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Invest in Colombia with Henry Arias

by | Oct 14, 2023

Henry Arias
General Manager
Zonamerica
harias@zonamerica.com

LATAM FDI: Hello. Today, we have Henry Arias with us. Henry is with a company called Zonamerica, which is located in Cali, Colombia. Welcome, Henry. Could you tell us a little bit about yourself and your organization?

Henry Arias: Hello. Thanks for the invitation to be part of your program to discuss why to invest in Colombia. Well, I’m the general manager of Zonamerica, Colombia, which is a free trade zone located in Cali. We are owned by Zonamerica Uruguay, a free trade zone in Montevideo that has been operating for 30 years. Zonamerica came to Colombia looking for a second location for their clients in Uruguay. They already have about five hundred companies installed in their free trade zone. Still, most of their clients wanted a second location with tax incentives, plenty of talent, and cheap labor costs for some nearshoring operations looking to attend the American market. They came to Colombia; it was back in 2012 or 2013. They looked around different cities and found a local partner in Cali, El Grupo Carbajal. Grupo Carbajal is one of the largest enterprise conglomerates in Colombia and probably the largest in Cali. They had a piece of land. I still don’t know how to convert square meters to feet, but it’s very big, it’s about 400,000 square meters. They started doing all the construction for this free trade zone. We are focused on having world-class infrastructure, buildings, technology, internet connection, cloud connectivity, and everything ready for companies from other countries to come and establish their operations in Colombia and Latin America. They can benefit from the talent that we have here and the advantages of the cost of labor and the cost of living, using them for their own benefit for reaching new clients. I’m very happy to be here talking to you about Colombia, Cali, and South America and why our value proposition makes sense for companies looking to relocate and looking for labor arbitrage.

LATAM FDI: So that our listeners are informed, what can you tell us in general terms about Colombia that would be of interest to site selection people, for instance?

Henry Arias: Of course, Colombia, I think, is the fourth largest economy in Latin America, probably approaching the third place after Brazil and Mexico. We have about fifty million inhabitants in our country, and we’ve been ranking very high in offshore operations due to the availability of talent and the market size. Companies are coming in increasing numbers to invest in Colombia.

LATAM FDI: Okay, for an examination of the town that Zonamerica is in, can you tell us something about Cali

Henry Arias: Yes. Cali is located in, you guys in the United States have states, we have departments. Cali is located in the Valle del Cauca department, and this department accounts for 10% of Colombian GDP, which makes it interesting. It concentrates around 18% or 20% of the national number of companies in the industry. Sectors that are present are varied. Sectors that are located in Cali range from agro to services and industry. The Valle del Cauca, where Cali is the capital and is the main city. The department has approximately seven cities with populations ranging from 100,000 to 400,000, which makes them medium-sized cities by Colombian standards. I think it’s the only department in Colombia with so many cities with this number of people. And among all of them, Cali is the capital. We have approximately three million people living in Cali, which makes us a market of interesting size. We have many universities located in Cali. There are about thirty institutions for higher education with more than forty undergraduate programs. Of these thirty institutions, about twenty have programs related to information technology and software, which is interesting. Approximately 1500 graduates come every year in software and IT-related majors, which is, I think, for Colombian standards, a good measure.

So, the IT and software industry in Cali is really important. And I read that 10% of the companies investing in Colombia in this sector are in Cali. We could say that this is after Bogota, which is the main city and a center of technology operations and services. We are the top after Bogota, which is the capital. What other data will be interesting about Cali? Approximately eight hundred companies are dedicated to the Digital Economy Cluster, which includes companies in telecommunication, BPO, digital transformation, software, information technology, outsourcing, and things related to IT, which is what companies typically try to outsource in cheaper labor countries. There are also industries of other sectors in Colombia, from pharma to agro to food processing. We are very diverse in terms of international investment.

LATAM FDI: Many companies go to invest in Colombia to establish BPO-type operations. Is there an availability of bilingual talent?

Henry Arias: I can say it from experience because here in Zonamerica, we have two companies that are BPOs. Both have the United States as their main or principal market, and all the talent they hire are bilingual. One has approximately three hundred agents, and the other has approximately eighty agents. They are not the only two cases; there are approximately another five to six bilingual or English-speaking BPOs in Cali. Universities are very aware of the need to have bilingual talent. It’s one of the priorities of the educational system. And I would say that Cali is in the top three or four in the number of bilingual inhabitants or people living here. Our population is quite young. And Steve, I want to mention this because we see that the population in different countries and cities is aging fast. But Cali had a census recently, and we found out that approximately 700,000 people of the total population are between the ages of 20 to 35, which accounts for the majority of the labor in the city available in the city.

LATAM FDI: So beyond obviously, you got the workforce and the bilingual capability. What kind of fiscal incentives does the government of Colombia offer for companies that want to come and set up operations and invest in Colombia?

