FITCH UPGRADES COLOMBIA RATING TO INVESTMENT GRADE

(Reuters) - Fitch Ratings on Wednesday raised its sovereign foreign currency credit rating for Colombia by one notch to BBB-minus, citing prudent economic policies and increased resiliency to internal and external shocks.

The investment-grade rating's outlook was revised down to stable from positive following the upgrade.

"Increased macroeconomic policy credibility, a flexible exchange rate regime, strengthened external liquidity position and moderate external debt have steadily improved the economy's capacity to absorb external shocks," Erich Arispe, sovereign credit analyst at Fitch said in a statement.

Both Standard & Poor's and Moody's Investors Service rateD Colombia investment grade earlier this year. Fitch's rating is now equal to S&P's BBB-minus and Moody's Baa3. 

COLOMBIAN ECONOMY WILL EXPAND BY 5.5% IN 2011

Colombia’s economy may expand as much as 5.5 percent in 2011, more than policy makers had been projecting, as strong expansion in credit and consumer confidence create “perfect” conditions for growth, central bank President Jose Dario Uribe said.

Latin America’s fourth-largest economy will be running close to full capacity in the second half of 2011, after expanding 4.3 percent in 2010, Uribe said in an interview in Washington yesterday.

“Consumer confidence is increasing again, credit growth is very dynamic,” said Uribe, 52, in an interview in Washington yesterday during the semi-annual meetings of the International Monetary Fund. “There are a lot of signals that the economy is strong, and is growing fast.”

The central bank’s 2011 economic growth projection is 4.5 percent, though this could be revised in the bank’s next quarterly inflation report to be published in roughly three weeks, Uribe said. Policy makers raised Colombia’s benchmark interest rate by a quarter point for a second straight month in March to 3.5 percent, noting the rise in consumer confidence, bank lending and retail sales.

As Colombia’s economic expansion gains momentum, inflation has been accelerating. Annual inflation was 3.19 percent in March, up from a five-decade low of 1.84 percent a year earlier. The central bank forecasts inflation near the 3 percent midpoint of its target range at the end of 2011 and 2012, Uribe said.

‘Stable, Sustained Path’

Economists cut their forecasts for year-end inflation to 3.31 percent in a central bank survey published last week, from 3.48 percent in the March survey.

“I see the Colombian economy in a perfect situation, on a very stable and very sustainable path,” said Uribe, who has a doctorate in economics from the University of Illinois at Urbana-Champaign, where he studied alongside Alexandre Tombini, the president of Brazil’s central bank.

The peso appreciated 1.1 percent last week to 1798.43 per dollar, its strongest level since October. The currency has gained 6.1 percent against the dollar this year, the best performer of seven Latin American currencies tracked by Bloomberg.

Recent gains in the peso are a result of companies bringing in funds from overseas to pay local taxes, Finance Minister Juan Carlos Echeverry said in an interview in Washington. Companies are slated to pay taxes between April 8 and April 25.

The currency’s strength has not prevented the “tradeables” sector of the economy from growing as fast as non-tradeables, Uribe said. Tradeables are goods that can be exported or substituted by imports, and so are sensitive to changes in the exchange rate.

Controls, Vigilance

Uribe said he sees no need for the sort of capital controls used in Brazil to stem gains by the peso. Such capital controls create distortions and should not be implemented without “clear evidence” that the benefits would outweigh the costs, Uribe said.

Colombia’s credit rating was raised one-level to BBB- by Standard & Poor’s last month, restoring the investment grade status lost in September 1999.

The yields on Colombia’s peso bonds fell to their lowest level in three months last week, as economists cut inflation forecasts and as bets mounted that funds from government securities maturing next month will be reinvested in debt.

The central bank needs to watch for signs that optimism about the Colombia’s economy could lead consumers and companies to take on too much debt, Uribe said.

“I’m not worried, but you have to always be alert that we don’t go mad and spend in excess,” Uribe said.

Gross credit expanded 19 percent to 183 trillion pesos ($102 billion) in the year through February, the fastest pace since October 2008, according to the financial regulator.

Asset price bubbles inflated by capital inflows could be dealt with by regulation of financial markets, Uribe said.

--Editors: Robert Jameson, Joshua Goodman

http://www.businessweek.com/news/2011-04-17/colombia-may-grow-faster-than-expected-5-5-in-2010-uribe-says.html

COLOMBIA OIL OUTLOOK IMPROVES WITH NEW FIND, HIGHER OUTPUT.

