05252015 información industria textil confección colombia

Apparel and textile sector in Colombia

Content Colombia: A strategic ally for international business ...................................................................... 2

The Colombian Government is Committed to Foster Domestic Competitiveness ............................ 5

Incentives in favor of foreign investment in Colombia .................................................................... 9

Colombia: A strategic ally for international business

The country has become a major development hub in Latin America thanks to its large, dynamic economy

Colombia is among the region’s most economically stable countries, ranking as the 3rd

largest economy in Latin America. The country’s economy showed an average increase over 4% during the last six years, and in 2012 it grew by 4% compared to the 3.2% growth in Latin America and the Caribbean. In 2013, the GDP grew 4.7% over the twelve months of 2012 (Source: IMF, 2014). By 2014 the economy is expected to achieve a growth of 5% driven by the implementation of infrastructure and housing projects and strengthening of private consumption.

Driven by its healthy economy, Colombia tripled its GDP per capita (USD 2,769 in 2000 to USD 8,478 in 2013), reaching a historic level of Foreign Investment (USD 16.35 billion) and Exports (USD 58.82 billion) in 2013 and its lowest unemployment rates in the last ten years (Source: DANE, 2013).

The growth of the Colombian economy has had a positive impact on poverty reduction and

growth of the middle class. In the last decade, the middle class rose to be approximately 25%. In this context, it is expected that the Colombian middle class be 44% of the population in 2020 and 60% in 2025.

Gateway to a wide local market comprising a population of Over 47 Million and with higher income

The improved economic conditions of Colombian citizens pave the way to become a better business destination. With 47 million inhabitants, Colombia has the 23rd largest population in the world, and the second among Spanish-speaking countries. This is a key factor, considering that Colombia’s middle class will double within the next ten years to comprise 50% of the population.

During the last decade, Colombia strengthened its Preferential Access to a 1,500-Million-consumer market

Colombia has more than 13 free trade agreements in force, enabling preferential access to nearly 1.500 billion consumers across markets including the United States, the European Union, Brazil, Mexico, Chile, and Peru; with new markets to be added soon, like Costa Rica and Korea, with which Colombia has signed agreements.

Apparel in Colombia

Apparel and textiles is one of the most traditional and recognized sectors in the Colombian

economy, especially because of the impact it has had on job creation, production,

internationalization and on the country's economic development.

The Fashion System is a priority sector driven by the Productive Transformation Program, which is a public-private partnership that works towards the consolidation of the Colombian fashion system as a World Class Industry.

Over the last decade, the production of the Colombian fashion system reached a CAGR of 4.2%, with a market value of US$ 8.690 in 2014, ranking as the thrid country in the region, after Brazil and Argentina. Euromonitor International (2014).

Growing demand for textiles, imports of this category increased at a rate of 49% between

since 200 to meet the requirements of the local market and export supply of finished goods to major trading partners like the United States, Mexico and Ecuador. DIAN (2013).

In the past 10 years, the Colombian Fashion System reported a dynamic export growth at

an annual rate of 8.4%, with the third highest export rates in the region after Brazil and Peru, and higher than those of countries like Chile and Mexico. TradeMap (2013).

Dynamic domestic market between 2004 and 2014 the consumption of fashion products

items grew 4.2%, reaching over U.S. $ 82.428 million in purchases by homes in this category. Euromonitor International (2014).

A business network with over 450 manufacturers of textiles and 10,000 production units

of apparel. INEXMODA(2012).

6.615 6.817 7.069 7.420 7.360 7.096 7.359 7.734 8.001 8.327 8.690 9.077 9.484 9.917

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014p 2015p 2016p 2017p

CAGR 2004-2014: 4,2%

Fashion System Sales in Colombia 2004-2013, Millions of US$

Important multinationals around the world have selected Colombia as a strategic

location for their expansion projects

DuPont, USA: In Colombia since 1993, with its first production plant in Barranquilla focused on the textiles industry, DuPont has worked ceaselessly on research and development.

Kaltex, México: Purchased part of the shares of Colombian manufacturer Coltejer.

Coats, United Kingdom: For over fifty years this company has operated in Colombia under the name of Coats Cadena in the city of Pereira, Risaralda.

Polymer Group, USA: Production plant in the Pacífico Free Trade Zone, in Cali, Valle del Cauca.

ParkDale Mils, USA: Operating in Colombia with Colombiana de Hilados Corporation, with a production plant located in the Rionegro Free Trade Zone in Antioquia. It has the capacity for Open End, Woven Cotton and Brushed Cotton threads.