Henry Arias: Well, the government of Colombia created the free trade zones regime, which has two incentives. Not all the office space available in Colombia has the free trade zone regime. So, you have to qualify. Zonamerica, the company I represent, is qualified as a free zone by the Colombian government. As a result, any company that creates their subsidiary inside Zonamerica and places their people in our infrastructure can import any goods from other countries with no value-added tax or duties, depending on the country where they import the goods. The items can range from computers to any other good or product that they need to perform their operations. So, this is one of the incentives companies get when creating a corporation inside Zonamerica. But the other incentive that they enjoy is related to taxation. The general income tax in Colombia is 35%. But companies inside a free trade zone can pay only 20% as income tax on every single sale they make to countries outside Colombia. This means on their exports. If you have a company, let’s say a BPO, a call center, or anything related to a software development company located in Zonamerica. You have clients in Venezuela, Ecuador, Panama, the United States, or anywhere else; all the sales that you do, all the software that you program from here, all the calls that you attend from here, and the services you provide from here will only pay 20% tax as income tax. This is one of the benefits companies enjoy when deciding to invest in Colombia.

The tax that you will pay at the end of the year for your earnings compared to other cities in Colombia or other, sorry, territories in Colombia which are not a free zone, a free trade zone, and have to pay 35%, I don’t have the numbers to determine whether 20% is competitive or not compared to other countries in Latin America. Still, it seems to be a fair tax, as we have spoken to many companies installed in South America and other free trade zones.

LATAM FDI: To give people a general, very general idea of labor costs in Cali, what would they look like for those companies that want to invest in Colombia?

Henry Arias: Well, it depends on what level of education the workers have. But we have numbers showing that Cali is approximately 15% cheaper in terms of labor than Bogota, the main city in Colombia. This is also related to the cost of living, which all capitals have as a problem. All major cities have the problem that the cost of living is higher than second-tier cities.

Cali has approximately a 15% advantage compared to Bogota, which is our capital. But then it depends on the company that is coming to Colombia. Where are they having their people located? But I can say approximate numbers. Our minimum salary per month in Cali is about $700. This number includes vacation pay, Social Security, health, and everything. It’s about $700 per month. A Chief of Technology, such as a boss with a higher education, can be hired for approximately $1,700 monthly. Our information is mainly in the IT or technology sectors, but this range can give an idea of where salaries are in Colombia and Cali at this point.

LATAM FDI: Yeah, I think it gives people who want to invest in Colombia a general idea of the situation in terms of salary in Colombia. You mentioned a little bit about Zonamerica. Can you tell me how many companies are located in your free zone at this time and what they do?

Henry Arias: Yes. Zoneamerica currently has 10,000 square meters of space. Again, I don’t know how to translate square meters into feet, but we have 10,000 of space built with 10% availability right now. We have plans to start a new building in January, which will add 50% more capacity ready by the end of 2024. We currently are hosting one thousand people employed by twenty companies. And they range from pure software development to fashion design. One of the major fashion designers in Colombia has their offices here. This is because her main market is outside of the country. Everything, including the fabrics she imports, comes into Colombia without duties. She can transform them and then re-export them to other countries, which makes a lot of sense. We have a drone manufacturer that assembles all the parts here, and they do it also based on the free trade zone benefit. We have, as I mentioned, a couple of call centers. We have an Oracle database manager located here. We have a video surveillance company that outsources Colombian watchmen to take care of facilities in the United States. So, they pay cheaper labor costs for clients that are in the United States, and they service them from here, which is quite interesting.

We have a data center, a very big data center with more than 450 racks available for servers. We have a telecommunication company that has a satellite Internet connection from here. And they have their teleporter antennas located in South America. From here, they transmit information to their satellites and broadcast it to other countries in Latin America. We have lawyers that have their offices here. We have advertising companies that have their offices here. So, it’s a very interesting mix of companies. They are all thinking about serving external markets through services, transformation, or another related service. They can do this when they invest in Colombia.

LATAM FDI: Now, we’ve spoken briefly here and have covered quite a bit of ground. Our experience has been that people who listen to our podcasts often have questions after absorbing what we’ve been saying for the last 20 minutes or so. What I would like to do, if it’s okay with you, is ask you how somebody could contact you directly with any further questions that they might have about Colombia, Cali, or Zonamerica.

Henry Arias: Thank you. Thank you, Steven, for your generosity. Everybody’s on LinkedIn right now, so LinkedIn is a platform. We have a site, Zonamerica Colombia. And my name is Henry Arias. I am available there, but also, we also have our web page, which is www.zonamerica.com. You can look it up on Google and find both sites. The Zonamerica Uruguay and the Zonamerica Colombia web pages are both under the same IP address. There, you can find videos, information, our office locations, pictures, and our contact information as well. Finally, my email. I can give you my email. It is harias@zonamerica.com. I’m available to answer any further inquiries that people may have about Colombia, Cali, or South America.

LATAM FDI: Okay, Henry. One thing we do is, on each of our podcasts, the people we talk to in the transcript section, we put links to all those things. We’ll link to your company’s LinkedIn page, personal LinkedIn page, email, and website. I want to thank you very much for speaking with me today. It’s been very interesting, and I’m sure the people who listen to this will also find it interesting. Some may even be motivated to invest in Colombia.

Henry Arias: Thank you. Steven. Thank you for your time. You’re more than invited to come to visit.

 

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