support growth.
PERU’S STATUS IN GLOBAL ECONOMIC RANKINGS

The World Bank “Doing Business Ranking” 2015. Compares Business Regulations for
Domestic Firms in 189 Economies
Peru 45 out of 189 countries

Other Rankings
Index Rank

and Uruguay Business Handbook 2015 Peru — Investment Risks, Barriers and Challenges 98
Index Rank
International Logistics Performance Index (LPI)71/160
Indo-Peruvian Economic Relations
Trade between India and Peru is growing, with trade crossing the US$1 billion mark for last
four years. During 2013-14, the total trade was US$1.145 billion.
Indo-Peruvian Trade (US$ million)

2012-13 2013-14 Growth 2014-15 Growth 2015-16 Apr 2015
India’s exports 637.927 620.569 -2.72% 819.818 32.11% 58.795
India’s imports 561.320 524.213 -6.61% 590.395 12.63% 32.601
Total trade 1199.247 1144.782 -4.54% 1410.213 23.19% 91.396
Source: DGCI&S, Department of Commerce, Government of India
India’s main exports to Peru are automobiles, motorcycles and three-wheelers, iron and
steel products, polyester and cotton yarns, pharmaceuticals, pipes, etc. Main Indian imports
from Peru are copper minerals, gold, phosphates of calcium, zinc and lead minerals, fish
flour, synthetic cables, fresh grapes etc.
Top 10 Peruvian Imports from India Top 10 Peruvian Exports to India

India’s exports to Peru amounted to Peru’s exports to India amounted to
$836.8 million or 2% of its overall imports. $320.8 million or 0.8% of its overall exports
1. Vehicles 180.9 million 1. Ores, slag, ash 130.1 million
2. Cotton 138.3 million 2. Gems, precious metals, coins 92.9 million
3. Iron and steel 68.3 million 3. Salt, sulphur, stone, cement 78.2 million
4. Plastics 54 million 4. Zinc 4.6 million
5. Pharmaceuticals 43.7 million 5. Inorganic chemicals 2.6 million
6. Manmade filaments 36.2 million 6. Fruits, nuts 1.9 million
7. Electronic equipment 36.1 million 7. Raw hides excluding furskins 1.5 million
8. Machines, engines, pumps 32 million 8. Cocoa 1.3 million
9. Manmade staple fibres 28.3 million 9. Manmade staple fibres 1.1 million
10. Rubber 25.8 million 10. Machines, engines, pumps 1.1 million

and Uruguay Business Handbook 2015 Indo-Peruvian Economic Relations 99
Investments
Five Indian companies have currently invested in the mining sector in Peru. It is estimated
that their present investment is to the tune of US$30 million. This will continue to grow
every year as the mines reach more advanced stages. Many more mining companies are in
the process of scouting/finalizing the acquisition of mining assets. In addition, IFFCO has a
major stake in a large phosphate mining operation in northern Peru. Similarly, Zuari Agro,
partnering with Mitsubishi, has a 30% stake in a large rock phosphate reserve in the same
area. Zuari’s investment share in the development of this project will be about US$36
million. Tata Consultancy Services, Aegis, Wipro have opened their offices in Peru. Reliance
too has a representation. All the major Indian pharmaceutical companies have their
representative offices or local subsidiaries here.
AJE Peru has opened a subsidiary in Maharashtra, AJE India Pvt. Ltd. manufacturing soft
beverages. The operations started in December 2010. They have invested US$15 million so
far and plan to increase this in the future. A major Peruvian company, Resemen S.A.C.,
which specializes in mining machinery, has opened a subsidiary in New Delhi by the name
of Reliant Drilling Ltd., following a major contract it has won from Hindustan Zinc Ltd.

and Uruguay Business Handbook 2015 Indo-Peruvian Economic Relations 100
URUGUAY
Highlights 102
Introduction 102
Uruguay — Key Economic Factsheet 2014 103
Infrastructure 110
Indo-Uruguay Economic Relations 117
Highlights
• The only country in the Americas that managed to avoid a recession during the
global financial crisis of 2008-2009.
• Economy grew 3.5% in 2014, completing 12 years of uninterrupted expansion.
• Geographical centre of South America.
• Highest income per capita of the continent.
• Highest percentage of renewable energy in its energy grid in Latin America. 2015:
+ 90% renewable energy
• One of the few countries in the world where tourists outnumber locals
• All children in public education centers are receiving a laptop with a wireless internet
connection
Introduction
Uruguay is a country located in South America bordering the Southern Atlantic Ocean.
Neighbouring countries include Argentina and Brazil. The geography of Uruguay includes
mostly rolling grassland and a dense network of rivers. The government system is a
constitutional republic. The chief of state and head of government is the President. Uruguay
has a mixed economic system in which there is a variety of private freedom, combined
with centralized economic planning and government regulation. Uruguay is a member of
the Latin American Integration Association (LAIA) and Mercosur.
Uruguay is a market-oriented economy in which the State still plays a significant role.
Following a deep crisis in 1999-2002, Uruguay’s economy grew robustly from 2003-2013
led by private consumption – fuelled by full employment, rising wages and a weak dollar–
and exports related to record-high commodity prices. Growth decelerated from an annual
average of 6.0% in 2004-2008 to 5.2% in 2009-2013, and is expected to be about 3.0% in
2014. Growth performance, foreign trade and investment, and the banking system were
largely unaffected by the 2009 global financial crisis. In mid-2012 Uruguay regained
investment grade status by major risk rating agencies.

