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PRESIDENT Jose Luis Sánchez DuPont de Colombia S.A. First Vice-President Carlos Vegalara E. Casa Toro Automotriz S.A. Second Vice-President Christian Onneto Cisco Colombia Treasurer Gustavo Dreispiel Pricewaterhouse Coopers Legal Counsel Mariana Posse Posse Herrera & Ruiz Executive Director Camilo Reyes Rodríguez Fiscal Auditor Édgar Antonio Villamizar González Baker Tilly Colombia General Edition AmCham Press and Communications Office [email protected] Phone: (+57 1) 587 7828 / Ext. 155 - 121 Cell Phone: (+57) 316 482 7324 Calle 98 Nº 22 - 64 Of. 1215 www.amchamcolombia.com.co Edited in Bogotá, Colombia National and international circulation Designed by: Rosario A. Castellanos [email protected]

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Summary clic k t h e titles to go :

MESSAGE FROM THE EXECUTIVE DIRECTOR TRADE AND INVESTMENT INSIGHTS Invest in a Bigger Colombia. SPECIAL GUEST A new Council shines a spotlight on U.S.- Colombia trade.

MARKET OPPORTUNITIES Monsú: The new investment Opportunity in LATAM and the Caribbean. SUCCESS STORIES Colombia: One of Cisco’s top 10 emerging countries. Payless opens its new Super Store in Colombia and first one in South America. BUSINESS ENVIRONMENT Colombia: An overview for investors. Tax and customs benefits obtained from investing in Non-Conventional Sources of Energy (NCSE) in Colombia. BUSINESS MONITOR →→ →→ →→ →→

USD - COP U.S. - COL Balance of Trade Main Exports/Imports Foreign Direct Investment

AMCHAM EVENTS XXXIII AmCham Colombia Golf Tournament 4th AmCham Colombia Business Meeting YOU MUST DO Colombia, guest of honor in “Memphis in May” Festival

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MESSAGE FROM THE EXECUTIVE DIRECTOR

Diego Santacruz

AMC H AM COLOMBIA | Page 1 / 1

Camilo Reyes Rodríguez Executive Director, Colombian-American Chamber of Commerce (AmCham Colombia)

The Colombian - American Chamber of Commerce - (AmCham Colombia) is an Association of enterprises founded in our country 62 years ago, with the main purpose of increasing trade and investment between Colombia and the United States. During all these years the Chamber has created wealth, jobs, progress and wellbeing in both countries. We are now launching a new instrument -AmCham Colombia Business Express- through which the private sector in the United States will get relevant information regarding the business environment and opportunities in Colombia. Therefore, the following E-Newsletter aims to review main topics such as: the overview for doing business in Colombia, show success stories in our country, discuss about legal procedures to enter the Colombian market and other tax benefits for companies among other indicators in regards to the trade and investment between Colombia and the U.S.

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Stand-out from the crowd and reach a unique audience Partnering with AmCham Colombia represents a huge opportunity to network with more than 1000 American and Colombian companies.

Advertise With Us!

Contact: Daniel Vásquez | [email protected] Phone: (+57 1) 587 7828 Exts. 110 - 102

@AmChamCol

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Cámara de Comercio Colombo Americana

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Invest in a Bigger

By: Felipe Jaramillo, President of ProColombia

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EXPORTS TOURISM INVESTMENT COUNTRY BRAND

he trust generated by the country’s macroeconomic performance, the increasing employment rate and the implementation of the peace agreement, among other geographic, natural and social factors, such as its geostrategic location, biodiversity and human resources, makes Colombia a key country for the expansion plans of American companies. The United States is the most important business partner for

Colombia, with a cumulative amount of USD 15,472 million between 2010 and 2016, in terms of foreign direct investment, according to data from the Central Bank of Colombia. It is also the main destination of Colombian exports with 31% of total sales abroad. The United States is the largest

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emitter of travelers to Colombia; about 2’000.000 American visitors have selected our country in the last five years.

The increasing and dynamic trade exchange between the two countries is supported by a long political, economic and commercial relationship backed with the signing of the Free Trade Agreement (FTA) that allows a direct, permanent and stable business scenario. Moreover, Presidents Donald Trump and Juan Manuel Santos have recently expressed their willingness to continue cooperating on important issues for both countries including the construction of peace and the strength of bilateral trade. With the FTA in place since 2012, famous firms have invested in Colombia, including Victoria’s Secret, Forever 21, Sanford Group, Johnny Rockets, Keller Williams, Marriott International, Hilton Worldwide, Best Western Hotels & Resorts, MWH Global, General Motors, Dow Chemical Company, GAP and Rep Grey.

