Nearshoring: Golden opportunity to increase foreign investment in Colombia

COVID-19 pandemic has not only been the largest public health crisis in the world, it has also developed a global economic crisis mainly affected by policies enforced by different countries to handle the pandemic and the rapid spread of the virus.

As a consequence, international trade was substantially affected, with restrictive policies that directly affected exports and imports, since special priority was given to the transit of products belonging to the health market. Hence, all those markets unbound to the production or marketing of these products were seriously stricken due to the fact that the cross-border demand for them was suspended.

Surprisingly, a golden opportunity for Colombia known as Nearshoring born out of crisis. This is a new model that companies are implementing worldwide through which they relocate their technology and business processes to the closest countries. All this with the purpose of minimizing costs and harness the advantages that proximity brings, such as benefits of the same time zone and lower operational and logistics costs by reducing shipping days by almost half.

Colombia has a strategic location for international trade operations, since it has two coasts, one on the Atlantic Ocean and the other on the Pacific Ocean. This makes the country extremely attractive since it has two large windows, one that connects it with the entire Caribbean area, including the countries of Central, South and North America. On the other hand, the coast of the Atlantic Ocean easily connects it with European countries. This allows Colombia to have several ports on these coasts which function as a focal point for imports and exports between northern and southern countries, thus facilitating trade partnerships between other countries.

The trade war between China and the United States has attracted all the attention on Central American countries, since companies of USA are seeking to implement nearshoring models. This modality seeks to relocate operations from Asia to Central America, promoting foreign investment, enhancing industrial and economic development.

When deciding where to relocate their operations, a large number of US companies have chosen Colombia as a strong contender, given its location and operational and economic efficiency, taking into account the following benefits: (i) Similar time zones ; (ii) Lower language and cultural barriers; (iii) Lower labor and production costs; and (iv) Ease of access to ports, among others.

In conclusion, Colombia is at a key point to attract a new wave of investors who are moving toward nearshoring.