Business closures grew by 31% in the first quarter of the year in Colombia | Companies | Business

Informa Colombiaa firm specialized in the provision of financial, commercial and reputational information for companies and entrepreneurs, published its study on the business dynamics in Colombia during the first quarter of the yearwhich denotes that the Colombian business panorama presents a scenario of contrasts.

Although there is a notable increase in the creation of new companies, with a total of 51,827this data is qualified by a worrying trend: the lowest business creation rate in the last four years for this period.

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Compared to the first quarter of 2023, business creation in 2024 has seen a significant decline of 30%. The comparison with the same period in 2022 reveals an even steeper drop of 42%. This downward trend has spread to most of the country’s departments, with regions such as Huila and Santander registering considerable decreases.

It is important to highlight that this period traditionally represents the time of greatest activity in terms of business creation. This significantly lower number marks the lowest point in the last four years for a first quarter, evidencing a persistent impact of economic challenges on the country’s business environment.“, is mentioned in the report.

Business creation in the first quarter of 2024

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Despite the general downward trend, two departments, Putumayo and Nariño, present positive realities when experiencing growth in business creation. This phenomenon highlights the diversity of the Colombian business landscape and the existence of opportunities even in challenging contexts.

The lagged effects of the pandemic continue to have an impact, particularly through supply chain disruption and changes in consumption patterns“says the study.

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Furthermore, it ensures that the slowdown in the country’s economic activity (GDP growth was 0.6% in 2023 according to the latest Dane report), accompanied by a contractionary monetary policy (intervention interest rate closed 2023 at 13%), are indicators that ““have increased the distrust of entrepreneurs and investors, which helps explain the deterioration in business creation in the first quarter of 2024”.

From this data, however, A positive variation of 88% stands out compared to the last quarter of last year, when 17,565 companies were createdshowing a notable recovery compared to a figure that only decreased throughout 2023, according to Informa.

Business creation

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Likewise, the report reveals that most macro sectors showed a drop in business creation compared to the first quarter of 2023. Sectors such as Wholesale and Retail and the Manufacturing industries They had reductions of 36% and 29% respectively, indicating changes in consumer demand and supply chains.

The Construction suffered a 30% decline, suggesting a slowdown in new projects and real estate investment. The macro sector of Agriculture, livestock and hunting presented a reduction of 49%, going from 1,330 to 672 companies.

Business closures increased 31%

In contrast to business creation, their closure experienced a sharp increase of 31% in the first quarter of 2024compared to the same period of the previous year.

Considering that in 2023 there was a decrease of 20%, with 22,469 closures, in 2024, business closures increased by 31%, reaching 29,453, suggesting that companies continue to face significant challenges. “This fluctuation underscores the need to implement supportive policies and economic stability to mitigate closures and promote a more business-friendly environment in Colombia.“says Informa in the study.

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Companies

Companies

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Nariño and Putumayo, the departments with the greatest growth in business creation, They also led the increase in closures, with percentages of 226% and 346%, respectively.

Most sectors have recorded an increase in business closures for the first quarter of 2024 compared to the same period in 2023. Some of those that showed significant increases in business closures are Artistic, entertainment and recreational activitieswhich increased by 59%; Accommodation and food services, which registered an increase of 48%; and the sector Human health care activitiesby 46%, indicating a notable vulnerability in the sector.

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Some sectors showed a more moderate behavior. Professional, scientific and technical activities did not present considerable changes (0.5%), while the Construction increased by 6% and Transportation and storage by 16%.

Business closures in the first quarter of 2024

Business closures in the first quarter of 2024

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Regarding company insolvency, The first quarter of 2024 has witnessed the lowest number of bankruptcy proceedings in the last four yearswith only 60 cases registered. This figure represents a decrease of 54% compared to the last quarter of 2023. “This notable reduction could indicate an improvement in the financial health of Colombian companies or a greater capacity to adapt to adverse economic conditions.“explains the Report.

Although Colombia saw an increase in business creation in the first quarter of 2024, it was the lowest in four years; However, the firm explains that there is a decrease in business closures, which suggests a possible recovery.

Find the full report at the following link.

JUAN MARTÍN MURILLO HERRERA
Portfolio Journalist

 
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