2022 was a year of immense challenges. The war in Ukraine, inflation, and increases in interest rates, as well as Colombia’s electoral climate that brought uncertainty due to a change in government, negatively affected the influx of investments in the country. However, according to the estimates on the balance of Foreign Direct Investment for 2022 for the Bogotá Region, carried out by the world-class investment promotion and event attraction agency, Invest in Bogota, the capital remains the preferred destination for foreign direct investment in Colombia.
Said balance reveals that, in addition to being the recipient of 64.7% of the country’s new and expansion FDI projects, foreign direct investment in the Bogota region created 64.5% of the country’s new jobs last year.
Most foreign direct investment in Colombia landed in Bogotá
“In 2022, 143 projects for new and expanded foreign direct investment in Colombia were carried out in the Bogotá Region. In total, these were valued at approximately USD 1.5 billion. This economic activity generated 20,952 quality jobs,” says Isabella Muñoz, executive director of Invest in Bogota. More than 30 different countries invested in the city last year. The diversity of interested markets shows the potential and confidence of foreign companies to expand their operations in Bogotá and its metropolitan area.
The balance also shows that most of the investment projects that the city received come from countries such as the United States (30.8%), Spain (9.1%), Mexico (6.3%), and Argentina (6.3%). However, other Latin American countries such as Brazil (4.9%) and Chile (4.2%), European countries such as Germany (4.9%) and Switzerland (3.5%), and finally, Japan (3 5%), which was the leading Asian investor, surpassing China, contributed to foreign direct investment in Colombia and the country’s capital.
Regarding the sectors where FDI projects were carried out, software and IT services are positioned as the leader in attracting investment to the Bogotá Region. During the last five years, this industry represented 20.2% of the city’s new FDI projects.
With a participation of 16.8%, corporate services are positioned as the second sector with the highest number of completed projects for foreign direct investment in Colombia and its capital city. These figures show the vocation of Bogotá as a city of services. The availability, quality, and cost of labor, advances in bilingualism, and the strategic position of the metropolis have contributed to investors perceiving the region as an ideal destination for developing their services and programming activities.
Investment in the communications industry is also gaining relevance in the realm of foreign direct investment in Colombia. In 2022, this sector had the third-highest investment projects, representing 9.1%. The pandemic also increased the demand for digital services, which require more significant investment in data processing and hosting services such as data centers, ICT, and internet infrastructure.
Finally, other vital sectors in attracting FDI in the Bogotá Region in 2022 were financial services (7.7%), textiles (4.2%), automotive (3.5%), and consumer products (3.5%).
Foreign Direct Investment (FDI) Outlook for 2023
The prospects for world FDI in 2023 are down since the world’s leading economies may enter a recession or register low growth. Under this scenario, many companies contemplate strengthening their current operations instead of expanding into new markets.
Despite this projection, the outlook for Latin America would be different since FDI trends indicate that, during 2023, the relocation of operations by multinationals near their headquarters (nearshoring) will boost investment projects. Thirty percent of the companies that developed FDI projects in Latin America during the last two years indicated that proximity to markets and consumers was the main reason for expanding in the region.
In this sense, the prospects for investment in Colombia and its capital city during 2023 are also positive. According to a survey carried out by Invest in Bogota of 56 foreign companies, 75% of them have contemplated investment projects in the Bogotá Region for this year. This figure reflects a high level of optimism regarding the city’s business climate for this year, particularly in IT, BPO, and creative industries.
Macroeconomic and reform issues affect decision-making
However, at the national level, the fluctuation of the exchange rate and inflation could affect the flow of foreign direct investment in Colombia this year. Additionally, concerning the new government’s reforms, 64% of the companies surveyed stated that the tax and labor reforms would affect their investment decisions in the city.
Although 2023 is shaping up to be a year of significant challenges to attract relevant foreign direct investment in Colombia, there are also immense opportunities for expanding and reinvesting in already established foreign companies.
“In 2023, a moderate increase in the number of FDI projects arriving in Bogotá can be expected, which may be greater if good macroeconomic results occur at the country level,” says Muñoz. “Invest in Bogota has identified 73 investment opportunities, which would generate an estimated investment of USD 1.3 billion and approximately 20,500 jobs,” she concludes.
