Colombia

Bureau of Economic and Business Affairs
Report
July 19, 2018

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Executive SummaryShare    

With markedly improved security conditions, a market of 49 million people, an abundance of natural resources, and an educated and growing middle-class, Colombia continues to be an attractive destination for foreign investment in Latin America. In the World Bank’s 2018 Ease of Doing Business Report, Colombia ranked 59 out of 190 countries and fourth in the region, behind Mexico, Chile, and Peru.

Colombia’s legal and regulatory systems are generally transparent and consistent with international norms. The country has a comprehensive legal framework for business and foreign direct investment (FDI). The U.S.-Colombia Trade Promotion Agreement (CTPA), which took effect on May 15, 2012, has strengthened bilateral trade and investment. Through the CTPA and several international conventions and treaties, Colombia’s dispute settlement mechanisms have improved. Weaknesses include protection of intellectual property rights (IPR), as Colombia has yet to implement certain IPR-related provisions of the CTPA. Colombia’s lack of meaningful progress on implementation of IPR provisions of the CTPA, led the U.S. Trade Representative to downgrade Colombia listing it on the Special 301 Priority Watch List in 2018.

The Colombian government has made a concerted effort to develop efficient capital markets, attract investment, and create jobs. However, the government has struggled both to replace the lost energy-sector revenues after prices of oil, its largest export, collapsed in 2014, and to adjust to a concomitant devaluation of the peso. The new government taking office in August 2018 will need to act quickly if it hopes to prevent Colombia’s sovereign credit rating from falling below investment grade. Restrictions on foreign ownership in specific sectors still exist. FDI increased 4.8 percent from 2016 to 2017, with more than half of the 2017 inflow dedicated to the extractives, transportation, and communications sectors. Roughly half of the Colombian workforce is in the informal economy, and unemployment registered at 9.4 percent for 2017.

Security in Colombia has improved significantly in recent years, with kidnappings down 94 percent from 2000 to 2017. Since the 2016 peace agreement between the government and the country’s largest terrorist organization, the Revolutionary Armed Forces of Colombia (FARC), Colombia has experienced a significant decrease in terrorist activity. Negotiations between the National Liberation Army (ELN) and the government have stalled, and the rebel group continues its attacks on energy infrastructure and security forces. The ELN is one of several powerful narco-criminal operations that pose a threat to commercial activity and investment, especially in rural zones outside of government control. Despite enhanced security conditions, coca production is at the highest levels since the 1990s, with the latest U.S. government estimate of 188,000 hectares released in March 2017.

Corruption remains a significant challenge in Colombia. The international bribery scandal involving Brazilian construction giant Odebrecht included Colombia, implicating 23 government officials for receiving at least USD 37 million in bribes. The World Economic Forum’s Global Competitiveness Index (2017-2018) placed Colombia at 66 out of 137 countries (a five-place drop from the prior year), citing corruption, tax rates, and government bureaucracy as the biggest challenges for doing business. The Colombian government continues to work on improving its business climate, but U.S. and other foreign investors have voiced complaints about non-tariff and bureaucratic barriers to trade and investment at the national, regional, and municipal levels.

Table 1

Measure

Year

Index/Rank

Website Address

TI Corruption Perceptions Index

2017

96 of 180

http://www.transparency.org/
research/cpi/overview

World Bank’s Doing Business Report “Ease of Doing Business”

2018

59 of 190

www.doingbusiness.org/rankings

Global Innovation Index

2017

65 of 127

https://www.globalinnovationindex.org/
analysis-indicator

U.S. FDI in partner country ($M USD, stock positions)

2016

$6.2 billion

http://www.bea.gov/
international/factsheet/

World Bank GNI per capita

2015

$6,310

http://data.worldbank.org/
indicator/NY.GNP.PCAP.CD

1. Openness To, and Restrictions Upon, Foreign InvestmentShare    

Policies Towards Foreign Direct Investment

The Colombian government actively encourages foreign direct investment (FDI). In the early 1990s, the country began economic liberalization reforms, which provided for national treatment of foreign investors, lifted controls on remittance of profits and capital, and allowed foreign investment in most sectors. Colombia imposes the same investment restrictions on foreign investors that it does on national investors. Generally, foreign investors may participate in the privatization of state-owned enterprises without restrictions. All FDI involving the establishment of a commercial presence in Colombia requires registration with the Superintendence of Corporations (Superintendencia de Sociedades) and the local chamber of commerce. All conditions being equal during tender processes, national offers are preferred over foreign ones. Assuming equal conditions among foreign bidders, those with major Colombian national workforce resources, significant national capital, and/or better conditions to facilitate technology transfers have an edge in tenders.

