Thanks to a strong GDP growth, Colombia is one of the fastest growing economies in Latin America. With a population of over 47.6 million, it has the third largest Latin American GDP after Brazil and Mexico. Colombia is the fourth largest exporter of coal in the world and also the fourth largest oil producer in Latin America. During 2013, the sectors that grew the most were construction, social, common and personal services, agricultural, and mining.
Due to its stable economic policy, sustained domestic demand, increased levels of foreign direct investment (FDI) (especially in the oil and mining sectors), and a current peace process, the local economy is experiencing unprecedented growth levels, with a projected growth of 4.5% for 2014. Indeed, Colombia’s bond rating has been upgraded by all three rating agencies. For the past five years, real GDP has grown an average of 4.1% per year, continuing a decade of strong economic performance due to steady economic policies, solid fiscal management, and the promotion of several free trade agreements.
Colombia has 13 existing free trade agreements, and several others already signed or under negotiation, which will result in new business opportunities. In turn, the agreements will lead to a demand for better infrastructure, especially in the transportation and agricultural sectors. Nevertheless, Colombia’s sustained economic expansion can be stymied by the country’s exposure to external risks associated with its reliance on energy and mining exports, and the externalities associated with the commodities and financial markets.
Current challenges the country faces include high poverty levels, inequality (one of the highest in Latin America), and extending educational opportunities to rural and urban areas. According to the World Bank, Colombia spent around 6.8% of its GDP on health services. Although this is high for middle-income countries, only 35% of the population has access to the local public health system.
One of the most stable sectors is the industrial sector, with weak growth, even though it has a significant weight in Colombia’s GDP. Here, we find that the most valuable brands in Colombia have been characterized by their long tradition, constant renovation, and their clear response to the functional and emotional needs of a changing market. These brands have recognized when to generate a relevant differential for their target markets, and last but not least, they have maintained a significant presence in terms of communication, not only through high levels of advertising investment, but also through the increase of their share of voice, the positive news about the performance of their products and the successful work on corporate social responsibility campaigns that many brands have implemented.
This growth has been so impressive among Colombian consumers that even the luxury segment grew by 12.3% in 2013-2014. The reasons for this mainly focuses on the arrival of new international brands, the country’s legal and political stability, the size of the market with a growing middle class, and an economy with sustained growth.
Good performance of brands in Colombia is based on a strong advertising spend. This grew more than 10% in absolute terms in 2013, with national TV as the primary medium, enjoying over 34% of the investment. It is worth mentioning radio, with 24% share, and print, with 16.4%. Digital investment grew over 31% in the same period, although digital does not exceed 3% of the investment for most brands. For some brands, such as spirits, digital is beginning to be the most important medium and is therefore playing a decisive role in their media plans.
After more than five decades of armed conflict between the government and insurgents, Colombia is finally approaching a period of peace. In November 2012, the Colombian government and the FARC began formal peace talks in Cuba. Even with the obvious setbacks, if the talks make progress, there will be a greater development opportunity for the country and, of course, for its economy and for brands.
Gabriel Castellanos y Oscar Ladino
Millward Brown, Colombia