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According to recent reports made by the United States Embassy in Bogotá, more than 250 American companies operate in the Colombia, including multinational organizations such as IBM, Citibank, ExxonMobil, General Motors, P&G, Hilton, 3M, Brinks, Cisco, DuPont, EY, General Electric, PWC, Pfizer and PepsiCo. These companies play an important role in the Colombian society to boost business plans and programs in Colombia, but most importantly to engage local governments, private sector and communities in building peace projects. It is widely known that Colombia is going through one of the most important moments in its history as the peace agreement was signed in November 2016 and it is expected that the transition to a stable and durable environment will report important dividends for the country and its regions. Nowadays, the country is recovering important lands that were controlled by the guerilla groups which mean that there are big business opportunities in sectors like agriculture, infrastructure, public utilities, financial and business services, manufacturing, construction, and hotel and catering, among others. However, agriculture unveils great opportunities for new investments in 11 regions that, due to the country’s past conflicts, are only just starting their integration process with the rest of the country. According to the Ministry of Agriculture and Rural Development, there are more than 4 million hectares suitable for agricultural activity in economic sectors like cereals, oleaginous

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plants, soybean, fruits, vegetables, forestry and livestock farming. Therefore, it is expected that this sector will receive a major part of the international investment because of its great potential for economic growth. According to the Food and Agriculture Organization of the United Nations (FAO), Colombia is one of the five countries known as a world food larder because of its location, land and availability of natural resources. In response, Colombia has released the “Colombia Siembra” program that aims to increase food production, develop agricultural businesses, strengthen the technological development of rural areas, and boost the sector from 2.3% in 2014 to 6.2% by 2018. As a result, the long lasting relationship between the United States and Colombia could encourage new business opportunities for companies from both countries. Moreover, PROCOLOMBIA found that another activity with great potential is Research and Development (R+I) since Colombia is considered one of the megadiverse countries in terms of its richness in fauna and flora, but also different kind of ecosystems and habitants. These ample resources and possibilities represent an appropriate scenario for cosmetics, medicines, medical devices and tourism. The good news is that this is a segment under construction so there are plenty of opportunities to improve these sectors in our country. There are also business opportunities in services, manufacturing, technology, renewable energy, logistics and tourism sectors making Colombia

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an ideal location to establish new businesses and expand your markets. Therefore, we invite you choose Colombia for your next investment. For more information, please go to www.procolombia.co

Overall business conditions •

Colombia is a country with a high availability of skilled labor in the region, which is an important issue for business development and growth; therefore, the country has the capability to provide and export supplies, goods and services to more than 1,500 million consumers worldwide.

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Some of the business platforms are located in Free Trade Zones (FTZ) all over the country and they include tax incentives for international investors.

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Thanks to the effective trade agreements, the country is able to provide legal stability, which combined with positive economic incentives has attracted companies and investors from all over the world.

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Colombia also offers a competitive domestic market of 48 million citizens listed as the third most populated country in Latin America.

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Colombia is connected to the main business centers of the Americas and Europe with more than 1,050 international flight connections a week.

The country is one of the 30 destinations that receive the higher foreign direct investment according to the UNCTAD, and it was recognized as a tourism and business location by prestigious international publications such as The Economist, Forbes, Le Monde, Le Figaro, The Telegraph, Lonely Planet, Condé Nast Traveler and CNN.

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P ro C olombia

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U.S. and Colombian chief executives pose for a photo with President Santos, Vice President Biden and members of both governments at the U.S. - Colombia Advisory Council in Cartagena.

By: U.S. Chamber of Commerce

A new Council shines a spotlight on U.S. - Colombia trade STA RT R E A D I N G N E X T PAG E 

