Required Report - public distribution

**Date:** 10/4/2005

**GAIN Report Number:** CO5020

CO5020

**Colombia**

**Exporter Guide**

**Annual**

**2005**

**Approved by:**

![](media/image1.wmf)David J. Mergen, Agricultural Attache

U.S Embassy

**Prepared by:**

Alicia de Jacobs, Marketing Specialist

**Report Highlights:**

Total Colombian food and agricultural imports were \$2.1 billion in
2004. The United States accounted for 33.9 percent of total imports
valued at \$726.05 million, making Colombia our largest export market in
Central and South America. Colombia and the United States are
negotiating a bilateral free trade agreement. The trade agreement will
provide a major boost to the Colombian economy and imports of food
products from the U.S.

Includes PSD Changes: No

Includes Trade Matrix: No

Annual Report

Bogota \[CO1\]

\[CO\]

**SECTION I. MARKET OVERVIEW**

In 2004, total Colombian food and agricultural imports were \$ 2.1
billion. The United States accounted for 33.9 percent of total imports
valued at \$726.05 million, making Colombia our largest export market in
Central and South America. Demand for processed foods and other
high-value food products had a steady increase in the last three years.
The Colombian GDP grew 3.96% in 2004 slightly down from the 4% projected
by the Government. Agricultural imports from the United States went up
41% or \$211 million in 2004 versus 2003. This increase was due to the
economic growth and the peso re-evaluation (14% in 2004) that made
imports more attractive. The economy is projected to grow at least 4% in
2005 and 4.5% is projected for 2006.

Colombia and the United States are currently negotiating a bilateral
free trade agreement, with the goal of implementing the agreement in
January 2007. The trade agreement is expected to provide a major boost
to the Colombian economy and imports of food products from the U.S.

The food processing industry continues to be one of the largest and most
vital sectors of the Colombian economy, accounting for 21 percent of
industrial production and 17 percent of industrial employment. The
supermarket sector in Colombia is one of the most modern in Latin
America, with sales of US \$7.8 billion in 2004, of which \$5.3 billion
was in food products. The hotel, restaurant and institutional sector is
also important, generating 2.1 percent of GDP. Colombia has great
potential for growth driven by the tourism sector. The government has
fostered in-country tourism. Colombia is well endowed with human and
natural resources and as security improves, foreign investment and
economic growth have been strong and as well as growth in tourism, with
its concomitant demand for imported products.

Despite the political unrest, industry continues to develop.
Concentration and consolidation remain as dominant forces in the
Colombian food market. Domestic supermarket chains continue seeking
strategic alliances with foreign partners in a frantic effort to capture
market share. The giants of the market continue opening new stores.
Economic realities and current consumer trends indicate that buying
decisions are increasingly based on quality and price. Today's consumers
are more health-conscious and selective shoppers. Consumers have
benefited from the "price war" among competitors. Although most imports
are still handled through agents and distributors, Colombian importers
are constantly seeking alternatives to reduce high costs. Large
companies import directly, and end-users are increasingly establishing
contacts abroad. Additionally, there is a new retail market structure in
Colombia and the production-consumer chain has forced
distributors/suppliers to switch from being passive to active agents.

Several factors have a negative impact on the market: 1. As a member of
the Andean Community, Colombia imposes a variable import duty system on
more than 150 products, resulting in high and unpredictable duties. 2.
Restrictive import licensing requirements block imports of U.S. products
such as chicken parts. 3. Despite GOC efforts, artificially low-priced
contraband produces unfair competition and disrupts sales of legally
imported products, and 4. Internal conflict continues hindering economic
growth.

Despite the present limitations and constraints, the market is highly
competitive and will become much more open in the future when the
bilateral free trade agreement is in place. U.S. products enjoy an
advantage because they are well regarded for their perceived high
quality and value. This makes it more challenging than ever for small to
medium-sized exporters to get their products on supermarket shelves and
restaurant menus.

#  ECONOMIC OUTLOOK

![](media/image2.wmf)

![](media/image4.wmf)

![](media/image5.wmf)

![](media/image6.wmf)

# Market Overview

![](media/image7.wmf)

**Colombian Food Production**

![](media/image8.wmf)

-   The food industry is one of the largest and most vital sectors in
    the economy, accounting for 21% of industrial production, and 28.6%,
    if beverages are included.

-   Industry has state-of-the-art technology and modern communications.

-   Colombia is a major producer in many intermediate and consumer-ready
    categories, such as sauces and spices, dairy products, breakfast
    cereals, confectioneries, baked goods, poultry feed, pet food, oils
    and margarines.

-   Foreign processing food affiliates account for a large portion of
    processed food output. Some domestic food manufacturers import
    products from foreign affiliates, labeled as their brand.

-   Store-brand products have increased in the last two years. They
    captured 3% of food sales.

-   The food-processing sector depends heavily on imports of ingredients
    like spices, dry mixes for sauces, modifiers, preservatives,
    flavorings, enhancers and thickeners.

![](media/image9.wmf)

**Food and Agriculture Products Imported In 2003-2004**

+---------------------------+---------+---------+----------+----------+
| **PRODUCTS**              | *       | *       | **MARKET | **GROWTH |
|                           | *2003** | *2004** | SHARE    | RATE     |
|                           |         |         | %**      | 04/03**  |
|                           |         |         |          |          |
|                           |         |         | **2004** |          |
+---------------------------+---------+---------+----------+----------+
|                           | **US\$  |         |          |          |
|                           | MI      |         |          |          |
|                           | LLION** |         |          |          |
+---------------------------+---------+---------+----------+----------+
| Consumer -oriented Food   | 375     | 412     | 100.0    | 9.9      |
| Products                  |         |         |          |          |
|                           | 51      | 48      | **11.7** | -5.9     |
| **U.S.A**                 |         |         |          |          |
|                           | 324     | 364     | 88.3     | 12.3     |
| Others                    |         |         |          |          |
+---------------------------+---------+---------+----------+----------+
| Beverages                 | 57      | 66      | 100.0    | 15.8     |
|                           |         |         |          |          |
| **U.S.A.**                | 0.6     | 0.9     | **1.3**  | 50       |
|                           |         |         |          |          |
| Others                    | 56      | 65      | 98.7     | 16       |
+---------------------------+---------+---------+----------+----------+
| Raw Mat. & Interm.Prod.of | 425     | 547     | 100.0    | 29       |
| Animal Food               |         |         |          |          |
|                           | 232     | 360     | **65.8** | 55       |
| Production                |         |         |          |          |
|                           | 193     | 187     | 34.2     | -3.1     |
| **U. S.A.**               |         |         |          |          |
|                           |         |         |          |          |
| Other                     |         |         |          |          |
+---------------------------+---------+---------+----------+----------+
| Other Raw Materials for   | 296     | 346     | 100.0    | 17       |
| Agriculture.              |         |         |          |          |
|                           | 97      | 96      | **28**   | -1       |
| **U.S.A.**                |         |         |          |          |
|                           | 199     | 250     | 72       | 26       |
| Others                    |         |         |          |          |
+---------------------------+---------+---------+----------+----------+
| Raw Materials &           | 847     | 1027    | 100.0    | 21       |
| Intermediate Products for |         |         |          |          |
| Food Industry             | 391     | 546     | **53**   | 39.7     |
|                           |         |         |          |          |
| **U.S.A**.                | 456     | 481     | 47       | 5.5      |
|                           |         |         |          |          |
| Other                     |         |         |          |          |
+---------------------------+---------+---------+----------+----------+
| TOTAL                     | 2000    | 2052    | 100.0    | 2.6      |
|                           |         |         |          |          |
| **U.S.A.**                | 771     | 1050    | **51**   | 36       |
|                           |         |         |          |          |
| Others                    | 1229    | 1002    | 49       | -18      |
+---------------------------+---------+---------+----------+----------+