BOGOTA, April 26 (UPI) -- Colombia is seeing the outlook for its energy sector improve with progress on two fronts -- new oil finds and higher production from existing wells.

Ecopetrol President Javier Gutierrez said the company, the largest integrated hydrocarbons company in the country, would aim to be producing at least 1.45 million barrels per day of oil equivalent by 2013.

Rising oil prices have given fresh incentives to petroleum prospecting worldwide despite warnings that more expensive oil and oil gas could spell further trouble for global economic recovery.

Last year Colombia embarked on an aggressive campaign to attract more investment and industry expertise into its unexplored and under-exploited oil resources.

With economic growth set to continue through this year the government expects domestic oil demand to continue rising and also wants to reduce dependence on refining abroad.

Colombia depends on Mexican Gulf Coast refiners to buy and refine most of its heavy, sulfur-laden crude and it ranks 10th among the exporters of oil to the United States. It shipped an average of 365,000 barrels per day to the United States last year.

Ecopetrol said results of tests on a new oil well in the south of the country showed encouraging assessments.

The 7,371-foot deep Nunda-1 well in the Tello municipality of the department of Huila was first drilled on Jan. 27. Initial tests had a flow of 318 barrels of fluid a day, 71 percent of which was water, corresponding to an average of 92 barrels per day of crude oil, the company said in a news release.

The well was drilled as part of an exploration and exploitation agreement signed between Ecopetrol and the National Hydrocarbons Agency dating to 2006. Ecopetrol has 100 percent participation in the project.

Ecopetrol will begin evaluating the discovery to determine its commercial viability. Company officials quoted in Colombian news media said they were confident about the outcome of the tests.

Colombia already producing a little less than 1 million barrels a day so the goal of producing 1.45 million barrels a day in two years is not overoptimistic, industry analysts said.

Colombian oil production in March reached 884,000 barrels per day, up 15 percent from the same month in 2010.

Ecopetrol and its associates extracted 786,000 barrels per day, while the contracts administered by the National Hydrocarbon Agency ANH exceeded 98,000 barrels per day, Ecopetrol said in a news release. On average Colombia has produced 860,000 barrels of crude oil daily so far in the first quarter of 2011.

"The discovery opens up a new era for Ecopetrol by branching out to new types of exploration activities involving stratigraphic traps (those in which hydrocarbons accumulate due to variations in the deposit environment) in the Valle Superior del Magdalena and helps increase reserve inventories in this area of the country," the company said in a statement.

Ecopetrol, Colombia´s largest integrated oil and natural gas company responsible for 60 percent of total production, is one of the top 40 oil companies in the world and the fourth largest oil company in Latin America.

Ecopetrol is also involved in exploration and production activities in Brazil, Peru and the U.S. Gulf Coast, and owns the main refineries in Colombia. The company also owns most of the network of oil and multiple purpose pipelines in the country, petrochemical plants, and is entering into the biofuels business.

Read more: http://www.upi.com/Science_News/Resource-Wars/2011/04/26/Colombia-oil-outlook-improves-with-new-find-higher-output/UPI-81971303840263/#ixzz1KjTPtX4b

PETRI-DISH ECONOMIES: COLOMBIA INFLOWS, OUTPERFORMING

“I WAS here ten years ago when the economy was in crisis and every day’s news was worse than the day before. Now all the news is better than expected.” Juan Carlos Echeverry was a top official in Colombia’s finance ministry when the country, then violence-ridden, went through a messy mortgage bust and budget crunch in the late 1990s. Now, as finance minister, he is in charge of an economy on the rise.

Foreign investment is up, drawn by an improved security situation, the lure of minerals and a bouncy regional market. Public coffers are swelling, thanks to rising commodity prices and oil output. Standard & Poor’s hiked Colombia’s sovereign-debt rating to investment grade last month.

It is Mr Echeverry’s task to manage the consequences of this good news. High oil prices could encourage outsize demands for government spending. A flood of foreign capital could send the peso soaring and cause credit bubbles, while threatening the viability of industries from cut flowers to food processing. The decision to create an integrated regional bourse with Peru and Chile will attract more money.

