INVESTMENT IN CONSTRUCTION MATERIALS

CONSTRUCTION, ONE OF THE MOST DYNAMIC INDUSTRIES

PROJECTED GROWTH OF THE CONSTRUCTION INDUSTRY IN COLOMBIA (USD MILLIONS)

The construction industry in Colombia is the third largest in Latin America after Brazil and Mexico (USD 109 billion between 2008 - 2012). The industry is expected to double in size by 2020, rising from USD 28 billion to USD 52 billion (a growth of 8.5 CAGR).

It was the sector with the highest growth in 2013. With an increase of 9.8%, the construction industry was ranked in first place among the sectors that grew the most in the country.

The investment in infrastructure amounted to 3% of the GDP in 2014 (USD 10 billion), of which USD 3 billion was used for public works and USD 7 billion was spent via concessions.

This investment will be aimed at the construction of new roads, improvement of the existing road network, upgrading of the airports and ports, and the development of railways (National Infrastructure Agency, 2013).

Building construction grew by 11.1% on average over the last five years, with residential housing being the most dynamic segment. The latter has been marked by Government policies that have the goal of constructing 1 million homes by 2014, increasing home incomes, and reducing interest rates on mortgage loans.

The construction of commercial buildings and hotel infrastructure are the second and third high-growth niches within this sector. Commercial buildings have increased in a manner that is complementary to growth in residential construction and the continuous increase in the consumption of homes, and hotel infrastructure is increasing given the existence

Source: Business Monitor

2012

7.0%

28.600

51.700

8.2%9.1%

9.7%9.3%

10.2%8.4%

6.6%

2013 2014 2015 2016 2017 2018 2019 2020

GROWTH, CONFIDENCE AND OPPORTUNITIES TO INVEST

Libertad y Orden

DYNAMICS OF THE CONSTRUCTION OF BUILDINGS IN COLOMBIA

DEMAND FOR CONSTRUCTION MATERIALS (MILLIONS USD)

2007

9,197 9,1838,543 8,765

9,990

GLASS AND GLASS PRODUCTS

REFRACTORY AND CLAY PRODUCTS

CONCRETE, CEMENT AND GYPSUM ITEMS

PAINTS, VARNISHES AND RELATED PRODUCTS

NON-STRUCTURAL CERAMIC ITEMS

CEMENT, LIME AND GYPSUM

CARVED OR CUT STONE FOR CONSTRUCTION OR OTHER USES

2008 2009 2010 2011

The demand for materials has grown by an average of 5.8% over the last five years, driven mainly by the construction of buildings, which requires approximately 42% of production, and public works, which need around 32%. In 2011 internal demand reached USD 10 million.

After Brazil and Argentina, Colombia is the third largest exporter country of materials in the region. Exports of construction materials grew 8% in 2012, amounting to USD 370 million (FOB prices).

Source: DANE

USES

RESIDENTIAL HOUSING

OFFICES

COMMERCIAL

WAREHOUSES

EDUCATION

HOTELS

HOSPITALS

PUBLIC HEALTHCARE

CENTERS

OTHER

TOTAL

ANNUAL AVERAGE GROWTH 2008-2012

10.90%

10.00%

9.50%

20.20%

3.10%

49.2%

37%

26.2%

11.80%

11.10%

CONTRIBUTION TO VARIATION 2008-2012

8.0 p.p

0.4 p.p

0.7 p.p

0.4 p.p

0.0 p.p

0.5 p.p

0.6 p.p

0.2 p.p

0.2 p.p

-

THE COUNTRY MAINTAINS A CONSTANT DEMAND FOR CONSTRUCTION MATERIALS

Paints and varnishes

Cement, lime and gypsum

Clay and non-refractory ceramic products for structural use.

