Colombia has positioned itself as an attractive destination for foreign investment and business development. One of the most prominent options for those seeking to establish a solid business presence is to take advantage of Free Trade Zones. These designated areas offer a number of benefits that drive growth. On this occasion we will address the impact of Free Trade Zones on the Colombian economy and their contribution to economic growth and employment generation.
To that extent, in a world where innovation and competitiveness are imperative, free zones are fundamental pillars for the sustainable growth and strategic expansion of companies. In a country that underwent a significant economic transformation in the last decades, the impact of free trade zones on the Colombian economy and their contribution to economic growth and employment generation turned out to be positive.
The National Government defined that "the Free Trade Zone is the geographic area delimited within the national territory, where industrial activities of goods and services, or commercial activities are developed under special tax, customs and foreign trade regulations" .
But, why is the impact of free zones on the Colombian economy so important, first let's start by analyzing some world statistics that will give an overview of the panorama.
Data on contribution to economic growth and employment generation
Number of Free Trade Zones:
- It is estimated that there are more than 5,000 free trade zones worldwide.
Employment Generated:
- Free trade zones employ more than 66 million people globally, hence their relevance in contributing to economic growth and employment generation.
Foreign Direct Investment (FDI):
- Free trade zones often attract a large amount of foreign direct investment. In 2021, global FDI was around US$1.5 trillion. The country also benefits in this aspect and it is an impact of free zones on the Colombian economy.
Participation in world trade:
- Exports from free trade zones represent a significant part of world trade. In some countries, these exports represent up to 30% of the total.
Geographic distribution:
- Asia is the region with the highest concentration of free trade zones, followed closely by the Americas and Europe.
Annual growth:
- The annual increase of the free zones in terms of investment and employment varies, but in some cases, it has exceeded 10%. Here we see another important aspect in which in the end has an impact of the free zones in the Colombian economy.
On the other hand, according to economic sources, foreign sales of the free trade zones grew 1.6% in May, which is another contribution to economic growth and employment generation.
Impact of the free trade zones on the Colombian economy
Tax and customs incentives
One of the major advantages of operating in a Free Trade Zone in Colombia is the attractive tax and customs incentives. Established companies enjoy profit tax exemptions for the first five years and significant discounts after that period.
In addition, they benefit from the elimination of taxes on imports and exports, facilitating international trade and reducing associated costs, being an impact of free trade zones in the Colombian economy and its contribution to economic growth and employment generation.
Foreign trade facilitation
They are strategically located to facilitate international trade. Colombia has a privileged geographical position, and Free Trade Zones reinforce this advantage by providing efficient access to global markets.
Companies have the ability to import raw materials and export finished products more quickly and economically, contributing to competitiveness in the global market, generating an impact of free trade zones on the Colombian economy and its contribution to economic growth and employment generation.
Quality infrastructure and services:
Free Trade Zones in Colombia are supported by modern infrastructure and high quality services. This includes industrial facilities, well-designed business parks, efficient logistics services and advanced security systems. These conducive conditions create an environment conducive to business operation without logistical concerns and provide a solid platform for long-term growth.
Innovation and Technology Promotion
Free Trade Zones foster innovation and technological development by facilitating the transfer of technology and knowledge. Companies take advantage of collaboration with other companies within the Free Trade Zone, as well as access to highly trained human resources. This contributes to the constant improvement of processes, products and services, keeping them at the forefront of innovation, which translates into the impact of free zones on the Colombian economy and their contribution to economic growth and employment generation.
Employment Generation and Regional Development:
The establishment of companies in Free Trade Zones not only benefits individual companies, but also has a contribution to regional economic growth and employment generation. Job creation contributes to the well-being of local communities, while economic development in specific regions helps reduce regional disparities.
Establishing a business in a Free Trade Zone in Colombia offers a number of benefits that make a difference in long-term success. From tax incentives to foreign trade facilitation and technological development, Free Trade Zones provide an environment conducive to business growth.
Considering this strategic option may be the key to reach new levels of success and contribute to sustainable development in Colombia, directly impacting economic growth and employment generation.
Challenges Free Trade Zones in Colombia
Economic Dependence
Balancing dependence on free trade zones makes any country vulnerable to global economic fluctuations and changes in trade policies.
Environmental Sustainability
Free Trade Zones are working to be environmentally sustainable and it is a strategy that should not be left aside to environmental issues.
Tax Evasion
User operators in Colombia are doing their homework very well to avoid the risk of some companies using free zones to evade taxes, which negatively affects the country's tax revenues.
Uneven regional development
In some cases, economic development driven by free trade zones could be concentrated in certain regions, leaving other areas behind. It is necessary to find the way and the regulations so that more regions have the alternative of having this type of zones.
Technological change:
Rapid technological evolution affects the relevance and competitiveness of free zones, especially if they do not adapt to new trends.
International negotiation
The negotiation of international trade agreements and competition with other global free zones are challenges to maintain the attraction of investors and companies, you want to take advantage of the benefits of a Free Trade Zone. Do not stay with the doubts and talk to one of our experts, contact us and enjoy the infrastructure we have available for your company.
