The best options to invest in Colombia in 2019

On January 18, 2019 Forbes magazine listed their 4 Best Places To Buy A Second Home Overseas In 2019, and once again Colombia, and more particularly Medellin, was positively recognized.

The best options to invest in Colombia in 2019
Medellín, Colombia

What makes Medellin so special? As Kathleen Peddicord, founder of Live and Invest Overseas, said, misperception is what keeps this place special. The more thinking they wouldn’t dare to set foot in Colombia, the less discovered that the paradise remain. And this results in real estate prices remaining affordable, especially when compared with similar metropolis in other parts of the world. But there’s much more in Colombia than just real estate, and unique opportunities in other industries remain undiscovered and unseized.

Where precisely are those investment opportunities? What can a foreign individual investor do in order to take advantage of them? In this newsletter, we will explain step-by-step details on, how and where to invest in Colombia. We will be writing this guide based on our experience of more than 10 years in serving foreigners who are willing to live and/or invest in our country.

First, let’s tackle the most important premise for any international investor: the exchange rate. Colombia’s currency is the Colombian Peso (COP). Having an economy dependent on oil exports makes the country vulnerable to oil prices. The lower the price of oil, the weaker the COP is against the US Dollar. There’s a clear inverse correlation between the price of the oil and the price of the COP/USD exchange rate.

According to Gutierrez Group, current prices of oil, plus a combination of several other macro and micro economic factors, have created a perfect setting for investors holding US currency wanting to invest in Colombia That’s mainly because they get to trade their currency at historically high levels. Today (February 28, 2019), at an exchange of $3,072+ COP per 1 USD, foreign investors have 60%+ more purchasing power than only 4 to 5 years ago, yet opportunities haven’t necessarily gotten more expensive. This can be considered as one of the best investment opportunities available for them to invest their money in.

Exchange Rate Behavior (1991 – 2019)

The best options to invest in Colombia in 2019

Now, what can the 60%+ extra acquisition power will buy you? Well, opportunities are everywhere. From the safest alternatives offered by the largest banks and securities brokers, where yields from 3% to 5% per year can be easily obtained; to tourism-related real estate, with expected average annual returns of 5% to 8%; to private financing alternatives featuring safe returns of between 10% and 12% per year; to the always promising and governmentally-subsidized agro-industry, where 15%+ yields can be expected. In between all of this, you may find lots of entrepreneurship and alternatives in other types of businesses, especially in the digital, tourism and gastronomic arenas.

Next, and in no particular order as each alternative suits different needs, expectations and the risk appetite of each investor, you’ll find Gutierrez Group’s top options and recommendations on where to invest in Colombia this 2019.

Mutual Funds, Money Market or interest-bearing accounts

The option for the most cautious.

If you want to invest in Colombia but are not sure precisely where, or you are waiting to close on that perfect piece of property, but still want to secure the best possible exchange rate, you can always send USD, convert to COP and simply hold funds in an interest-bearing account. Our suggestion is to use Securities Brokers, which are much easier to work with, instead of banks. In Colombia, the most-reputed firms provide a set of mutual funds where you can earn 2% to 6%, depending on the underlying assets and their associated risk, which is usually very low.

Gutierrez Group holds tight relations with several reputed Securities Brokers in Colombia, with which hundreds of clients are shared.

Fixed-rent traditional alternatives

Bonds, CDs and T-Bills. Secure assets offering much better yields than US entities.

These are also offered by banks and Securities Brokers. In Colombia, yields of these assets are much greater than in the North American and European markets. You may expect annual returns of between 5% and 8% depending on the issuer and term of the particular asset. If you stick to the safest ones, you may expect 5%.

Real Estate

The constant dilemma between traditional (long-term) and touristic (daily rentals) rental income.

Let’s face it. When investing internationally, it´s hard to beat brick and mortar. It’s familiar, perceived as safe, specially by traditional investors, because you get to see and touch it, in other words, it´s tangible. For most newcomers to Colombia, Real Estate is the very first step they want to take, and we’re thrilled to be there for them, helping our clients to hunt, close and manage their properties.

Real Estate in Medellin, as in any other big city, offers different paths of action. The conservative route being traditional rentals, furnished or unfurnished, mainly in neighborhoods of predominantly locals. The other, more adventurous route, is short-term rentals, aiming at tourism or temporary (monthly) rentals to foreigners, in the most vibrant neighborhoods of the city. For both, although more importantly for the latter, it becomes indispensable to count with a reliable property manager.

The best options to invest in Colombia in 2019
4 bedrooms unit in the best scene of Medellín: Provenza One of the apartments that we manage.
The best options to invest in Colombia in 2019
2 bedrooms penthouse in trendy Barrio Manila. One of the apartments that we manage

In our expertise, despite what rental agencies like to think, average annual net returns of 4 to 5% may be expected in traditional real estate, and 6 to 8% in tourism-related real estate, not including a potential valuation of the property. Think over when you hear promises of double-digit returns in real estate, those are very rarely achieved. It’s important to be cautious, retain professional and perform proper due diligence before engaging in any major real estate purchase.

