VZCZCXYZ0013
RR RUEHWEB

DE RUEHBO #0817/01 0702135
ZNR UUUUU ZZH
R 112135Z MAR 09
FM AMEMBASSY BOGOTA
TO RUEHC/SECSTATE WASHDC 7598
INFO RUEHBR/AMEMBASSY BRASILIA 8728
RUEHPE/AMEMBASSY LIMA 7144
RUEHCV/AMEMBASSY CARACAS 1825
RUEHZP/AMEMBASSY PANAMA 3215
RUEHLP/AMEMBASSY LA PAZ MAR QUITO 7870

UNCLAS BOGOTA 000817 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EINV CO
SUBJECT: TOURISM IN COLOMBIA: RECENT GROWTH UNDER THREAT 
 
REF: A. 08 BOGOTA 713 
     ¶B. 08 BOGOTA 4312 
     ¶C. 09 BOGOTA 7 
 
¶1.  SUMMARY:  Colombia's tourist industry continued its rapid 
growth in 2008, increasing 16 percent, but local stakeholders 
fear the global financial crisis threatens recent gains. 
Tourism leaders worry the crisis will negatively affect both 
the number of tourists visiting Colombia as well as the 
much-needed GOC investment to increase the sector's 
competitiveness.  There are hopes that GOC incentives and a 
weakening peso will cushion the blow, but until concentrated 
industry and GOC efforts are made to improve the overall 
quality of tourism infrastructure and services, Colombia's 
travel sector will remain uncompetitive with other 
international destinations and more vulnerable to external 
shocks.  END SUMMARY. 
 
2008: Another Growth Year 
------------------------- 
 
¶2.  Tourism, after petroleum and coal, represents Colombia's 
third largest export, with growth having continued its 
impressive climb in 2008.  In 2008 2.5 million visitors 
entered Colombia, a 16 percent increase over 2007 (ref A). 
According to Minister of Commerce and Tourism (MOC) Luis 
Plata, tourism added a record USD 2.2 billion to Colombian 
GDP in 2008.  The MOC highlights that in addition to a 7.5 
increase in air travel, the number of cruise passengers 
entering Colombia increased by 172 percent.  Local experts 
attribute the growth to improved security, efforts to improve 
Colombia's image abroad, and GOC initiatives to create a 
favorable investment environment.  However, all stakeholders 
note that 2009 year-to-date tourism statistics have fallen 
dramatically. 
 
Effects of the Financial Crisis Thus Far 
---------------------------------------- 
 
¶3.  According to Sergio Diazgranados, president of Colombia's 
Tourism and Travel Agency Association (ANATO) and former MOC 
vice-minister for trade, industry stakeholders are concerned 
both with reduced tourist travel, as well as with decreased 
investor interest in Colombia's tourism infrastructure.  Jean 
Claude Bessudo, the president of Colombia's largest travel 
agency Aviatur, told us that it is impossible to predict the 
full impact of the crisis but that all in the sector are 
bracing for a difficult year.  He said that while the GOC can 
encourage investment through incentives, it cannot convince 
people to keep traveling.  Bessudo observed that compared 
with the same period of 2007-08, travel agency sales dropped 
16 percent during the crucial December-January holiday 
season, airline travel fell 27 percent (ref B), and hotel 
occupancy has dropped to 48.6 percent in 2009 -- its lowest 
level in the last five years. 
 
Reduced Investment Impacts Sector's Competitiveness 
--------------------------------------------- ------ 
 
¶4.  Bessudo expressed doubt about the GOC's ability to 
increase investment to promote the sector's competitiveness. 
Diazgranados added that tourism-related associations 
collaborated with the GOC in 2007 on competitiveness plans, 
which they had hoped would receive increased GOC financing in 
2009-2010.  He said with GDP growth estimates reduced to 1-2 
percent and shrinking government revenues, such spending now 
seems implausible (ref C).  ProExport Vice-President for 
Tourism Ricardo Galindo noted, however, that the GOC remains 
committed to supporting the sector's growth, even if it must 
now postpone certain initiatives (as all governments are 
presently doing).  He added that even if spending does not 
increase, the GOC already offers significant tax incentives 
to promote tourism investment and is committed to continuing 
its contributions to Colombia's tourism promotion fund. 
 
