International Business 2: Incentives to Colombian exporters: A mutual benefit

1. CONCEPTS

Incentives: "A payment or concession to stimulate greater output or investment: tax incentives for investing in depressed areas" (Oxford dictionary, 2010)

Exportation: "Sales of goods or services to other countries, or the revenue from such sales" (Oxford dictionary, 2010)

Proexport: "Institution in charge of promoting Colombian non-traditional exports, international tourism and foreign investment to Colombia" (proexport, 2010)

2. Which Incentives offers Colombia to their exporters and why are they important?

As people know, both organizations and their employees need motivation to ensure that the actions and activities are productive and efficient. Consequently, exporters

As people know, both organizations and their employees need motivation to ensure that the actions and activities are productive and efficient. Consequently, exporters need also motivation through incentives to promote the efficiency of its exports. When the government provides incentives to exporters in their export efficiency, they are not doing a favor, this is because the country and its economy also benefits. For this reason, Colombia offers to Colombian exporters the following most important incentives:

FREE TRADE ZONE:

"Areas bounded national territory where industrial activities of goods and services and commercial activities for the foreign market." (Proexport, 2010)

A free trade zone is important because guarantee faster process by removing obstacles like customs regulations. "FTZs prove to be beneficial both for the importers and exporters, as these zones are designed to reduce labor cost and tax related expenditures." (Economy Watch, 2010).

The benefit offered by a free trade zone is not unique to the exporter, it also gives to the country advantages, because it helps countries to reduce serious problems such as unemployment to be able to reduce labor costs. Besides that, I think the most important thing is not just having these benefits of the free zone, but the most important thing is to have enough strategies to harness these opportunities.

"Free trade zones help the traders to utilize the available business opportunities in the best possible way" (Economy Watch, 2010).

INTERNATIONAL TRADE SOCIETY (CI)

“Is an instrument of export support given by the Government, which grants tax benefits through the Tax and Customs - DIAN by which companies aimed at the commercialization and sale of Colombian goods abroad acquired in the domestic market or made by members of the same producers, and / or Services Middle of production destined for export are free of VAT sales tax and / or withholding tax on local purchases.” (Proexport, 2010)

About this incentive, I can point out the same characteristics of mutual benefit, as there are organizations for which in his objective is not to export goods or services, therefore, they gain recognition in other countries to sell their products to the CI, who will then export them to other countries and who also receive the benefit of not taxation from government.

VALLEJO PLAN

“It is an instrument of export incentives consisting of temporary import Colombian customs territory of raw material and inputs, with full exemption from customs duties and VAT, which is used in the production of export goods.” (Proexport, 2010).

The Vallejo plan helps saving money, because when a company imports raw material to make products or to support services, it don’t have to pay certain taxes, so this allow products to have lower costs and, therefore a lower selling price, so companies can sell them better in international markets and consequently it allows be more competitive.

ALTEX

“Is a mechanism created to encourage companies that have made major exports FOB value equal to two million dollars (U.S. $ 2.000.000.00) and the amount exported, directly or through an international marketing company to be more equal to sixty percent (60%) of the value of its total sales in the same period during the year immediately preceding the application to be considered as such in order to access a range of benefits that facilitate their exports.” (Proexport, 2010)

In ALTEX, there is not VAT causation and other taxation to exporters who meet those conditions, so this make the products and services more competitive in foreign markets.

UAP

it is important that government give incentives to companies that contribute with the economy of a certain country, and this is an example, because this kind of companies exports million dollars.

PEX

"Is the operation which, under a trade agreement, a foreign resident buy raw material, inputs, intermediate goods, packaging material, with a national to a producer based in Colombia, providing delivery to another producer also resident in the national customs territory, who are obliged to develop and export the goods manufactured from such raw material, inputs, intermediate goods or using the packing material or containers, according to instructions from the foreign buyer" (proexport, 2010)

3. POINT OF VIEW

"The extent and the form of export incentives vary from country to country depending on the country's economic structure (including its fiscal structure), its resource availability, its export potential, and the effectiveness of export incentives in doing its export potential" (AHUJA, 2001)

To be competitive in changing world and with a high market demand, it requires the support of government, which has to be flexible and recognize that to increase their competitivenes and their products and services are recognized by foreign markets.

I think thare are many opportunities that have Colombian exporters, but the true is that corruption in some cases makes strategies are not implemented and that many operations carried out by companies are illegal, which also harms the country's economy. Proexport is a good tool to know much more about these incentives.

CYBERGRAPHY

Ahuja (2001). Export incentives in India within

WTO framework. [Online]: http://www.icrier.org/pdf/rajeev72try.PDF

DIAN (2010). Instructivo plan Vallejo. [Online]: http://www.dian.gov.co/

Colombian President Juan Manuel Santos speaking. getty image. (online) Available at:

http://www.gettyimages.com/detail/104554252/LatinContent-Editorial

Economy Watch (2010). International free trade zone. [online]:

http://www.economywatch.com/international-trade/free-trade-zone.html

Invest In Colombia Corporation (2004). Colombia: Businness Overview. [On line]:

http://www.sice.oas.org/investment/NatLeg/COL/Comp_Advant.pdf

Invest in Colombia (2010) Special Import - Export System for Services: "Plan Vallejo". [online]: http://www.investincolombia.com.co/investment-incentives/special-import-export-system-plan-vallejo.html

Inside Tesco Store. getty image. (online) Available at: http://www.gettyimages.com/detail/104714024/Bloomberg