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olombia and the United States share more than a commitmentto democracy, open markets, and regional stability. They have developed an important strategic partnership forged through the security cooperation of Plan Colombia and commercial ties strengthened through a bilateral free trade agreement (FTA). The fact that Vice President Joe Biden traveled to Colombia in his final weeks in office, and both President Trump and Vice President Pence have

spoken with President Santos in their first weeks in office speaks volumes about the U.S.-Colombia relationship. Given the strategic focus on this partnership and the peace efforts ongoing in Colombia, the work of AmCham Colombia and the U.S. Chamber of Commerce is more important than ever. In recognition of this, the U.S. Chamber of Commerce is establishing a U.S.-Colombia Business Council this month. It will be the Chamber’s 14th bilateral council, joining countries like Japan, Brazil, India, Turkey and most recently, the United Kingdom, with this distinction. The Council aims to foster the strongest possible economic and business relationship between the United States and Colombia, and like the goals of the FTA itself, to expand trade and promote economic growth in both countries. The creation of the new U.S.-Colombia Business Council emerges from a year of discussions that AmCham Colombia and the Chamber have fostered between the private sector and the governments on increasing commercial activity between the countries, including two high-level dialogues with President Juan Manuel Santos. During his February 2016 visit to the Chamber, as he welcomed the announcement of a bilateral advisory forum in Cartagena, which paved the way for the new Council, President Santos celebrated the U.S. business community, saying it “helped Colombia become the fastest-growing economy in South America.” In December, the Chamber, AmCham Colombia, ANDI, and the Embassy of Colombia collaborated to organize the bilateral advisory forum in Cartagena, where U.S and Colombian CEOs met with President Santos, Vice President Joe Biden, and the Ministers of Trade, Foreign Affairs, Finance and Public

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Credit, and Mining and Energy to discuss the bilateral economic relationship. The forum featured a series of plenary and roundtable discussions where participants discussed investor perceptions of Colombia, key challenges and opportunities in the Colombian market, and ways to maximize the U.S.-Colombia relationship through robust FTA implementation. The leaders of all five AmCham Colombia branches participated in the event, and Camilo Reyes, Executive Director of AmCham Colombia, addressed the opening plenary. The CEOs also highlighted the importance of innovation in key sectors like ICT and energy, as well as the need to prioritize education and infrastructure in Colombia’s post-conflict rebuilding.

The Leaders of AmCham Colombia with U.S. Embassy Commercial Counselor Michael McGee (center) at the advisory forum in Cartagena.

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The themes of the forum and the momentum from these discussions, supported by a memorandum of understanding signed by the Chamber and ANDI, define the focus for the new Council and laid the foundation for increased collaboration to address these issues. Executives expressed support for a program of work that focuses on trade and investment, energy and mining, health, ICT and education, and these sectors will be the initial focus of the Council’s policy recommendations. Since the beginning of the year, the Chamber and AmCham Colombia have already hosted meetings in Washington, DC with Vice Minister of Foreign Trade, Javier Gamboa, Technical Director, Hector Castro from the Ministry of Health, and Education Minister Yaneth Giha to begin working in these areas. On May 18th, the U.S. Chamber of Commerce, AmCham Colombia and ANDI hosted the second binational business summit in Washington, D.C., that provided insights to both governments on what it takes to grow and compete in the global economy. Furthermore, the group discussed the progress that has been made in the five years since the FTA was signed and engaged with senior officials of the U.S. administration on the next steps for strengthening the U.S.-Colombia strategic relationship.

“On May 18th of this year, the U.S. Chamber of Commerce, AmCham Colombia and ANDI hosted the second binational business summit in Washington, D.C.”

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The new investment opportunity in LATAM and the Caribbean

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Monsú, our most ambitious initiative located in northwestern Colombia, is a new industrial and logistics city which spans 268 hectares and was built in response to the needs the industrial and economic growthin the region. It is considered the ideal place for new businesses that connect with the main markets of the world: the East Coast of the United States, Europe, and Central and Latin America.

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onsú offers attractive options to boost investments It is the country’s first Megapark with 32 hectares of free trade zone to provide investors with the advantage of the legal tax benefits offered by Colombia’s Free Zone regime, leveraging competitiveness and

giving access to differential rates. This 5-in-1 mega-project combines industrial and commercial cooperation between By: Juan Pablo Rivera, President ZFB Group

the different zones: Free Zone (32.1 hectares), Logistics Activity Zone + Business Park (25 hectares), High Impact Industrial Park (32.5 hectares), Business Services Area (9.1 hectares), and Expansion Zone (20.6 Hectares). Therefore, it is a relevant option as a global business platform that is capable of offering lots, warehouses and large yards in its first stage of development with the highest international standards of commerce infrastructure.

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“in the midst of the new tributary reform and the peace agreement scenario in Colombia, Monsú will be a great option as a destination for new foreign investment, taking into account the advantages and built capacities that the Caribbean region has to offer today”.