and Uruguay Business Handbook 2015 Uruguay — Introduction 102
Uruguay — Key Economic Factsheet 2014
Key Economic Facts

GDP, PPP (current international $) $71.41 billion (2014)
GDP per capita, PPP (current international $) $20,884.26 (2014)
External debt stocks, total (DOD, current US$) $14,349,584,000.00 (2011)
Current account balance (BoP, current US$) -$2.51 billion (2014)
Imports of goods and services (current US$) $14.68 billion (2014)
Exports of goods and services (current US$) $13.43 billion (2014)
Uruguay’s GDP expanded a strong 3.5% during 2014 over the previous year, with positive
activity in most sectors of the Mercosur member economy, according to the latest report
from the Central bank. The result was in line with government officials expectations of 3%
growth last year.
Private analysts had also anticipated a healthy performance despite the significant slowdown
in mid-year when the economy was steaming ahead at 5.1%. The complicated situation in
neighbouring countries and Mercosur associates Argentina and Brazil, plus a fall in demand
and prices for commodities impacted in foreign trade dependent Uruguay.
The Central bank report indicates that most sectors had a positive performance during the
twelve months with the exception of “retail, repairs, restaurants and hotels mostly because
of a slowdown in commercial services activities, and construction, since the housing market
seems to have reached a plateau”.
The most active and contributing sectors to the global outcome, according to the report
include manufacturing, exports, transport, storage and inventories and communications
because of the surge in telecommunications and other sub-sectors.

and Uruguay Business Handbook 2015 Uruguay — Economic Highlights and Forecast 103
“All sectors have seen an increase in activity and positive growth rates, with the exception
of construction. The most dynamic sectors were transport, storage and communications and
manufacturing industries” underlines the central bank release with graphics to support it.
With this latest report Uruguay has experienced one of its longest and solid growth periods
in recent history, beginning in late 2003, following on the banking crisis of 2002 as a
consequence of the melting of the Argentine economy. Since then the Uruguayan economy
has not ceased to expand speared by the commodities boom and a massive influx of
foreign capital looking for higher dollar yields as a result of the US Federal Reserve quantitative
easing policies.
Low prices and volumes for imports will help keep Uruguay’s import bill in check, and
offset some of the deterioration in exports, however growth will still be impacted by the
slowdown in Brazil and Argentina. Panellists surveyed for this month’s Latin Focus report
revised down Uruguay’s 2015 growth forecast by 0.3 percentage points amid on-going
external challenges. They expect GDP growth of 2.1% in both 2015 and 2016.
Panellists participating in the Latin Focus Consensus Forecast expect inflation to close 2015
at 9.1%, which is up 0.1 percentage points from last month’s projection. For 2016, panellists
see inflation easing to 8.6%, which is up 0.2 percentage points from last month’s forecast.

Uruguay received FDI inflows of US$2,731 million in 2014. This was the second highest
value in the country’s history, despite being lower than 2013. Consequently, the country

and Uruguay Business Handbook 2015 Uruguay — Laws and Policies Relating to Foreign Investment 104
remains the second largest recipient in the region, just behind Chile, with incoming FDI
flows of around 5% of GDP well above the average of both the region (2.9%) and the
Mercosur (2.2% of GDP).
In terms of economic sectors, manufacturing is the primary recipient of FDI in Uruguay,

which is mainly explained by two mega investments, UPM and Montes del Plata’s pulp
mills. The latter, is the largest investment in the country’s history, with an estimated value
that exceeds US$2.1 billion. Construction is the second destination of FDI, followed by the
Trade and Services sector. Besides, there was a recovery in FDI inflows to the agricultural
sector. This industry has been particularly dynamic in the last decade.
Uruguay, one of the smallest countries in South America, with a population of around
3,400,000, has in recent years become an attractive destination for foreign investment,
building a reputation worldwide as a safe and profitable country in which to carry out
projects and businesses.
Located between two South American colossi – Brazil and Argentina – and a member of
Mercosur (South America’s trade agreement – the biggest regional market in the world,
with 270 million potential consumers) Uruguay has, besides its strategic geographical
location, political, economic and social conditions that have aroused interest all over the
world.
In 2012, the Uruguayan economy grew by 3.9% after 10 years of continuous growth. Between
2003 and 2012, Uruguayan GDP increased by 5.2%, the highest growth rate in its history,
above the average level in Latin America. Uruguay’s national forecasts agree with the
international ones: that the economy will continue to grow during 2013 by around 4%.
The reliability and responsibility of the country’s macroeconomic management made it