Colombia is not the only emerging economy to face these issues. Countries from Brazil to South Korea have introduced a plethora of taxes and restrictions to deter foreign inflows. But Colombia is one to watch. Along with Chile, it pioneered the use of capital-inflow controls in the 1990s. Yet its strategy today is subtly different from many others, with more weight on fiscal reforms and less on controls.

The country’s technocrats do worry about the impact of inflows but they see the exchange rate as the most important shock absorber. And with Colombia’s long-term prospects improving, they believe a gradually stronger currency is inevitable. José Darío Uribe, governor of the central bank, puts a lot of weight on using prudential rules to stop inflows causing financial instability. The central bank does not allow banks to borrow in foreign currency and then lend in pesos, for instance. It guards against maturity mismatches in foreign currency and it has long limited banks’ foreign-exchange derivative bets.

Mr Uribe is less convinced that capital controls can do much to affect the exchange rate. Though no one rules them out, such controls are clearly not Colombia’s first line of defence. And when the central bank does intervene to try to stem excessive strength in the peso, the tactics are different from, say, Brazil’s.

On September 15th 2010 the central bank announced that it would buy $20m of foreign exchange every day for four months. That policy has been extended to mid-June. Mr Uribe is convinced that this kind of transparent, small, predictable intervention is much more effective than the large-scale but unpredictable accumulation of foreign-exchange reserves that other emerging markets have gone for. Colombia’s currency has depreciated slightly over the past six months, in contrast to most others in the region (see chart). How much this owes to the intervention strategy is debatable. Roberto Steiner of Fedesarrollo, a think-tank, says the goal is to insulate the central bank from pressure to intervene more fiercely.

The big question is whether Colombia’s government will be able to resist political pressures to spend. The budget deficit is likely to be well over 3% of GDP in 2011. Colombia urgently needs better infrastructure. Despite the government’s military gains against the FARC guerrillas, plenty of money still needs to be spent on security and reparations. As Alejandro Gaviria at the Universidad de los Andes says: “Colombia faces the demands of conflict and post-conflict spending at the same time.” And painfully high income inequality means pressure for social spending, too.

Mr Echeverry is trying hard to hold firm. A recent tax reform slashed tax breaks on investment. A Chilean-style fiscal rule, designed to limit the deficit and force the prudent use of commodity receipts, is working its way through Congress. But in a country whose constitutional court can force public spending (by, say, declaring that people have a right to expensive health care), that may not be enough. So the government is also pushing for a German-style constitutional amendment to enshrine the notion of fiscal sustainability. Mr Echeverry is confident. “The whole economic plan of our government is tailor-made to manage a boom,” he boasts.

http://www.economist.com/node/18560513

COLOMBIA RAISED TO INVESTMENT GRADE BY S&P ON GROWTH OUTLOOK

March 16 (Bloomberg) -- Colombia’s credit rating was boosted to investment grade by Standard & Poor’s, 11 years after it was cut to junk in the midst of an insurgency, as violence recedes and growth prospects improve.

S &P raised Colombia one step to BBB-, from BB+. The increase puts Colombia’s rating in line with that of Brazil and Peru. Moody’s Investors Service and Fitch Ratings rate Colombia one level below investment grade.

Colombia has cut its homicide rate by almost half since 2002, when former President Alvaro Uribe took office and boosted investor confidence by cutting debt levels, maintaining stable inflation and increasing economic growth. The government forecasts the economy grew 4 percent last year and estimates gross domestic product will rise 4.5 percent this year.

“This is a certificate of good behavior,” President Juan Manuel Santos said in a statement on the presidential website. The rating increase “allows many companies, funds and institutions with considerable resources to invest in Colombia,” he said.

Yields on Colombia’s 7.375 percent dollar bonds due in 2019 fell 14 basis points, or 0.14 percentage point, to 4.20 percent, the lowest since Jan. 13, according to data compiled by Bloomberg.

“A lot of people expected it for a very long time,” said Alberto Bernal, head of fixed-income research at Bulltick, a Miami-based brokerage that focuses on Latin America. “I expect Moody’s to move very fast after this. They’ve been very vocal on the possibility of an upgrade coming for Colombia.”

Budget Deficit

The government forecasts the budget deficit will equal 4.1 percent of GDP this year, up from 3.9 percent in 2010.