Source: World Trade Atlas

**2003-2004 Food and Agricultural Imports from U.S.**

+------------------+-------+-------+----------------+-------+-------+
| **PRODUCT**      | **2   | **2   | **PRODUCT**    | **2   | **2   |
|                  | 003** | 004** |                | 003** | 004** |
+------------------+-------+-------+----------------+-------+-------+
|                  | **U   |       |                | **U   |       |
|                  | S\$** |       |                | S\$** |       |
|                  |       |       |                |       |       |
|                  | *     |       |                | *     |       |
|                  | *MILL |       |                | *MILL |       |
|                  | ION** |       |                | ION** |       |
+------------------+-------+-------+----------------+-------+-------+
| Meat and Edible  | 4.2   | 0\*   | Mis.           | 29    | 40.6  |
| Meat Offals      |       |       | Grain,seeds    |       |       |
+------------------+-------+-------+----------------+-------+-------+
| Fish, Shellfish, | 0.4   | 0.6   | Animal or      | 16    | 16    |
| Mollusks         |       |       | Vegetable Fats |       |       |
|                  |       |       | and Oils       |       |       |
+------------------+-------+-------+----------------+-------+-------+
| Dairy Products,  | 1.2   | 2.0   | Preparations   | 12.5  | 4.7   |
| Eggs, Honey      |       |       | of Meat and    |       |       |
|                  |       |       | Fish           |       |       |
+------------------+-------+-------+----------------+-------+-------+
| Products of      | 2.7   | 2.0   | Sugars and     | 3.0   | 3.9   |
| Animal Origin    |       |       | Confectionery  |       |       |
| and other Animal |       |       | Products       |       |       |
| Products         |       |       |                |       |       |
+------------------+-------+-------+----------------+-------+-------+
| Live Trees and   | 3.0   | 2.7   | Cocoa and      | 1.8   | 1.3   |
| Plants, Bulbs,   |       |       | Cocoa          |       |       |
| Roots            |       |       | Preparations   |       |       |
+------------------+-------+-------+----------------+-------+-------+
| Vegetables       | 1.5   | 1.6   | Cereal         | 2.9   | 3.8   |
|                  |       |       | Preparations,  |       |       |
|                  |       |       | Flour,         |       |       |
|                  |       |       | Starches,      |       |       |
|                  |       |       | Milk, Bakery   |       |       |
|                  |       |       | products.      |       |       |
+------------------+-------+-------+----------------+-------+-------+
| Edible Fruits    | 8.0   | 8.0   | Preserved food | 3.6   | 4.8   |
| and Nuts, Citrus |       |       |                |       |       |
| Fruits           |       |       |                |       |       |
+------------------+-------+-------+----------------+-------+-------+
| Soybean meal     | 39    | 74    | Miscellaneous  | 15.4  | 18.5  |
|                  |       |       | Edible         |       |       |
|                  |       |       | Preparations   |       |       |
+------------------+-------+-------+----------------+-------+-------+
| Grains           | 323.6 | 424   | Beverages,     | 1.0   | 1.6   |
|                  |       |       | Spirits and    |       |       |
|                  |       |       | Vinegar        |       |       |
+------------------+-------+-------+----------------+-------+-------+
| Soybeans         | 35    | 48    | Residues and   | 39.3  | 74.2  |
|                  |       |       | Waste from     |       |       |
|                  |       |       | Food           |       |       |
|                  |       |       | Industries     |       |       |
|                  |       |       | /Prepared      |       |       |
|                  |       |       | By-Products    |       |       |
+------------------+-------+-------+----------------+-------+-------+
| Fruits and Veg.  | 6     | 5     | Cotton         | 97    | 96    |
| juices           |       |       |                |       |       |
+------------------+-------+-------+----------------+-------+-------+
| Lacs, Gums,      | 6.5   | 5.0   |                |       |       |
| Resins, Other    |       |       |                |       |       |
| Vegetable Saps/  |       |       |                |       |       |
| Extracts         |       |       |                |       |       |
+------------------+-------+-------+----------------+-------+-------+

World Trade Atlas

\* Due to BSE

**Market Entry Strategy**

**General suggestions to access the Colombian food market, raise sales
competitiveness and introduce new products:**

-   Calculate your level of competitiveness on the equation of high
    quality, moderate price and good service to meet increasing foreign
    competition.

-   Consider innovative marketing strategies when introducing new
    products. Social marketing strategy is a new approach. Sales
    generate funding for social programs. Leading supermarkets are
    deeply involved in social programs with customers' direct
    participation and alliances with NGOs. Exito has the "Children's
    program." Carulla customers are encouraged to donate small change
    for housing and educational plans.

-   Provide guarantee of consistent supply of products to large stores,
    hotel chains and institutional markets. Marketing strategies must
    meet the specific needs of the Colombian market.

-   Reinforce activities, such as trade exhibits, product sampling,
    advertising and campaigns.

-   Keep in mind that category managers are key people. They are in a
    position of being able to offer a service that is unlikely to be
    matched.

-   Be aware that Hyper/Supermarkets condition shelf space acceptance to
    discounts, promotions and/or additional cost.

-   Establish direct relations with leading companies to develop a low
    cost, direct sales approach and to offer products and services.

-   Develop a relationship with top executives, i.e, marketing
    directors, purchasing managers, and expose them to U.S. business
    practices. Take advantage of domestic food fears and exhibits.
    Alimentec is the Colombian trade show for food products and
    ingredients. It takes place in Bogota every other year. The next
    Alimentec Trade Show will take place in August 23-26, 2006.

-   Include after-sales service and customer support, which are decisive
    purchasing factors.

-   Prepare promotional material in Spanish or dual language. Product
    literature should highlight products and services available.
    Communication media have a great impact on Colombian consumers*.*

# Advantages for U.S. Companies and Products

  -----------------------------------------------------------------------
  The Colombian food market is dynamic and efficient. Demand in Colombia
  for processed foods and other high-value food products has grown over
  the past years.

  U.S. continues to be the number one trading partner of Colombia. The
  U.S. accounts for 33.9% (\$726.05 million) of food and agricultural
  imports.

  Most popular U.S. made products are well regarded by Colombian
  consumers, because they are perceived as being of good quality and good
  nutritional value. Many Colombians have traveled and studied abroad and
  have developed a taste for U.S. products.

  Alliances and merging with foreign companies are broadening the scope
  of the food business.

  Locally established multinational firms are taking advantage of their
  brand names to position new imported products.

  The readjustment of the retail market is paving the way for the new
  retail market structure in Colombia. The mini-market is a new and
  strong competitor of "Mom and Pop" stores, which continue to be the
  number one competitors of the hypermarkets/supermarkets.

  .

  Information and technology have become strong tools for food marketing.
  The Uniform Product Code and scanners at point of sale have been
  fundamental to collaborative planning, forecasting and replenishment
  aimed at increasing profitability and stock control.

  The Colombian government has changed investment policy to attract new
  foreign investors. Joint ventures, franchising and licensing agreements
  are increasing in number and value.

  The younger population (60% is under 30) has been stimulating the
  expansion of fast food restaurants. The deli business is one of the
  faster growing segments.

  Middle-income families are developing a taste for new and more
  sophisticated products. Colombian consumers are now more health
  conscious and selective shoppers.

  Changing lifestyles and the rise in female participation in the labor
  force (38%) will continue to stimulate demand for value-added food
  products.

  The shift from basic to high-quality foods is continuing. A surplus of
  ordinary low-price food products coexists with a shortage of
  high-quality food products. Colombians are now selective shoppers.

  Upscale and middle-income Colombian families are eating out more
  frequently, at least twice a month, devoting 24% of food spending for
  meals away from home.

  U.S. Food shows are excellent opportunities to introduce new products
  and set up personal relationships, meet customers and personally
  address their technical needs and requirements.

  Colombian business community knowledge of and confidence in U.S.
  business practices as well as geographical proximity help reduce costs
  of training trips, equipment transportation, etc.

  Supply channels have been streamlined. End-users increasingly are
  establishing direct contact abroad for sourcing new products and
  services.

  Colombia's strategic geographical position makes it a gateway to many
  other Latin America markets.

  Pre-shipment inspection has been eliminated
  -----------------------------------------------------------------------

**Challenges to U.S. Companies and Products**

  -----------------------------------------------------------------------
  Consumption of processed food is low according to international
  standards and highly price sensitive. Colombian households devote 34%
  of their earnings to food.