ProColombia is the Colombian government entity that promotes international tourism, foreign investment, and non-traditional exports. ProColombia assists foreign companies that wish to enter the Colombian market and addresses specific needs, identifying contacts in the public and private sectors, organizing visit agendas, and accompanying companies during visits to Colombia. All services are free of charge and confidential. Business process outsourcing, software and IT services, cosmetics, health services, automotive manufacturing, textiles, graphic communications, and electricity are sectors that receive special priority. ProColombia’s “Invest in Colombia” web portal offers detailed information for opportunities in agribusiness, manufacturing, and services in Colombia (www.investincolombia.com.co/sectors).

Limits on Foreign Control and Right to Private Ownership and Establishment

Foreign investment in the financial, hydrocarbon, and mining sectors is subject to special regimes, such as investment registration and concession agreements with the Colombian government, but is not restricted in the amount of foreign capital. The following sectors require that foreign investors have a legal local representative and/or commercial presence in Colombia: travel and tourism agency services; money order operators; customs brokerage; postal and courier services; merchandise warehousing; merchandise transportation under customs control; international cargo agents; public service companies including sewage and water works, waste disposal, electricity, gas and fuel distribution, and public telephone service; insurance firms; legal services; and special air services including aerial fire-fighting, sightseeing, and surveying.

According to the World Bank’s Investing Across Sectors indicators, among the 14 countries in Latin America and the Caribbean covered, Colombia is one of the economies most open to foreign equity ownership. With the exception of TV broadcasting, all other sectors covered by the indicators are fully open to foreign capital participation. Foreign ownership in TV broadcasting companies is limited to 40 percent. Companies publishing newspapers can have up to 100 percent foreign capital investment; however, there is a requirement for the director or general manager to be a Colombian national.

According to the Colombian constitution and foreign investment regulations, foreign investment in Colombia receives the same treatment as an investment made by Colombian nationals. Any investment made by a person who does not qualify as a resident of Colombia for foreign exchange purposes will qualify as foreign investment. Foreign investment is permitted in all sectors, except in activities related to defense, national security, and toxic waste handling and disposal. There are no performance requirements explicitly applicable to the entry and establishment of foreign investment in Colombia. However, there are export incentives relating to the operation of free trade zones.

Foreign investors face specific exceptions and restrictions in the following sectors:

Media: Only Colombian nationals or legally constituted entities may provide radio or subscription-based television services. For National Open Television and Nationwide Private Television Operators, only Colombian nationals or legal entities may be granted concessions to provide television services. Colombia’s national, regional, and municipal open-television channels must be provided at no extra cost to subscribers. Foreign investment in national television is limited to a maximum of 40 percent ownership of the relevant operator. Satellite television service providers are only obliged to include within their basic programming the broadcast of government-designated public interest channels. Newspapers published in Colombia covering domestic politics must be directed and managed by Colombian nationals.

Accounting, Auditing, and Data Processing: To practice in Colombia, providers of accounting services must register with the Central Accountants Board; have uninterrupted domicile in Colombia for at least three years prior to registry; and provide proof of accounting experience in Colombia of at least one year. No restrictions apply to services offered by consulting firms or individuals. A legal commercial presence is required to provide data processing and information services in Colombia.

Banking: Foreign investors may own 100 percent of financial institutions in Colombia, but are required to obtain approval from the Financial Superintendent before making a direct investment of 10 percent or more in any one entity. Portfolio investments used to acquire more than five percent of an entity also require authorization. Foreign banks must establish a local commercial presence and comply with the same capital and other requirements as local financial institutions. Foreign banks may establish a subsidiary or office in Colombia, but not a branch. Every investment of foreign capital in portfolios must be through a Colombian administrator company, including brokerage firms, trust companies, and investment management companies. All foreign investments must be registered with the central bank.

Fishing: A foreign vessel may engage in fishing and related activities in Colombian territorial waters only through association with a Colombian company holding a valid fishing permit. If a ship’s flag corresponds to a country with which Colombia has a complementary bilateral agreement, this agreement shall determine whether the association requirement applies for the process required to obtain a fishing license. The costs of fishing permits are greater for foreign flag vessels.