easier for Uruguay to overcome the strong shock waves coming from external upheavals
and volatility, which reflects a decrease in vulnerability to external events. As a consequence
of this stability and economic dynamism and the trust that it inspires, in April 2012 the
rating agency Standard and Poor’s assigned Uruguay the Investment Grade, which was
also later assigned by Moody’s and Fitch.
Over the last decade, local and foreign investment has shown a strong growing trend,
quadrupling in the last six years to reach an all-time high. In 2012, in a world scenario of
economic slowdown and uncertainty, Uruguay remained among the top countries in the
region in terms of FDI and GDP, after Chile and Peru. In particular, the flow of foreign direct
investment reached $2.8 billion, i.e. 5.4% of GDP.

and Uruguay Business Handbook 2015 Uruguay — A Magnet for Investment 105
The reliability and responsibility of the country’s macroeconomic management made it
easier for Uruguay to overcome the strong shock waves coming from external upheavals
In 2012, fixed investment grew by 19.4% in Uruguay, above official forecasts, and estimates
indicate that it will continue to grow strongly. The global investment rate has also registered
a growing trend in recent years. On average, the investment rate grew from 14.7% (1983-
2004) to 20% (2005-2012). In this regard, and in view of the investments made in the
short term, a new increase of the investment rate to 21% has been forecast for the next
five-year period.
These investments involve major development projects in different economic sectors, such
as agro-industry, infrastructure, mining and tourism. Some of the main projects include
innovative ventures in the dairy industry; new forestry projects, such as the setting up of a
new pulp mill; new grain terminals; regeneration of railways; power generation from
renewable energy sources; iron extraction; construction of hotels and tourist centres, among
others.
Special reference should be made to the renewable energy sector, which has captured –
mainly through the generation of wind power – a significant flow of productive capital in
recent years. Uruguay is one of the countries that have most strongly fostered the
development of alternative energy sources, driven by an intention to change the structure
of its energy matrix.
Since 2009, the renewable energy sector has enjoyed a series of specific tax incentives that
have proven to be extremely successful in attracting foreign investments. Within this
framework, the government has called for bids for the establishment of wind parks, which
has resulted in substantial investments by transnational companies. In 2012, almost 80%
of the projects promoted by the Investments Law Application Committee were in relation
to wind power generation projects, mostly financed by foreign companies or else by local-
foreign capital associations. It is estimated that the energy restructuring process will result
in investments of over $7 billion, accounting for 13% of GDP.
For 2015, the energy matrix is expected to be 15% wind power generation and 13% biomass
generation. Likewise, for 2016, Uruguay is expected to become the country with the largest
share of wind power generation in its energy matrix worldwide.
Investment Incentives
The renewable energy sector is not the only one to benefit from these kinds of incentives.
Uruguay has also encouraged and strongly supported productive investment – national as
well as foreign – an essential driver for economic growth and development.
Based on a reliable regulatory framework with clear rules, the current Investment Promotion
Regime provides for an equal treatment of both foreign and local investors. Incentives
include a series of tax exemptions and benefits, such as the business income tax exemption
on a percentage of the capital invested ranging from 20% to 100%.

Other benefits are the free repatriation of capital and the free access to the exchange
market, facilitated by a sound and reliable banking system that operates in national as well
as foreign currency. Uruguay also offers free zones, temporary admission and free ports
and airports. Furthermore, it is worth pointing out that investment promotion and protection
agreements have been entered into with 30 countries, such as Spain, the US, Finland,
France and the UK, among others.
For 2015, the energy matrix is expected to be 15% wind power generation and 13% biomass
generation
Finally, with the approval in 2011 of the legal framework for the regulation of public-private
partnership agreements, a new impulse has been given to the promotion of investment
projects in infrastructure, which is a crucial sector for sustainable development. Law No.
18,786 provides for investment projects in infrastructure for road, rail, port and airport
works; energy infrastructure works; waste treatment and disposal works; social infrastructure
works, including prisons, health centres, educational centres, social interest housing, sports
centres, and urban improvement in facilities and development.
Economic dynamism and specific investment incentives are not the only elements that
explain the investment phenomenon in Uruguay. In order to understand the reasons
supporting this phenomenon, a series of factors related to social and political circumstances
should be considered – for example, the soundness of the institutions, public and legal
security, and the level of education of the local population.
Uruguay’s social and political stability has been acknowledged by the most prestigious
international organisations and was placed at the top of South America’s Democracy Index
2012 according to The Economist’s Intelligence Unit, the Prosperity Index (Legatum Institute
2012), Political Stability Index (World Bank 2012), Quality of Living (Mercer Quality of Living
City 2012), and Low Corruption (Transparency International 2012).
Furthermore, it holds second place in Economic Freedom (Heritage Foundation 2012) and
the third-place in Latin America in the World Bank’s Doing Business’ ranking 2013, which
measures the ease of doing business.
Uruguay’s investment climate is generally positive. A decree passed in 2007 and modified
in 2012 provides significant incentives, mainly corporate income tax cuts, to local and
foreign investors. Foreign and national investors are treated alike; there is free remittance
of capital and profits, and investments are commonly allowed without prior authorization.
Overall, U.S. firms have not identified corruption as an obstacle to investment.

