Colombia to conquer retiring Baby Boomers

Colombia would find synergies between a prospective Second Housing legal regime (currently at the Congress Legislative Agenda) and the existing healthcare free trade zones incentives regime. This would allow the country to massively attract retiring baby boomers, creating huge economic benefits.

In a recent interview granted to Fox News, Christopher Howard, considered to be an authority in second housing market for American retirees, quoted what are the reasons that have positioned Central America as a top destination for retirees: “First, these countries offer good year-round weather and a lower cost of living. All are within two-and-half hours of the U.S. so their proximity is a factor. In the case of Costa Rica, all of the factors I just mentioned plus an affordable first-class medical care seem to be the attraction.”

Despite having the same weather and geographic conditions than Central America and, regardless of counting with a more prestigious health care system, Colombia is not competing at all in the US Retirees foreign second housing market.

Costa Rica created in 1985 a legal regime to attract foreign retirees by offering incentives in two ways: granting tax benefits to real estate developers and giving custom duty exemptions to foreign retirees willing to by a second house in the country. Panama did the same in 1994.

Colombian government announced 4 years ago a legal initiative that would adopt the same existing incentives to attracting foreign retirees. Nevertheless, as of today, the adoption of such legal regime has not being part of legislative priorities in Colombian Congress. This has depriving the country to have a great mechanism to foster development.

Potential market: retiring baby boomers with less resources

The time is now. Baby Boomers are reaching retiring age. According to Future Years, a website for retirees, around 75 million American citizens are reaching retiring age during the present decade. Due to recent financial crisis, most of them will not be allowed to live in the US under the same standards they used to, so a massive migration to foreign locations is expected.

A 2007 survey by New Global Initiatives, in conjunction with the Zogby International, found that more than three million U.S. citizens have decided to live outside of the U.S. for retirement and another 17 million were mulling leaving.

By attracting non – wealthy seniors, Colombian developers would find opportunities in the second housing market for US retirees.

Heath Care Free Trade Zones as a perfect complement to a second housing legal regime

Costa Rica has an annual flow of 50.000 retirees, mostly coming from the United States. Regardless of the benefits and dynamism granted to the real estate industry as a consequence of building second housing developments, such flow of migrants creates a currency flow of almost US$6.500 per person (US$ 325 yearly).

Costa Rican authorities are aware of the similarity of their country to other potential competitors in the region. This is how they have chosen to focus on strengthen their competitive advantage through the improvement of their health care system. This is why almost 60% of retirees arriving to Costa Rica are looking for high quality and low cost health care services.

Colombia has the same climate and geographic advantages than Costa Rica and other Central American countries. Moreover, it has a well respected health care system (ranked 1st among Latin American Countries by the World Health Organization) that, together with the tax and customs incentives granted by the Health Care Free Trade Zones Regime (0% custom duties and preferential income tax of 15%), could allow Colombia to massively attract Baby Boomers looking for inexpensive, high quality and full service second housing.

Beyond the Caribbean

Both Cartagena and Santa Marta have had an impressive performance in real estate development over the last years. Attracted by historical city centers, together with nice beaches, tourists have increasingly helped to develop this part of the Country.

Although future projects intended to attract Baby Boomers should consider the Caribbean coast as a top choice, it is important to bear in mind the full array of tourism development potential existing throughout Colombian territory.

The proposal

Colombia needs to share part of the retirees market for second housing. Nowadays, with the Baby Boomers market reaching retiring age and with the best Colombian – US business climate ever (as a consequence of the recently signed Free Trade Agreement), a billion dollar industry is waiting for us.

Colombian Congress should give priority to the approval of the Second Housing Law. More important, private associations and developers should understand that the way to succeed in a strategy to attract American seniors is to offer high quality medical services. The Free Trade Zones regime is an outstanding way to achieve it.

Click here to read Original article by Federico Gomez Pardo - Partner at Stratlegal


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