New Colombian President Leans Left

Former guerrilla Gustavo Petro became Colombia’s new president on August 7, campaigning on a left-wing agenda that could bolster housing and other socially-oriented construction, even if some foreign investors in other sectors are wary, once again, of making new investments.

Petro’s government is committed to social reform, ranging from agriculture to housing to use of oil revenues. The Ministry of Finance has submitted a bill that will increase taxes nationwide by some $6 billion per year, largely fueled by higher corporate tax and higher tax for the wealthy. As such, government spending is expected to increase substantially.

Housing is expected to be one target for new federal funding. “The main challenge in housing is to overcome the housing deficit and provide formal housing for the 1.6 million new households that will be formed in the years 2022-2026,” the Camacol La Cámara Colombiana de la Construcción (Camacol), the national construction association, said in May.

Based on the prior administration’s efforts, over the next two years Colombia expects to see 500,000 new housing starts, a double-digit increase over prior years, Camacol said.

The ten state regions with the greatest increase in housing starts last year were: Quindío Department, in the central west at 11.7 percent, followed by Norte de Santander Department, in the northeast, at 10.2 percent, Huila Department, in the south near Cali, at 8.8 percent and Cundinamarca Department, including Bogota, at 8.6 percent, Camacol reports.

The expansion of housing construction has been underway for several years, according to the Colombian government investment promotion agency, ProColombia, citing statistics from Dirección Nacional de Estadística (DANE), the national statistics agency.  “There is growth potential in the residential and non-residential construction sectors due to the growing middle class. These two types of construction account for 50% of the sector’s value,” ProColombia indicates.

Apart from housing, hotel construction in Colombia is seen as expanding rapidly. “In the coming years, 34 hotels with 5,751 rooms will open across Colombia,” Top Hotel News reported in December 2021. “Six launches and 1,012 rooms are being pencilled in for 2022. But with 16 scheduled openings and 2,711 keys, 2023 will see by far the largest number of debuts in the near future,” the specialized publication reported.

“The attractive coastal city of Cartagena will see the most growth overall, with seven projects and 1,119 rooms on the books,” Top Hotel News reported. “Elsewhere, Cali, known for its lively salsa dancing scene, will see five new properties with 750 rooms go live,” the publication reported.

Overall construction in Colombia is also expanding. “The Colombia construction market size was $37.3 billion in 2021. The market is expected to grow at an annual average growth rate of over 4 percent during the 2023 to 2026 period,” said GlobalData, in its 2022 Colombia Construction Market report.

Part of the funding for new construction in Colombia is coming from the multinational banks. The International Finance Corporation (IFC), part of the World Bank Group, on August 3 announced a $40 million loan to Fondo de Inversion Colectiva Inmobiliario Visum Rentas Inmobiliarias (Visum), the fifth largest real estate investment trust (REIT) in Colombia.

The IFC loan will be used to support Visum’s 2022-2024 investment plan in green commercial properties, including the development of a world-class 80,000 square meters built-to-suit warehouse for Falabella, a leading regional retailer and DIY hardware chain, for its e-commerce operations.

Paint & Coatings Manufacturing Expands

Among international paint and coatings companies poised for growth in Colombia is AkzoNobel, which in April completed the acquisition of Grupo Orbis, the Colombian parent company of Pintuco paints and coatings business, Andercol and Poliquim (resins, emulsions, adhesives and specialty chemicals), Mundial (paints and related product distribution services) and Centro de Servicios Mundial (shared services center).

In January, Pintuco president Juan Carlos Moreno told The Republic that the company had over $1 billion in sales during 2021, building on a 15 percent increase in demand. CW has reported Pintuco annual sales at over $200 million per year. Among new Pintuco product launches last year were antibacterial and antiviral paint formulations.

Apart from Pintuco and its sister manufacturers of paints and coatings, a number of domestically-owned manufacturers are taking part in the industry expansion in Colombia.

Pinturas Prime, for example, has two manufacturing plants with an installed capacity for the production of lacquers, enamels, dyes, architectural, automotive and industrial paint at more than 100,000 gallons per month. The company is based in Medellin, in Antioquia Department.

Similarly, Pinturas Ferro, based in Sincelejo, in Sucre Department, south of Cartagena, manufactures architectural, wood, automotive and industrial paints and coatings. The company has a sales network that includes some 200 towns and cities in Colombia.

Paint & Coatings Growth Double-Digit

The paint and coatings industry in Colombia recovered strongly in 2021, with double-digit expansion in sales, according to press statements by Claudia Vergara, the general secretary of Acoplasticos and Acopinturas, the national paint and coatings trade associations.

“In the first quarter of 2021, the paints and coatings sector had growth of 9 percent in production and 15 percent in sales, compared to the same period of the previous year. This was due, in large part, to the growth of the remodeling segment, which has led to an increase in inventories of wholesalers, hardware stores and warehouses,” Vergara said.

Despite the sales increase, the cost of raw materials, transportation and other factors increased much faster, with overall emulsions precursors up close to 100 percent, according to a statement by Daniel Mitchell, the president of Acoplásticos, to local publication eColombiano in September 2021.

U.S.-Colombia Trade Strong & Growing

The United States has had a Free Trade Agreement in place with Colombia since 2012. Exports to Colombia amounted to $14.7 billion pre-COVID, according to the US trade representative. One factor that could increase that figure is that Colombia has been targeted as a potential location for near-shoring US production away from Asia.

According to Banco de la Republica, Colombia’s central bank, the United States is the world’s largest investor in Colombia, with more than 500 US companies operating in the country, ProColombia notes.

Colombia’s $270 billion gross domestic product grew by an estimated 9.5 percent during 2021 and is moving much faster now. “Colombia’s economy beat expectations in the second quarter in a boost for the government of President Gustavo Petro, who took office this month,” Bloomberg reported on August 16.

“Gross domestic product expanded 12.6 percent from a year earlier, the national statistics agency said Tuesday. That compares to a median estimate of 12.1 percent from economists surveyed by Bloomberg,” the news agency reported.