GOC Efforts to Sustain Industry 
------------------------------- 
 
¶5.  Galindo reiterated that Colombian law provides a 30-year 
full tax exemption for the construction of new hotels and a 
partial exemption for remodeled ones, the longest tax benefit 
offered by Colombian law.  He also highlighted a 20-year 
income tax exemption for eco-tourism service projects, 
value-added tax exemption for air tickets and tourist 
packages, and the development of free trade zones for 
tourism.  The GOC also hopes that increased airline 
connections, which introduced low-cost carriers Jet Blue and 
Spirit, will keep people traveling.  Bessudo noted, however, 
that the GOC is not consistent in its tourism plans.  He said 
the GOC is attempting to market Colombia as a 
"product-driven" destination (i.e. eco-tourism, bird 
watching, medical tourism, conference destination, etc), 
which requires a prioritization on high-quality service 
provision, rather than simply offering investment incentives. 
 He said the industry will never rise to a world-class 
tourist destination until the GOC develops a comprehensive 
development plan.  Diazgranados also confirmed that improving 
Colombia's human resource deficit is an ANATO priority, as 
the industry attempts to develop niche tourism markets. 
 
Promotion Fund Continues To Grow 
-------------------------------- 
 
¶6.  Despite the financial crisis, all local experts said that 
Colombia's image abroad is still the leading threat to the 
sector.  To counter that image, in 2006 Colombia established 
a fund to promote Colombia as a tourist destination, 
beginning with USD 1 million.  Presently the fund, through 
monthly contributions from the tourism associations -- ANATO, 
Colombian Hotel Association (COTELCO), Colombian Restaurant 
Association (ACODRES) -- and other tourism entities such as 
ProExport, contains USD 20 million.  The MOC manages the 
fund, which supports international public relations tools 
such as commercials, as well as small-scale capacity-building 
competitiveness initiatives.  Diazgranados said the fund is 
the most successful public-private partnership created to 
promote the sector, noting highlights such as a Colombian 
tourism commercial during CNN's Presidential Election night 
coverage.  He expressed confidence the fund will continue to 
thrive in 2009 as it is not exclusively based on GOC 
financing. 
 
Weakening Peso: Protection for Local Industry 
--------------------------------------------- -- 
 
¶7.  Diazgranados also told us the weakening peso should help 
protect the industry during 2009 as it becomes more expensive 
for Colombians to travel overseas.  He believes Colombians 
will still travel during the crisis, choosing local rather 
than international travel due to value of the dollar. 
ANATO's Executive Director Paula Calle added that 63 percent 
of tourism in Colombia is local, with statistics indicating 
that travel is still occurring, albeit in low cost ways. 
Calle mentioned that travel agencies are not yet closing 
their doors, but are rather changing their operations to 
focus on lower cost packages or destinations.  She expressed 
concern, however, about the industry's strength if the crisis 
deepened, stating that eventually Colombians would bypass 
travel agencies to cut costs, threatening the entire sector. 
 
COMMENT:  Crisis Underscores Investment Needs 
--------------------------------------------- 
 
¶8.  2009 will be a difficult year across the board for the 
Colombian economy, even more so for a tourism sector that is 
finally emerging from years of sluggish activity.  Tourism 
faces not only traditional obstacles such as an inadequate 
infrastructure and Colombia's negative international image, 
but must also withstand reduced GOC investment and depressed 
demand from its primary source of international travel (U.S., 
Venezuela and Ecuador).  As a market that is not 
internationally known or established, Colombian tourism finds 
itself more vulnerable to the external shock of a global 
downturn than traditional destinations in Latin America and 
the Caribbean. 
 
 
BROWNFIELD