Colombia’s ripening marketPosted on Written by Reagan Haynes
The Cartagena International Boat Show grew exponentially in its second year as attendance rose 165 percent, from 1,300 in its inaugural year to 3,455 this year.
The March 22-24 show included a U.S. pavilion for the first time, reflecting a concerted effort by the Republic of Colombia to ramp up its nautical tourism, infrastructure and relationships.
Organizers say there were 126 percent more exhibitors this year than last — 93, compared with 41 —and more than twice the boats, with 27 on display. There were 16 first-time exhibitors at the American pavilion, which was organized by the National Marine Manufacturers Association.
“I can tell you that our exhibitors within the U.S. pavilion were very satisfied with the quality of attendee,” says Julie Balzano, who heads the export program for the NMMA.
With the country’s culture — and coastlines on the Pacific and Atlantic oceans that have several major ports — the country is poised to develop the recreational boating industry, says Santiago Rojas, Colombia’s minister of tourism, industry and commerce.
“In Colombia now, we see tourism as one of the main sources of employment,” Rojas said at the show. “In Colombia, of course, we have two seas on our borders. Nautical tourism and all of the industry around it is very important. We are out of the hurricane zone. In Cartagena, we decided to work with the chamber of commerce to develop a cluster of nautical industry. That means working very closely with businesses, boatbuilders and shipyards to help create more services around the industry.”
The country is accepting marina proposals for at least one of the government-sponsored projects it has in the works.
“Increasing nautical trade and tourism is a top focus for Colombia,” says Maria Claudia Lacouture, president of Proexport Colombia, a government agency responsible for boosting tourism and exports.
“With 13 free trade agreements and access to two oceans, Colombia provides an ideal location and environment for maritime business, Lacouture says. “The government has made investments in all of our ports to increase the number of berths and make them more accessible to trade and cruise vessels. Our strategy includes making sure foreign companies are aware of the benefits of creating and transporting products from Colombia and that cruise ships consider Cartagena as an excellent destination in between the Pacific and Atlantic oceans.”
Proexport Colombia paid the expenses of two boating journalists (I was one of them) to visit the show. In 2013 the agency financed a visit by an NMMA delegation to explore export possibilities. “The reason for making this investment is that they really want to put Colombia on the map as a nautical destination,” Balzano says. “It’s a government initiative at the minister level.”
Colombia has the fourth-largest economy in Latin America, and its approximately 46 million inhabitants represent the third-largest population. It is the only South American country with two seacoasts. As one of the oldest democracies in Latin America, with a middle-income population, rich history and a privileged geographic location, Colombia is emerging as a popular stop for sailboats, yachts and charters heading through the southern region of the Caribbean Sea. It’s also below the hurricane zone, making it even more appealing during storm season.
Colombia ranks 26th among export markets for U.S.-made recreational boats and equipment — up slightly from 2012. Many factors, including a marine culture, close proximity to the United States, preferential currency exchange rates, a free trade agreement and its current trading status (the United States is Colombia’s No. 1 trading partner) contribute to an increasing demand for U.S. boats and equipment.
Another South American country, Brazil, has generated a lot of attention as a nation that is ripe for building a new customer base. The boating industry sees it as a major growth market as the nation’s GDP expands and its currency strengthens. But high import taxes in recent years on products such as boats — as much as 100 percent in some cases — have discouraged some would-be exporters to Brazil.
That Brazil tax situation represents an opportunity for Colombia, Proexport officials say. They are determined to make it easier for local companies to grow and less challenging for companies around the world to come and do business. Several recent free trade agreements have been put into place. Ten years ago the country had four or five such agreements; now it has 12.
Some of them make it possible for companies to construct their products abroad but assign some assembly or other work to Colombia and avoid taxes, Proexport officials say. It depends on the country of origin, but roughly 30 percent of the product must be built or assembled in Colombia to qualify as a native product.
Excessive regulations or taxes in countries such as Brazil give Colombia opportunities, says Enrique Stellabatti Torres, vice president of tourism for Proexport.
Internally Colombia is looking to partner with marine schools to provide training for Colombians, Andres Cerda Nieto of the Cartagena Chamber of Commerce said during a March 21 presentation. A nautical education program in conjunction with Broward College in Florida has been discussed to help residents become trained and skilled in boating industry occupations, Nieto says.
