Growth Opportunities in Colombian Textile & Apparel Industry

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Colombia, the fourth-largest country in South America, is rightly taking on the title of being the fashion center of Latin America. Medellin city in Colombia has now become the center of the country’s integrated and widespread garment industry that exports apparel, leather goods and footwear.

Industry Overview

The country’s textile and apparel industry is alone accountable for the nation’s 7.5% manufacturing GDP, 0.8% of total GDP, 17% manufacturing sector employment and 2.4% of the total exports. The United States are the main commercial partner, with a 33 % participation in the Colombian apparel exports, followed by Venezuela (19%), México (11%) and Ecuador (7%).

Source:, DANE

The beginning of 90s is marked by economic reforms that the Colombian government made to open the economy for FDI. These reforms consisted of tariff reductions, privatization of state companies, financial deregulation and a flexible exchange rate. Colombia is at strategic advantage geographically also. It is located close to the United States, is a middle point between North and South America, has Caribbean and Pacific coastlines with ports on both, and thirteen highway projects underway to support overland transportation.

Landmarks in the Fashion Industry

Colombia is a reference point for Mexico and other countries in Latin America regarding the design and development of textile –apparel products, which translates into products with a high aggregate value.” Alejandro Faes, Mexican industrialist and ex-president of the International Apparel Federation –IAF.

Colombia’s fashion industry has become a priority sector for the country driven by the Productive Transformation Program (public-private alliance) working towards strengthening the country’s apparel and textile sector. In the last decade, country’s fashion industry achieved a compound annual growth rate of 4.2% making it the third most prominent country in the region, closely after Argentina and Brazil.  Apparel sales for the country have grown at 9.9% CAGR. (Euromonitor International 2015)

13 free trade agreements, 10 international investment agreements, three times lower logistical cost than shipping in from China, competitive location with easy access to global markets, 700 direct international flights per week, more than 4900 domestic flights per week, a National Training Service offering free training to companies and workers with more than 26 specialized programs for the textile and clothing sector with national coverage, a business network of more than 450 textile and 10,000 apparel production units, and preferential access to more than 1.5 billion consumers (due to geography and FTAs) makes Colombia a very attractive location for the global fashion sourcing. According to Euromonitor International, Colombia is expected to generate $870 million over the 2013-2018 period.

Colombia’s R&D push is also attractive to foreign players, as incentives like 175% of tax deduction of the R&D investment value and VAT exemption for import of equipments and other items used in R&D centers attract innovation. Also, the income generated by companies to finance innovation projects is non-taxable.

The country offers investment opportunities to foreign players to set up their textile and apparel production units to replace textile imports within the country. Also, establishing logistics distribution centers to Latin America and the Caribbean to milk country’s strategic location and FTA advantages, as a forward integration opportunity is also a lucrative option. Major foreign companies like Kaltex, Mexico, Polymer Group, USA, Coats, UK, ParkDale Mills, USA, have already chosen Colombia as a lucrative place to invest by setting up their plants in the country’s free trade zones.

Latin America’s Fashion Potential

Textile and Apparel Trade shows across Latin America can be seen growing and upgrading their offerings in the recent years. There is a visible growth in the region’s B2B fashion trade as a result of high quality of imports and exports in the region. Mexico, Argentina and Colombia are the three biggest names in the region for textile and apparel trade and industry.

Industry experts are actually forecasting that Latin America’s growth trajectory (7.2%) is in line with their forecasts for Asian countries (China’s forecast: 7.8%) in the industry. (Source: BMI Research, an emerging market analysis firm)

Affordable brands like H&M, Mango and Forever 21 are aggressively expanding their footprint across the region. International fashion brands and growing e-platforms are marking the fashion retail landscape of Latin America.

According to figures released by New World Wealth, by 2025, Latin America is predicted to be the home to US$ 841,100 millionaires (with a 42% growth within the last decade). Latin America’s fashion industry has already begun a long overdue process of amalgamation and consolidation.