Some of its benefits are: 1) an income tax rate of 14% below the rest of the zones of the country (34%) with no custom duties nor aggregated taxes (VAT & tariffs) for goods entering the free zone from abroad, 2) no parafiscal contributions (equivalent to 9% of the payroll) and 3) 100% of VAT exemption (19%) for raw materials, inputs and finished goods acquired in Colombia. As a result, the entire value chain can be optimized just by using promotional tools for international trade as well as purchases at lower costs, high product quality and short delivery times. Monsú also takes advantage of local tax incentives due to its strategic location in the Colombian Caribbean Coast (18 miles from Cartagena and 62 miles from Barranquilla, which are the main seaports of the region). This area established important tax breaks (up to 10 years) such as commercial operation and property taxes exemptions, as well as tax discounts that are applicable to new constructions in each of the zones mentioned above, simply by having an approved construction license.

A smart decision for all type of companies In 2017, ZFB started its pre-sale process with seven hectares that are ready to be occupied by companies from logistics, trade, manufacturing and many other industries

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that provide different types of products and services from a wide range of economic sectors. Previous organizations from industries such as petrochemical, metallurgical, construction, plastic, and food, among others have also been involved as the price of land per square meter is very competitive compared to Mexico and Central America. Currently, Monsú is home to companies like Cemex, the multinational building materials enterprise, which has a strong presence in the region with a 50 million dollar production plant, as well as Puma Energy, an international oil company which will start to build an oil station in the first half of the year. The construction, promotion and operation of Monsú, is backed by ZFB Group, an accredited member with 20 years of experience in the construction and real estate sector, and the leader in managing and developing competitive environments for businesses in Colombia. In 2016 alone, ZFB made 654,827 trade operations in 6 permanent Free Trade Zones and 30 Special Free Zones which represented 35% of the free trade zones of Colombia. Over the years, ZFB has built 270,000 m² around the country in Cartagena at la Candelaria Free Trade Zone, in Cali at the Pacifico Free Trade zone, in Cauca at Cauca Free Trade zone and Barranquilla at Palermo Free Trade Zone. Juan Pablo Rivera Cabal, CEO of ZFB Group, expressed that “in the midst of the new tributary reform and the peace agreement scenario in Colombia, Monsú will be a great option as a destination for new foreign investment, taking into account the advantages and built capacities that the Caribbean region has to offer today”. Therefore, Monsú remains a great proposal to generate value and increase competitiveness in your business.

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SUCCESS STORIES C I S C O | Page 1 / 6

One of Cisco’s top 10 emerging countries

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The growth prospects of Colombia’s economy situate this market as one of the most promising for Cisco in Latin America and the world. From the market perspective, it is the largest in the region after Brazil and Mexico; if we speak of dynamism, it can only be compared with Peru and Chile; and if it is about expectations and projections, no other country compares.

By: Christian Onneto, president Cisco Colombia.

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t Cisco, we have defined the next top 10 emerging countries and Colombia has a special place in this list. Being among this list, means that there is a special focus at the corporate level in this market, and there are investment funds that we are focusing on in Colombia in order to create and define new business models regarding mobility, cloud and interconnection between objects and processes with people.

Our new office in Colombia, just opened a couple of years ago and it has all the characteristics of a modern business model. This important investment that we made in Colombia was conceived as a strategic value proposition, not only for all our customers and partners, but also for the entire market. In spite of already having physical presence in Bogota and Medellín, these new headquarters will help us to continue to reach, understand and cover the Colombian businesses more comprehensively.

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In addition, for the past 15 years we have been working in the Cisco Networking Academy (CNA) program in Colombia, an IT initiative that is considered the largest classroom in the world with more than one million students participating in different countries every year. The CNA helps students and instructors to deliver top-quality IT skills and career programs by using a single online platform that, in Colombia, has already impacted thousands of students across the country. Moreover, our company brought to the country, the Cisco Entrepreneur Institute, a corporate initiative that seeks to strengthen the entrepreneurial spirit, increase employment and help to develop and maintain economic growth throughout the world. With this program, we foster innovation, growth and prosperity in Colombia, but at the same time we help to transform the economic and social reality of the country by providing entrepreneurs with specific business knowledge that offers business advice and mentoring, internet business solutions for SME’s, and technology enabling processes. In Cisco we understand that the success of education and training programs requires efficient and high level technological platforms. Therefore, the Cisco Entrepreneurship Institute has partnered with the National Learning Service of Colombia - SENA to provide a wide range of applications that enable management, access and interaction solutions. As a result, hundreds of facilitators and entrepreneurs have been trained since 2009. We’ve also been committed to the connectivity development, not only for businesses, but also for the country, as emerging social, economic, productive and educational opportunities rise in all regions of Colombia. Thus, our company has donated a Cisco TelePresence Room to the

