"The City of Eternal Spring" has had a fascinating, turbulent, and inspiring history - only two decades ago regarded as the world's most dangerous city while producing its highest murder rate, Medellin has transformed itself from a violent, chaotic city into a vibrant, model city of smart governance paired with private sector innovation - a feat referred to as the "Medellin Miracle." Today, Medellin is booming. The city's accomplishments were highlighted with an award in a competition conducted by the Wall Street Journal and CitiGroup that deemed it the most Innovate City in the World in 2012, beating finalists New York and Tel Aviv. In recognition of Medellin's urban innovations and accomplishments, Medellin hosted the United Nation's World Urban Forum in 2014, and recently was awarded to host the 2016 Global Entrepreneurship Congress (GEC). Building on its momentum, the city government announced plans - entitled MedellInnovation - to spend $389 million to create a new technology district with the goal of becoming the premier technology center and capital of innovation in Latin America by 2021. Now others also believe that Medellin is on its way to becoming the Silicon Valley of South America.
There are three fundamental reasons why Medellin has the potential to become the top tech center in Latin America: (1) its quality of life, (2) the progress and potential of its private sector, and (3) its government's ability to spur innovation.
1) Medellin's high quality of life will continue to attract entrepreneurs and investors who want to live in the city
In a special on Medellin and Cartagena, Colombia, Anthony Bourdain proclaimed, "Sometimes, once in a really long while, I find myself thrilled and surprised to discover a place is so much better than you could have ever imagined. Who would have guessed? Colombia - food capital, fun as hell, from worst to one of the best, in what seems like the blink of an eye. ... It's almost ludicrous that this place exists and that everybody doesn't want to live here." Medellin was ranked as the city with the highest quality of life in the country because of factors such as high quality public services, education, and social and economic environment, according to the National Competitiveness Report 2009-2010. The publication Portafolio ranked Medellin at the top of its list of the best 10 cities to live in Latin America. Medellin is attracting people with ideas and software skills, both nationally and internationally, because they want to live in Medellin due to this high quality of life, and, its keeping its local talent pool for the same reason. For foreigners looking to work in the city, the two biggest opportunities - outside of fairly low paying English teaching jobs - is to offer software engineering skills or to come to found a business. Medellin's high quality of life is highlighted by the fact that Colombia and/or Medellin has arguably the best of the following in the world:
2) The progress and potential of the private sector's tech development
The city has a history of innovation and the following highlights where Medellin's private sector stands today and how it's contributing to the establishment of a tech center in Medellin.
-Latin America's best country for business - In its annual Doing Business report for 2014, the World Bank ranked Colombia as the best country for doing business in Latin America. Colombia improved 9 spots globally since 2013, and jumped past competitor Chile and remained ahead of Brazil. The World Bank praised Colombia's improved laws regarding taxes, credit, and property registration.
-Industrial capital of Colombia - Medellin is considered Colombia’s industrial capital, where 20% of the country’s most important companies have their headquarters. It was also ranked as one of the best cities in which to conduct business in Latin America, as judged by the ranking by América Economía magazine.
-Venture capital - While Brazil still leads in South America's venture capital industry, Colombia has caught up to and is now on par with Chile for second.
-High foreign direct investment - Foreign investment levels have 'broken all records' during 2012 and 2013. According to the Economic Commission for Latin America (CEPAL for its Spanish acronym) in 2012 Colombia received the third highest level of Foreign Direct Investment with US$15.82 billion in the region, beating out Mexico, and only behind Brazil and Chile. In addition, official figures from the Bank of the Republic, Antioquia (the state, or 'department', which Medellin is the capital of) ranked second among FDI targets in Colombia between 2007-2011 with a 23.5% share above the total flows into the country, reaching $2.6 billion USD at the 2011 cutoff. The United States remains the largest single foreign investor, Britain is second, and has set a bilateral trade and investment target of £4bn by 2020. The 2015 target of £1.75bn has already been met. Domestic investment has also been at record levels - the investment rate of Colombia's GDP is also at its highest level at 28.4 percent, as compared with 24.5 percent in 2010.