THE DEMAND FOR MATERIALS IS HIGHER THAN NATIONAL PRODUCTION, GENERATINGINVESTMENT OPPORTUNITIES IN THE COUNTRY FOR THE PRODUCTION OF:

PRODUCTION CONSUMPTION

Concrete, cement and

gypsum items

3,1

17.1

3,0

99.9

Cement, lime and gypsum

2,8

04.0

2,9

68.6

Clay and non-refractory

ceramic products for non-

structural use

1,18

0.1

1,261.

3

Glass and glass products

1,19

5.1

1,245.7

Paints, varnishes

and related products

950.4

1,10

4.5

Carved or

cut stone for construction

Glass and glass products

Paints, varnishes

and related products

Cement, lime and gypsum

Clay and non-refractory

ceramic products for

structural use

Carved or cut stone for construction

Non-structural ceramic items

Concrete, cement and

gypsum items

442.7

502.7

Non-structural ceramic items

372.1

352.0

IMPORTS EXPORTS

274.2

223.6

203.5

49.5

194.6

30.0

181.

9

100.7

98.4

38.4

73.4 93.4

15.6

32.8

Colombia offers benefits to promote investment in projects for construction materials, within which the following stand out:

FREE TRADE ZONES: Free Trade Zones are geographical areas where companies can be established to develop industrial activities for goods or services under a regime that offers customs and tax benefits, such as the opportunity to benefit from a reduced income tax rate, as well as being able to import machinery, equipment and supplies without incurring customs duties.

The Free Trade Zone regime considers two types of areas that enjoy the same benefits, but to which different requirements apply in regard to investment and job generation:

PERMANENT OR MULTI-USE FREE TRADE ZONE: companies should present projects to its operator/user and comply, within three (3) years following its declaration, with the following requirements for investment and employment based on the total amount of its assets:

FREE TRADE ZONE FOR PROJECTS INVOLVING MANUFACTURING GOODS: the Special Permanent or Individual Business Free Trade Zone regime allows for the recognition of a Free Trade Zone in any part of the country for a new legal entity for developing investment projects of high economic and social impact. The company should comply with the following requirements within 3 years after its declaration:

*Amounts defined in monthly legal minimum wages in force (for 2014, COP 616,000). Exchange rate USD 1 = COP 1900.**For every additional investment of USD 7.4 million, the amount of jobs can be reduced by 15, to a minimum of 50 jobs.

INCENTIVES

TOTAL ASSETS (USD)*0 – 162.112162.112– 1,6 million1,6 million – 9,7 millionMore than 9,7 million

INVESTMENT AMOUNT (MILLIONS USD)*

001,63,7

DIRECT JOBS0203050

INVESTMENT AMOUNT (MILLIONS USD)*

48,6DIRECT JOBS150 **

TAX BENEFITS FORGENERATING JOBS

COLOMBIA AS AN EXPORT PLATFORM

New companies with less than 50 employees and total assets under approximately USD $1.6 million will benefit from progressive income tax payments, certain payroll contributions, and corporate registration.

Specifically, the benefits are the following:

0% of the taxes owed during the first two years of operation.25% of the taxes owed during the third year of operation.50% of the taxes owed during the fourth year of operation.75% of the taxes owed during the fifth year of operation.100% of the taxes owed after the sixth year of operation.

0% of the amount owed during the first two years of operation.25% of the amount owed during the third year of operation.50% of the amount owed during the fourth year of operation.75% of the amount owed during the fifth year of operation.100% of the amount owed after the sixth year of operation.

0% of the fee for the first year of operation.50% of the fee for the second year of operation.75% of the fee for the third year of operation.100% of the fee after the fourth year of operation.

With more than 13 trade agreements in force, Colombia has preferential access to close to 1.5 billion consumers in markets such as the United States, the European Union, Brazil, Mexico, Chile and Peru, among others. This, in addition to its privileged geographic location, makes the country an ideal export platform for the region.

The air freight transportation connections from Colombia are covered by more than 32 airlines, with more than 1,700 export routes and access to close to 400 cities around the world. The El Dorado International Airport moves the most freight of anywhere in Latin America, at 520,000 tons.