“Deepening domestic capital markets and improving external liquidity should continue to reduce the level of vulnerability embedded in the sovereign’s debt burden,” S&P said in a statement.

Colombia lost its investment grade rating with Moody’s and S&P in 1999, when violence and a banking crisis helped trigger six straight quarters of contraction beginning in 1998.

Santos, who took office in August, and Uribe, his predecessor, have drawn investment by improving security and weakening rebel groups, including the Revolutionary Armed Forces of Colombia, or FARC. Foreign direct investment more than quadrupled in the past decade, to $7.2 billion in 2009 from $1.5 billion in 1999.

“If Santos’s policies continue to be market friendly, and if they are able to hold onto gains that have been achieved in security, there will be further upgrades,” Bernal said.

Colombia’s rating outlook is stable, S&P said.

By Boris Korby and Helen Murphy

Convergys Announces Expansion into Colombia With State-of-the-Art Contact Center

CINCINNATI & BOGOTÁ, Colombia--(BUSINESS WIRE)--Convergys Corporation (NYSE: CVG), a global leader in relationship management, announces its expansion into Colombia with a state-of-the-art contact center that will provide top quality customer care services for leading corporations in the Americas. The new facility in Bogotá will bolster Convergys’ presence in Latin America, where the company already has offices and contact center facilities in Brazil, Mexico, and Costa Rica.

“Bogotá boasts a highly-educated bilingual population ideally suited to help ensure that Convergys continues to meet our global clients’ current and future need for superior technical and customer support, sales, and back office services.”

Known as the “Athens of South America” because of the number of top-notch colleges and universities located in the city, Bogotá impressed Convergys with its large bilingual talent pool and advanced telecommunications and transportation infrastructure. Choosing the location for its latest foray into Latin America, Convergys has outfitted a facility located in one of Bogotá's top commercial areas with the latest tools in contact center technology. Convergys is hiring for all levels of talent, including management, support staff and skilled contact center agents to begin serving clients from the site in the first quarter of 2011. Once fully staffed, the site will employ up to 2,000 customer service experts.

“Continued client demand for the high quality bilingual services Convergys provides from Latin America is driving our growth in the region,” said Jorge Robledo, Convergys Vice President of Operations in Latin America. “Bogotá boasts a highly-educated bilingual population ideally suited to help ensure that Convergys continues to meet our global clients’ current and future need for superior technical and customer support, sales, and back office services.”

Convergys Customer Solutions help optimize everyday interactions throughout our clients’ enterprises – turning the customer experience into a strategic differentiator. As a single-source provider of self-service, agent-assisted, and proactive care, Convergys combines analytics, innovative technology, and agent-assisted services to optimize the customer experience and strengthen customer relationships.

As defined by its core set of values, Convergys is committed to building from within by emphasizing talent development among its employees. Through a number of training and development programs provided, employees will be able to build a future with Convergys and move into bigger roles throughout the company.

Convergys is hiring in Bogotá. Interested applicants are encouraged to apply in person at Convergys' state-of-the-art contact center located at Empresarial 93, Calle 93 No. 11 A-11 in, Bogotá, or online at www.convergys.com/colombia.

About Convergys

Convergys Corporation (NYSE: CVG) is a global leader in relationship management. We provide solutions that drive more value from the relationships our clients have with their customers. Convergys turns these everyday interactions into a source of profit and strategic advantage for our clients.

For more than 30 years, our unique combination of domain expertise, operational excellence, and innovative technologies has delivered process improvement and actionable business insight to marquee clients all over the world.

Convergys has approximately 70,000 employees in 67 customer contact centers and other facilities in the United States, Canada, Latin America, Europe, the Middle East, and Asia, and our global headquarters in Cincinnati, Ohio. For more information, visit www.convergys.com

GARTNER: COLOMBIA WELL POSITIONED FOR OFFSHORE SERVICES

Over the last four years, the Colombian Government has focused its attention on strengthening a group of industries that they have identified as Sectors of Productive Transformation.  These sectors were selected following an elaborate analysis by the Ministry of Commerce and Industry and McKinsey and Company. Two of the eight sectors that they identified as having the potential to transform the country are the Business Process Outsourcing (BPO) Sector and the IT sector.