  Importers demand competitive prices, good quality and consistent supply
  availability. Category management practices by stores, including
  charging slotting fees for products, are overhead costs to be expected.
  The supplier absorbs at least 60% of price discounts.

  Competition has intensified. Food products from countries around the
  world are found on the shelves of Colombian stores, and Colombian
  companies and foreign affiliates are launching a variety of new frozen
  and ready-to-eat products.

  Consumer prices for food and beverage have declined more than total
  consumer price index. "Price War" among retailers has become a
  permanent tool to maintain market share and increase sales.

  Colombian consumers are now either time-constraint consumers who seek
  good quality and essential products, or "cherry pickers" after sales
  and discount products.

  Innovation and new concepts for a low-cost product portfolio is a must
  to gain market participation. The portion-pack business is an expanding
  sales venue.

  Investment in new outlets continues as part of the effort to penetrate
  regional markets and attract unattended consumers.

  Private brands are expanding rapidly though still incipient and
  limited. They represent 2.5% of total sales. Private brand margins are
  higher than other brand margins (20,4%). Similarly, private brand
  prices are 25.6% lower than third party prices.

  Franchising is an excellent opportunity for fast food restaurants,
  particularly through the expanding Gasmarts. Investment and foreign
  trade are keystones for economic development in the years to come.

  Procurement Law 80 regulates purchases and contracts by the government
  and state industrial and commercial enterprises. Given equal
  contracting conditions, the offer of goods and services of domestic
  origin are preferred. The GOC urges all official entities and
  decentralized industrial and commercial government organizations to
  \"buy Colombian\".

  For sales to the government, either directly or through international
  tenders, foreign bidders must: have legal representation in Colombia,
  register with the Colombian Chamber of Commerce under the so-called
  \"Registro Unico de Proponentes\" (Bidders Register), and be
  pre-classified and pre-qualified by the Chamber and, in some cases, by
  the Colombian government contracting agency.

  Colombia is negotiating a Free Trade Agreement with the U.S. with the
  goal of implementing the agreement in 2007, which will increase the
  Colombian imports from the U.S.

  U.S. suppliers should intensify market advertising and promotional
  campaigns and sampling to compete with the wide range of quality
  products available. After-sales service and customer support is a
  decisive purchasing factor in Colombia.

  U.S. suppliers should encourage buyers to tour suppliers/producers
  facilities and have business representatives tour their plants.

  The import process still has many layers. However, the GOC has
  introduced key modifications to significantly simplify the paperwork.
  Import/export procedures and customs clearances have become almost
  virtual. Documents are to be presented through electronic or magnetic
  media.

  Despite GOC efforts, artificially low-priced contraband products still
  produce a climate of unfair competition and disrupt sales of legally
  imported products.
  -----------------------------------------------------------------------

#  

# Section II Exporter Guide

# FOOD LAWS AND IMPORT LICENSING REQUIREMENTS

The average Colombian consumer, who is usually the urban consumer, has
developed some special characteristics that are explained basically on
Section III of this report.

Food Legislation: The basic piece of legislation dealing with food
products and human health in Colombia is Law 9 of January 24, 1979. All
decrees and regulations produced since then are based on the
above-mentioned Law.

**Import Licensing**: The Colombian Government maintains control over
imports through the Ministry of Commerce, Industry and Tourism (MOCIT).
All responsibilities in dealing with Colombian foreign trade have been
transferred to the MOCIT including the issuance of import licenses and
the registration of imports and exports as well as the handling of the
export incentives and administration of the certificates of sugar quota
eligibility (CQE's).

Because most, if not all, agricultural commodities require permits or
have to be approved by another government agency (i.e., the Ministry of
Agriculture), they need an import registration at the MOCIT to be
cleared through customs. There are three categories of imports in
Colombia:

**Free (libre) Imports**. Free imports are products whose importation is
not limited and do not need prior approval by the MOCIT. Free import
products must be registered at the MOCIT only if they are under the
special import-export program. The majority of agricultural product
imports requires authorization or permits from official institutions
(Ministry of Agriculture or Ministry of Social Protection/INVIMA) and
import registration at MOCIT.

**Prior License (licencia previa) Imports**. Import products that
require import registration with the Ministry of Agriculture or Invima,
in addition to approval of the MOCIT.

INVIMA - Import registration with INVIMA (the equivalent of FDA in the
U.S.) under the Ministry of Social Protection applies to most products
destined for the final consumer, such as meat and food products for
retail sales. While the registration process can sometimes be
complicated and costly (particularly for products destined for retail
sale), Invima has not used this process to prohibit imports.

ICA, Colombian Agricultural Institute -- ICA is the Ministry of
Agriculture agency responsible for sanitary and phyto-sanitary issues
(the equivalent of FSIS and APHIS). ICA is responsible for products
requiring sanitary or phyto-sanitary registration such as meat, fresh
fruits and vegetables, and animal inputs, including pet food. ICA
currently prohibits imports of beef and beef products from the U.S. due
to BSE related restrictions under ICA Resolution 3865 of Dec. 24, 2003,
and poultry meat from states where there have been outbreaks of Avian
Influenza in the last two years.

Ministry of Agriculture/General -- Products subject to import
registration in order to restrict imports for non-scientific reasons,
either to protect local production from import competition or to
regulate imports under tariff-rate quotas. These include products such
as poultry parts, which are banned, and products subject to tariff-rate
quotas (beef, corn, sorghum, rice and cotton).

**Prohibited (prohibida) Imports**. Imports on the "prohibited list" are
not allowed entry into Colombia. No food and agricultural products are
included into this category.

**Tariff Rates**

Most processed foods are assessed a 20 percent ad‑valorem import duty.
However, some high-value food product imports, such as fresh/chilled and
frozen pork and chicken parts, are subject to the Andean Community\'s
price band and reference price system, which can markedly increase the
Colombian import duty. The U.S. Government views the reference price and
price band systems applied by Colombia to be inconsistent with
Colombia\'s World Trade Organization obligations. The price band system
distorts trade and does not operate in a transparent manner. Colombian
processed food imports from Chile and other country members of the
Andean Community (Peru, Ecuador, Bolivia, and Venezuela) enter
duty‑free. This, combined with lower transport charges, provides a
significant cost incentive for local importers to turn to regional
suppliers rather than to purchase from the United States. This is
particularly true for fresh and processed fruit, wine, and at times for
meat.

For those U.S. products subject to the price band system, import duties
are calculated based upon the CIF adjusted floor, ceiling, and reference
price levels determined by the Andean Board of Directors. The Andean
Community establishes annual ceiling and floor prices every April. The
Andean Community adjusts the reference prices every two weeks. If, the
applicable reference price falls within the floor and ceiling price
band, the import duty is calculated by applying the common external
tariff rate for the Andean Community to the reference price. When the
reference price falls below the floor price, a variable levy, or
surcharge, is applied, which is based on the difference between the
floor price and the reference price. This surcharge is levied in
addition to the applied duty. Conversely, when the reference price
exceeds the ceiling price, a reduction is made to the applied duty,
based on the difference between the reference and the ceiling prices.

The following illustrates how Colombia\'s import duties are calculated
for those U.S. food products subject to the price band system. In the
example below, we have calculated Colombia\'s import duty treatment that
would be assessed against imports of chicken parts (if they are approved
for imports) arriving at Colombian ports July 16-31, 2005:

Price Band Ceiling Price \$1,580 per ton

Price Band Floor Price \$1,400 per ton

Reference Price \$1,120 per ton

Basic Duty Rate 20 percent

Variable Surcharge = (Floor Price - Reference Price) \* (1+Basic Duty
Rate)/Reference Price

Total Import Duty (50 percent) = Basic Duty Rate (20 percent) + Variable
Surcharge (30 percent

The Total Import Duty is updated and published on the web page of the
Andean Community
(http://www.comunidadandina.org/politicas/franja_circular.htm) twice a
month. The duty paid is the total import duty (50 percent) times the
declared import value.