As per the BMI Research, the Latin American fashion market was already worth more than $160 billion in 2016, which is far larger than the size of the fashion market in the Middle East. Spending on clothing and footwear in Latin American region is forecasted to increase at a CAGR of 7.2% over the next five years surpassing $220 billion by 2021. So, it not just the sheer size, the growth opportunity that the region offers, is actually the core attraction for foreign brands here. The region can easily outpace North America (1.8%) and Europe (1.9%) over the same period as per the research. Stronger underlying economic activity and the cooling inflation are set to boost disposable income and spending in this region further ahead.

Advantages of being a Duty-Free Sourcing Destination
Free- Trade Zones

Colombia is home to 106 free-trade zones, with 67 of them being permanent-single company zones (status of free zone to a company to develop an investment project that has a highly positive social and economic impact). These free-trade zones not only serve as an instrument to create more employment and attract capital investment to the country, but also promote competitiveness in the region. They help the country to develop highly productive and competitive industrial processes, simplify the procedures for trade and generate economies of scale.

Companies operating in these zones enjoy:

  • A flat income tax rate of 15% (against the general tax rate of 25% in the country),
  • Exemption from the import duty and VAT Tax,
  • Exemption from income tax for equality, CREE, Remittance Tax
  • Foreign exchange freedom,
  • Temporary admission to the national customs territory,
  • Benefits of international treaties signed by Colombia,
  • Elimination of customs procedures,
  • Internal credits,
  • Legal certainty,
  • Lower costs associated with security and public services,
  • Customs transit and multimodal transit operations available from international ports and airports to free zones and between zones,
  • Freedom to Re-ship abroad without re-loading or re-exporting procedures, and without policy or consular visa,
  • Freedom to conduct operations other than those required for the type of activity without official permits,
  • Waiver of a percentage of the nationalization goods produced, and
  • Waiver of a percentage of local purchased inputs standards.
Free-Trade Agreements

Columbia enjoys many free trade agreements with major global fashion sourcing countries like US and Europe:

  • Colombia is a member of the Andean Community (since 1969), which constitutes a free trade agreement with Bolivia, Ecuador, and Peru. This Andean Community has signed a free trade agreement with the Mercosur countries (Brazil, Argentina, Paraguay and Uruguay) (in 2005).
  • The United States-Colombia Trade Promotion Agreement (CTPA) that came into force on May15, 2012.
  • Colombia has various FTAs with individual countries and associations, including the Central American Northern Triangle (El Salvador, Guatemala, and Honduras), Canada, Mexico, Chile, the European Free Trade Association (EFTA) countries (Switzerland, Norway, Iceland and Liechtenstein), and the European Union.
  • Colombia has also signed FTAs with South Korea, Costa Rica, Panama and Israel in 2013. These FTAs have yet not come into force but they are soon expected to.
  • Currently, Colombia is negotiating with Turkey and Japan for FTAs with them.
  • Colombia also enjoys Bilateral Investment Treaties (BITs) with Switzerland, Peru and Spain.
  • Additional BITs have also been negotiated with China, India, and the UK.

These FTAs make Colombia an attractive investment destination, and also opens the country’s domestic market for the investors. Lower labor costs and FTAs together can prove to be efficient in the cost saving efforts being taken by major fashion brands across the world.

Trade Organization Memberships

Colombia enjoys membership in the Andean Community, Pacific Alliance (founding member), Caribbean Community (CARICOM) Agreement, World Trade Organization and Latin American Integration Association.


In the article “Colombian fashion is a ‘rough diamond’”, published in 2007 in the newspaper El Espectador ,the fashion expert Lee Shafkowitz said that the design in Colombia is at the height of Italian, French, and Spanish proposals, only with an added value to the consumer: its lower price.

Colombia’s competitive advantages of tradition (more than 100 years of experience), flexible production, design integration with the manufacturing and distribution processes, innovation push, multiple FTAs, qualified and skilled labor market, environmentally responsible industry and shorter delivery times (45 to 60 days against 120 to 150 days in China) make it a lucrative investment location for apparel and textile industry globally.

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