In order to accelerate the development of these sectors, the government has designed a twenty-year plan that includes:

-       New legislation permitting the creation of Single Enterprise Free Trade Zones for these types of businesses, giving them special income tax structures and tax exemptions for importing equipment and materials related to their operation

-       The creation of legal stability contracts, providing companies with insurance on the benefits of Single Enterprise Free Trade zones in case of policy reversals by new governments or changes made to the current legislation

-       Increased visibility of the country at international levels through a government agency, Proexport Colombia, which is in charge of promoting investments, tourism and exports internationally.

As I’ve discussed in some of my recent blogs, these efforts are starting to payoff, as exemplified by the arrival of major international players like Convergys with its call center in Bogota and Hewlett Packard with its Global Services Center in Medellin (one of only five in the world). Finally, the international IT and Off shoring Services Consultant Gartner has recently published their December report in which they have identified Colombia as one of the leading countries suitable for the allocation of off shoring services, further emphasizing the success of these developing sectors. (See complete report below)

Analysis of Colombia as an Offshore Services Location

Frances Karamouzis, Allie Young

This report (see Note 1) analyzes Colombia's suitability for offshore outsourcing, based on 10 criteria: language, government support, labor pool, infrastructure, educational system, cost, political and economic environment, cultural compatibility, global and legal maturity, and data and intellectual property security and privacy. Sourcing managers can use this report to judge whether Colombia might be a good location for their organization's captive or outsourced offshore IT and business process services.

Key Findings

Colombia has launched a marketing campaign through Proexport, the Colombian government's trade bureau, to raise awareness of Colombia as a destination for offshore services and to capture a select portion of the business process outsourcing (BPO) and IT outsourcing (ITO) export services market.

Colombia offers market access to the U.S. and other countries for specific types of application services but is primarily focused on BPO work where Spanish-language skills are a business requirement.

A small but growing number of multinational corporations (MNCs) in the high-tech and manufacturing sectors have successfully established Colombia as a location for call center and transaction BPO work, and some indigenous Colombian service providers are gaining scale to support other Latin American organizations.

Few service providers have yet exploited Colombia as a major commercial global delivery hub for near shore delivery to the U.S.

Recommendations

Investigate Colombia for internal shared services, BPO, contact centers and captive centers, particularly when Spanish-language skills and proximity to U.S. buyers and a similar time zone are key requirements.

Seek opportunities in an emerging country such as Colombia to benefit from less competition for IT talent/resources, and preferential treatment and/or exclusivity regarding real estate or other subsidies

ANALYSIS

Table 1 provides a summary of Gartner's rating of Colombia, based on our 10 criteria. Figure 1 shows Colombia's location and time zone difference compared with selected cities.

Table 1. Colombia: Outsourcing Rating - Source: Gartner (November 2010)

Criterion	Rating
Language	Fair
Government Support	Fair
Labor Pool	Fair
Infrastructure	Fair
Educational System	Fair
Cost	Good
Political and Economic Environment	Good
Cultural Compatibility	Good
Global and Legal Maturity	Fair
Data and Intellectual Property Security and Privacy	Fair

Language

The official language of Colombia is Spanish. English is the second most-spoken language in Colombia.

1. As the trade exchange between Colombia and the U.S. continues to grow, the use of the English language in Colombia increases each year. (Exports from Colombia have tripled between 2002 and 2009.

2. There are 9,895 English-certified professionals across all Colombian cities with different levels of proficiency (Basic High, Intermediate and Advance.

3. The national government has undertaken additional initiatives to boost English-language proficiency with programs such as I-Speak.

4.Promoted by the Colombian Ministry of Industry, Trade and Tourism.

Analysis: Colombia's focus today is to capitalize on the Spanish-speaking market for BPO; in the future, it will target the English-speaking market for application services. For English-specific IT services, there is still significant growth needed to garner the appropriate level of English- speaking labor to lead application services work.

Gartner rating: Fair Government Support

According to Colombia's Ministry of Information and Communications Technologies, Colombia's free-trade zone policy is competitive, allowing for 15% income tax, no import duties, and vendors may sell in the local market (in addition to exporting).

5. In "The Global Competitiveness Report, 2009-2010," Colombia is ranked No. 80 (out of 133) for government efficiency (down nine places from 2009). Its rankings also declined for transparency of government policymaking, public trust of politicians, ethics and corruption, and property rights.

6. While foreign direct investment (FDI) terms have improved in the past decade, FDI is currently at 4% of the overall GDP, so FDI terms need to improve further to attract greater investment.

