Colombia: There is No Risk in Staying

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While watching the History Channel mini-series, “The Men Who Built America,” I am reminded of how much willpower is exerted to create something out of nothing, or to transform something that doesn’t work into something that does to transform society.

One of my tech compatriots with ties to the digital TV business, whom I amazingly bumped into at Bogota’s Casa Vieja restaurant during lunch last week, agrees that “the transition in Colombia is exciting.” We and many observers believe a decade from now, Colombia could take its place as a major software development center in the Western Hemisphere.

Over the past decade, Colombia’s and Bogota’s governments have been working on two fronts:

One, pushing out both the physical presence of and the lingering perception of narco-trafficking. According to government officials, the drug trade has been dismantled in the same way the Mafia has been defanged in the U.S., and is gone from Medellin and Cali, relegated to smaller towns. Both homicide and kidnapping rates are below that of most U.S. cities and not even a concern anymore. Colombia addresses its no longer relevant violent reputation in its tourism slogan, “The Only Risk is Wanting to Stay.”

Two, building out the country’s human, trade, physical and digital infrastructure, efforts aimed at creating an IT and software export industry unparalleled outside of the U.S.

On the human side, university graduations have doubled in the last decade, during which there have been 1.8 million engineering degrees awarded in a population of 49 million. I visited software and videogame developers around Bogota doing Web-development and IT programming work for major American companies including Coca-Cola, American Express, Sears, Target, Wal-Mart, Travelocity and others. Because of its similar time zones (Bogota is on Central Time), U.S. companies are “near-shoring,” especially call centers.

TRADE AND DIGITAL BUILD OUT

On the trade front, Colombia signed a free trade agreement with the U.S. last year as in the process of reaching similar deals with Europe and Asia, and has set up more than 100 free trade zones with 15 percent tax rates around the country. Bogota is about to start work on a 7,000-square-meter technology corridor. Colombia also offers funds to help companies acclimate and train employees, the tech-centric SENA (National Apprenticeship System), and INNpulsa.

Regarding digital infrastructure, the number of Colombian towns with access to broadband connections has more than quintupled in just two years thanks to a rapid fiber optic build-out. Digital TV has seen similar expansion.

According to my compatriot:
“From the perspective of video service operators (cable/sat), I’d say Colombia is in similar position to that of Argentina, slightly behind Chile, but far behind Brazil. Digital cable penetration in Colombia is under 50 percent (vs. almost 90 percent in Brazil, for example). However, going forward, new STBs for Colombia will focus not on basic STBs (i.e. standard definition, one-way), but rather on HD boxes with integrated DOCSIS modems to enable deployment of relatively advanced features (DVR, HD, VOD).”

Colombia also is about to drop the hammer on a 4G wireless spectrum auction, open to foreign bidders, from which the government hopes to yield US$480,000. Mobile phone penetration has zoomed from just 5.3 percent to 101.3 percent in the last decade, with a quarter of subscribers already using smartphones; anecdotally, I saw few smartphones that weren’t iPhones.

HARDWARE AND TRANSPORTATION

On the consumer electronics front, the country’s primary big box retailer, the 13-store chain K-Tronix, stocks most of the major brands found in U.S. retailers.

But prices on TVs, Blu-ray players, PCs and other CE hardware are around 25-30 percent higher than in the U.S. A 16 GB iPad 3, for instance, listed at $667, compared to just $499 in the U.S.; a 60-inch Panasonic ST50 3D plasma HDTV lists for $2,100, on sale for $1,700, in the U.S. but for $2,750, on sale for $1,911.

In addition to K-Tronix, Samsung, LG, Sony, Bose and Bang & Olufsen all have showrooms stores in varying parts of Bogota.

One way around these higher prices for Bogota residents are two adjacent tech malls, Unilago and Centro de Alta Tecnologia (Center for High Technology). Combined, these two three-story rabbit warrens pack in more than 600 “stores” – more like 200 to 300-square-foot booths, each specializing on one type of gadget category (i.e. PCs, printers, portable audio, etc.) None of these stores post prices – everything is a negotiation.

These higher prices make these goods further out of reach for most Colombians; while per capita income has doubled in the last decade, it’s still a fifth of that as in the U.S.

Another potentially crippling Colombian problem is transportation. With no widespread mass transit, traffic in Bogota is a nightmare and getting worse, not only the number of cars but of buses, but the aggressive way people drive, often on pot hole-filled side and secondary streets that resemble the pock-marked face of a pubescent teen. Motorcycles are enormously popular for their ability to weave in-and-out of normal bumper-to-bumper jams.

Bogota hopes to break ground on a subway system next year with the first lines completed by 2018. The country also is expanding inter-city highways and wants to build rail links to connect cities separated by mountains and from the land-locked Bogota to both Cartagena on the Caribbean coast and Buenaventura on the Pacific – Colombia is the only South American country with access to both the Atlantic and the Pacific.

TALK TO ME

But Colombia’s biggest problem in becoming an international player may be in basic communication. Outside of the professional class, not many Colombians are bi-lingual. Few hotel staffers, service workers or taxi drivers speak English.

Both the national and Bogota governments have instituted bi-lingual education and certification to address this obvious need. Individual companies also are pitching in; software developer Globant holds English classes three days a week.

But as a capitalistic country surrounded by socialist entities, Colombia – the second-largest country in South America with the second-largest Spanish-speaking population – is positioning itself as an IT/software/service development center. No matter how it turns out, Colombia’s re-building is exciting to watch and worth keeping an eye on.

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