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“In Cisco, we predicted that between 2012 and 2017 the information flow within mobile networks will grow 17 times in Colombia” Colombian Government, which is one of the largest collaborative technology innovations that integrates ultra-high definition audio and video as well as interactive elements to provide the experience of a live face-toface meeting, via internet. This action lies on one of our current pillars: we work with educational institutions to bring connectivity to the classroom; therefore, it impacts the educative systems and models by making them more accurate to the needs of the XXI century. We are a company that is committed to Colombia’s progress and we firmly believe in its potential as a country and society. From Cisco, we identified two types of opportunities in Colombia: the first one is technology coverage as there is a place for a higher market penetration with mobility, collaboration and data center technologies; and the second one is related to geographic coverage, since there are great chances to grow considerably in cities like Barranquilla, Cali and Medellín.

Insights for the coming future In Cisco, we have identified several opportunities in the Colombian market and I would like to focus on two of them: broadband connection and the increasing entrepreneurship and business networks. According to our last Broadband Barometer study, the opportunity to penetrate with more broadband connections in Colombia is big. Much

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progress has been made in just a few years since the market penetration is 9.1%, which shows great potential, especially when compared to other countries in the region. In this sense, one of the main concepts that Cisco has been working on is the Internet of Everything, which is the intelligent connection of people, processes, data and things. Bringing people, processes, data and things together to make networked connections more relevant and valuable than ever before is not only a huge opportunity to turn information into actions, but also to create new capabilities, richer experiences and

Cisco has been working on is the Internet of Everything –which is the intelligent connection of people, processes, data and things–, to make networked connections more relevant and valuable than ever before.

unprecedented economic opportunities for businesses, individuals and countries. In Cisco, we predicted that between 2012 and 2017 the information flow within mobile networks will grow 17 times in Colombia. That prediction make us think that Colombia is a market with great potential when it comes to corporate clients when we see the growth of industries related to financial services, retail, health and manufacturing. There are a lot of things to be done, especially when it comes to video and data center business perspectives. Besides this, there is an important ingredient in the Colombian economy: the entire entrepreneurship and business network that is continuously growing in Colombia

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and it will bring new needs and expectations for connectivity, security, collaboration and cloud services. There is a need for companies to be more productive and competitive and Cisco works every day to build leading solutions in order to optimize daily tasks. For example, the increasing importance of teleworking is taking us towards consolidating these practices inside organizations to positively affect the quality of life and efficiency of workers. Cities like Bogotá, Medellín, Cali, Barranquilla and Bucaramanga will keep working on models to become smart cities in Latin American and we would like to support these processes. Moreover, from our insight, the Government will keep on using connectivity as the locomotive of growth and progress for Colombian society and this is important news for the country’s development and well-being. Our confidence in Colombia, leads us to think that we can double our operation in the coming years. We are convinced about this, as we firmly believe that there are currently many opportunities, as well as in the future. Colombia has been an excellent market; however, it will continue grow as the peace process continues. Ambitious goals such as becoming the most educated country in Latin America, the entry of Colombia in the OECD, and the infrastructure growth are important milestones to guide the development and forge a brilliant future. Therefore, Colombia will continue to be a priority, and it should be too for American companies that are considering expanding to one of the most important markets in the world. To all these companies, we look forward to seeing you in Colombia and we invite you to count on Cisco as your ally in this country.

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Payless opens its new Super Store in Colombia and first one in South America By: Payless Colombia

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Since 2008, Payless has been in Colombia and it has investments of more than $34 million dollars in the Colombian economy.

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ayless is an American discount footwear retailer that started to sell its products in 2008 in Colombia by taking huge steps in the local economy. With an initial investment of USD $200,000, our company, which is a member of Amcham Colombia just opened its first Super Store in Colombia (its third one in South America) last march.