7. Analysis: The Colombian government has made significant strides in the past several years, but still needs to increase investments and fight corruption issues to increase its status as a trusted government. Additional government-subsidized marketing efforts are needed to raise awareness and increase the visibility of Colombia, and targeted investments in the IT sector will be needed to make Colombia a more attractive country for IT investment.

Gartner rating: Fair Labor Pool

As of 2009, Colombia had 74,000 people employed in the following IT services sectors: ITO (12,500), BPO (60,000) and knowledge process outsourcing (KPO) (1,500) (this represented 0.3% of the total workforce of Colombia).

8. Colombia is one of the leaders with the most flexible labor policies in Latin America. In 2010, Colombia rated 23.7 on a scale from 0 to 100, where 0 was the most flexible, which placed it ahead of other Latin American locations.

9. According to the Colombian Ministry of Education, between 2001 and 2008, more than 97,000 students graduated from universities and technical schools in Colombia.

Publication Date: 9 December 2010/ID Number: G00209136

Analysis: Colombia has made major employment strides in structuring a solid foundation for the growth of the BPO and IT services industry. Labor laws, and the low presence of labor unions, combined with longer shift options, offer flexibility and make it easy for prospective vendors or organizations seeking captive center options to deal with HR issues. The availability of talent is steadily growing. However, it still constitutes a very small percentage of the total workforce and is spread across three primary locations in Colombia (Bogota, Cali and Medellin).

Gartner rating: Fair Infrastructure

According to a 2009 IMD study, Colombia is the Latin American country with the largest investment in information and communication technology (ICT) infrastructure as a percentage of its GDP. Almost 11% of Colombian GDP (equivalent to $25 billion) is planned under the 2010 three-year investment plan for infrastructure alone.

10. According to the World Economic Forum's Networked Readiness Index, 2009 to 2010, Colombia ranked No. 60 out of 133 countries.

One indicator of infrastructure capability and ability to scale is the growth of local telecommunications operators. Between 2005 and 2008, the revenues of local Colombian telecom operators almost doubled.

11. The main sources of revenue included: fixed telephony, long distance, mobile, and Internet access.

Analysis: Colombia has focused on making consistent investments in telecommunications infrastructure in the past several years, and the rate of increase of the use of broadband and mobile services has been dramatic. The country's overall ability to manage this growth has been commendable. The recent investment proposed for infrastructure development is significant (a double-digit percentage of its GDP). If these proposals are executed, the time to implement them will still be substantial.

Gartner rating: Fair Educational System

Colombia's educational rankings have declined from previous years. "The Global Competitiveness Report, 2009-2010" ranked Colombia No. 71 for higher education and training and No. 72 for health and primary education out of 133 countries.

12 Colombia has 189 universities, of which 74 offer masters degrees and 34 institutions grant Ph.D.s. There are 19 universities that grant International Baccalaureate certifications.

13. The graduates (approximately 37,500 engineers) from these institutions serve as the vital fuel of talent for the industry.

Analysis: The education system in Colombia is in need of: investment; reform of policies and focus; and strategic alignment with the main commercial sector of BPO and IT services. It needs to develop competitiveness among its students with regard to technical and functional skills, as well as English-speaking competency for global delivery model requirements.

Gartner rating: Fair Cost

The average salary of a software engineer/developer/programmer in Colombia ranges from $12,660 to $29,013, according to PayScale.

14. The operational cost in Colombia is competitive (compared with other Latin American countries), as Colombia offers: flexible structures and work shifts can be scheduled over a greater range of hours; competitive broadband cost; and the lowest severance pay in Latin America.

15 Analysis: Colombia's overall cost structure for sourcing (as defined by a combination of salaries, telecom, real estate and other operational costs) is competitive compared with other countries in Latin America. Government policies have focused on creating an easier and friendlier climate with regard to labor laws, use of temporary contractors and staff severance issues that often plague neighboring countries such as Brazil. Additionally, the government has structured a program that provides financial relief related to the required social payments per worker (which amount to 30% of staff salaries).

16 Rating: Good Political and Economic Environment

Kidnapping and violent crime have declined drastically and are now confined mainly to rural areas, where the state lacks control due to the presence of guerrillas and drug cartels.

17. In the "2010 Global Peace Index," Colombia was ranked No. 138 out of 144 countries (where 1 equals the most peaceful country).

