According to rankings on the Doing Business 2016 list provided by the Word Bank, Colombia was recorded as 54th out of 189 countries. It is ranked 3rd in Latin America, following Chile and Peru. Since 2013, the Colombian government has been active in the modernization of roads, harbor, and airports. In addition, the economy of Colombia is growing rapidly. From 2011 to 2014, the average growth rate was 5%. In this regard, Colombia is a land of opportunity to launch franchise businesses. To launch franchise businesses in Colombia, it is pivotal to research about transportation, agriculture, population, and urbanization.
Population and urbanization
Columbia’s population is 46,736,728 with 41.71% of the population is between the ages of 25-54. This informs us that the majority of the population is a part of the working class. The country depends on 35.4% of the younger population as its work force. The urbanization rate has slowly been increasing over the recent years due to a demographic transition resulting from steady declines in its fertility, mortality, and population growth rates. This has caused a 1.66% urbanization rate in the recent year. Bogota being the largest urban city with a population of 9.765 million has become the major area for urbanization, because soil and water quality damage from overuse of pesticides, agricultural land makes up more than 37.5% of the land used in Colombia, this has caused a shift from the rural areas to the more urban cities in search for work. However, the birth rate has fallen from more than 6 children per woman in the 1960s to 2 children who are just above replacement level today as a result of increased literacy, family planning services, and urbanization. Even though there is a lower population rate then in the 1960s Columbia has an income inequality that is among the worst in the world. Over a third of the population lives below the poverty line.
Colombia is currently is carrying out a plan of $25 billion in road infrastructure alone, and up to $100 billion in transportation infrastructure by 2021. The goal is to build 4,970 miles of roads and cut travel times by 30 to 50 percent; this will reduce travel time to different cities and some ports. Colombia’s overall infrastructure falls below all of the countries that it borders except for Venezuela. According to the World Economic Forum’s 2015-2016 Global Competitiveness Index on 148 countries, Colombia ranks 126 in quality of roads, 85 in port infrastructure, 74 in airport infrastructure, 72 in communication infrastructure, and 110 in quality of overall infrastructure.
The climate here in Colombia is a little different; even though it lays almost on the equator, the country has four different climate zones because of the height different. 83% of the country lies below 1000 meters, so it has an average temperature of sixty-four degrees; 9% of the land located between 1000 meters and 2000 meters has an average temperature of fifty-five degrees; 6% of the land area is between 2000 and 3000 meters and has an average temperature of forty degrees; and above 4500 meters altitude is snow. In the low areas, there is a dry season from December to March, and the rest of the year is rainy. In the south, the rainy season is interrupted by a period of less rainy nature in June and July, and on the Pacific coast, a dry season almost is non-existent. It is important to understand the climate because if someone moves from the United States to the lower areas in Columbia to start a farming business, the dry season accompanied by the non-stop rain after the dry season would destroy the crops, and the business would not last.
The urban population in Colombia was last measured at 36398403 in 2014. In 2010, it was measured at 34767425.6, and in 2000, it was measured at 28669963.7. This shows that the urban population is growing, and this means more job opportunities will arise because of more international trading opportunities between countries. This could benefit other countries because it gives them more opportunities to trade and develop their economy.
The main products cultivated in Colombia are coffee, corn, rice, sugarcane, banana and potato. The agriculture in this country is a private industry. It is basically a perfect competition with 17670 field owners selling the same exact products. Yet most of the owners are poorly educated farmers, which agriculture techniques are not the optimal. This is combined with the fact that the cost of labor is one of the cheapest in the whole region. Although there is a minimum wage imposed nation wise, this seems to just apply in the main cities. Agriculture is practiced in really rural areas and transporting it to the cities is a problem for the farmers, therefore they have to rely on intermediaries that buy their crops and distribute them to the main cities. These ones take advantage of the poorly educated farmers and buy the products at relatively cheap and not fair prices – the farmers are forced to sell because they do not have any other way to sell their products. Sometimes their revenue would not even cover the production costs.
The fact that agriculture is mainly practiced by farmers and not huge corporation means that there is still more expansion in this category. An American food franchise with the appropriate resources seeking to branch out to Colombia could get contracts directly with the farmers and incorporate better facilities such as machinery and irrigation systems to improve the production of the crops and provide adequate transportation from the fields to their restaurants and even to distribute them to the cities and make even more profit. This will give them a competitive advantage over other Colombian franchises, providing a cheaper and more accessible output, food.
Transportation, Ports, and Shipping
Transportation in Colombia consists of many of the same types of transportation we see here in the United States of America. The infrastructure really is not that different. According to Daniel Silva, who has been to Colombia, the roadways are very nice. However something we do not see very often would be how there are so many motorcycles on the road. In Colombia, motorcycles are often used not only because they are economically efficient, but also because they are very easy to maneuver through traffic jams. In Colombia, the gas prices are a lot higher than the prices here in the US, so many people drive motorcycles because one can go much farther for less of the price. Also in the bigger cities like Bogota, there are many traffic jams, due to not having a metro train that would be able to carry many citizens as an alternative to driving their commute. According to Daniel Silva, motorcycles do not really “pay attention” to the road lines during traffic jams, and instead will just weave in and out of traffic because of their small body frames. Unlike in the state of Florida, helmet laws are strictly enforced unless on the islands of San Andres, and Providencia. So therefore if our business were a motorcycle helmet business, it might be smart to outsource our goods to Colombia, because if have a comparative advantage in making helmets and we outsource our good to country who has a high demand for motorcycle helmets, we might be able to gain some real rewards in profit. This is a factor of distance that a business wanting to go international really would need to know about transportation.
While the roads in the big cities are nicely paved, the rural areas where farming takes place do not get to experience such a luxury. Farmers struggle greatly getting their fruits and vegetables into the big cities because their roads are almost un-drivable due to the lack of transportation infrastructure. This is not good for local business because Colombia is forced to import non-organic foods, which could in turn cause health issues. The point of this rant is that the Colombian economy should invest in transportation infrastructure in rural areas just as much as the big cities because it is just as, if not more important to help the local farmers and their businesses.
Airports in Colombia are much like the airports in the United States, however there are airports that are uncontrolled by the government. An example of these would be small propeller planes that do not go international but instead are used for island hopping and for short trips around Colombia.
There are very few waterways in Colombia. The main one is the River Magdalena. While other rivers are used for transportation, this river is mainly used for transportation of vessels carrying cargo. According to the CIA, 18,300 of the 24,725 km are navigable so that transportation is possible. The Magdalena offers 1,488 km of drudged waters so that the big cargo vessels can transport goods inland.
Colombia is a prime location for trade from other countries. This is because it can be reached from both the Atlantic and Pacific Ocean. However there are not very many ports to ship into. There are fourteen coastal ports to ship into. While this may seem like a good amount, if one were to compare it to the shipping ports of the United States, the US blows Colombia out of the water in terms of number of ports. While the US does trade with Colombia, Colombian culture does not like to recognize American goods. For instance Wal-Mart trying to go international in Colombia would fail miserably because Wal-Mart is the essence of American. However American goods are still indeed exported and sold in Colombia.
Although the distance between the United States and Colombia is not just the 2662 miles in between the two countries but also the cultural differences between them and how much risk this represent for American countries to expand to Colombia. With the appropriated resources, knowledge research, and the right connections, a well design American franchise can face all the challenges such as transportation, language and national competition, and overcome to take advantage of this market in expansion – this way making the sought economic profit.
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