**Value-added Tax (VAT)**

-   Most imports are subject to the VAT (value-added tax).

-   VAT is assessed on the CIF value plus import duties.

-   The VAT fluctuates between 2% and 16 %

-   VAT for Liquors and wine is 35%.

-   Law 788 of 2002 aimed to reform the tax system modified the VAT for
    a number of food and agriculture products:

    \*extended the VAT to imports of several agricultural products,
    including some feed ingredients, such as soybean meal and soybean
    oil.

    \*exempted from VAT fresh, chilled or frozen meats; fresh, chilled
    or frozen fish; some milk and skim, fresh cheese, milk preparations
    for infant use, eggs in shell and eggs for hatching.

    \*excluded from VAT more than 124 products including some meats,
    fruits, vegetables,

    milk and grains.

-   Imports of feed grains are levied a VAT of 10%

**Pricing Products**

-   Import duties are quoted ad-valorem on the CIF value of shipments.
    Retail prices of consumer-oriented imported products are generally
    60 to 120 percent above FOB prices.

-   Freight and insurance costs are 10 to 15 percent.

-   Other factors affecting import costs and retail price are peso
    revaluation, inflation, and financing.

-   Local manufacturers usually work with a markup varying from 15 to 30
    percent and wholesalers from 15 to 20 percent. Profit margins for
    consumer goods may reach 20 to 30 percent.

**Sanitary and Phytosanitary Measures and Other Licensing Requirements**

## Product Health Registration

All processed retail food items, including products imported in bulk for
repackaging for retail use without further processing, must be
registered and approved by the National Institute for the Surveillance
of Drugs and Food (INVIMA), an agency of the Ministry of Social
Protection (decree 3075/97). INVIMA charges a registration fee ranging
from \$534.40 to \$1,220.70 per product. According to Decree 3075 of
1997, product registration is not required for:

-   Products that are not subject to any transformation, such as grains,
    fruits, fresh vegetable, honey, etc.

-   Products of animal origin which are not subject to any
    transformation process.

-   Products used as raw materials by the food industry or HRI sector in
    food preparation.

A transformed product is defined by the GOC as having been subjected to
processing that resulted in a change in its internal structure.

INVIMA registration is valid only for the applicant (exporter or
importer) and the manufacturer specified in it. Whenever the U.S.
exporter wants to change its Colombian importer, there are two
possibilities:

\(a\) If the U.S. exporter is the applicant for the INVIMA registration,
he must submit an application for modification to INVIMA (cost 83,533
pesos or about \$36.32).

\(b\) If the Colombian importer is the applicant, the U.S. exporter must
initiate a new registration process, specifying his new importer(s).
Afterwards, he may change his importer(s) whenever he deems it
advisable. The U.S. exporter must apply through his legal representative
in Colombia or a lawyer.

INVIMA registration is valid only for the specifications (e.g.,
presentation and size) mentioned in the registration. If another
presentation of the same product is to be imported, the registering
company needs to inform INVIMA in writing of the new product.

INVIMA registration of processed foods requires: (1) a written document
from the manufacturer stating that it manufactures the product; and (2)
a certificate of free sale stating that the products are approved for
human consumption in the United States. This certificate needs to be
issued by a U.S. government (state, local or federal) health authority.
Although not strictly required, INVIMA registration is facilitated if a
description of the manufacturing process and a list of the ingredients,
including any additives, preservatives, and colorings (dyes), is
submitted. Since Colombia implemented the Hague Convention of October 5,
1961 with Law 455 of August 4, 1998, facilitating import documentation,
the above listed documents must carry an "apostille" stamp. The
"apostille" stamp fee amounts to \$20 each and it is produced by
different authorities in each State, i.e. a Notary or a State Secretary
or Under Secretary. This procedure replaced the notarization by the
Colombian Embassy or a Consulate in the United States and by the
Ministry of Foreign Affairs in Bogota. A translator approved by the
Ministry of Foreign Affairs must translate these documents into Spanish.

INVIMA charges a registration fee ranging from \$534.40 to \$1,220.70
per product. After the submission of all required documentation, product
registration by INVIMA takes about three working days (although we have
received reports that this can take longer). Internet can carry out most
of the product registration process. After issuing the product
registration, INVIMA analyses the documents provided by the importer and
may request additional information within a given period. Some importers
complain that this procedure may result in additional requirements that
become a non-tariff barrier to trade.

## Sanitary Permit

Products used as raw materials by the food industry or HRI sector in
food preparation do not need an INVIMA registration, but they do need a
sanitary permit from the Ministry of Agriculture's Colombian
Agricultural Institute (ICA). ICA is responsible for the issuance of
import sanitary permits for animal products, vegetables, fruits, grains,
pet food and agricultural inputs, including seeds and GMO's. The permit
details the phyto-sanitary and zoo-sanitary (SPS) import requirements
for the specific product. The Colombian importer must first obtain the
import permit from ICA, before requesting an import registration from
the MOCIT. The importer should supply the exporter with the ICA import
permit for submission to USDA. USDA then issues a sanitary export
certificate referencing the requirements in ICA's import permit. No
shipments should be loaded and transported without the submission of the
sanitary permit. Whenever, ICA issues new health requirements, the
health agency in the US is notified to see if it can comply with the new
requirements.

For ICA approval, the product must: (1) come from a USDA inspected
facility; (2) be free of disease; (3) be inspected by USDA prior to its
shipment and be accompanied by a USDA health certificate; and (4) be
inspected by an ICA veterinarian upon arrival in Colombia.

**Registration Requirements**

**Company/Importer Registration**

Every Colombian importer must be registered with the Ministry of
Commerce, Industry and Tourism (MOCIT). U.S. exporters seeking to sell
to a Colombian firm should ascertain that the Colombian importer has
obtained the legal authority to import agricultural products by
completing the Ministry of Commerce, Industry and Tourism registration
process. Once registered, the importer or importing company enjoys the
legal right to import any agricultural product.

Most agricultural imported products require an import registration form
(cost 30,000 pesos or about \$13) issued by the MOCIT. Import
registration approval takes about two working days.

**Labeling and Marking Requirements:**

The Government of Colombia (GOC) requires country-of-origin labeling for
processed foods. The GOC, however, does not classify frozen vegetables
as a processed food and, therefore, no country of origin labeling is
required. Also, fresh fruit and vegetables do not require country of
origin labeling.

The GOC issued resolution 0485 of February 25, 2005 through the Ministry
of the Social Protection (previously known as Ministry of Health)
establishing labeling requirements for canned food and food raw
materials. The regulation came into force beginning on September 15,
2005. The label must contain the following information: food product
name, list of ingredients, net content and drained weight, producer name
and address, origin country, lot identification, date marking and
instructions for product conservation, instructions for product use, and
sanitary registration number. These requirements apply to both domestic
and imported canned food products and food raw materials. GOC officials
have stated that stickers are admitted on the imported products, but
they must contain the information of the original label in Spanish. The
most important information is lot identification number and expiration
date.

[]{.mark}

Imported processed food products that are not destined for further
processing must comply with the labeling requirements mentioned in the
previous paragraph. GOC labeling requirements for processed foods do not
address the question of ingredient origin. Therefore, if an imported
food item contains ingredients from more than one country, for example,
U.S. and Canadian peas in the same frozen package, the label must only
identify the processor's name and address and the country where the
product was produced. The GOC's product labeling requirements for
imported processed foods do not require that the exporter identification
information be affixed in a specific part of the package.

Product labeling information on imported processed products must be
present at the point of retail sale. The responsibility for this
labeling information rests with the importer, not the retailer. Many
Colombian importers arrange for this information to be placed on the
product by the exporting firm, before it enters Colombia.

For processed products shipped with Spanish labels, the following
information must be shown: product name, name and address of importer,
name and address of producer, net contents in metric units, list of
ingredients, Ministry of Social Protection (INVIMA) registration number,
any recommended method of storage/conservation, and product expiration
date, if appropriate

Imports that are destined for further processing, such as mechanically
deboned chicken, do require country-of-origin labeling. The GOC also
does not require country-of-origin labeling for imported bulk-packed or
consumer-packed fresh fruits and vegetables. The GOC does not require a
sticker/label indicating country of origin on individual pieces of fresh
fruit. Colombian consumers, therefore, seldom are aware of the origin of
imported fruit and vegetables.