18. The World Bank ranked Colombia No. 5 out of 183 countries for protecting investors. This makes Colombia the second-highest-ranked country in Gartner's 30-country study of offshore destinations.

In the past few years, Colombia has experienced a marked improvement in its macroeconomic performance. It has moved up 15 positions on the macroeconomic stability parameter from its 2009 ranking of No. 88 (out of 134 countries), to No. 72 (out of 133).

19. The significant economic downturn of the past 18 months has negatively affected the Colombian economy. According to IHS Global Insight, in 2010, Colombia's GDP growth increased to 4.6% and it is expected to remain at 4.0% or higher through 2014.

Analysis: In the past 10 years, perceptions of, and trust in, the political and economic environment in Colombia have improved considerably. The attractiveness of the business climate continues to improve, given GDP growth and the resiliency of Colombia's economic performance. However, the government needs to continue to address corruption, and improve its overall efficiency, in order to become a more trusted business partner and destination for sourcing.

Rating: Good Cultural Compatibility

Colombia ranks No. 4 in the IMD Global Competitiveness study of Latin America for having a culture open to foreign ideas.

According to the Administrative Department of Security (DAS), the number of international visitors to Colombia has almost doubled since 2002. Approximately 1.45 million foreigners visited Colombia in 2008 and, in 2009, there was a 17.2% increase. This continues to build awareness of other cultures.

Several MNCs have established BPO or IT services centers in Colombia; while these centers mainly serve Latin America, this exposure to MNC practices advances Colombia's experience and global business awareness.

Analysis: Like many Latin American countries, physical proximity and U.S. time zone alignment give Colombia a natural compatibility with U.S. buyers, as trade and business exchange grows between countries. Further, the growth economies in Latin America, including Colombia, are promising for MNC expansion. Thus, while Colombia does not have a distinct advantage over other Latin American locations, it is beginning to capitalize on its proximity to the U.S. as a relatively untapped offshore services market that holds "early entrant" opportunities.

Rating: Good Global and Legal Maturity

The World Bank ranks Colombia No. 37 out of 183 countries for ease of doing business, making it first among Latin American countries, and No. 5 overall in the countries evaluated in Gartner's top-30 country list for 2010.

Colombia is ranked No. 40 out of 104 countries on the Personal Freedom parameter.

20. According to the World Democracy Audit for 2009, Colombia's democracy ranking declined to No. 86, from No. 67 in 2008; similarly, its corruption ranking declined to No. 57, from No. 54 in 2008; press freedom remained constant, at No. 88 in both years.

In 2010, approximately 108 legal stability contracts were either signed or approved in an effort to strengthen and attract investment projects.

21. Analysis: Colombia has many areas of weakness in terms of its image with regard to stability and democratic practices. Improving international relations through investment agreements and contracts with existing and new partner countries worldwide — along with growing relations with the U.S. in terms of investment, trade and aid — will improve the global image of Colombia.

Rating: Fair Data and Intellectual Property Security and Privacy

According to "The Global Competitiveness Report, 2009-2010," by the World Economic Forum, Colombia has made small strides in this area, moving from No. 74 to No. 69 (out of 133 countries). A focus on this analysis related to data and intellectual property categories reveals that it still ranks in the lower third of countries. From an overall pool of 133 countries, Colombia ranked No. 83 for property rights, No. 94 for intellectual property protection and No. 85 for legal framework.

Colombia has been able to reduce software piracy in the past several years, ranking it among the lowest of the top six economies in Latin America. However, software piracy still accounted for 55% of all software in the country in 2009.

22. Colombia is improving its efforts to combat infringement of intellectual property rights through enforcement actions, but much more needs to be done to remove Colombia from the U.S. Watch List 2010. San Andresito in Colombia is featured in the Notorious Markets List of the "2010 Special 301 Report."

23. Analysis: Colombia has made important strides, as demonstrated by its rankings compared with those of other Latin American countries. However, more work needs to be done. Other Latin American countries have attracted a larger number of established vendors and captive centers with focused attention on intellectual property, allowing them to build trust among buyers of BPO and IT services that overcome macrocountry statistics. Colombia has not achieved this yet.

Rating: Fair

RECOMMENDED READING

Some documents may not be available as part of your current Gartner subscription.