-Free trade agreement between the US and Colombia - In May 2012, the United States-Colombia Trade Promotion Agreement (CTPA), also called the Colombia Free Trade Agreement, went into effect. Already, over 80% of U.S. exports of consumer and industrial products to Colombia are duty free, and remaining tariffs will be phased out within the next decade. Colombian exports to the United States accounted for $17.1 billion. This agreement highlights the outstanding political, economy, and even culturally friendly relationship that the US and Colombia maintains. Good relations is also showcased by the Pacific Alliance, an organization to promote trade and investment among Colombia, Mexico, Peru, and Chile, which has friendly relations with the US, contrary to the 'protectionist,' and sometimes anti-American Atlantic side of South America. Colombia will soon be a member of the OECD - it applied in recent years and the accession process was announced in 2013.
-IT and software industry growth - Revenue of Colombia's IT sector grew by 177% between 2007 and 2012. In this same time frame, the software industry grew 3.79 times. By 2012 Colombia had become the third highest country in Latin America in IT sales.
-Foreign companies in Medellin - Established companies such as Google, Facebook, and IBM already have a presence in the city. In addition, so does The Kimberly-Clark Global Innovation Center, Pipeline Studios (one of the largest animation centers in the world), MSH Group, Hewlett-Packard, Procter & Gamble, MS Timberland Holdings, Unisys, as well as, Toyota, Mitsubishi, and Phillip Morris.
-Examples of start up stories in Medellin - New startups are emerging in Medellin, including PaMotos, an e-commerce platform for motorcycles, educational platform TarasPlus, which in 2012 received $1.8 million in venture funding, and Nest5, a mobile payment startup backed with angel funding.
-Medellin high potential growth areas - According to ProExpat Colombia, Medellin offers opportunities to attract foreign entrepreneurs in the fields of ICT (shared centers and BPO, development and integration of IT services and applications, and software and data center development), cosmetics and toiletries (production and R&D centers), tourism (business and shopping destinations), textiles, and agribusiness (fruit and vegetable produce and woodlands). In the last few years, the city has welcomed companies focused on IT, BPO, digital content, etc. This has allowed Medellin to support training activities for human resources, resulting in growth for these industries. There are also health-related opportunities, thanks to the strong universities in the city and the fact that Medellin has five of the 35 top-rated hospitals in South America.
-Educated workforce ready for the tech sector - Students educated to be engineers: 22.8 percent of degree holders in Colombia hold a degree in engineering.
-A cost competitive city - According to the ranking "Cost of Living" conducted by the American Journal of Economics in 2009, the cost of living in Medellin is lower than other similar cities such as Panama City, Buenos Aires and Santiago. Rio de Janiero is much more expensive, and according to consulting firm Mercer, is more expensive than San Francisco, and is ranked a few spots behind Los Angeles, California, in its 2014 Cost of Living City Rankings. In a study from 2011, global real estate firm Cushman and Wakefield found that rent for office space in Rio, one of Medellin's primary tech center competitors, was more expensive than in New York. Approximate cost of workforce in Medellin: operating costs for a full-time employee are $12.4 per hour for English speakers and $8.5 per hour for Spanish speakers.
3) The progress and potential of the government in investing in and spurring innovation, and in developing the city into a global tech center
The government of Medellin has been heavily involved in promoting innovation and entrepreneurship in the city. Recently, it announced a plan, entitled MedellInnovation, to spend $389 million to create a new technology district in an effort to become Latin America's technology and innovation center by 2021. A recent OECD Development Centre’s Startup Latin America analysis highlighted how critical it is to see the involvement of Colombia’s regional government in supporting startups to promote growth. Entrepreneurship.org argued that "Medellin's strategy reflects strong links between academia, entrepreneurs, industry, and government around creating a map of ecosystem stakeholders that includes rock star entrepreneurs, iNNpulsa Colombia, entrepreneurship centers at universities, the city of Medellín, banking enterprises, industry associations, the Colombian Promotion Agency (ProExport), Endeavor Colombia, and private sector consultants and advisers to the government, such as entrepreneur-guru Luis Florez, who represents Colombia in the global Startup Nations network."