Labeling for Food Products. Food products that are canned, bottled,
filled or packed by (marketing agents) such as chain stores,
supermarkets, delicatessen, etc for further commercialization must be
labeled in accordance to this resolution and must contain at least the
following information:

1.  Name

2.  Ingredients list

3.  Net content

4.  Name and address of producer or importer

5.  Origin country

6.  Lot identification

7.  Expiration date

8.  Preservation method or system

**Import Documentation**

The following steps must be accomplished in order to carry out an
import:

a\) The exporter must provide a pro-forma invoice to the importer. The
invoice should contain the specific product name, quantity, weight, and
value per unit.

b\) The local importer should verify the Colombian harmonized schedule
to see how the product is classified and its import requirements.

c\) Based on the above information, the importer requests a commercial
invoice from the exporter, including the currency used for the
transaction, FOB or CIF prices, and terms of payment.

Importers should also take into consideration the following
recommendations:

1)  Where required, obtain sanitary permit for products from the
    Ministry of Agriculture\'s Colombian Agricultural Institute (ICA).
    All domestically produced and imported food products require a
    sanitary registration approved the National Institute for the
    Surveillance of Food and Medicines (INVIMA), which is part of the
    Ministry of Social Protection (decree 3075/97).

2)  Buy and fill out the Import Registration form. File the Import
    Registration form with the MOCIT.

3)  Obtain approval from MOCIT.for the Import Registration Form or
    Import License

4)  Make arrangements with a financial entity for payment of the
    importation either through a letter of credit or direct payment.

5)  Ask the exporter to ship goods to a Colombian port along with the
    packing list and certificate of origin that include an statement
    that the product is approved for human consumption, and expiration
    date.

6)  Request the bill of lading from the transportation firm.

7)  Make arrangements, with the SIAs or Customs Intermediary Entities to
    receive the merchandise. All merchandise must be transferred to
    either bonded warehouses or free trade zones. Transfers must be done
    within two days from airport arrival or five days from seaport
    arrival. Products are allowed a maximum of two months from the
    arrival date while undergoing customs clearance. A two months
    extension is possible. If extension period expires, products are
    declared abandoned by Customs.

    Note: The importer must keep import documents for a period of not
    less than five (5) years. Documents must be in Spanish.

Patents and Trademarks

-   The Superintendence of Industry and Commerce under the MOCIT is in
    charge of patents and trademarks.

-   Protection of patents, trademarks and plant varieties is based on
    regulations by the Andean Community of Nations (CAN). These are
    generally consistent with international standards for protecting
    intellectual property rights, and also govern protection of
    industrial secrets.

-   Patents have a 20-year term of protection.

-   Trademark registrations have a ten-year duration and may be renewed
    for successive ten-year periods.

-   Priority rights are granted to the first application for a trademark
    in an Andean Community country.

-   Colombia is a member of the Inter-American Convention for Trademark
    and Commercial Protection and the Treaty of Patent Cooperation. The
    Andean Community decision on patent and trademark protection also
    provides for protection of industrial secrets.

Copyright

-   Andean Community Decision 351/94 and Colombia Law 44/93 regulate
    protection of copyrights in this country. Law 44/93 extends computer
    software protection to 50 years, but does not classify it as a
    literary work.

-   Colombia belongs to both the Berne and the Universal Copyright
    Conventions. This decision provides a generally Berne-consistent
    system.

-   Law 44/93 significantly increased penalties for copyright
    infringement, specifically empowering the Attorney General's office
    to combat piracy. Ineffective anti-piracy enforcement in Colombia
    adversely affects employment, job creation and revenues, both in the
    United States and Colombia.

-   U.S. companies suffered trade losses due to copyright piracy
    exceeding \$108 million in 2003 in Colombia.

    Samples

-   As a general rule, samples require the same documents as commercial
    imports.

-   Samples are exempt from import license, registration form or import
    duty payment when

    they are consigned to a designated free trade zone, bonded warehouse
    or imported on a

    temporary in-bond basis.

Courier and Express Shipments

-   Courier or express shipments not exceeding US\$ 1,000 in value and
    20 Kilograms in weight are freely imported into Colombia.

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-   Air or surface shipment of products is allowed.

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```
-   The number of units of the same product should not exceed 6 units in
    order to be considered as a sample.

Distribution and Sales Channels

-   The Colombian food industry ranges from state-of-the-art processing
    food companies to all types of retail outlets, including
    sophisticated hypermarkets, supermarket chain stores, department
    stores, specialty stores, mini-markets, wet markets, cooperatives,
    street vendors and truckers who engage in door-to-door peddling.

-   Radio and TV sales, as well as Internet e-commerce sales are
    becoming more popular.

-   Direct marketing through credit card promotions, flyers, polls, and
    sales calls to either home or office sites are also popular,
    including home delivery services. Chain stores and large
    distributors have their own catalogs for phone, mail orders and
    internet purchases, which can be paid for by cash, check, or credit
    card.

-   Mini-markets, Mom & Pop stores, wet markets and traditional stores
    are retaining their 50% market share.

-   The number of suppliers has been growing along with those providing
    private brands.

-   Negotiations between the new retail structure and suppliers have
    changed. Suppliers deal with fewer but stronger retailers.

Joint Ventures/Licensing

-   Joint ventures, franchising and licensing agreements are increasing
    in number, value, and importance to improve competitiveness.

-   The Colombian government investment policy encourages foreign
    investments.

Sales Representative

As a general rule, it is advisable to appoint a local agent or sales
representative to help with import procedures, sales promotion and
after-sales service, in spite of the fact that Colombians prefer to deal
directly with manufacturers or through their export divisions, rather
than through outside representatives or brokers.

Importers And Distributors

-   The United States traditionally has been Colombia\'s main trading
    partner. Colombia is considered a natural market for U.S. products
    and technology, because of its proximity.

-   The bulk of purchases from the U.S. are made through
    well-established local importers, representatives and distributors.

-   Importers offer a full line of products to meet the domestic demand
    and to expand market possibilities.

-   Competition in the food market has intensified and supply channels
    have been streamlined. There are now a few large players with strong
    negotiating and purchasing power. Large numbers of end-users are
    purchasing directly from suppliers and/or manufacturers abroad,
    avoiding local representatives.

-   Colombian businesses are establishing direct contacts abroad to find
    new products and services. FAS/Bogota has detected an increasing
    interest in looking for new food products. This interest has been
    fueled by the marketing activities carried out by this office.

-   Suppliers to large store and hotel chains and institutional markets
    must provide guarantees of the consistent supply of products.

Colombian- Main Ports and Cities

\...\...\...\...![](media/image10.jpeg){width="5.472222222222222in"
height="5.722916666666666in"}

-   Colombia is located in the northwest corner of South America and has
    both Atlantic and Pacific coasts.

-   It has a strategic location, which makes it a commercial bridge into
    South America for North America, Europe and Asia.

-   Colombia has four seaports with container facilities, three on the
    Atlantic Coast: Barranquilla, Cartagena and Santa Marta, and one on
    the Pacific Coast, Buenaventura.