"Gartner's 30 Leading Locations for Offshore Services"

"Tutorial for Defining Key Offshore Services and Global Delivery Terms"

"A Successful Outsourcing Strategy Requires a Clear View of Future Market Disruption"

"Ten Competencies and Key Activities for Mastering Multisourcing"

"How to Achieve Efficient and Effective Multisourcing"

"Global Delivery Model Market Competitiveness Cube Provides Insights into IT Services Providers' Direction"

Evidence

1 "Colombia education system," www.virtualcampuses.eu/index.php/Colombia.

2 Departamento Administrativo Nacional de Estadística (DANE).

3 Common European Framework of Reference for Languages (CEFR).

4 For details of this English-language proficiency progam, see www.ispeak.gov.co.

5 Colombia's Ministry of Information and Communications Technologies (May 2010 report submitted to Gartner).

6 "The Global Competitiveness Report, 2009-2010." 7 Colombia Fact Sheet, The 2009 Legatum Prosperity Index, 23 November 2009.

8 Colombia's Ministry of Information and Communications Technologies (May 2010 report submitted to Gartner).

9 "Doing Business, 2010," the World Bank. 10 Colombia: a center of opportunities," Posse Herrera & Ruiz, March 2010.

11 Colombia's Ministry of Information and Communications Technologies (May 2010 report submitted to Gartner).

12 "The Global Competitiveness Report, 2009-2010," the World Economic Forum. The report reveals that Colombia has dropped 12 positions for the quality of its educational system, 10 positions for the quality of the management of its schools and seven positions for the quality of math and science education since the 2008 to 2009 report, which reflects the poor performance of Colombia's educational system.

13 "Colombia Outsourcing Landscape," Tholons, 10 June 2010.

14 PayScale, June 2010.

15 "2010 Quality of Life Index," "International Living." Other Latin American countries have shifts that are shorter by one to three hours.

16 Colombia's Ministry of Information and Communications Technologies (May 2010 report submitted to Gartner).

17 "Colombia, Risk Overview," Factiva, 13 May 2010, reproduced in "Colombia — The Transformation of a Country," Libertad y Orden, 19 May 2010.

18 "2010 Global Peace Index," the Institute for Economics and Peace.

19 "The World Factbook," the Central Intelligence Agency.

20 "Global Competitiveness Report, 2009-2010," the World Economic Forum.

21 Invest in Colombia, presentation, 6 May 2010.

22 "Software Piracy," TradeTalk, "Latin Business Chronicle," 20 September 2010, www.latinbusinesschronicle.com/app/article.aspx?id=4496.

23 "2010 Special 301 Report," United States Trade Representative, 2010.

Note 1 Objective, Methodology and Limitations

Objective

This report is part of Gartner's annual analysis of 30 leading offshore locations, which began in 2007. Organizations seeking an outsourcing arrangement, or those wanting to set up a captive center, should use these reports to evaluate a country's current suitability for offshore service work.

Each report includes key data points and insight to provide a brief, high-level perspective, so organizations can easily compare potential locations. Because each organization will have a different view of which factors are the most important for its needs, the reports aren't intended to rank each country and don't include an overall rating for each country.

Methodology

We applied a rigorous and repeatable methodology to assess each country's state. This involved:

Identifying 10 categories that organizations should consider when looking at a potential location for offshore or nearshore IT or business process services.

Applying the insight, knowledge and experience of Gartner analysts, as well as consulting credible secondary sources, to evaluate the countries against these categories. Rating each category on a 5-point scale, with 1 being poor and 5 being excellent, to provide an at-a-glance view of the status of that country.

Performing a comparative analysis at a regional and global level to ensure balance in the assessments.

Limitations

These reports assess each country's current status. They will not reflect the benefits of investments some countries are making to improve an area of weakness or enhance current strengths, where these investments have not yet visibly come to fruition. For example, investments in English-language education will take some time to demonstrate improvements in the workplace.

Although organizations could apply these reports to applications, business processes or infrastructure, the reports don't address this level of granularity. If organizations were to apply these reports to one specific service line, they may need to adjust some of the ratings (for example, the availability of specific skills in the labor pool).

This research is part of a set of related research pieces. See "Gartner's 30 Leading Locations for Offshore Services, 2010-2011" for an overview.

Publication Date: 9 December 2010/ID Number: G00209136           

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