If you ever wish to inquiry about our Property Management service feel free to reach out to our division’s leader e-mailing her here.

Private Mortgage Financing

A hassle-free alternative to real estate, with the same underlying asset and better yields.

This is a solid alternative for those willing to secure their investment with a traditional asset such as real estate, but not having to deal with the daily hassles of owning a rental property. In Colombia, interest rates are elevated, and local banks are stubborn. When you take a look at investment banking, you need to pay a lot of attention towards this fact. Hence, investment companies can be considered as the best option available for you to proceed with. They don’t service foreigners and are inflexible with terms. In other words, they are unable to provide tailor-made solutions to their clients. This represents nothing but a unique opportunity to make money in the business of lending money. Assuming a very low degree of risk, using short and medium terms, lending only up to 60% and collateralizing the loan against a liquid property, yields of between 8 and 11% can be made. And the best thing is that no property manager, nor lousy tenant, gets involved.

To know more about our private mortgage lending opportunity click here.

Private Taxi Lending

Fear not Uber. In this market, the renowned app is irrelevant.

Another alternative for those in the business of lending money. In this case, instead of collateralizing the loan against a property, there’s a pledge both on the taxi and its medallion (official license to operate the taxi). These loans have terms of no more than 60 months, for up to 70% of the combined taxi + medallion price, with principal and interests collected every month, just as a traditional bank would offer. In fact, most Colombian banks are in this business, but there’s also room for private players. Uber, Lyft and others are not a concern, as they don’t have substantial market penetration, besides being illegal. Expected rates of return are in the order of 10% to 12% per year. People who are looking forward to invest in Bogota can pay special attention towards this.

To learn more about our taxi lending opportunity click here.

Factoring against public debt

A best kept secret that will soon fade away.

Feasibly the most truly unique Colombian opportunity of them all. While you can invest in factoring alternatives in most financial markets, you won’t find this type of factoring anywhere else in the world. The product consists in buying non-recourse settlements that have been already won by their claimants, against the Colombian government. After these claims are settled, the government takes 3 to 4 years to pay, depending on the fiscal budget. Money from investors is used to pay off claimants in advance at a discounted price (hence the term factoring), at which point they become the new lawful owners of the economic rights of the judgment. Expected annual yields of 10 to 13% can be expected in this very safe product, where the government is the counterparty.

And why will this product soon fade away? Because the lawsuits that are being bought correspond to events related to the armed conflict, which have decreased more than 97% since the peace agreement was signed in 2015, and with it the availability of new claims to finance.

This product is the main reason why mutual funds in Colombia offer such good yields, as most securities brokers include this asset in their funds. So, when investing into these funds, you’re ultimately buying the same asset, in a small proportion.

Some investment companies, wealth management firms, or Family Offices like Gutierrez Group offer the possibility of investing in this asset directly, without intermediaries. If interested in learning more about this opportunity click here.

Agro-industry

One of the country’s hottest picks right now.

Along with development of tourism, agriculture is the government’s most important bet right now. It is greatly incentivized by means of subsidies and income tax exemptions, depending on the features of the given development, such as location, economic, social and environmental impact.

The best options to invest in Colombia in 2019
Colombian Timber Plantations in Vichada

Traditionally, Colombia has had very solid coffee, flowers and banana industries, among others. These industries are highly competitive, with strong, aggressive players controlling the market, thus opportunities are limited, and specialization, or being able to produce a premium, value-added product, is a must. However, there are other industries in their growth or consolidation stage, where better opportunities can be found. Today, the two fastest-growing industries in Colombia are avocados and timber.

Gutierrez Group is involved in the largest timber project of the country, located in the eastern plains of Colombia (Province of Vichada), where more than 65,000 hectares (160,000+ acres) of land is being planted with fast-growing species, destined to be converted into wood biomass for the generation of clean energy. Investors may expect annualized returns of 16%+ in this venture. To know more about this project go to www.colombiantimber.com

Entrepreneurship

Medellin as an innovation hub and digital nomad paradise.

Medellin has become one of the most desired destinations for expats, from full-time retirees to young digital nomads, thanks to powerful reasons: spring-like weather all-year-round, cost of living, and lifestyle options, to mention just a few.
But it doesn’t end there. The city has changed its strategic business planning, from a city driven by the old traditional industries, being textiles the most important one, to one driven by innovation, science and technology. The city counts with a few of the best universities in the country, the most important economic groups operating locally, and a private sector fully committed to the development of the region.
The city is known for its welcoming business framework and its willingness to promote any initiative that contributes to the social and economic wellbeing of the region.

If you’re wondering which door to knock on first, feel free to reach to us for business and/or legal advice. We’ve helped 1,500+ foreign individuals and companies insert into the local business atmosphere. Click here to read more about our services.

Different options for all needs and tastes at not necessarily high entry levels. With a minimum amount of only USD 50,000 an investor may get to diversify into 2-3 different options.

The following graph shows the expected average returns of these alternatives:

Average Expected Annual Yield per Product

The best options to invest in Colombia in 2019

Now, for first-timers, how to invest in Colombia?