Top Colombian Importers and Distributors of High Value and Processed
Food -- Imports in 2004

+---------------+-----------------------------------+--------+--------+
| Importer      | Products                          | From   | Total  |
|               |                                   | U.S.   |        |
|               |                                   |        | US\$   |
|               |                                   | US\$   | Mill.  |
|               |                                   | Mill.  |        |
+---------------+-----------------------------------+--------+--------+
| Fruticola de  | Apples, grapes, kiwis             | 0.3    | 4.0    |
| Colombia      |                                   |        |        |
+---------------+-----------------------------------+--------+--------+
| Fruticola     | Fresh apples, plums, kiwis,       | 2.8    | 13     |
| Comercial     | cherries, garlic.                 |        |        |
| Panamericana  |                                   |        |        |
+---------------+-----------------------------------+--------+--------+
| Nestle of     | Poultry fat, condensed milk,      | 9.3    | 28     |
| Colombia      | lactose/whey, tomato sauce,       |        |        |
|               | bakery products, biscuits, cacao  |        |        |
|               | preparations, cereals.            |        |        |
+---------------+-----------------------------------+--------+--------+
| Italcol       | Cookie meal, meat meal, yellow    | 14     | 31.1   |
| Occidente     | grease. Oilseed meal.             |        |        |
+---------------+-----------------------------------+--------+--------+
| Harinera del  | Corn, wheat, sauces, margarine,   | 17     | 39     |
| Valle         | baked products.                   |        |        |
+---------------+-----------------------------------+--------+--------+
| Carulla -     | Vitamins, cheese, margarines,     | 0.8    | 0.7    |
| Vivero        | dairy spreads, bakery mixes,      |        |        |
|               | bakery enhancers                  |        |        |
+---------------+-----------------------------------+--------+--------+
| Grasas S..A.  | Sunflower oil, bovine animal      | 1.6    | 30     |
|               | fats, edible mixture of animal    |        |        |
|               | fats/oils of fish, soybean crude  |        |        |
|               | oil.                              |        |        |
+---------------+-----------------------------------+--------+--------+
| Industrias    | Glucose, sugars, bakery           | 33.1   | 35.4   |
| del Maiz      | enhancers, mixes and pastas.      |        |        |
+---------------+-----------------------------------+--------+--------+
| Colombiana de | Soybean oil, soups, frozen        | 0.3    | 0.6    |
| Comercio S.A. | potatoes, ketchup, tomato sauce,  |        |        |
| Corbeta       | pasta, canned tomatoes, bakery    |        |        |
| Alkosto       | mixes                             |        |        |
+---------------+-----------------------------------+--------+--------+
| Aceites y     | Bakery enhancers, shelled eggs,   | 3.4    | 4.8    |
| grasas        | chocolate blocks, cookies,        |        |        |
| vegetales,    | confectionary                     |        |        |
| ACEGRASAS     |                                   |        |        |
+---------------+-----------------------------------+--------+--------+
| Alimentos     | Cereals, orange juice, mineral    | 0.6    | 3.2    |
| Polar de      | water, apple juice, tomato juice  |        |        |
| Colombia S.A. |                                   |        |        |
+---------------+-----------------------------------+--------+--------+
| Effem         | Confectionery, pet food           | 13     | 21     |
|               | ingredients.                      |        |        |
+---------------+-----------------------------------+--------+--------+
| Nacional de   | Tuna, peanuts, almonds, soups,    | 0.1    | 10.4   |
| Chocolates    | broths, cocoa, lactose/whey,      |        |        |
|               | cereals.                          |        |        |
+---------------+-----------------------------------+--------+--------+
| Agrinal/Agri  | Sunflower seeds, soybean          | 10     | 16     |
| brands-Purina | oilcakes, dog/cat food, fish      |        |        |
|               | meal.                             |        |        |
+---------------+-----------------------------------+--------+--------+
| Amway         | Chocolate bars, confectionary,    | 0.8    | 0.8    |
| Colombia      | bakery mixes                      |        |        |
+---------------+-----------------------------------+--------+--------+
| Compania de   | Vinegar, sauces, tomato sauce.    | 17     | 21     |
| Galletas Noel |                                   |        |        |
+---------------+-----------------------------------+--------+--------+
| Rica Rondo    | Frozen pork, edible swine offal,  | 7.3    | 13.3   |
|               | and other edible pork.            |        |        |
+---------------+-----------------------------------+--------+--------+
| C.I. Agrodex  | Sweet corn, cheese powder, frozen | 0.5    | 2.4    |
| S.A.          | potatoes, cheese, jams,           |        |        |
|               | seasonings, cookies, bakery       |        |        |
|               | products, confectionary           |        |        |
+---------------+-----------------------------------+--------+--------+
| Avidesa Mac   | Corn, fish meal,, spices,         | 20     | 26     |
| Pollo         | cookies.                          |        |        |
+---------------+-----------------------------------+--------+--------+
| Productos     | Wheat, semolina, pasta, dry       | 1.1    | 12.6   |
| Alimenticios  | vegetables.                       |        |        |
| Doria         |                                   |        |        |
+---------------+-----------------------------------+--------+--------+
| Productos del | Vinegar, tomato sauce,            | 5.8    | 5.9    |
| Maiz S.A.     | mayonnaise, margarine, corn.      |        |        |
| Promasa       |                                   |        |        |
+---------------+-----------------------------------+--------+--------+
| Comerfruit    | Grapefruits, prunes, apples,      | 0.6    | 4.8    |
| Ltda.         | prunes, grapes, oranges           |        |        |
+---------------+-----------------------------------+--------+--------+
| Comestibles   | Vinegar, meat and fish bases,     | 0.8    | 1.1    |
| Alfa          | canned foods                      |        |        |
+---------------+-----------------------------------+--------+--------+
| Congrupo      | Food preparations, sauces,        | 0.6    | 1.2    |
|               | pickles, ketchup, vinegars,       |        |        |
|               | pasta, confectionary, mustard,    |        |        |
|               | soup bases                        |        |        |
+---------------+-----------------------------------+--------+--------+
| Crepes and    | Canned fruits and vegetables,     | 0.7    | 0.8    |
| Waffels       | mustard, cappers and olives       |        |        |
+---------------+-----------------------------------+--------+--------+
| Distribuidora | Wine, whiskey, seasonings,        | 0.6    | 1.7    |
| de vinos y    | breakfast cereals, canned fish    |        |        |
| licores       | products, cookies, vegetables and |        |        |
|               | grains.                           |        |        |
+---------------+-----------------------------------+--------+--------+
| Frigorifico   | Soy protein, cold cuts            | 0.6    | 1.1    |
| Continental   |                                   |        |        |
+---------------+-----------------------------------+--------+--------+
| Frigorifico   | Fruit preparations, olives, palm  | 0.3    | 2.4    |
| de la Costa   | hearts, capers, prunes, edible    |        |        |
|               | mixtures of bovine meat           |        |        |
+---------------+-----------------------------------+--------+--------+
| Importaciones | Fresh fruits.                     | 2.2    | 8.9    |
| y             |                                   |        |        |
| Exportaciones |                                   |        |        |
| Fenix         |                                   |        |        |
+---------------+-----------------------------------+--------+--------+
| Frigorifico   | Frozen pork, pig/poultry fats,    | 1.0    | 2.5    |
| Suizo         | edible offal.                     |        |        |
+---------------+-----------------------------------+--------+--------+
| Bavaria       | Hop cones of lupulin, malt.       | 3.7    | 42     |
+---------------+-----------------------------------+--------+--------+
| Cooperativa   | Frozen pork meat, fats, corn,     | 4.3    | 7.6    |
| Colanta       | breakfast cereals, milk           |        |        |
|               | replacements for heifers.         |        |        |
+---------------+-----------------------------------+--------+--------+
| Vigomez       | Fresh apples, pears, grapes,      | 0.3    | 5.3    |
|               | kiwis.                            |        |        |
+---------------+-----------------------------------+--------+--------+
| Quala S.A.    | Dried onions, ice cream flour,    | 0.6    | 1.8    |
|               | yeast, animal fats.               |        |        |
+---------------+-----------------------------------+--------+--------+
| Procaps       | Lactose, juices, honey, dry       | 1.2    | 2.0    |
|               | vegetables, fish oils, nuts.      |        |        |
+---------------+-----------------------------------+--------+--------+
| Productos     | Soybean oilcake, corn, animal     | 1.7    | 2.2    |
| alimenticios  | feed mixes, fish "pellets.        |        |        |
| El Galpon     |                                   |        |        |
+---------------+-----------------------------------+--------+--------+
| FEDCO         | Pistachios, frozen bread/pastry,  | 0.6    | 0.9    |
|               | mayonnaise, preserved vegetables, |        |        |
|               | sweet corn, tomato sauce, pasta,  |        |        |
|               | cereals.                          |        |        |
+---------------+-----------------------------------+--------+--------+
| Griffith      | Pastry, vegetables, spices,       | 0.4    | 1.2    |
| Colombia S.A. | lactose, isolated proteins, whey. |        |        |
+---------------+-----------------------------------+--------+--------+
| Frigoríficos  | Fruit preparations, olives, palm  | 0.4    | 2.2    |
| de la Costa   | hearts, capers, prunes, edible    |        |        |
|               | mixtures of bovine meat.          |        |        |
+---------------+-----------------------------------+--------+--------+
| Unilever      | Bovine fats, coconut and soybean  | 0,6    | 0.8    |
| Andina        | oil, cereal flours, tomato sauce. |        |        |
+---------------+-----------------------------------+--------+--------+
| Almacenes     | Tuna, frozen orange juice, bakery | 0.2    | 9.0    |
| Exito         | products, pastry, marmalade,      |        |        |
|               | cocoa preparations, Green peas,   |        |        |
|               | onions, garlic, fresh fruit, dry  |        |        |
|               | plums, olive oil..                |        |        |
+---------------+-----------------------------------+--------+--------+