Private Security and Surveillance Companies: Companies constituted with foreign capital prior to February 11, 1994 cannot increase the share of foreign capital. Those constituted after that date can only have Colombian nationals as shareholders.

Telecommunications: Barriers to entry in telecommunications services include high license fees (USD 150 million for a long distance license), commercial presence requirements, and economic needs tests. While Colombia allows 100 percent foreign ownership of telecommunication providers, it prohibits “callback” services, services which route international calls via a third country where call charges are substantially lower.

Transportation: Foreign companies can only provide multimodal freight services within or from Colombian territory if they have a domiciled agent or representative legally responsible for its activities in Colombia. International cabotage companies can provide cabotage services (i.e. between two points within Colombia) “only when there is no national capacity to provide the service,” according to Colombian law. Colombia prohibits foreign ownership of commercial ships licensed in Colombia and restricts foreign ownership in national airlines or shipping companies to 40 percent. FDI in the maritime sector is limited to 30 percent. The owners of a concession providing port services must be legally constituted in Colombia and only Colombian ships may provide port services within Colombian maritime jurisdiction; however, vessels with foreign flags may provide those services if there are no capable Colombian-flag vessels.

Other Investment Policy Reviews

In the past three years, the government has not undergone any third-party investment policy reviews through a multilateral organization such as the OECD, WTO, or UNCTAD.

Business Facilitation

New businesses have to first register with the chamber of commerce of the city in which the company will reside. Since May 2008, applicants can go online to register at the tax authority’s portal www.dian.gov.co. The portal provides access to information and speeds up the process of starting a business. The chambers of commerce portals also offer clear and complete information (in English) on the business registration process. Beside the registration with the chamber and the tax authority, companies must register a unified form to self-assess and pay social security and payroll contributions. The unified form can be submitted electronically to the Governmental Learning Service (Servicio Nacional de Aprendizaje, or SENA), the Colombian Family Institute (Instituto Colombiano de Bienestar Familiar, or ICBF) and the Family Compensation Fund (Caja de Compensacion Familiar). After that, companies must register employees for public health coverage, affiliate the company to a public or private pension fund, affiliate the company and employees to an administrator of professional risks, and affiliate employees with a severance fund.

Colombia improved two spots from 61 to 59 in “Ease of Doing Business,” according to the World Bank’s 2018 Doing Business report. According to the report, starting a company in Colombia requires eight procedures and takes an average of 11 days. Information on starting a company can be found at www.ccb.org.co/en/Creating-a-company/Company-start-up/Step-by-step-company-creation; http://www.investincolombia.com.co/how-to-invest.html#slider_alias_steps-to-establish-your-company-in-colombia; and www.dian.gov.co.

Outward Investment

ProColombia, the government’s FDI promotion agency, also promotes Colombian investment abroad. The “Colombia Invests” web portal (http://www.colombiainvierte.com.co/) offers detailed information for opportunities in the priority sectors of agribusiness, manufacturing, and services for Colombian investors in a range of countries. ProColombia also offers a network of foreign contacts and plans commercial missions.

2. Bilateral Investment Agreements and Taxation TreatiesShare    

Colombia has thirteen free trade agreements or agreements of economic cooperation that include investment chapters with the United States, the European Union, Canada, Chile, Costa Rica, Cuba, Mexico, South Korea, CAN (Andean Community of Nations – Peru, Ecuador, Bolivia), the Pacific Alliance (Colombia, Chile, Mexico and Peru), EFTA (European Free Trade Area –Switzerland, Liechtenstein, Norway and Iceland), Mercosur (Brazil, Uruguay, Paraguay, and Argentina), and Central America’s Northern Triangle (El Salvador, Honduras, and Guatemala). Colombia has subscribed trade agreements with Panama and Israel, but they are not yet in effect. The agreement with Israel was ratified by Colombia’s legislature and endorsed by the executive in June 2017, and is now pending constitutional court review before it becomes effective. There are ongoing FTA negotiations with Japan and Turkey. Through the Pacific Alliance, Colombia is also participating in negotiations with Canada, Australia, New Zealand, and Singapore to extend “associate state” status to these countries. Additionally, Colombia has stand-alone bilateral investment treaties in force with China, India, Peru, Spain, Switzerland, the United Kingdom, and Japan.