Key consumption trends for the sector

Fashion Becomes More Affordable To Consumers In 2013 apparel and footwear continued to show a positive performance, faring better compared with the review period. The wider offer of products in terms of brands, designs and styles at very affordable prices, the improvement in disposable incomes and fast-moving fashion trends were some of the factors that contributed to boosting sales of clothing, accessories and footwear, with consumers directing more resources to renewing their wardrobes. Men’s Clothing Gains Importance Men continued to increase their interest in their personal image, and followed the latest fashion trends. Also, as casual wear continued to become more common in the workplace, men renewed their wardrobes more often. Brands ran more promotions on menswear to encourage them to purchase more frequently. The potential for growth that the category is exhibiting attracted specialised brands such as Celio. Local Companies Hold Outstanding Positions in Spite of the Increasing Presence of Multinational Competitors

Source: BPR Securities, 2012 .

Colombia witnessed the entry of new players in apparel and footwear. In late 2012 and during 2013, brands such as Forever 21, Gap, Banana Republic, Celio, Justice, Perry Ellis, Nacaramicie, Colloky, Parfois and BCBG, amongst others, landed in the country, widening the options for consumers. In spite of this, local brands were able to compete and adapt to the new conditions and local companies such as Crystal Vestimundo Grupo, Manufacturas Elliot, Arturo Calle, Permoda, Cueros Velez, CI Hermeco and Confecciones Leonisa, amongst others, still held strong positions in the categories in which they operated.

Retail sales of apparel and footwear are expected to maintain growth

Over the forecast period new competitors are expected to continue to enter the market, and apparel and footwear specialist retailers is likely to see an increase in outlet numbers, linked to the expansion of shopping centers in the main large and mid-sized cities. This, along with a positive economic outlook and an expected decrease in constant 2013 prices in apparel and footwear, is likely to drive the positive prospects for the market, which is predicted to see a faster pace of growth in the forecast period compared with the review period 2008-2013.

Woman’s wear: opportunities in establishing production of colorful and stretchable textiles, and textiles for shapeware

Women’s leggings continued to be very important in women’s wardrobes in 2013. They are very versatile and can be worn with tunic blouses, skirts or sweater dresses, and with boots, flats or heels, for example. Besides the basic black and brown, companies are now offering a wide variety of colors and patterns, as well as different prints. Besides, their lower price contributes to more frequent purchases. As a result, during 2013 current value sales posted an increase of 6%.

Women’s skirts and dresses both continued to fare well, as they are now more versatile, and can be used for formal occasions, at work, as well as in more casual situations, due to a variety of styles, as a more feminine look continues to be one of the most important trends in Colombia.

Hipster pants returned, and in terms of colors, red returned, along with blue, purple and cobalt, although the traditional black, white and beige continued to rule. Prints such as arabesques in light colors such as green, purple and pink was also an outstanding trend. During 2013 combined sales of underwear and nightwear posted an increase of 6% in current

value terms and 4% in volume terms.

Shapewear is in general well-accepted by Colombian women, as they ca re about their personal

appearance, and want to wear the latest fashion trends, which sometimes require a certain body shape. Fájate is one of the most important brands, but hosiery brands such as Tall, Samsara and Cocoon, amongst others, also offer shapewear products, as they incorporate body control technologies in the tights they offer, which is an appealing feature for women.

Swimwear in Colombia remains a small category with slow growth. Although Colombia is recognized for the high quality and designs of its swimwear, most local production goes to foreign markets. In the country women do not buy swimwear very often. It is usually considered expensive, and is an item that is not used very often, mostly for holidays. The main trends observed in 2013 were bright colours, shiny decorations and details, as well as one-piece swimsuits.

During 2013 the palette of colours in women’s clothing was varied, with neon colours observed at the beginning of the year, but also pastel colours were present, especially in the second half of the year. Other colors, such as black and white, remained very important, with combinations of the two, or used to contrast with neon colours. Blouses with bows and light materials also continued to be an important trend, mainly amongst young working women.

Mens wear: opportunities

Although the use of ties and suits continued to be important in some professions, such as the law and financial services, it is ever more common to find that men are wearing casual outfits for their jobs, and this contributed to the growth of men’s shirts and shorts and trousers. These two categories were amongst the most dynamic in 2013, with growth rates of 5% and 7% respectively in current value terms.

In 2013 menswear posted an increase of 5% in current value terms, which was similar to the performance of womenswear. Although value sales of menswear (excluding jeans) are significantly lower than womenswear, men are now buying clothing more often, as now they are following fads and renewing their wardrobes more often, and they can find more promotions and sales, encouraging them to increase the frequency of purchase. As a result, compared with the review period, value sales at 2013 prices saw a better performance.