The Super Store concept is a retail format that Payless has been implementing with great success since 2013. Based on ample and well-lit spaces, these stores offer a wide range of products

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that almost doubles the range available in traditional stores. Therefore, more than 13,000 references and accessories are available to our customers, which, compared to a regular store represents just 30% of our products on a normal basis. This Super Store is located in Plaza Central Mall in Bogota and its 600 square meters promises a great place for shopping. However, this is just one example of our strategy of consolidating our business, not only in Colombia, but also in the region. Today, Colombia has become our principal South American market, given that our operations here are the largest in the region in terms of sales and number of stores. Currently, Payless counts on 82 stores throughout the country, with 26 of them located in Bogota, the country’s capital which has a huge potential of 9.1 million of customers. As you can see, we strongly believe in the strong performance of Colombia’s economy and therefore, we have made investments of more than $34 million dollars. According to Guillermo Barreto, CEO in Colombia and Regional Operations Chief in South America, the company found a strong business climate which is evidenced through our customer’s positive response to our quality and service proposition. In this sense, Barreto points out that “We want to keep offering our customers the best footwear and accessories portfolio, combined with a unique shopping experience. That is why we decided to open our new Super Store here. We are really proud because Colombia was chosen as the country to develop these new kinds of stores in South America, which is great news for the country since it will create new job and investment opportunities”.

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An overview for investors By: Lloreda Camacho & Co (LC&C)

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ursuant to the World Bank’s Doing Business 2017 index, Colombia is ranked as the 2nd best economy in Latin America for doing business. Colombia is the leader in Latin America in strategic variables such as “starting a business” and was recognized as the second economy in the world in terms of credit access. In macroeconomic terms, Colombia’s GDP was worth USD$292 billion in 2015 and the GDP per capita is approximately USD$6,104.

Colombia has entered into several free trade agreements with strategic countries and economic areas such as Mexico, El Salvador, Guatemala and Honduras, CARICOM, Mercosur, Chile, EFTA, Canada, U.S., Cuba, Nicaragua, European Union, South Korea and Costa Rica. Colombia is also a member of the Andean Community (Ecuador, Peru and Bolivia) and part of the Pacific Alliance (Mexico, Peru, and Chile).

1. Corporate vehicles Investors must incorporate a company or a branch in Colombia if the business entails a permanent activity. The decision on which vehicle or corporate structure should consider specific requirements for each investor and additional regulations imposed by special entities that govern certain sectors (e.g. oil and gas and financial services). From the variety of corporate structures, LC&C identified common vehicles as: (i) branch of a foreign

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company; (ii) simplified corporation (sociedad por acciones simplificada in Spanish); (iii) the corporation (sociedad anónima in Spanish) and; (iv) limited liability companies (sociedades de responsabilidad limitada in Spanish). The first one refers to branches of foreign companies that are business establishments of foreign companies created by the main office to carry out permanent activities in Colombia. Thus, the branch is not a different legal entity from its foreign parent company. The second one is simplified corporations that are a very flexible type of legal entity and, for such a reason, is the main mechanism for businesses in Colombia. This type of legal entity may be incorporated with only one shareholder as the liability of the shareholders is exclusively limited to their contribution to the company’s equity. On the downside, simplified corporations cannot be listed on the stock exchange. The next one regards to corporations, which is the predominant legal vehicle before the introduction of the simplified corporations. The main characteristics of this corporate structure is that a stock corporation shall have a minimum of five shareholders, a sole shareholder can have up to 94.99% of the company’s shares and the shareholders' liability is limited to the amount of each shareholder’s contribution. Besides this, corporations must have a Board of Directors. Finally, limited liability companies are not very common in Colombia (as the simplified corporation is the predominant vehicle). The transfer of the quotas requires a public deed and an amendment of the by-laws. The company shall have a minimum of two and a maximum of twenty-five quota-holders. The quota holders' liability is limited to the

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amount of their respective quotas, except in the case of tax and labor liabilities.

2. Foreign investment Foreign investment in Colombia is legally treated as Colombian investment; therefore, governmental authorities may not discriminate against foreigners by imposing more conditions than those applicable to local investors. Foreign investment must be registered with the Colombian Central Bank. Duly registered investments, confer the investor exchange rights to: (i) remit abroad the profits generated by the investment; (ii) reinvest the profits; (iii) capitalize any amounts that can be remitted abroad; and (iv) remit abroad the amounts resulting from the sale of the investment in Colombia or from the liquidation of the investment.