ENERGY
Uruguay features a favourable business climate, great social stability, legal security, tax
incentives for investors and strong corporate accountability.
Both the State and private stakeholders have made large investments in the industry in
excess of US$7 billion on aggregate. This means the country has invested more than 3% of
the annual GDP in energy infrastructure.
Uruguay has a long-term energy policy unanimously approved by a multi-party committee.

This shows the significance of the issue and supports the State policy status of energy
policy.
Energy policy features a strong hope for renewable energy, with important introduction
goals in the short term and material tax benefits for this type of undertakings.
Energy policy further includes a commitment to diversification and non-reliance on external

sources, which has resulted in investments in onshore and offshore hydrocarbon exploration
activities.
Wind Energy
Seven wind farms with a total installed capacity of 340 megawatts to come online between
April and June of 2015 adding that by 2015, it expects wind sources to generate 30% of the
country’s energy. The development of wind energy is part of Uruguay’s strategy to completely
decarbonize its electricity sector, and with strong winds and a favourable policy framework,
the up to 900 megawatts of wind energy currently envisaged will supply Uruguay with
reliable, very affordable and ‘inflation proof’ electricity.
LOGISTICS
Uruguay has become a regional hub in the Southern Cone due to the large advantages it
offers for the development of logistic activities.
Uruguay is the regional hub par excellence for the Southern Cone: it offers important
advantages for the location of Regional Distribution Centres (RDCs).
Uruguay has a brand new airport which became operative in 2009, deep water ports - with
top level infrastructure - and the busiest highway network of Latin America.
Uruguay is geographically located at a privileged area featuring two ports in the main
gateway to the Southern Atlantic coast with access to Parana-Paraguay-Uruguay waterway.
The richest cities of the continent can be reached in 12 to 96 hours by land and 1 to 3
hours by air.

and Uruguay Business Handbook 2015 Uruguay — Focus Areas for Investment 108
The Uruguayan legal framework provides major advantages to logistics operations, with
highly strong incentives to the setup of RDCs and the handling of goods in transit. This
includes Duty-Free Zone, Free Port and Airport, bonded warehouses and temporary
admission regimes.
Logistics in Uruguay has its own institutional framework. In 2010, the National Institute for
Logistics (INALOG) was created by Law as a means for public/private participation and
coordination of logistics development.
VEHICLE AND AUTO PARTS

Over the last years, foreign investments have been made in the Uruguayan automotive
industry, both in the assembly of vehicles and in the manufacturing of auto parts. The
industry exports reached US$483 million in 2014.
According to the Investment Promotion Act, companies may be eligible for 100% deduction
of the invested amount from the Corporate Income Tax, along with other tax benefits.
The industry exports receive a benefit of 10% reimbursement on the FOB value by means
of credit certificates issued by the State’s Tax Authority.
Uruguay has a Temporary Admission regime in place for machinery and input included in
the exported goods, so import taxes are not applicable to these products (customs duties
and others).
The import of parts (CKD kits) for vehicle assembling intended for the domestic market is
applied reduced tariffs (2%).
Uruguay has free access to the Argentinean, Brazilian and Mexican market for automotive
products, with more favourable terms for new models. Uruguay also boasts preferences
when entering other regional markets, such as: Bolivia, Chile, Colombia, Ecuador, Peru and
Venezuela.
PHARMACEUTICALS
Pharmaceutical sales in Uruguay have increased significantly in recent years, amid an
expanding economy and rising salaries. The country’s pharmaceutical market saw a
compound annual growth rate of 12% between 2003 and 2013, reaching $510 million.
Concurrently, exports rose to $130 million. The most important export markets are in Latin
America, but the level of concentration is quite low—none of the most important markets
represents even 20% of total exports—and France and South Africa are included among
the top-ten buyers.