Colombia has double taxation treaties with Bolivia, Canada, Chile, the Czech Republic, Ecuador, France, India, Italy, Mexico, Peru, Portugal, South Korea, Spain, Switzerland, United Arab Emirates, and the United Kingdom. Colombia is currently negotiating double taxation agreements with Germany, Japan, the Netherlands, Panama, and the United States.

3. Legal RegimeShare    

Transparency of the Regulatory System

The Colombian legal and regulatory systems are generally transparent and consistent with international norms. The commercial code and other laws cover broad areas including banking and credit, bankruptcy/reorganization, business establishment/conduct, commercial contracts, credit, corporate organization, fiduciary obligations, insurance, industrial property, and real property law. The civil code contains provisions relating to contracts, mortgages, liens, notary functions, and registries. There are no identified private sector associations or non-governmental organizations leading informal regulatory processes. The ministries generally consult with relevant actors, both foreign and national, when drafting regulations, but not always and sometimes for a very limited time period. Proposed laws are typically published as drafts for public comment, though not always, and the complexity of the subject is not necessarily taken into account.

Enforcement mechanisms exist, but historically the judicial system has not taken an active role in adjudicating commercial cases. The Constitution establishes the principle of free competition as a national right for all citizens and provides the judiciary with greater administrative and financial independence from the executive branch. Colombia has transitioned to an oral accusatory system to make criminal investigations and trials more efficient. The new system separates the investigative functions assigned to the Office of the Attorney General from trial functions. Lack of coordination among government entities as well as insufficient resources complicate timely resolution of cases.

Colombia is a member of UNCTAD’s international network of transparent investment procedures (see http://www.businessfacilitation.org/ and Colombia’s website http://colombia.eregulations.org/). Foreign and national investors can find detailed information on administrative procedures applicable to investment and income generating operations including the number of steps, name, and contact details of the entities and people in charge of procedures, required documents and conditions, costs, processing time, and legal bases justifying the procedures.

International Regulatory Considerations

Colombia is making a hard push to join the Organization for Economic Cooperation and Development (OECD) in summer 2018, before President Santos’ term ends in August. If not completed, the accession process would continue into the next administration. Colombia is part of the World Trade Organization (WTO). The government generally notifies all draft technical regulations to the WTO Committee on Technical Barriers to Trade. In December 2017, the legislature ratified the WTO Trade Facilitation Agreement (TFA), which was subsequently endorsed by President Santos. The TFA is now pending constitutional court review before Colombia can deposit its letter of acceptance with the WTO. Regionally Colombia is a member of organizations such as the Inter-American Development Bank (IADB), the Andean Community of Nations (CAN), the Union of South American Nations (UNASUR) and the Pacific Alliance.

Legal System and Judicial Independence

Colombia has a comprehensive legal system. Colombia’s judicial system defines the legal rights of commercial entities, reviews regulatory enforcement procedures, and adjudicates contract disputes in the business community. The judicial framework includes the Superintendence of Industry and Commerce (SIC), the Council of State, the Constitutional Court, the Supreme Court of Justice, and various departmental and district courts, which collectively are administered by the Superior Judicial Council. The 1991 constitution provided the judiciary with greater administrative and financial independence from the executive branch. Colombia has a commercial code and laws covering broad areas including banking and credit, bankruptcy/reorganization, business establishment/conduct, commercial contracts, credit, corporate organization, fiduciary obligations, insurance, industrial property, and real property law. Regulations and enforcement actions are appealable at the different stages of court processes in Colombia. The judicial system is generally regarded as competent, fair, and reliable, but it did suffer reputational damage in 2017 following the arrest of an official in the Attorney General’s office on corruption charges, which led to the uncovering of a judicial influence-peddling scandal linked to the Supreme Court. Except for the SIC’s efficient exercise of judicial functions, investors may encounter time-consuming bureaucratic requirements and corruption in parts of the judicial system.

Laws and Regulations on Foreign Direct Investment

Colombia has a comprehensive legal framework for business and FDI which incorporates binding norms resulting from its membership in the Andean Community of Nations as well as other free trade agreements and bilateral investment treaties.

