Expanding Business Opportunities In Free-Trade Colombia
July 23, 2012
Dear Offshore Living Letter Reader,
Yesterday morning, while walking along the pedestrianized lanes of Medellin’s Avenida Poblada with Kathie and the kids, I wondered out loud why the entire world doesn’t live here. The weather’s great all year ’round, the city is big enough to offer cultural diversions, there are loads of outdoor activities, shopping, restaurants, and on and on.
My question was rhetorical, but there are reasons the whole world doesn’t live in Medellin, of course. One is straightforward–not everyone would be able to establish residency in Colombia. In that case, though, you could live here part-time.
Another reason Medellin isn’t for everyone is that, to get anything done here, you have to speak Spanish. You could move here speaking just a little, but, to enjoy the experience, you’d have to commit to continually improving your Spanish language skills. Negotiating with the guy with a shop along the side of the road between Medellin and El Retiro for him to make furniture for our terrace reinforced this point. The guy couldn’t have been more friendly, more helpful, or more charming, and he was happy to struggle through with my decent Spanish.
However, he, like several other small shop owners we did business with over the weekend, is apparently unable to read and write. Not only did we have to place our order and negotiate entirely in Spanish (unlike in Panama City, here in Medellin you can’t throw in generic English words and expect the person on the other end of the conversation to understand even if he doesn’t speak English), I also had to write out the order for him…well, Kathie did, as my handwriting is generally considered illegible.
Language challenges aside, Colombia continues to offer many opportunities for investors. My focus is real estate. Unfortunately, the apartment we bought and renovated has turned out to be too nice to rent. (I suspect this was Kathie’s unspoken plan all along.) The value now, though, is estimated at twice what we have invested, including the total renovation cost, so, from an investment perspective, we’ve still done ok, even if we never rent the place. However, my original objective in buying was to own a rental investment property in Medellin, which I see as one of the best markets for this in the world today. So now I’m looking for another apartment to buy specifically as a rental property.
Property prices in Medellin have risen over the past two years that we’ve been paying attention but are still very reasonable and can produce good yields (as I explain in more detail here). My focus is residential. However, good office rentals, condo-hotel units, and other commercial opportunities are also available.
I see interesting and expanding business opportunities here, as well (although you have to remember the language hurdle). The new free trade agreement between Colombia and the United States means that there’s now a big opportunity to make money exporting products to the States, for example.
The export options in this context would be wide and varied. Colombia is already the number-one exporter of flowers to the United States. Still, though, niches exist for this market.
Another interesting option occurred to us during our weekend shopping trip to the El Retiro area. We had already purchased several cow hides to use as throw rugs in the apartment, but our daughter, Kaitlin, wanted to buy another one for her apartment back in Panama. The lady in one shop took us upstairs to see what she had available. Kaitlin wandered into a small area with piles of hides and pulled one out that she liked.
At first, the shopkeeper wasn’t sure how to react, as Kaitlin had found the pile of hides intended for export. These hides, the lady explained to us, are better quality and therefore a bit more expensive. Kaitlin pushed a little, and the woman agreed to sell her the one she’d pulled out. It was bigger than any of the ones for sale in the shop and, indeed, nicer…but not that much more expensive than the others.
Back in the car, Kaitlin commented that the coloring and pattern of the hide made it ideal for purses and other leather items…which started us thinking.
We paid about $200 for the hide. You could resell it for multiples of that amount, just the hide itself, to a designer in New York, for example. Of, if you had the wherewithal, you could turn the hide into end-product and your profit margin could be greater. And, remember, we bought retail. Find a wholesaler and buy in bulk, and your cost of goods would be much less.
That’s just one example that presented itself randomly. My point is that the opportunities are many and everywhere if you’re paying attention. Especially, again, thanks now to the new free trade agreement.
The whole world isn’t going to come to live in Medellin, and maybe you won’t either, but you could, nevertheless, take advantage of the great weather and pleasant lifestyle while planting a flag or two as part of your big-picture plan to globalize your life.