and Uruguay Business Handbook 2015 Uruguay — Focus Areas for Investment 109
Infrastructure
Much of the country’s historic development can be attributed to port activity. Today, owing
to Uruguay’s geographically strategic position and easy access to the Atlantic Ocean, foreign
trade is higher than ever, resulting in unprecedented development of the country’s maritime
infrastructure.
The Port of Montevideo has been the driving force behind the history and development of
the country thanks to its rapid growth that has remained consistent at an average annual
rate of 14%. This success is in part down to its geographical position and its access to the
Atlantic Ocean and also down to an increase in foreign trade in the area.
Alberto Díaz Acosta, President of Uruguay’s National Port Authority, says the port plays an
important role in the country’s economy: “The port stands out because of the support of
institutions working in the country. There is a common strategy between the Ministry of
Economy, the Ministry of Livestock, Transport, and the ANP and Customs.
“The infrastructure that we have is not bad. The returns that are in operation in some cases
are even the best in the South Atlantic. There are operations that are done very quickly,
very efficiently and there is adequate infrastructure for that dynamic.”
Movements of goods have been growing dramatically since 2004, with 50% of the activities
being exports to Argentina and Paraguay, as well as Argentinean, Brazilian, and Paraguayan
imports.
Through direct government investment and private investment, the upgrading of the Port
of Montevideo has continued. The government is now promoting two other projects that
are vital for the growth of the area. “One is the Fishing Terminal in Capurro area,” Mr. Jacob
explains. “The purpose of this project is to better logistics capacities to all fishing operations
of the South Atlantic.
“The other project is the Punta Sayago where the Ministry of Transport and Public Works
has assigned 96 hectares for the development of other projects. Simultaneously there is
the regasification plant, Gas Sayago, which is under construction.”
These projects will in turn boost Montevideo port by increasing operations at the port and
create jobs in several areas that are connected with these projects. Work has also begun on
utilizing Puerto de la Paloma to the east of Montevideo. “The port was underutilized,” says
Mr. Jacob, “and from the investment effort we have made with state support, we have
managed to recover berthing docks so that vessels could operate.”
The Public-Private Partnership Act offers incentives and sets a framework for investment in
infrastructure works through joint ventures. By virtue of this law, road, rail, port, airport,

and Uruguay Business Handbook 2015 Uruguay — Infrastructure 110
energy infrastructure, waste disposal and treatment and social infrastructure works can be
undertaken.
Law 18,795 promotes investment in the development of housing aimed at low and lower
middle income sectors, through strong tax exemptions. Several projects have been
introduced under this Law, allowing for the construction of more than 4,000 dwellings.
In the next few years, significant construction developments are in the pipeline, most notably
road and energy projects, port development, among others.
A list of infrastructure projects can be viewed at: www.uruguayxxi.gub.uy/invest/wp-content/

uploads/sites/4/2015/08/Base oportunidades-inversion-web-Ingl%C3%A9s-24-8-15.pdf
FREE TRADE ZONES

Uruguay has open and solid financial and banking systems and offers a business-friendly
environment. No wonder why the country and its more than 10 free zones are attractive for
many multinationals and investors.
In order to boost investment and international commercialisation, Uruguay has many free
zones located at strategic points. These zones count on vast and modern resources and
high technology, and are aimed at high-value sectors. Private zones are managed by
individuals authorised by the administration. Through the General Trade Bureau – Free
Trade Zone Area, the Uruguayan administration manages the state free zone and monitors
and controls all the systems.
Uruguay has a beneficial and modern Investment Promotion and Free Trade Zone Act
applicable for both national and foreign investors. Because of this and many other benefits,
important multinational companies of different sectors such as tourism, automotive,
pharmaceutical, alternative energy, alimentary and real estate have settled in the country
during the last couple of years.
International Trade
Uruguay: Trade Statistics


and Uruguay Business Handbook 2015 Uruguay — International Trade 111
Code Product Export Value ($) Code Product Import Value ($)
12 Oil Seeds 1,878,004,130 27 Oil and Mineral Fuels 2,147,950,452
02 Meat 1,496,296,173 87 Motor vehicles and parts 1,279,801,823
04 Dairy Products 913,019,120 84 Industrial machinery 1,274,130,197
10 Cereals 893,019,120 85 Electrical machinery 944,405,730
44 Wood 527,160,130 39 Plastics 599,164,295
39 Plastics 296,231,609 38 Chemical products 346,356,480
41 Hides and Leather 289,793,637 31 Fertilizers 329,858,651
87 Motor vehicles and parts 283,675,036 29 Organic chemicals 269,584,056
51 Wool 260,710,396 30 Pharmaceuticals 245,306,528
11 Milling products 228,469,829 40 Rubber 236,534,378

Brazil 1,688,294,254 Brazil 2,096,831,517
China 796,244,254 Argentina 1,741,407,069
Argentina 504,313,168 China 1,662,458,370
Venezuela 415,365.034 United States 1,046,785,117
Russia 393,508,731 Venezuela 826,841,071
United States 331,427,046 Russia 589,164,498
Germany 256,466,890 Nigeria 342,548,116
Chile 208,233,766 Mexico 292,768,565
Israel 176,632,975 Germany 247,653,838
Mexico 147,385,575 France 189,138,848
Services Industry
FINANCIAL SERVICES
Moody’s Investors Service is maintaining its stable outlook for the Uruguayan banking
system, according to “Banking System Outlook: Uruguay,” published on 2 Jun 2015.
“While we expect Uruguay’s economy to slow slightly to 2.6%, domestic demand, a strong
labour market and investments in export-oriented projects in the pulp, dairy and agriculture
sectors will support stable loan growth at a similar pace in 2014,” said Valeria Azconegui, a
Moody’s assistant vice president. “These dynamics will be complemented by legislation
passed in 2014 that will result in a gradual increase in local-currency deposit taking and
lending.”