3. Taxes Although taxes and tax rates vary for the type of investment, the basic taxes to be taken into account by a foreign investor are: •

Income tax: In Colombia it is levied on the income that increases the taxpayer’s patrimony. However, for foreign investors the tax is levied only over income received in Colombia. The income tax rate is determined on a yearly basis. For 2017 the tax rate is 34% plus a 6% surcharge applicable in certain circumstances (surcharge only applicable for 2017 and 2018). Investors located in Chile, Spain, Canada, Mexico, Switzerland, South Korea, India, Portugal, the Czech Republic and countries of the Andean Community of

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Nations (Equator, Peru and Bolivia), may be eligible to apply the double taxation treaties entered into by Colombia. •

Value Added Tax (VAT): This tax is levied on goods and services (but also over the sale of new buildings and constructions). With few exceptions, the general VAT rate is 19%.

•

Industry and trade tax: It is related to industrial and commercial activities. In general terms, it is a local tax where municipalities have the autonomy to set rates between 0.2% and 1.4%.

•

Financial Transactions Tax: Levied over financial transactions involving the Colombian financial system. The tax rate is 0.4%.

Please note that Colombia introduced transfer-pricing rules in 2002 and they have been enforceable from fiscal year 2004 onwards. Transfer-pricing rules apply to income taxpayers that enter into transactions with an economic affiliate party domiciled abroad (cross-border and inter-company transactions) and they require the use of the arms-length principle to determine prices in those types of transactions.

4. Anti-corruption In 2016, Colombia adopted the OECD standards against bribery and corruption. Bribery (including transnational bribery) and corrupt acts can be punishable not only as a criminal offense, but also through an administrative proceeding conducted by the Superintendence of Companies. The new sanctions establish fines and penalties to companies involved in local and transnational acts of corruption of up to 200,000 times the minimum monthly wage (in 2017, approximately USD $50 million), and this situation can lead to the suspension or the cancellation of the corporate chart.

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Tax and customs benefits obtained from investing in Non-Conventional Sources of Energy (NCSE) in Colombia

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By: José Abusaid, executive director Abusaid Gómez & Asociados

A

ct 1715 of 2014 was enacted with the intention to bring diversity to the actual energy supply system, and to attract companies and individuals to invest in renewable energy projects, by granting them tax and customs incentives. This document conducts a brief description of the benefits:

1. Income Tax

Incentives are exclusively directed to those investors who invest directly in the research, development and production or generation of non-conventional energies in the country. This benefit consists in deducting, in a period no longer than 5 years after the investment is made, up to 50% of the amount invested, from the income tax liability. Besides, the annual deducted tax cannot exceed 50% of the net income of the taxpayer for that specific year. In addition, to obtain this incentive it is necessary to have an approved environmental certification from the Ministry of Environment and Sustainable Development. The general requirements to access to this incentive are: 1. Investors must obtain the Certification of Environmental benefit issued by the Ministry of Environments and Sustainable Development according to the terms of the article 158- 2 of the Tax Code, and other related rules to this disposition. Moreover, investors must obtain a certification from the “Mining and Energy Planning Unit” (UPME in Spanish), which is part of the Ministry of Mines and Energy of Colombia.

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The incentive will not be applicable when: 1. The investment is made through a lease back agreement or any other method that doesn´t imply the transfer of ownership of the assets. 2. The contracts that were used to get the deduction are cancelled or rescinded. In this case, taxpayers will have to refund the incentive by incorporating the amount of the benefit as a liquid rent for recovery of deductions, under the terms of article 195 of the tax code and taking into account the taxable year in which the contract was

“To obtain this incentive, the investor must have a certificate of all the equipment and services issued by the Ministry of Environments and Sustainable Development (specifically ANLA, or division of environmental licenses) where the reduction is recognized, and therefore, it can be applied”

cancelled or terminated. 3. If the assets subject to the investment are disposed of before the end of the depreciation time or the amortized period, the beneficiaries of the deduction must return the incentive, by returning it as a liquid income for the recovery of the deductions under the terms of the articles 195 and 196 of the tax code, taking into account the taxable year in which the alienation was perfected.

2. Value Added Tax (IVA in Spanish) In addition to this, the law grants an exception of the VAT in any purchase related to the equipment needed in the pre-investment or investment phases of the project. To obtain this incentive, the investor must have a certificate of all the equipment and services issued by the Ministry of Environments and Sustainable Development (specifically ANLA, or division of environmental licenses) where the reduction is recognized, and therefore, it can be applied. As the spirit of this act is to promote the use of NCSE, this incentive applies to the purchase of national or imported equipment, elements and machinery, or the acquisition of

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services inside or outside the national territory, that are destined to new investments and pre- investments for the production and use NCSE. As a result, the Colombian government expects to foster new investments, research and development projects in NCSE, as well as those destined for the measurement and evaluation of potential resources of energy.