After having assisted several hundreds of clients to invest in Colombia, we can say that the process is simple and safe, as long as you allow a professional to hold your hands. Here’s what you need to do, step-by-step:

  • Open an account of your own at a bank or securities broker. We can introduce you to a reputable one and help you throughout the process, which should only take 4-5 days.
  • Once the account is ready, send funds and convert foreign currency (any) into Colombian Pesos.
  • Register funds. At the moment of conversion you’ll be asked to register funds by completing a currency exchange form.
  • Decide where to invest and trigger funding upon execution of the corresponding documentation.

We cannot emphasize strongly enough on the need for you to retain expert advice, regardless of the business you decide to pursue. Good advice is also an investment, and there´s a timeless saying that explains it: Prevention is cheaper than cure.

Here are some of our client’s testimonials about their experience with us:

I cannot say enough good about my client experience with Gutierrez Group. Working in Medellin and navigating a new culture has its challenges, there are obstacles that are difficult to anticipate. But, with Gutierrez Group’s expertise, potential problem areas are alleviated, saving me time and money. I have worked with attorneys in the U.S. and Medellin, and have not experienced any with the high-level of integrity and professionalism of Juan and all the Gutierrez Group I highly recommend them when doing business in Colombia.”

PHILIP, USA

I met with many lawyers before deciding to work with Gutierrez Group on the legal process for my real estate investment, and they have been fantastic. They are reliable and trustworthy, and I have since recommended Gutierrez Group to all my friends. As a foreigner, it’s important to have a good lawyer when making investments, and they are the best in Medellin.”

EDGAR, SINGAPORE

I wish to thank your firm, for your help in guiding me and helping me in my investments in Medellin. Although I speak Spanish, I am not versed in the legal complexities of doing business in Colombia. You know and understand the law and have successfully guided me in my investments in Medellin. My thanks to your brothers, your staff, and to you for excellent efforts for me.”

BUD, USA

I met Juan Darío Gutierrez several years ago at a conference in Medellin, Colombia and was impressed with his professionalism. It was my first time in Colombia but I knew it was where I wanted to do some investing. He then introduced me to his two brothers Daniel and Felipe who together, made the Gutierrez Group. Over the years they have given me great advice and I can trust them to always have my best interest at heart.”

GERRY, CANADA

Gutierrez Group is a Multi-Family office whose main goal is to help foreigners relocate, invest and/or do business in Colombia. We have a comprehensive practice that includes legal, investment, real estate, wealth management, back office and more. To reach out to us visit our website or send us an e-mail.

Yours truly,
Felipe Gutierrez
GUTIERREZ GROUP

Corporate Law

 

250+ successfully incorporated companies.

Whether you are considering incorporation for the purpose of establishing a business in Colombia, shielding an ongoing venture or for estate planning in connection with your affairs in this part of the world, our highly trained lawyers specialize in legally structuring investment and/or holding vehicles that will allow you to achieve your goals in our country.

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Real Estate Law

 

350+ lawfully acquired properties.

With hundreds of successfully handled real estate transactions, our team of experts has unparalleled experience to properly and integrally guide you in connection with your real estate needs. From title searches, drafting or analyzing real estate contracts, dealing with liens, to handling closings and even negotiating terms, our skilled lawyers will offer comprehensive service.

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Immigration Law

 

450+ effectively obtained visas.

In turbulent economic and political times such as the ones we live in, the ability to immigrate presents itself more as insurance than anything else. Our experienced and skillful group of experts has timely and successfully handled several hundreds of Colombian visa applications of all natures. From permanent investment visas, to real estate ownership, pension, capitalist, student, work, spouse, family related and beneficiary visas, we have experience with them all and offer full turnkey service.

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Foreign Investment Law and Banking

 

2.500+ duly registered foreign investment operations.

Lots has been written about how cumbersome it is to send funds in or out of Colombia, about how accounts for foreigners are even unavailable. When you know the regulations, the system, the procedures, the authorities and the participating agents like our experts do, you realize that such appreciations are nothing but misconceptions. Thanks to more than a decade of reputation and experience in dealing with financial operations, our team has seamlessly created countless individual and corporate accounts at financial institutions as well handled thousands of investment and repatriation transactions.

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Accounting and Tax Law

 

+10 years of experience in accounting, bookkeeping and tax matters.

Whether you are just starting up or your business is an already consolidated project, our accounting professionals offer a decade of experience and all year round service in connection with accounting, bookkeeping and tax matters so that clients may concentrate in growth and productivity while resting assured that tax contributions are being rationalized.

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Estate Planning

 

Comprehensive service in non-business related matters.

Business matters are just as critical to our clients as civil and family ones, which is why our team brings broad experience to the table in regards to estate planning matters. Those who have decided to invest or relocate in Colombia count on our firm´s knowledge towards properly structuring their assets so as for avoidance of probate and smooth generational transfer of wealth to take place. Our services in this realm of the law include wills and structures such as companies, trusts and escrows.

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