and Uruguay Business Handbook 2015 Uruguay — Services Industry 112
Uruguay’s banking sector benefits from a stable operating environment, and its asset quality
and capitalization are stable. Household debt remains moderate, employment is favourable
and households’ purchasing power continues to grow.
In addition, system liquidity is high, because of loan growth that still lags deposit growth
and depositors’ preference for US$-denominated demand deposits, which provides the
banks with ample low-cost funding. Furthermore, credit risks are offset by the banks’ healthy
capitalization and the high reserves mandated by Uruguay’s strict provisioning, which
discourage the banks from expanding rapidly.
However, the banking system remains highly dollarized, and further devaluation of the
Uruguayan peso in 2015 will limit any sudden shift towards local-currency deposits in the
near term. Foreign currency lending is largely concentrated in corporate loans to exporters,
which help somewhat mitigate banks’ foreign currency risk.
The government-owned banks have a dominant position, resulting in a highly concentrated

banking system that somewhat limits business opportunities for the privately owned banks.
Furthermore, growing competition, rigid personnel expenses, inflation adjustments, and
equity taxes will continue to limit earnings in 2015, despite the banks’ conservative growth
strategies to contain risks.
HUMAN CAPITAL
Uruguay was the last country in Latin America to authorize private higher education
institutions. Current regulatory and financing arrangements contribute to a still rather limited
private-public competition but that may be changing, and the graduate level is a key locus
of such new competition. A New Private Sector Private higher education was not allowed
in Uruguay until 1985, when the government authorized the founding of the Catholic
University. Ten years later, a new regulation was passed, opening the way for ample private
growth. Since 1995, 17 private higher education institutions have been recognized by the
state. In the past 10 years, the sector has expanded and now offers 98 academic programs
at the undergraduate and graduate levels. Uruguay’s private sector now holds 12% of total
national enrolments, although this percentage remains far below the private sector’s share
in Chile, Brazil, and other countries in the region, some of which have more than half the
enrolments in the private sector. The venerable University of the Republic (Universidad de
la República) is the country’s only public university. It has a rather open admissions policy,
and it does not charge tuition. As a consequence, the private sector is constrained in its
ability to attract students, especially from low- and middle-income families. This dual nature
of the system, in terms of finance, is the main reason why private-public competition at the
undergraduate level remains limited.
HEALTHCARE
According to BMI Research, Growth potential within Uruguay’s healthcare market remains
highly positive as the country becomes increasingly proactive toward public-private
partnerships within the sector, as well as the result of improving medical services and

accessibility nationwide. Efforts to develop Uruguay’s healthcare system will continue over
the long-term, driven by the country’s tremendous burden of non-communicable conditions.
These are namely neuropsychiatric conditions, diabetes, and cardiovascular diseases, which
will dominate the country’s long-term epidemiological profile, ensuring revenue generation
through hiking medicine demand. This, combined with Uruguay’s status as 65 out of 190
countries ranked according to health sector appeal by the World Health Organization,
solidifies the country’s attractiveness for multinational health companies and drug-makers.
Uruguay’s healthcare market will more than double over the next decade, growing from
UYU112 billion (US$5 billion) in 2014 to UYU296 billion (US$9 billion) in 2024, equating
to a compound annual growth rate (CAGR) of 10.2% and 6.2% in local currency and US
dollar terms, respectively. Over our 10-year forecast period, per capita medical spending
will rise from US$1,411 to US$2,490, while health expenditure as a proportion of GDP will
fall from 8.4% to 7.0%. Public healthcare will retain its dominance over the next decade as
its percentage of total health spending grows from 68% to 74%, leaving private services
the minority health provider. Between 2014 and 2024, pharmaceutical sales as a proportion
of total health spending will grow from 6.7% to 7.0%.
TOURISM
Uruguay boasts a dynamic services sector with tourism as its largest source of revenue.
With a population of slightly under 3.4 million, Uruguay welcomes about 2.5 million tourists
a year, mainly from within the region, though increasingly from Mexico, the U.S. and Europe.
A favourable business climate, with tax incentives for investors, cause tourism to account
for 7% of the Uruguayan GDP and to generate more than 90,000 direct jobs.
The country offers very attractive natural conditions for different types of tourism, all located
a very few kilometres away from each other. In addition to the traditional sun-and-beach
and urban tourism, the country also offers tourism involving rural spaces and nature, hot-
springs and leisure, nautical, congress and events destination, and social tourism, among
others.
The significant progress as regards infrastructure, connectivity and related services over the
last years create favourable conditions for tourism and multiply opportunities.
The sector is granted important tax benefits, including Income Tax exemptions from the
regulation of tourism promotion as well as a specific investment promotion system for
Condo-Hotels.