International entrepreneurial recognition:
The city of Medellin's successful partnering with civil sector organizations and entrepreneurs to accelerate the rise of the city’s entrepreneurial economy, in part by focusing on plugging the city to the global startup community, has resulted in international recognition, including:
Utilization of public-private partnerships:
Medellin has a history of its government forming purposeful, productive, and successful public-private partnerships with the city's big corporations and powerful multinationals in its objectives and urban projects. The Grupo Empresarial Antioqueño (Business Group of Antioquia) is a coalition of businesses representing 125 companies in the Antioquia department, the vast majority of which are located in its capital - Medellin. Led by a quartet of the city’s corporate titans – the country’s largest commercial bank Bancolombia, cement manufacturer Argos, insurance giant Sura and food manufacturer Nutresa — the coalition generates seven percent of the Colombian GDP and an aggregate market capitalization of around $17 billion USD. These organizations and others in the business sector have been unusually active in many of the cities investment projects, such as the one which produced the city's gondola system (for more, see the last section below).
Provide grants and funding - iNNpulsa:
Grants are available from organisations such as iNNpulsa Colombia, part of the country’s development bank Bancoldex. iNNpulsa is a national policy tool institutionalizing entrepreneurship as a national priority. The public agency has been offering local training and subsequent seed money to new entrepreneurs, all while raising the profile of new business creators as key economic players. Since its inception in 2012, it has mobilized resources of over COP 240 billion for innovation (approximately 120 million USD), and benefiting more than 27,000 companies and organizations in 32 departments. In 2013, iNNpulsa awarded three grants of $800,000 to investor groups setting up operations in the country.
Largest tech hub in all of Latin America - Ruta N:
Ruta N is an office park of ultra-modern series of glass buildings, occupying 150 hectares, and funded by the local government. They offer cheap office space with 100% tax break for the first ten years - aimed initially at foreign startups. Recently, Velum Ventures, a venture capital firm, received $3 million to spur early-stage technology investments from Ruta N.
Investment in Innovation:
The government of Medellin is investing more in IT than any other city in Colombia – 0.4 per cent of their budget, rising to one per cent by 2017. One way they raise funds for such investment is by imposing a levy of between 30-50 percent on profits of Empresas Publicas de Medellin – the state-run company that owns the city’s water, energy, communications and waste processing facilities. Seven per cent of that charge will be used to finance “innovation” – which means that this year $20 million is to be spent on such schemes. The Government has earmarked through its Digital Talent initiative (Iniciativa Talento Digital) U.S. $19 million so that Colombians can study (for free): technical, technological, professional, and related postgraduate degrees that are related to Information Technology.
Use of education and universities to spur synergy and innovation:
The regional government has set up initiatives such as an interschool “programming marathon” contest, and the “Vivero del Software” – a Software Greenhouse – which aims to nurture blossoming tech talent, offering free programming lessons for 14-18 year old students. Other educational investments include Digital Talent, which provides up to 100 percent forgivable loans for students with tech-specific career paths. Finally, Parque E was designed to leverage the University of Antioquia, the most prestigious university in the city, as a key knowledge partner in its innovation pipeline.
Governance that gets its citizens involved, active, and to take ownership of their city:
Medellin is one of the largest cities in the world to practice participatory budgeting, allocating five percent of the city budget to the cause. Municipal legislation provides for communal councils and neighborhood assemblies that receive funds based on a progressive formula, weighted in favor of communities with a lower quality of life and higher participation rates in the councils. The city also has a progressive tax system that taxes the wealthy at a higher percent. For example, properties are categorized on a 'strata' system, ranked 1-6 based on location and property value. The higher stratas pay a higher percentage for their utilities. The existence of these types of taxes reflects the willingness of Medellin's wealthy to contribute, give back, and invest in the city they love and are so proud of. While taxes are not high in Medellin by developed country standards, in the context of Latin America where many country's wealthy do not pay much at all in taxes, this commitment to Medellin is noteworthy. Like the business sector, the wealthy take ownership of their city and strive to make it better.
Investment in transportation infrastructure, connecting its population with the city's economy:
Medellin has built the best public transportation system in the country, and possibly all of Latin America, ranging from traditional methods - bike paths, bus systems, a fair and transparently priced taxi system, and a metro rail system - to truly unique and first in the world to try methods such as its gondola and escalator systems.