Source: Customs Administration.

Standards

-   ICONTEC (Colombian Institute of Technical Standards and
    Certification), accredited by the Superintendency of Industry and
    Commerce (SIC) as a certification entity, is responsible for the
    development of technical standards. SIC performs under the MOCIT.

-   ICONTEC is a member of the International Standards Organization
    (ISO).

# Section III. Market Sector Structure and Trends

Hotels and Restaurants and Institutional Sector (HRI)

HRI sector sales of food and beverages in Colombia were estimated at
\$1.7 billion dollars in 2004 and are expected to grow 5 percent in
2005. The market has benefited from the arrival of world-class
hypermarkets, such as Makro and Carrefour, which are oriented toward
serving the food service sector. There are other Colombian hypermarkets
such as Alkosto, Carulla-Vivero and Almacenes Exito who are developing
strategies to serve the food service sector. Colombia is experiencing an
increase in hypermarket chains and a decrease in the number of HRI
sector importer/distributors. Foreign processed food brokers, who are
the major suppliers of the Colombian HRI sector, are facing strong
competition from domestic producers. Distribution channels for hotels
and restaurants have become more efficient, while the system for sales
to institutions is still relatively small and undeveloped. Public
institutions use very few imported products.

Colombia currently has relatively high duties for processed food
products imported for the HRI sector (generally around 20 percent) and
strict registration requirements that cost around \$800 per product
registered. The rising value of the Colombian peso relative to the U.S.
dollar and strong competition in the restaurant sector have, however,
made U.S. food products more attractive to local purchasers. The current
negotiations for a bilateral free trade agreement between the U.S. and
Colombia, Peru and Ecuador (the goal is to implement the agreement in
2007) have also generated more interest in U.S. food products.

Changes in consumer taste and consumption patterns and the rise in
female participation in the labor force have demanded new market
strategies. The remarkably young population, 70 percent of which lives
in urban areas, has new tastes and preferences and is more
health-conscious and selective. With rising participation of women in
the workforce and greater use of fast food restaurants, demand for new
high-value products is increasing. Current consumer trends indicate that
buying decisions are increasingly based on quality and price. There is a
general perception that U.S. products are of good quality and value.

The hotel and restaurant sector catering to tourism has potential for
growth driven by the tourism sector, though it continues to be affected
by persistent internal conflict. The government campaign "live Colombia
and travel in it" has fostered in-country tourism through out the
country, with a significant portion of the tourists traveling to
Cartagena and Santa Marta on the northern coast. Santa Marta is the only
tourism destination with large hotels catering exclusively to tourism.
Foreign tourism is still relatively small and generally concentrated in
the historic colonial walled city of Cartagena, while international
business travel is generally to Bogotá, Medellin, Cali, Cartagena and
Barranquilla.

Quick service and fast food restaurants, especially franchises, are
expanding rapidly. Colombians are getting more inclined to eat in fast
food restaurants due to working schedules, prices, and convenience. Most
of the fast food restaurants are American franchises, although there are
several local fast food restaurants that use American techniques and
marketing strategies. Currently, away-from-home meals represent nearly
24 percent of food spending. High and upper-middle income groups are
interested in foreign cuisine and are eating out more frequently, at
least twice a month, devoting 24 percent of food spending to meals
outside the home.

Most hotels and restaurants in Colombia buy food products from food
importers and retailers specialized in the food service. Fruits and
vegetables are mostly bought at wholesalers. Dairy products are bought
directly from Colombian dairy plants and distributors. There are ethnic
restaurants with specialized menus like Italian, French, Mexican, Cajun,
Japanese, Chinese, etc. Those restaurants buy the essential ingredients
for their menus from specialized importers. The restaurants that import
directly are local restaurants like "Crepes and Waffles" and owners of
upscale restaurants. International food chains such as McDonalds and
Fridays also import directly.

Colombia has a total population of 42 million and the restaurant sector
generates an estimated 300,000 direct jobs, while the hotel sector
generates 54,000 direct jobs. In 2004, total Colombian food and
agricultural imports (January-October) were \$1.74 billion of which the
U.S. accounted for 35 percent or \$599.5 of the total. Colombia
continues to be our largest export market in Central and South America.
Economic growth was 3.6 percent in 2004 and the projected economic
growth in 2005 is estimated at around 4%.

Food Processing Industry

The food industry is one of the largest and most dynamic sectors of the
Colombian economy accounting for 21.8% of industrial production and
28.6% including beverages. It generates 7.9 of GDP and 17% of industrial
employment. Colombian demand for processed foods and other high value
food products has grown steadily. Imports play an increasingly important
role in meeting consumer demand for food products.

Some industries have state-of-the-art technology and modern
communications. Others such as Harinera del Valle, Doria, Nacional de
Chocolates and Grupo Antioqueno are making significant investments to
modernize or expand production. Productivity has improved substantially.

Product lines have diversified and new products have entered the market.
Such is the case of the dairy industry with lactose free products, the
meat industry with low fat products; the baked goods industry with high
fiber and whole-wheat products and the oil and fats industry with low
cholesterol cooking oils.

Colombia is a major producer in many intermediate and consumer-ready
categories such as sauces & spices, dairy products, breakfast cereals,
confectioneries, baked goods, poultry feed, pet food, oils and
margarines and dairy products.

Top processing companies, such as Colombina, Alpina, Levapan, Industrias
del Maiz, Invernacional de Chocolates, etc. successfully compete in
international markets. Foreign food processing affiliates provide a
large portion of domestic processed food. Some of them have a number of
their brand lines produced by affiliates abroad.

Specific products showing stable sales are : fresh/frozen chicken,
turkey and pork, and poultry , mechanically deboned chicken meat,
cheese, fresh fruits, breakfast cereals, wine and beer, and assorted
snack foods. Feed grains represent the bulk of grain imports. Almost all
corn imports are directed to the feed industry, mostly for poultry. The
United States is the dominant supplier.

Food processing industries rely heavily on imported inputs, such as
thickeners, preservatives, modifiers, flavorings, dry mixes for sauces,
and spices.

The Retail Food Market Sector

The supermarket sector in Colombia is one of the most modern in Latin
America, with preliminary sales estimates of \$7.1 billion in 2003, of
which \$4.9 billion were food products. Despite significant growth,
fierce competition characterized Colombia's retail sector in 2003,
causing shrinkage in profits. Consumers have benefited from the "price
war" among competitors. The sector is consolidating a massive structural
change initiated in recent years. Strategic alliances, such as
Carulla-Vivero, took place in a frantic effort to modernize and capture
market share.