The Chamber of Uruguayan IT companies, CUTI, notes that 700 IT organisations currently
operate in Uruguay. It states this is partly because the sector is constantly promoted and
developed by the government and the software produced for export isn’t subject to profit
tax or VAT. And adds that a Harvard University study identifies it as one of the most advanced
software development centres in Latin America.

This means many ambitious tech entrepreneurs are flocking to the tech hub in Uruguayan
capital, Montevideo, in the southern tip of the country. And some people are specifically
coming to Uruguay to start tech-related businesses.
Some reasons for optimism for further development of IT sector are:
Excellent availability of skilled workers. Its professionals are internationally acknowledged

in several areas of knowledge.
High penetration of Internet, PC and cell phone, reliable power supply, much of which
comes from renewable energies.
Cultural affinity, time zone between USA and Europe, which is also an excellent supplement
to global services rendered from other more distant locations.
Important tax incentives for activities related to Shared Service Centres, Call Centres, Software
and Biotechnology, among others.
The Uruguayan Government is developing the “Support Program for Global Services Export”
for the purposes of contributing to the development of the global export service market in
Uruguay and, in particular, increasing investment, exports and employment in the sector.
Strengths
• Plentiful agricultural and forestry resources
• Social homogeneity and political stability
• Active reforming policy (business climate, public finances, social protection)
• Comfortable currency reserves and sizeable foreign direct investment
• Member of Mercosur, favoured trading relations with the EU and the United States
Weaknesses
• Economy vulnerable to external shocks
• Inadequate transport infrastructures
• Dependence on Argentine and Brazilian economies, as well as on agricultural markets
• High level of public debt, but being reduced
• Competitiveness being reduced by high inflation
• Vulnerable banking system

and Uruguay Business Handbook 2015 Uruguay — Investment Risks, Barriers and Challenges 115
POLITICAL
Tabaré Vázquez, previously President between 2005 and 2010, was elected (with 52.8% of
the votes) in the presidential elections in November 2014. His party, Frente Amplio (FA),
won a majority in both houses of Congress. The continuation of the left in power is due to
the significant social advances made (universal sickness insurance, welfare payments for
the poor) and the improvement in the country’s economic indicators. The newly elected
President, with a term of office starting in March 2015, is committed in particular to the
issues of education, infrastructures and security. The continuation of an expansionist policy,
in particular for social spending, would seem problematic because of the slowing of the
Uruguayan economy. The country does however continue to enjoy proven institutional
and political stability.
GOVERNANCE
Uruguay has little corruption; it is one of the 20 top countries that were ranked as having
the lowest perceived levels of corruption in 2013. Government procurement and bidding
processes are generally transparent, but slow. The bureaucracy for obtaining official
investment information and procedures can be sluggish at times.
ECONOMIC
Uruguayan economic growth in 2014 suffered as a result of the slowing in the Brazilian
economy and the Argentinian recession, its two leading trading partners. The outlook for
an upturn in activity in 2015 is not much better because of the slow pace of economic
growth for the region as a whole. Whilst remaining moderate, the economic expansion is
an encouraging sign that the country is less exposed to the problems being faced by Argentina
during the 2001 crisis. In terms of internal demand, this is likely to be held back by the
slowdown in investment, The absence of major construction projects (completion of the
Montes del Plata pulp mill), the decline in house building linked with weaker demand,
together with the easing back in foreign direct investment (Argentinian and Brazilian in
particular) will slow the country’s economic growth. Its tourist sector will also struggle
because of smaller numbers of visitors from its neighbours, which will also hit the retail
sector. Household consumption however should remain relatively dynamic thanks to an
improving jobs market and the indexing of wages against food prices. The contribution
from exports is likely to be smaller, with the decline in sales of manufactured products
(clothing and textiles, building materials) being partly offset by higher sales of wood and
pulp. On the supply side, industrial performances will remain mediocre, despite the increase
in production with the new paper mill on the Uruguay River. The depreciation of its currency,
the indexing of wages as well as the lack of credibility of its Central Bank, (inflation running
above the 3-7% target for more than three years) will add to the inflationary pressures.

and Uruguay Business Handbook 2015 Uruguay — Investment Risks, Barriers and Challenges 116
URUGUAY’S STATUS IN GLOBAL ECONOMIC RANKINGS

Compares Business Regulations for Domestic Firms in 189 Economies
Uruguay 88 out of 189 countries

Other Rankings
Index Rank
Indo-Uruguay Economic Relations
Trade turnover was US$119 million for 2013 and during the first ten months of 2014 (January-
October) stands at US$129 million. Indian exports to Uruguay account for US$114 while
Indian imports account for US$15 million.
India´s exports to Uruguay

Chemicals, garments, vehicles, sound and image devices, pharmaceuticals, iron and steel,
synthetic yarn, equipments and machinery
India´s imports from Uruguay