Men’s jackets and coats also saw a positive performance in 2013. The more frequent use of casual outfits for work increased the demand for blazers, which can be combined in different ways, and used with jeans or more formal trousers.

Sports wear – increasing demand for functional textiles

During 2013 sales of sports-inspired apparel accounted for a 58% share of total sales of sportswear, followed by performance apparel with 40% and outdoor clothing with a 2% share of value sales. Sports-inspired clothing has a wider consumer base, as people buy this type of clothing based more on its comfortable and relaxed fit, to be used at weekends, and not necessarily to practice any sport.

Performance sportswear showed the fastest growth in

2013, supported mainly by the increasing popularity of running races, in which people participated more often.

Football is one of the most important sporting activities

in the country, and this motivated the development of a big industry around this activity, which includes sales of sports apparel such as the official shirts of teams, and other items, such as footwear, hosiery and sweatshirts. In soccer there are many more fans than practitioners, but these fans are important buyers of the official shirts of their preferred team.

The Colombian Government is committed to foster domestic

competitiveness

Colombia has a privileged location, situated at the focal point of maritime activity because of its proximity to the Panama Canal. It is a strategic point of connection between North and South America, and between the East and West Coast of the United States and Asia. In addition, it offers opportunities as an export platform towards the rest of the Americas.

Ports, and airports, are linked to major carriers and airlines of the world, being a strategic

point in global connectivity.

During 2013, Colombia shipped by sea from its ports by more than 165 million tons of cargo and received about 33,000 vessels in the Atlantic and Pacific coasts, reaching 2 million containers per year.

Air line connections for freight transport through more than 32thousand airlines with regular operation over 2000 export routes and access to over 470 cities worldwide.

El Dorado International Airport located in the city of Bogotá, has registered the largest

freight movement in Latin America, having moved 622,000 tons of cargo in 2013.

Export logistical capacity and Regional Opportunities for the establishment of Distribution

Centers

Source: Superintendency of Ports and Transport

The National Government is implementing a big budgetary project to improve the country’s infrastructure and competitiveness, intending to double its infrastructure budget in 2014 to achieve an investment of nearly $6.5 billion USD. This will be devoted to building freeways, improving the highway system, fitting airports and harbors, and developing railroads.

Buenaventura Port (Valle del Cauca)

Main port on the Pacific.

Export cargo movement 2012: 3.5 million

tons.

846 scheduled shipping routes

308 destinies

Cartagena Port (Bolívar)

Cargo Movement 2012: 8.9 Million Tons.

1.422 scheduled shipping routes. 426 destinies

5-time winner of the Prize for the Most Competitive Port in the Caribbean.Caribe.

Santa Marta Port

(Magdalena) Exports 2012: 44.5 million Tons.

207 scheduled shipping routes.

174 destinies

Specializing in bulk and refrigerated cargo.

Barranquilla Port (Atlántico) Cargo Movement 2012: 2.7 million Tons

583 scheduled shipping routes.

303 destinies

Multi-purpose Port: 2 docks capable of handling all cargo types.

Incentives in favor of foreign investment in Colombia

General Incentives:

The taxpayers of income tax or grants that invest directly or indirectly classified as research and development projects shall be entitled to deduct from its net income 175% of the invested amount . This deduction may not exceed 40 % of net income.

Labor Incentives : Discount on income tax and some additional fiscal contributions and other payroll contributions by linking : new employees under twenty-eight (28 ) years (duration of benefit per employee is two ( 2) years ), new certificates displaced employees , reinstatement or disability (duration of benefit per employee is three ( 3) years), new female employees over forty (40) years with one (1 ) year or more unemployed (duration of benefit per employee is two (2) years) and new employees who earn less than half minimum monthly wage ( 1.5 SMMLV ) (duration of benefit is two (2) years ) .

Free Trade Zones :

Rate income tax of 15 % to Free Zones requested or approved to December 31 2012. Free zones that were requested after December 31 2012 will have a fee of 15 % + income tax for Equity (CRE ) . This is 9 % from 2013 to 2015 and 8% for subsequent year (Law 1607, 2012).

Non cause nor customs taxes (VAT and Tarif ) for goods brought from outside.

VAT exemption for raw materials, supplies and finished goods sold from the national customs territory to industrial users on Free Zones.

VAT exemption on the sale of goods to foreign markets.

The exports made from the FTZ to third countries are likely to benefit from international trade

agreements negotiated by Colombia.

Possibility of partial processing outside the free zone for up to nine (9) months.

Possibility of selling in the country 100% of the production of goods and services produced in the free zone , with payment of customs duties

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