Medellin now has two gondola's for public transportation to connect its hillside slums with its metro rail system. When it completed its first gondola system, it was the first in the world for the purpose of general public transportation. They have been successful financially as well, and not a money loser. The city plans to build more. Alejandro Echeverri, director general of the Urban Development Company from 2004 to 2005, accepted the Veronica Rudge Green Prize in Urban Design from the Harvard Graduate School of Design for the Northeast Urban Integration Project, the centerpiece of which was the gondola. More recently, in 2011, Medellin officials installed a $7 million outdoor escalator — the first ever designed for a slum.
Medellin's investment in transportation particularly helps the poor, who are now connected to the city's economic activity and the opportunities that provides. Whereas reaching the city center used to take two-and-a-half hours from one poor hillside community, now via cable cars and the subway it takes only 45 minutes. These creative transportation methods are consistent with Medellin's policy of investment in the poor, which also includes improved education, health, public spaces and parks, and free outdoor athletic facilities. Mayor Sergio Fajardo, the son of one of Colombia’s most famous architects, who also received a PhD in math and economics from a US university, made a bold declaration during his 2003-2007 administration: “Our most beautiful buildings must be in our poorest areas.” This philosophy led the city to put its new and celebrated library, Parque Biblioteca España, in what was then one of the poorest and most dangerous neighborhoods in Medellin. The result has been a transformation of the local area, leading to substantially less crime and violence along with an improved economy. The city understands that investment in all parts of the city, and not just the wealthy communities, is a cost-efficient way to expand opportunity and get the most out of its population, leading to long-term economic growth and raised standards of living. Inclusion and buy-in from its people have been one of the ways the government has won against its past and the cartels. The "Medellin Miracle" likely would not have occurred without that buy-in, and subsequent input and help, of its business sphere, local community leaders, and population at large. And yet, this activism was not guaranteed - the government and it leaders had to earn it. Now it's one of the things that makes this city so special - the pride and care of Paisas for their city.
Facts and figures about Colombia
-Colombia is the 2nd most populous country in South America, behind Brazil. It shares borders with Panama, Venezuela, Brazil, and Ecuador.
-Colombia has the 2nd biggest economy in South America, behind Brazil. It recently surpassed Argentina's economy.
-Colombia’s GDP grew at a rate of 4.3% in 2013, which ranks as the second highest increase in Latin America, ahead of Chile (4.1%), Mexico (1.1%), and Brazil (2.3%).
-The Economist's Intelligence Unit predicts 5% growth for 2014, and some forecast this level of growth, or more, for at least the next several years. In fact, in the first six months of 2014, Colombia was the 3rd fastest growing economy in the world, behind just China and Indonesia. President Juan Manuel Santos recently boasted: "Bloomberg published a survey this month where banks informed that the best global economic performance in 2014 will belong to Colombia."
-Inflation in 2013 was 1.94%, the lowest in the region. Meanwhile, Argentina's rate last year was over 20%. Colombia also created more jobs in the last three years than any other country in Latin America (between 2010 and 2013, it created over 2.4 million jobs at a rate of 10.7 percent of the labor force). This has lead to its lowest level of unemployment since 1995. Rating agencies have raised the country's credit rating in the last year, including Standard & Poor's, Fitch Ratings and Moody's
-For a county that was once the second most unequal country in Latin America, behind only Haiti, it is remarkable how quickly Colombia is building its middle class and diminishing its poverty rates: Colombia earned the largest reduction in inequality and the second largest reduction in poverty between 2010 and 2012 in Latin America, according to the World Bank.
Where Medellin is now
~Medellin is Colombia's second largest city, behind Colombia's capital, Bogota.
~Medellin's metropolitan area's population is approximately 3.8 million people. Therefore, it has roughly the same population as Silicon Valley, not to mention they share similar outstanding weather as well.
Medellin versus its Competition
Medellin is already among South America's biggest tech centers, along with Rio de Janiero, Brazil, Santiago, Chile, and Buenos Aires, Argentina. Here is an analysis of how Medellin can beat its competition and come out on top:
For more on what the government has done to improve the quality of life in Medellin and help make it a city of the future!