Wool, Leather and Timber.
INDIAN INVESTMENTS
TCS has established a Global Delivery Centre in Montevideo employing 800 local staff
besides about 60 Indians. This was the first IT Centre opened by TCS in Latin America in
2002. Indian IT company Geodesic Ltd acquired a Uruguayan software company in
Montevideo in May 2009. The Uruguayan company has a staff of 40 persons and specializes
in Instant Messaging solutions and applications for mobile phones and companies. Zamin
Resources, an NRI company promoted by Mr. Pramod Agarwal has entered into an iron ore

and Uruguay Business Handbook 2015 Indo-Uruguay Economic Relations 117
mining project. The total cost of the project is over a billion dollars. The company has
already spent several million dollars in the preparatory stage and has an office in Montevideo.
Arcelor Mittal has acquired (Dec 2007) a Uruguayan stainless steel tube producer CINTER
S.A., with sales of US$47 million employing about 200 people. A consortium of Indian
vegetable oil companies is exploring opportunities for investment in agribusiness in Uruguay.
Olam, a NRI company based out of Singapore has acquired a Dairy farm in Uruguay for
over 150 million dollars. Olam has also started rice farming in Uruguay. Other Indian
companies have shown interest in investment in pharma and agri-business sectors. A number
of Indian companies, including Reliance and Sakti pumps, use the bonded warehouse
facilities of ‘GrupoRas’, which is keen to provide the facility to other Indian companies as
well as marketing support. Carlos Ott, the famous architect of Uruguay was the architect for
the 250 million dollar IT park of TCS in Chennai, the largest software development centre in
the world, employing 24000 professionals. This was inaugurated by the Uruguayan Vice
President in February 2011.

and Uruguay Business Handbook 2015 Indo-Uruguay Economic Relations 118

Argentina Chile Etc Ebook 2015dec04

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Handbook - 38/2015

Argentina, Chile, Colombia, Peru, Paraguay and Uruguay

GoG-AMA Centre for International Trade

For any queries, please contact: library@amaindia.org

First Published: December 2015

• Argentina is Latin America’s third-largest economy.

Argentina, Chile, Colombia, Peru, Paraguay

KEY ECONOMIC FACTS

Economic Highlights and Forecast

Fragile External Accounts, Loose Budgetary and Monetary Policies

Argentina, Chile, Colombia, Peru, Paraguay

Gross Domestic Product (GDP)

Argentina, Chile, Colombia, Peru, Paraguay

According to a Presidential decree governing foreign investment in Argentina, foreign

The Argentine Ministry of Economy (www.mecon.gov.ar), the Investor’s Information Service

Argentina, Chile, Colombia, Peru, Paraguay

A Magnet for Investment

Argentina, Chile, Colombia, Peru, Paraguay

FOOD AND BEVERAGES

Argentina, Chile, Colombia, Peru, Paraguay

Argentina’s vast expanse of fertile lands, exceptional agro-ecological conditions, benchmark

Local Response Capacity

Extensive Experience and Qualified Workforce

Argentina, Chile, Colombia, Peru, Paraguay

Diversity and Specialization

Public and Private Sector Cooperation

Argentina, Chile, Colombia, Peru, Paraguay

Tradition, Capacity and Innovation

Specialized, Skilled Workers

From Argentina to Mercosur and the World

Argentina, Chile, Colombia, Peru, Paraguay

According to BMI Research, after a new government is inaugurated in 2016, we expect

Infrastructure – Construction Industry Forecasts (Argentina 2014-2020)

2014 2015f 2016f 2017f 2018f 2019f 2020f

Estimate of Infrastructure Needs

Argentina, Chile, Colombia, Peru, Paraguay

FOREIGN TRADE ZONES/FREE PORTS/TRADE FACILITATION

Argentina, Chile, Colombia, Peru, Paraguay

Argentina - Exports and Imports Data

Top Argentina Exports 2014

Top Argentina Imports 2014

Argentina, Chile, Colombia, Peru, Paraguay

Fastest-Growing Argentine Exports

# Commodity Growth (from 2010) Value in $

Argentina, Chile, Colombia, Peru, Paraguay

# Commodity Growth (from 2010) Value in $

Argentina, Chile, Colombia, Peru, Paraguay

There is demand for:

• Public Health Service for 17 million people

• imaging diagnostic equipment

INFORMATION AND COMMUNICATION TECHNOLOGY

Argentina, Chile, Colombia, Peru, Paraguay

Optimal Price-quality Ratio

There are opportunities for:

• supply mobile phone carriers with technology to improve network capacity

TECHNICAL AND PROFESSIONAL SERVICES IN ARGENTINA

Argentina, Chile, Colombia, Peru, Paraguay

Talented, Creative and High-qualified Technicians and Professionals

Competitive Operative Costs and Excellent Communication Network

Investment Risks, Barriers and Challenges

Argentina, Chile, Colombia, Peru, Paraguay

POLITICAL AND SECURITY

According to the World Bank’s worldwide governance indicators, corruption remains an