Competition and Anti-Trust Laws

The SIC is Colombia’s national competition authority and has been strengthened over the last five years by adding additional personnel, including economists, and lawyers. The SIC issued landmark anti-competitiveness fines in 2015, including against a sugar cartel. More recently the SIC has sanctioned a rice cartel, three of the biggest telecommunication companies in the region, and truck transport operators for anticompetitive practices. In the last four years, the SIC has imposed sanctions of approximately USD 400 million for unfair competition practices on approximately 400 individuals and companies. In 2016, the SIC sanctioned cartels operating in the sectors of baby diapers, soft paper and notebooks, imposing fines of over USD 150 million. The SIC also sanctioned several sectors – including the telecommunications, furniture and home appliances, tourism, technology, automotive, and construction sectors – for consumer rights violations, such as misleading advertising or noncompliance with warranty agreements. In the last five years, the SIC has imposed fines of over USD 300 million for “business cartelization,” collusion among producers to control prices or restrict production.

Expropriation and Compensation

Article 58, numeral 4 of the Constitution governs indemnifications and expropriations, and guarantees owners’ rights for legally-acquired property. For assets taken by eminent domain, Colombian law provides a right of appeal, both on the basis of the decision itself and on the level of compensation. The Constitution does not specify how to proceed in compensation cases, which remains a concern for foreign investors. The Colombian government has sought to resolve such concerns through the negotiation of bilateral investment treaties and strong investment chapters in free trade agreements, such as the CTPA.

Dispute Settlement

ICSID Convention and New York Convention

Colombia is a member of the New York Convention on Investment Disputes, the International Center for the Settlement of Investment Disputes (ICSID), and the Multilateral Investment Guarantee Agency. Colombia is also party to the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards. In October 2012, the new National and International Arbitration Statute (Law 1563), modeled after the UNCITRAL Model Law, took effect.

Investor-State Dispute Settlement

Domestic law allows contracting parties to agree to submit disputes to international arbitration, provided that the parties are domiciled in different countries, the place of arbitration agreed to by the parties is a country other than the one in which they are domiciled, the subject matter of the arbitration involves the interests of more than one country, and the dispute has a direct impact on international trade. The law lets parties set their own arbitration terms including location, procedures, and the nationality of rules and arbiters. Foreign investors have asserted that the arbitration process in Colombia complex and dilatory, especially with regard to enforcing awards. However, investors note some signs of progress – increases in the number of professionals and arbitrators with ample experience on trade and transnational transactions, growth in the number of arbitrage centers with cutting edge infrastructure and administrative capacity (around 340 arbitration and conciliation centers across the country), and greater receptivity in the courts to arbitration processes. The Chamber of Commerce of Bogota handles 75 percent of all arbitration cases in the country. All arbitration tribunals in total handle around 600 cases a year.

There were eight pending investment disputes in Colombia in 2018. The pending disputes represent a wide array of sectors including marine services, aviation, real estate, mining, and financial services industry.

Separately, a Spanish energy company which is the majority owner of a Colombian utility company initiated arbitration proceedings before the United Nations Commission on International Trade Law (UNCITRAL) in March 2017 after the government ordered the liquidation of the electricity supplier. The company asserted that the move constituted expropriation without compensation, though the government cited mismanagement, an inability to service its debts, and failure to provide reliable electricity to the northern coast of Colombia as justification for its actions. The Colombian government also has three disputes in the World Bank’s International Centre for Settlement of Investment Disputes (ICSID).

According to the World Bank’s Doing Business 2018 report, the time from the moment a plaintiff files the lawsuit until payment and enforcement of the contract averages 1288 days, the same as in the previous two years. Traditionally, most court proceedings are carried out in writing and only the evidence-gathering stage is carried out through hearings, including witness depositions, site inspections, and cross-examinations. The government has accelerated proceedings and reduced the backlog of court cases by allowing more verbal public hearings and creating alternative court mechanisms. The new Code of General Procedure that entered into force in June 2014 also establishes an oral proceeding which is carried out in two hearings, and there are now penalties for not ruling in the time limit set by the law. Enforcement of an arbitral award can take from six months to one and a half years; a regular judicial process can take up to 7 years for private parties and upwards of 15 years in conflicts with the State. Thus, arbitration results are cheaper and much more efficient. According to the Doing Business report, Colombia has made enforcing contracts easier by simplifying and speeding up the proceedings for commercial disputes. In 2018, Colombia’s ranking in the enforcing contracts category of the report held at 177.