More than 3,000 maritime export routes start from Colombian ports that are in regular service, direct and with connections, provided by 28 shipping companies that connect to 500 ports across the world. Colombian port areas move more than 127 million tons of cargo and receive close to 25,000 ships on its Atlantic and Pacific coasts, moving 2.1 million containers a year.

1The amount is defined as 5,000 salarios mínimos legales mensuales vigentes [monthly legal minimum wages in force] (SMMLV) The SMMLV for 2014 is COP 616,000. The reference exchange rate used is USD 1 = COP 1,900.

INCOME TAX

PAYROLL TAXES AND OTHER CONTRIBUTIONS**

COMMERCIAL REGISTRATION**

COLOMBIA, A COUNTRY WITH MULTIPLE DEVELOPMENT HUBS

BOGOTA - CUNDINAMARCAWith 7.5 million inhabitants and 26% of the country’s income, Bogota has a high demand both for residential housing and office, industrial and commercial space.

The wide range of projects under development (6 million square meters of construction) position Bogota as the main construction market in Colombia.

The city and the surrounding region have more than 400 companies that produce a wide range of construction supplies, such as concrete, cement and gypsum items, and clay, refractory ceramic and glass products, among others.

High availability of qualified human resources in Bogota. More than 5,000 technicians and professionals graduate in engineering careers related to the sector every year.

Strong business network with national companies such as Alfagres, Plásticos Gerfor, Fiber Glass, and Ladrillera Santafé.

CALI – CAUCA VALLEYDue to the high volume of infrastructure and urban renewal works, there is a high demand for construction materials in the short and medium terms.

The proximity of the Buenaventura port allows the region to easily access the local market and Pacific Rim countries.

The region has significant limestone, bauxite, stone aggregate and clay deposits, among others, which constitute the raw materials for various materials used in construction.

Large national and multinational companies to meet the needs of the sector’s dynamic economy.

BUCARAMANGA- SANTANDER11% of the national GDP for construction.

Estimated invoicing: USD 735 million.

Infrastructure projects amounting to USD 11 billion.

Strengths in the production of clays and ceramics.

BARRANQUILLA - ATLANTICOStrategic location allows access to markets in the USA, Brazil, Central America and the entire Caribbean region.

High installed capacity for the generation of thermal electricity for the country and an electricity service coverage of 98%.

Development of infrastructure products, especially the Ruta Caribe [Caribbean Route], Corredor Portuario [Port Corridor], Circunvalar de la prosperidad [Prosperity Ring Road], among others.

In 2013 there was a 24% growth in construction licenses for general projects and 27% for residential housing as compared with 2012.

Human resources. 60% of the industrial jobs in the region are generated in Barranquilla. The presence of leading companies such as Tecnoglass, C.I. Energía Solar, Eternit, and Holcim.

LARGE FOREIGN COMPANIES HAVE CHOSEN COLOMBIA AS A PLACE TO INVEST

PREBUILD, PORTUGAL: construction of 11 plants for manufacturing construction materials such as ceramics, aluminum, wood, plastic and metalworking. The investment amounted to USD 200 and will generate approximately 1,600 jobs.

SAINT GOBAIN, FRANCE: production plant for float glass. The investment amounted to USD 200 and will generate approximately 1,250 jobs. The company expects to produce more than 200,000 tons of glass for supplying the national market and exporting to countries in the Andean region.

MEXICHEM: expansion of the production plant for agricultural piping, accessories, sewage systems and water storage tanks, with pipes up to 3 meters in diameter. This operation will supply the domestic and Central American markets. The investment amounted to USD 20 million and will generate 130 jobs.

CEMEX: construction of a cement production plant in Bolivar with a capacity of 450,000 tons. This operation will supply infrastructure projects in the Caribbean. The investment amounted to USD 50 million and will generate. The plant will use cutting-edge technology for the milling process in order to exercise environmental control and maintain high quality standards.