This is part of a series, which looks at emerging global markets that are attracting the business and investment of enterprising Canadian companies.
When the CEO of animation company Pipeline Studios Inc. told members of his Ontario staff that they'd soon be invited to work in Medellin, Colombia, a few employees were understandably hesitant.
The city, often referred to as "the former murder capital of the world," undoubtedly has a different feel from Hamilton, the steel capital of Canada where Pipeline, which produces The Backyardigans and other popular animated shows, is located.
"Yeah, they had questions like, 'Should I get insurance for kidnapping?' or robberies, all kinds of dangers," Juan Esteban Lopez says. "We had to hold everybody's hands through the process, including clients'."
But Medellin, with a population of 2.5 million, has changed in the past 20 years, Mr. Lopez assured his staff. Sure, student protests occasionally include homemade explosives called "potato bombs," and one has to watch out for muggings in bad neighbourhoods. "You have to keep your wits about you," Mr. Lopez says, but that's true in any big city.
Once people visit Colombia, he says, "they see how it is and they feel safe. Now we have people lining up to go."
Pipeline was relatively early on the scene in the "new" Colombia, arriving in 2009, in time to see annual GDP growth hit a high of 6.59 per cent in 2011. In the first quarter of this year, Colombia's economy grew by 6.4 per cent compared with the same period in 2013. Thanks to commodity prices and fiscal reforms, the country just overtook Peru in the Economist's ranking of the fastest-growing Latin American countries, and is expecting to report an annual growth rate above 4.7 per cent.
"What happened in Brazil when it was becoming the market it is today – that's what's happening in Colombia now," Mr. Lopez says.
Brands move in
Large brands have taken note of the new buoyancy. Two years ago Canada's Bank of Nova Scotia established a presence in Colombia by taking a controlling stake in a domestic bank; Starbucks arrived in the capital city of Bogota this summer and Starwood's first W Hotel in Colombia will open before Christmas in the capital.
For smaller foreign-owned businesses outside of the energy and mining sectors, though, Colombia has been anything but an obvious option. Blame the country's 50-year civil war between various ideological and criminal factions, including FARC guerrillas on the left, well-armed paramilitaries on the right, and once-mighty drug cartels everywhere else. Demilitarization efforts over the past 10 years may have slashed the murder rate and pushed armed conflicts into easily avoided pockets of the country, but Colombia's reputation abroad has not entirely caught up with the nation's current reality.
Even Pipeline Studios, which Mr. Lopez launched with his brother Luis and sister Angelica, almost didn't land there – and the Lopez family comes from Bogota. In 2010, three years after Pipeline established itself in Canada, Juan and his brother toured South America, looking at Brazil, Argentina and Mexico as potential expansion spots.
"We were very close to setting up in Mexico when the then-vice-president of Colombia came to Toronto and said, 'Take a look at us.'"
Emboldened by the economic turnaround they saw under former president Alvaro Uribe, the brothers took advantage of a government program offering free education to open a training studio in Bogota, a city of an estimated eight-million people.
Pipeline later relocated to the arguably hipper, more arts-focused Medellin and took up space in Ruta N, a striking new office complex and incubator-type tech centre and a "landing zone" for foreign firms looking to set up quickly. Medellin is hoping to become the Silicon Valley of Latin America, and so far Hewlett-Packard Co. is the largest company to move in. Pipeline's Medellin studio eventually became a full production outlet and now employs 45 animators, while 180 people work at the mothership in Hamilton.
"Everyone in IT should be looking at Colombia," says Cesar Picasso, director of Latin America operations for SOTI, a mobile device management company based in Mississauga. The firm, which specializes in building customized platforms for BYOD, or bring-your-own-devices, use, has seen triple-digit growth in Colombia in the past three years, and is forecasting more of the same for 2015.
A few years ago, SOTI won a contract to manage 20,000 government-owned mobile devices for a public polling agency, and has since added a government security authority as a client. It has also begun to target traditional businesses, such as coffee farms, where mobile access to real-time data can be of huge value.
Mr. Picasso thinks Colombia will soon be a powerhouse in Latin America, pointing out that it offers a highly skilled talent pool, it's in a handy time zone for inter-regional communication, it's situated for easy trade within Latin America, and it's becoming easier to get to as more airlines add direct flights to its major cities.
"The other bonus about Colombia – something that's hard to measure – is the optimism I see reflected in the employees," he says. "People feel they're on the right path, and that helps everything go well."
Respiratory Homecare Solutions, a Calgary-based company that sells CPAP machines – continuous positive airway pressure therapy is a common treatment for sleep apnea – and runs respiratory health clinics, has opened offices in four cities across Colombia over the past three and half years, partnering with a local health-care company.
Company president Ben Asuchak says revenue from the firm's operations in Colombia is already on target to hit $4-million for the current calendar year. He expects to see that double year-over-year through at least 2017 as health reforms put even more emphasis on preventive medicine and occupational health.
At the Toronto office of Proexport Colombia, trade commissioner Alvaro Concha explains that his government is expecting that more than 50 per cent of Colombia's population will be part of the middle class by 2025. One main driver of growth will be a massive $25-billion commitment to new infrastructure – that's five times the cost of the Panama Canal expansion project.
There is another possible future for Colombia, of course. Mr. Lopez admits that many Colombians fear the good times could end if it turns out the FARC is just "fooling around" in current peace talks in Havana, buying time to regroup. "People are getting anxious again," he says. "Going to Colombia is still more adventurous than going to other places."
DOING BUSINESS THERE
Thinking about doing business in Colombia? Here's some advice:
– Contact Proexport Colombia (www.proexport.com.co) to do preliminary research, make industry contacts, and find out about tax incentives for your industry.
– Check out government programs that subsidize the salaries of recent grads and mothers who are the head of their household.
– Although the required paperwork is not arduous, hire a lawyer and accountant who have worked with foreign firms. They can help you decide what kind of business structure or partnership you want to have locally and to understand local laws, such as labour laws when hiring, as well as regulations.
– Be prepared to deal with infrastructure issues, such as poor highways; plan for heavy traffic in Bogota.
– Expect meetings to start late, run long and include personal conversation.