World-class hypermarkets, such as Makro and Carrefour, made their first
incursions into the country in 1998 and continue to expand. Carrefour´s
marketing strategies led it to a larger market share and a strong
position in the industry. In 2003 Carrefour purchased 35% of the stocks
held by the Grupo Santodomingo and 10% of those owned by the Spanish
company Sigla, ending up with a 100% ownership of the chain in Colombia.
Other significant acquisitions, such as the purchase of 28 percent of
Carulla by the U.S. based New Bridge, and of 28.6% of Exito by Casino (a
French enterprise) have reshaped the sector. Exito had previously bought
out the Cadenalco group, one of it's largest rivals, and in 2003
acquired the Comfamiliar chain; Olimpica in turn, purchased the Febor
chain (former Central Bank employees Fund). Furthermore, the arrival of
French giant Carrefour and Holland retailer Makro in Colombia, as well
as the sustained strength of local players such as Exito, Carulla,
Alkosto, Olimpica, Colsubsisio and Cafam, have unleashed a wave of
concentration in 50 percent of the retail market. On the other hand,
convenience stores are a new sales venue and are expanding in the form
of GasMarts. As a result, supply channels have been rapidly streamlined,
and end-users are increasingly establishing contacts abroad. Colombian
importers are constantly seeking alternatives to reduce high costs. The
new retail market structure in Colombia and the production-consumer
chain has forced distributors/suppliers to switch from being passive to
active agents.

Despite rapid modernization in the retail sector, traditional Mom \'n
Pop stores continued to consolidate as one of the most important
distribution channels in the country. They have regained the near 50
percent of the market share they had in the past, at the expense of the
market tigers and have been extremely resilient in the face of massive
modernization in the sector. This is because the hyper/supermarkets, do
not offer services, such as credit, small-quantity sales of bulk
products, and a proximity that appeals to the vast number of middle and
lower-income consumers. Likewise, they are expanding in a format of
mini-markets that are effectively competing with supermarkets.

Additional factors are expected to contribute to further expansion of
the retail food market: market leaders are investing in construction of
new modern shopping centers in which super/hypermarkets and cinemas are
the cardinal points; sales areas of between 6,000 and 12,000 sq meters,
offer a complete range of products and fulfill the increasing demand for
one-stop shopping. Investment also includes state of the art technology,
tailored logistics to save consumers time and money, remodeling and
improvement of service areas. Total investment will be nearly USD 172
million reinforcing the growth of the sector in the last three years.
The target now is to reach low-income consumers: the aggregate of low
income population has quite a large budget to spend in massive
consumption products, which are less sensitive to family earning
declines.

# Competition, Consumer- Ready Food

Colombia is a strong competitor in the production of:

  ---------------------------------- ------------------------------------
  Product                            Company

  Dairy products                     Alpina, Colanta, Parmalat, Purace,
                                     Nestle

  Breakfast cereals                  Kellogg's, Nestle, Quaker

  Snacks                             Frito Lay -Margarita, Savoy Brands,
                                     Yupi, Nabisco Royal, Kraft Foods

  Baked foods                        Levapan, Bimbo, Ramo, Comapan

  Confectionery                      Colombina, Noel, Warner Lambert,
                                     Nacional de Chocolates,Chiclets
                                     Adams, Italo

  Oils and margarines                Grasas S.A.,Unilever, Lloreda,
                                     Acegrasas, Gravetal

  Dry mixes for sauces, mayonnaise,  Unilever-Disa-Best Foods,
  ketchup, mustard, jellies,         California, La Constancia, El Rey,
  condiments                         Productora de jugos, Frutos del
                                     campo

  Poultry feed and pet food          Solla, Purina, Finca, Italcol,
                                     Contegral, Nestle Pet care,etc.

  Canned food products               La Constancia, Fruco, Comapan

  Canned tuna fish                   Van cans, Tune
  ---------------------------------- ------------------------------------

# Best Products Prospects

Colombia is a growing market for value-added food products. Surveyed
retailers and producers feel there is significant potential for new
products in almost all food product categories.

Healthy and ethnic food categories are new and especially new and fast
growing. Also, wines and gourmet products are penetrating the market
with excellent results. Frozen products represent 38% of total sales,
followed by chilled products 34% and, dry products 24%.

Fast food chain restaurants are the largest buyers of frozen products

**Business Practices and Habits**

**Travel Warning and Visas**

# Related Reports

+-----------+----------------------------------------------+----------+
| **Report  | #### Report Name                             | **Date** |
| No.**     |                                              |          |
+-----------+----------------------------------------------+----------+
| CO4007    | Wine and Liquor                              | 6-02-04  |
+-----------+----------------------------------------------+----------+
| CO4011    | Retail                                       | 9-15-04  |
+-----------+----------------------------------------------+----------+
| CO4017    | Bakery Premixes                              | 12-30-04 |
+-----------+----------------------------------------------+----------+
| CO-5003   | Oilseeds and Products                        | 02-01-05 |
+-----------+----------------------------------------------+----------+
| CO-5005   | Grain and Feed                               | 03-10-05 |
+-----------+----------------------------------------------+----------+
| CO-5006   | HRI                                          | 03-01-06 |
+-----------+----------------------------------------------+----------+
| CO-5007   | Sugar                                        | 04-10-05 |
+-----------+----------------------------------------------+----------+
| CO-5010   | Coffee                                       | 05-15-05 |
+-----------+----------------------------------------------+----------+
| CO-5015   | Fairs                                        | 07-29-05 |
+-----------+----------------------------------------------+----------+
| CO-5016   | Fairs Export Certificates                    | 08-31-05 |
+-----------+----------------------------------------------+----------+
| CO-5020   | Rice Update                                  | 10-04-05 |
+-----------+----------------------------------------------+----------+

For further information, visit the FAS home page at
[http://www.fas.usda.gov](http://www.fas.usda.gov/).

# Post Contact Information

**Office of Agricultural Affairs**

**U.S. Embassy, Bogota, Colombia**

Calle 22D Bis, No. 47-51

Apartado 3831

Bogota, Colombia

**David Mergen**

Agricultural Attaché

U.S. Mailing Address: U.S. Embassy - Bogota

Agr Section, Unit 5119

APO AA 34038

Phone: (57-1) 315-2138

Fax: (57-1) 315-2181

Email: agbogota@usda.gov

**APHIS Attaché**

**(Agricultural and Plant Health Inspection Service)**

U.S. Mailing Address: U.S. Embassy - Bogota

Agr Section, Unit 5103

APO AA 34038

Phone: (57-1) 315-2192

Fax: (57-1) 315-2191

Email: usdacol@colomsat.net.co

**COLOMBIAN GOVERNMENT CONTACTS**

**Ministry of Agriculture and Rural Development**

Colombian Agricultural Institute (ICA)

(Phytosanitary and Zoosanitary requirements office)

Calle 37, No. 8-43, Piso 4

Bogotá, Colombia

Deyanira Barrero-León

Deputy Manager Animal Health Protection and Regulation

ICA -Instituto Colombiano Agropecuario

Calle 37 \# 8-43, Of. 401

Bogotá, Colombia

Tel. (57-1) 320-3654, 332-3700/ext: 250 259

Cel pone: (315)899-7032

Fax: (57-1) 232-4695

e-mail: subgerencia.pecuaria@ica.gov.co

Jaime Cardenas, Head

Plant Inspection Guarantee-Health Risk

ICA -Instituto Colombiano Agropecuario

Calle 37 \# 8-43, Of. 401

Bogotá, Colombia

Tel: (57-1) 232-4709

Fax: (57-1) 288-1753

E-mail:sanidad.vegetal@ica.gov.co

**Ministry of Social Protection**

National Institute for the Surveillance of Food and Medicine (INVIMA)

Division of Food and Alcoholic Beverages

(Food Products registration and Health permits)

Carlos A, Robles

Carrera 68D \# 17-21 Zona Industrial

Bogotá, Colombia

Phone: (57-1) 294-87003 Ext. 3920

Fax: (57-1) 315-1762

E-mail: invimasal@invima.gov.co

**Ministry of Foreign Trade**

Juan Guillermo Castro

Director of Commercial Relations

Calle 28, No. 13A-15, 6th Floor

Apartado 240193

Bogotá, Colombia

Phone: (57-1) 606-7676 Ext. 1433

Fax: (57-1) 606-7539

E-mail:jcastro@mincomex.gov.co