Question

Compare the risk of opening a factory in Columbia, Panama, and Paraguay?

Answer 1

Starting or expanding a business to Colombia is an attractive option in Latin America but it is important to understand the challenges.

Colombia is one of the most attractive economies in Latin America for international markets and foreign investment. However, it presents some challenges in terms of tax, accounting, regulatory and foreign exchange. As signatory to 13 commercial agreements, Colombia receives preferential access to a market of 1.5bn consumers for companies investing in the country to access Latin America.

Risk of opening a factory in Colombia are:

Geographical Landscape: As previously mentioned, though Colombia holds a strategic location for international operations, its mountainous landscape makes domestic business operations between cities much more difficult; for this reason, manufacturers must be deliberate in how they setting up shop, analyzing the market of each Colombian market separately, determining what it will bear, and considering where they may wish to import/export from in the future in relation to that city’s location within the country.

Developing Infrastructure: Further exacerbating complications associated with Colombia’s topography, the country currently struggles in providing reliable and efficient means of public ground transportation within some of its major cities, such as Bogota, as well as improved highway networks between these cities; consequently, cities such as Bogota are pushing to expand their metro systems (projected to begin in 2015) and the federal government has proposed the “Highways for Prosperity” initiative, in which two new major highway systems will be created to benefit local business and residents alike.

Increasing Stability: There are certain areas that are of higher risk and best avoided; though unrest still exists between the Colombian government and local guerillas, it seems that the country has taken great strides in suppressing such conflict and implementing peace throughout the region.

Risk of opening a factory in Panama are:

Panama’s constitution dates back to 1972. According to political commentators it is insufficient to deal with the country’s current realities. Among concerns is an excessive concentration of power in the president, which has weakened other organs of the state, creating fragile institutions. This has been particularly evident in the case of the judiciary which has been, reportedly, inefficient at dealing with high profile corruption scandals.

Panama’s impressive economic performance has not translated into proportional increases in purchasing power for the majority of the population. Although inequality seems to be a key challenge for Panama, unemployment and extreme poverty have been reduced significantly. There is also a marked disparity between the rapid development of Panama City and the Canal Belt, compared to the countryside, where the other half the population lives. Panama has traditionally neglected its agricultural and industrial sector.

The principal human rights problems in Panama are lengthy pre-trial detention, harsh prison conditions marked by overcrowding, and widespread, low-level corruption, often practiced with impunity. Other human rights problems include delayed court proceedings, including a judiciary susceptible to corruption and outside influence

The law recognises the right of private sector workers to form and join unions. However, some concerns have been raised about the lack of right to form unions in strategic sectors of the economy such as banking and the Canal. Panamanian law also prohibits public servants from forming unions, though it does permit public servants to form associations that may bargain collectively on behalf of their members.

Although there’s no recent history of terrorism in Panama, attacks can’t be ruled out.

There’s a heightened threat of terrorist attack globally against UK interests and British nationals, from groups or individuals motivated by the conflict in Iraq and Syria.

Risk of opening a factory in Paraguay are:

orruption, contraband and weak judicial security are the main impediments. Poor infrastructure, particularly decent paved roads, is a major block to growth.

The principal human rights problems are impunity in the judicial sector, together with lengthy pre-trial detention and trial delays; harsh and at times life-threatening prison conditions; and police involvement in criminal activities including unlawful killings by persons associated with police and the military. The government has taken steps to prosecute and punish officials who committed abuses, but general impunity for officials in the security forces and elsewhere in government remains an issue.

Corruption is a major problem in Paraguay. It contributes to high levels of mismanagement and acts as an additional break on the already cumbersome bureaucratic system. According to the Corruption Perceptions Index by Transparency International, Paraguay ranked 123 out of 176 countries in the world in 2016.

There are no major commercial disputes, although there have been cases of the government not honouring contracts for public tenders. This is mainly due to changes in government. Those interested in participating in public tenders should contact the Embassy and seek advice beforehand.