3. Customs Duties This law also grants an import duty waiver on imported equipment and supplies intended exclusively for pre-investment and investment projects. As a result, this exemption can only be applied to NCSE generation projects and must be requested to the Colombian tax and customs authority (DIAN in Spanish) within a minimum of 15 working days before the import of the good, in accordance with the project documentation endorsed by the UPME certification. Additionally, the Free Trade Agreement (FTA) between Colombia and the United States includes special protections to foreign investors that ensure that their investments will not be subject to illegal discrimination, and expropriation. If needed, the FTA allows the investor and the states to resolve

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disputes at an international arbitration panel.

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USD - COP E xchange Rate

1 USD =

JANUARY 2017

FEBRUARY 2017

MARCH 2017

APRIL 2017

COP $2,944.65

COP $2,881.68

COP $2,943.49

COP $2,873.55

Source: Central Bank of Colombia

B alance of trade bet we e n Colom bia and the Unite d States

2016 $13,099,479,639

$13,795,801,977

Exports

Imports

Colombia is currently the

25th

largest trading partner of the U.S.

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U. S . E XP ORTS to Colom bia U.S. exports to Colombia decreased to $13 billion compared to 2015 ($16.2 billion). In 2016, leading domestic exports from the U.S. included:

Petroleum & Coal products

Chemicals

Computer and Electronic Products

Agricultural products

Transportation equipment

Food manufactures

All others

$2.8

$2.4

$1.3

$1.2

$1

$1

$3.1

billion

billion

billion

billion

billion

billion

billion

U. S . IMP ORTS from Colombia U.S. imports from Colombia totaled $13.7 billion in 2016 and decreased $300 million compared to 2015 ($14 billion). In 2016, leading imports categories included:

Oil & Gas

Primary Metal MFG

Agricultural products

Petroleum & Coal

Mineral & Ores

Food manufactures

All others

$6.2

$2

$1.9

$814

$515

$428

$1.8

billion

billion

billion

million

million

million

billion

Source: United States Census Bureau – Office of the United States Trade Representative Office – International Trade Administration

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Investment In 2016, U.S. Direct Investment in Colombia represented US$ 2.1 billion, an increase of 5.3% compared to 2015.

2015

2 BILLION 2016

2.1 BILLION Source: Central Bank of Colombia

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XXXIII AmCham Colombia Golf Tournament - September 8, 2017 Sport and business in one place

Make it possible at the XXXIII Amcham Colombia Annual Golf Tournament. A place to exercise and network with Colombian Senior Executives.  September 8, 2017 

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4th AmCham Colombia Business Meeting - October 20, 2017 Join us and participate in more than 10 business meetings in one day and boost your business opportunities through efficient speed networking sessions with Colombian companies from different economic sectors.  October 20, 2017 

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Colombia guest of honor in “Memphis in May” Festival

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C

urrently, the bilateral relationship between Colombia and the United States is going through an excellent moment, furthermore, the cultural and commercial exchange between the two countries are growing significantly. In the last five years, Colombia became one of the top commercial partners of the U.S. consequently

being accompanied by a cultural and gastronomic integration never seen before. Is not surprising that “Memphis in May”, an important and recognized festival invited Colombia as honored country of the 2017 version. This international event is world famous because

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attendees can enjoy a month of different activities and live an unparalleled experience in the city of Memphis, also known as the capital of the Blues. The first days of the festival are dedicated to music, thus in this edition more than 60 bands and artists will perform multiple concerts that will delight the public and spark the party. Afterwards, from May 8th to 20th Colombia will participate with conferences, presentations, film screenings and exhibitions. Colombian-born Chef Juan Felipe Camacho will honor Colombian cuisine with five-course menu in an environment in which Colombia and Memphis will be united by their flavors. Likewise, Sergio Saavedra and Daniel Kaplan will represent Colombia in the World Championship Barbecue Cooking Contest America's most prestigious barbecue cooking competition which will be held from May 17th to the 20th. Memphis is a wonderful city and with Colombia as an honored guest, this year’s edition seems more attractive and wonderful as ever. You will enjoy incredible gastronomic and cultural experiences that will contribute to continue to strengthen the ties and relationships between both countries. We invite you not to miss this great festival full of activities; food, beverages, music and cultural exchanges.

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