“We are trying to contact people from marine mechanics institutes and marine technical programs,” Nieto says. “We’re open to making alliances with universities and training centers from other countries. We don’t currently have educational offerings with those high standards, but we will look for that.”
Investment agencies such as Moody’s and Standard & Poor’s are giving the country good grades as a place to invest, Torres says. Colombia, he says, rated fifth among 142 nations for being more friendly for investors to do business. The country is looking to create a Pacific alliance similar to that of the BRIC nations — Brazil, Russia, India and China — to remove barriers to export. “The conditions, requirements and legal procedures are easier than other countries,” Torres says.
One of the major hurdles Colombia has faced in trying to expand its boating industry is the widely held belief that the country is unsafe. “There have been negative perceptions of security issues in Colombia,” Torres concedes.
But the country has become safer in the past 15 years as the government began cracking down on kidnapping and other crimes, say Colombian officials, who also cite the economic growth the nation has experienced. The improving economy helped Colombians feel confident in their country again, which also brought about the improvement.
With a slower-than-expected rebound in domestic boat sales and continued sluggishness in Europe, more U.S. marine manufacturers are looking past traditional markets for opportunities. For companies such as Regulator Marine, that means an expanding presence in Central and South America. “The initial research we’ve done shows that Colombia has some potential,” says Keith Ammons. “This has been a good show for us, more from an industry contact standpoint than from a consumer point of view.”
“Colombia appears to be an emerging market for the pleasure boat industry and we want to get in at the ground level to lead the charge for more exports to South America,” says Drew Halford, international sales manager at Malibu Boats. “The Cartagena boat show gives us an opportunity to expose potential buyers to our products and acquire distributors within the country and evaluate the market potential and infrastructure to support our products and industry.”
Regulator chose Colombia because the brand fares well in rough water, “so from our market research we feel that style of boat will do well in waterways surrounding part of the area,” Ammons says. “That’s one reason we chose that market over some others.”
The port city, which dates from 1533 (4,000 B.C. for indigenous people), had a population of 892,545 as of the 2005 census.
The region has provided opportunities for JL Audio, which is trying to expand its marine presence globally. Last year the company grew 15 to 20 percent because of its increase in the marine space, says Jorge Pardo, of JL Audio. Latin American countries provide additional opportunities, and the company has been working with four or five boatbuilders in Colombia.
“Here yachts are not owned by the elderly,” Pardo said at the show. “It’s important to have sound. The industry is continually growing, and especially now that the dollar is stable, you’ve got a boom of richer people. It’s part of our culture to be loud, to have fun and spend time with family and friends. Recreational boating is growing. It’s in its best moment historically. This show is twice as big as it was last year.”
Contacts have been key at the show, particularly in a region that needs more infrastructure to keep up with the growing industry, says Andrew Gibbs, project development manager at Bellingham Marine.
“The best part of this trade show was all the government contacts because that’s really how all these marina projects live and die — permitting,” Gibbs says. “We’re hoping to get a marine trade association going, hopefully with someone who is ex-government so they know the ins and outs of the process. They need a marine trades association to help advocate for growth.”
Regulator today has no boats or dealers in the region, Ammons said from the company’s 10-by-10 inside booth at the show. “We believe the Latin market is going to be the next big boating market, not just in South and Central America, but also in the United States, with the rapid growth of the Spanish-speaking population. That population will be the fastest-growing over the next two decades, and Regulator wants to get in front of that.”
The company says it chose Colombia over some other nations because its boats fare well in rough waters. For Malibu, it was Colombia’s experience with organized water sports competitions, including the hosting of the Cartagena show, Halford says.
“By entering the market early — and by entering I mean having a full-blown dealer in place that can effectively educate buyers, conduct sales events, provide after-sales service, promote and market the brand at the local and regional level — Malibu can set a high standard for water sport boats in the country,” Halford says. “Early entry also allows Malibu to deliver its message to raw consumers.”
Greg Pelini, of Bob’s Machine Shop, who travels the world, says Colombia’s improving economy, combined with the government push, will give the industry a boost in a region that is ripe for nautical growth.
“The economy here is doing very well,” Pelini says. “They are pushing nautical tourism. It’s beautiful and the food is great. And new free trade agreements are helping outboards. The other benefit is that it has borders on the Caribbean and Pacific and it has a good, stable government. I just came from Dubai. This could potentially be a growing market like that.”
This article originally appeared in the May 2014 issue.