How foreign investors can benefit from Colombia’s Orange Economy?

By Craig Dempsey January 8, 2020

The orange economy is set to grow even more in 2020, offering more opportunities for international investors.

Orange economy
Photo: Joanna Kosinska

It is a well-known fact that Colombia has a vast cultural variety and social diversity, and its economic growth in recent years has led to a subsequent boom in commercial activity in these spaces. To further support this growth and Colombia’s prominence in the region, President Ivan Duque Marquez introduced a series of policies that come together to form the ‘orange economy.’ 

With innovative policies supporting new businesses in creative fields, President Duque aims to develop the tremendous potential for Colombia’s cultural and economic growth. Duque once claimed that he aims to transform Colombia into the “Silicon Valley of Latin America,” rivalling other top competitors like Chile and Mexico. 

But how can entrepreneurs and foreign investors benefit from this new initiative? The orange economy is a new option for investors and will help to develop a more diversified economy for commercial players in Colombia.

What is the orange economy?

The orange economy is a term and subsequent policy coined by the current Colombian government, led by President Duque. The Orange Economy aims to incentivise the creation of new companies that intend to produce goods and services that add value to the market of innovative sustainable startups in ‘creative’ industries. Additionally, President Duque wants to see the industries encompassed by the orange economy become a greater representation of the national GDP (which is currently 3.4%).

There are three main sectors within the orange economy:

  • Arts and cultural legacy
  • Cultural industries 
  • Creation of new functional content and software

This encompasses commercial areas such as digital media, software development design, marketing, tourism, and education, among others.

Moving forward with orange economy initiatives demonstrates a national priority to facilitate growth of Colombia’s cultural footprint and support entrepreneurs in creative, artistic and technological areas. 

What are the benefits of the Orange Economy?

With this policy, entrepreneurs and small-scale companies and investors can find a robust framework to support their establishment and commercial success in Colombia. 

Rappi is one of the orange economy’s flagship success stories thus far. Rappi is a delivery service for food and other goods that operates through an application. Since its founding in 2015.  Now, Rappi not only dominates its respective service industry in Colombia, but is expanding to neighbouring markets. The application is proving to be a success in Ecuador. The growth and success of Rappi was – and remains – solidly backed by Colombian government through policies such as the orange economy.

Intellectual property protection crucial for creative development

What makes the orange economy so unique is the fact that intellectual property (IP) is being positioned as a commodity to generate economic development. People operating commercially in creative industries need strong intellectual property protections in order to ensure their work remains profitable. Backing companies’ and individuals’ IP rights has a twofold benefit; not only does it build commercial confidence and security in creative industries, but success for businesses in these areas means an increase in national revenue through taxes.

Related: Creative industries, turning creativity into cash

Local institutions such as the Ministry of Industry and Commerce, Colciencias and Superintendence of Industry and Commerce are equipped to support companies to develop their business models, and also protect their inventions with patents, trademarks and other legal resources defined by Colombian Law.

Commercial incentives for orange industry businesses

The specifics of the orange economy initiative include a number of valuable incentives for businesses looking at operating within one or more industries identified as ‘creatives’.

To enjoy these preferential conditions, foreign investors and entrepreneurs must first form or incorporate a company in Colombia, and ensure it’s registered with relevant local authorities. The business must meet regular compliance requirements as well, and can do so with local legal support.

Tax exemptions

Under the orange economy umbrella, the Colombian government offers a tax exemption for the first seven years of business. 

This exemption gives a helpful hand to investors. Operating over a seven-year period without taxes gives a company the opportunity to organize themselves in terms of accountability and other legal compliance, before full tax requirements are implemented.

New job opportunities 

The orange economy also aims to bring job opportunities to people without financial independence, which is considered crucial for the developing country. With the Orange Economy, businesses must now hire and pay seven employees. This policy aims to offer greater opportunities for local workers and reduce overall unemployment

Register with the orange economy

Investors can register their business in a creative industry to receive orange economy benefits.  They can create user profiles and register their business on the Ministry of Culture’s website page dedicated to orange economy companies. 

To register on this site, you’ll need to provide the following information about your company:

  • Certificate of Existence
  • Type of business structure
  • Tax Identification Number (known locally as a NIT)
  • Local code (known as CIIU) identifying the kind of economic activity
  • Company’s date of foundation
  • Description of the relevant economic activity identified in the orange economy framework
  • Information related to physical location, contacts and legal representation.

Apply for tax exemption

After providing this information, you can proceed with the project registration to apply for the tax exemption. According to the Ministry of Culture, three dates to present the proposal were launched to this current year during the months of March, May and October.

In 2020, the 3 periods for presenting project proposals have yet to be confirmed

The Ministry of Culture is responsible for approving these proposals within 30 working days of the application submission. This application can be completed online and doesn’t have an associated cost. Companies can complete the form through any electronic device.  The approval process is divided into four stages, and you may be asked to provide additional information during this time.

Foreign companies, investors and inventors face a unique opportunity to achieve success with their ideas in a country open to developing them. Colombia offers a talented workforce, legal stability and a sustainable competitive advantage for long-term commercial success. The orange economy will be the next step to increase economic development, strengthening the industrial, service and communication sectors to create a hybrid field to bring greater autonomy and diversity to Colombia’s commercial environment.

This article was provided by Biz Latin Hub ([email protected]).