INDUSTRY

General Information

The industry sector is dominated in number by small businesses although two thirds of all workplaces, the increase of wealth and the gross production are dictated by around 1.000 big businesses.

From the German point of view, very few middle-size businesses exist. For a Colombian, instead, a company with more than 200 employees (taking into account the labor intensive and nor rationalized production of most Colombian companies) is a large concern.

Also here, the dualism, already mentioned in the case of the agrarian sector, is clearly seen. In the industrial sector obviously a dualism in the aspect of technology occurs. From the point of view of costs the implementation of modern and capital intensive technologies is only advisable if production and moreover exports reaches an international level. A working hour just cost about 50 – 60 USD cents, compared to 12 US dollar and more in Germany.

External factors as the export of petroleum and coffee have an influence on the economic growth of the industry and should therefore be mentioned. First, because both produce a high proportion of the necessary foreign currency to acquire raw material. Second, because of the important contribution of the processing industry to the economic growth. In 1998 this sector contributed 18% to the Colombian GNP.

Internal factors of the country’s economic development are nor only the unemployment rate (1998: around 20%), but also sectors such as the building activity and the automotive industry, with a high requirement of supplier products. Also tax polices of the respective government have and essential influence. For some years, Colombia has maintained an annual economic growth of 3.5% to 5.5%. even in 1992, a year characterized by the energy crisis and the opening for imports, this economic growth lay at 5.3%, but stagnated in 1996 at about 4%. In 1998, the most critical year, Colombia did not have any economic growth (0.3%), which appears to be the first time in Colombian history.

ICONTEC is the official institution in charge of enforcing "Quality control” regulations, which are still one of the biggest problems of industrial production. Slowly, industrial concerns are acquiring the necesary know how and the required technology to carry out quality control.

The opening of imports, started in 1991, was extremely difficult for many manufacturers because they were forced to adopt new survival strategies. Hitherto, for the normal Colombian consumer, price has always been more important than quality. Examples of this statement are shown in the textile sector. The companies adapted themselves to this, producing minor quality for lower prices in spite of having the know-how and the technology. Today they must compete against low priced import products, so that quality is their only strategy to gain back market share.

 

Chemistry and the Pharmaceutical Industry

40% of the Colombian chemical industry works with foreign capital. Most of the huge multinational concerns are represented in the country. The large foreign investment turned this sector into one of the most important production branches quite early. It is one of the very few sectors in Colombia which do not work with low cost employees, but hire well trained personnel.

In 1998 the chemical industry imported raw materials for around 2.733 million US dollars, from which an important share accounts for the synthetic production. 992 million US dollars worth have been exported.

Colombia’s most important companies within the chemical industry are:
• Monómeros Colombo-Venezolanos
• Ecopetrol
• Petroquímica Colombiana
• Dow Química de Colombia
• Enka de Colombia
• Álcalis de Colombia
• Poliolefinas Colombianas
• Bayer de Colombia/Sucromiles
• Cia. Pintuco
• Hoechst Colombiana
• BASF Química Colombiana

Foreign investment is still higher in the pharmaceutical industry, only around 30% of the capital are in national hands.

The government indirectly controls prices of medications. The State interferes if the prices of basis medicines increases too much. The licensing procedure for new medications takes between one to two years on average. Already existing licenses for the product granted in other countries are taken into consideration.

In Colombia, the ex8istence of a social health system is not as exceptional as in Germany. Most medication are acquired privately, specially as they can be purchased – with very few exceptions (sleeping drugs, tranquilizers, and stimulants) – without any prescription.
The average Colombian prefers a consultation at the pharmacy rather than seeing a doctor. Nevertheless, the law that a pharmacy has to be managed by pharmaceutical professional with a university degree stipulates it.

In the pharmaceutical sector most of the raw materials are imported and processed. Around 20% of the production is acquired by the State and later distributed to the national cooperatives. The remaining 80% is sold through the pharmaceutical wholesale trade.

 

Mechanical engineering and the processing of metal

The engineering and development of machines is still in its infants stage. Besides small enterprises, in which people improvise, this sector is a typical import area.

Mechanical Engineering and Metal Products
1998
Annual Production USD 1.479 millions
Workplaces          USD 32.301
Imports                 USD 2.835 millions
Exports                USD162 millions
Source: DANE

The development of this sector is supported by the domestic demand, on first instance. A vigorous demand for instrument panels and machines for the processing of wood and metals exist, mainly produced by very small, small and medium sized companies.

There are few exports. They account for exported, nearly without exception, to countries members of the “Pacto Andino”.

Engineering of machines and the processing of metals are traditional import branches. North America, Germany and other European countries supply the market with machines and installations of any kind. German machines have had a good reputation over a long period of time. However, the competition of Japanese companies, which penetrate the market with their services as competitive advantage, is big.

National production includes electric motors, pumps, instruments panels and machines for processing wood and metal. Customers are generally medium sized and State owned companies.

 

Wood, Paper and printing

• Wood

The wood processing industry plays a relatively unimportant role within the processing industry. Small and medium sized companies characterize the structure of wood production enterprises. These have limited capital and are therefore restricted to make necessary investments for streamlining of production techniques.

Wood, Paper, Printing 1998
Annual Production     USD 2.973 millions
Workplaces              USD 63.943
Imports                     USD 571 millions
Exports                    USD 263 millions
Source: DANE

The technology used for the processing systems is in general terms insufficient and explains the poor productivity. Just few concerns, which produce chip and press boards, as for example the company called PIZANO, located on the Atlantic coast, are at the international level of standard.

The export of unprocessed wood is forbidden in Colombia. Processed wood and products made from wood are destined- nearly without exception- for the domestic market. In relation to the international efforts, concerning the conservation of the rain forest, the wood needed by the industry has to come out from specially controlled forest. These have to be reforested. Obviously, a country, as huge and difficult to access as Colombia, is very difficult to be controlled with the scarce means allocated by the national budget. This is the reason why it is well seen, that industrialized countries are restricting and prohibiting the import of tropical noble wood.

• Paper

The paper producing industry is practically limited to three big companies: The State owned PAPELCO, which has been struggling against enormous economical difficulties over the last years. Fortunately, it solved its situations thanks to a considerably high foreign investment PAPELES NACIONALES, COLOMBIANA KIMBERLY, FAMILIA S.A.., and PROPAL.

The manufacturing of packages, cardboard boxes and other containers, as well as corrugated cardboard produced in the country (and with raw materials extracted from the country’s forest, which are continually reforested) is the responsibility of CARTON DE COLOMBIA, a company operating with foreign investment. Other producers are following, in spite of not having the high-tech standard of this company, something that is indispensable for the exportation of packages. The missing competition is partly to blame to the high prices and generally, a satisfactory supply in relation to quality of packaging, is difficult.

• Printing

The graphic business sector is without any doubt one of the most dynamic industries in the Colombian economy. From the small handicraft business, which had been existing over the last twenty tears, developed a printing and editing industry that today occupies the twelfth position in the worldwide rank.

Until recently, Colombians had to import their books from Spain, Mexico or Argentina