International Commercial Arbitration and Foreign Courts

Foreign judgments are recognized and enforced in Colombia once an application is submitted to the Civil Chamber of the Supreme Court. In 2012, Colombia approved the use of the arbitration process when new legislation based on the United Nations Commission on International Trade Law (UNCITRAL) Model Law was adopted. The statute stipulates that arbitral awards are governed by both domestic law as well as international conventions (New York Convention, Panama Convention, etc.). This has made the enforcement of arbitral awards easier for all parties involved. Arbitration in Colombia is completely independent from judiciary proceedings, and once arbitration has begun, the only competent authority is the arbitration tribunal itself. The CTPA protects U.S. investments by requiring a transparent and binding international arbitration mechanism and allowing investor-state arbitration for breaches of investment agreements if certain parameters are met. The judicial system is notoriously slow, leading to many foreign companies to include international arbitration clauses in their contracts.

Bankruptcy Regulations

Colombia’s 1991 Constitution grants the government the authority to intervene directly in financial or economic affairs, and this authority provides solutions similar to U.S. Chapter 11 filings for companies facing liquidation or bankruptcy. Colombia’s bankruptcy regulations have two major objectives: to regulate proceedings to ensure creditors’ protection, and to monitor the efficient recovery and preservation of still-viable companies. This was revised in 2006 to allow creditors to request judicial liquidation, which replaces the previous forced auctioning option. Now, inventories are valued, creditors’ rights are taken into account, and either a direct sale takes place within two months or all assets are assigned to creditors based on their share of the company’s liabilities. The insolvency regime for companies was again revised in 2010 to make proceedings more agile and flexible and allow debtors to enter into a long-term payment agreement with creditors, giving the company a chance to recover and continue operating. Bankruptcy is not criminalized in Colombia. In 2013, a bankruptcy law for individuals whose debts surpass fifty percent of their assets value entered into force.

Restructuring proceedings aim to protect the debtors from bankruptcy. Once reorganization has begun, creditors cannot use collection proceedings to collect on debts owed prior to the beginning of the reorganization proceedings. All existing creditors at the moment of the reorganization are recognized during the proceedings if they present their credit. Foreign creditors, equity shareholders including foreign equity shareholders, and holders of other financial contracts, including foreign contract holders, are recognized during the proceeding. Established creditors are guaranteed a vote in the final decision. According to the Doing Business 2018 report, Colombia takes an average of 1.7 years to resolve insolvency – the same as OECD high income countries; the average time in Latin America is 2.9 years.

4. Industrial PoliciesShare    

Investment Incentives

The Colombian government offers investment incentives such as income tax exemptions and deductions in specific priority sectors and, more recently, as an effort to generate investments in former conflict municipalities. During the last decade, it has committed to providing more incentives and stability for investors. Investment incentives through free trade agreements between Colombia and other nations include national treatment and most favored nation treatment of investors; establishment of liability standards assumed by countries regarding the other nation’s investors, including the minimum standard of treatment and establishment of rules for investor compensation from expropriation; establishment of rules for transfer of capital relating to investment; and specific tax treatment.

The government offers tax incentives to all investors, such as preferential import tariffs, tax exemptions, and credit or risk capital. Some fiscal incentives are available for investments that generate new employment or production in areas impacted by natural disasters and former conflict affected municipalities. Companies can apply for these directly with participating agencies. Tax and fiscal incentives are often based on regional considerations. Border areas have special protections due to currency fluctuations in neighboring countries, which can harm local economies. National and local governments also offer special incentives, such as tax holidays, to attract specific industries.

Special tax exemptions have existed since 2003 and range from ten to thirty years. Income tax exemptions for investments in tourism cover new hotels constructed between 2003 and 2017, and remodeled and/or expanded hotels though 2017, for a period of 30 years, and for ecotourism services through 2023. New forestry plantations and sawmills also have benefitted from income tax exemptions since 2003. Late yield crops planted through 2014 are tax exempt for ten years from the beginning of the harvesting. Certain printing and publishing companies can benefit from tax exemptions through 2033. Software developed in Colombia has been tax exempt for up to five years since 2013. To qualify for tax exemption, the software must be patented, be based upon a high concentration of national scientific and technological research, and should receive a certification from Colciencias (Colombia’s agency for promoting science, technology, and innovation).

Foreign investors can participate without discrimination in government-subsidized research programs, and most Colombian government research has been conducted with foreign institutions. R&D incentives include Value-Added Tax exemptions for imported equipment or materials used in scientific, technology, or innovation projects. Qualified investments may receive tax credits up to 175 percent. A 2012 reform of Colombia’s royalty system allocates ten percent of the government’s revenue to science, technology, and innovation proposals executed by subnational governments. Although only subnational governments can submit a project, anyone, including foreigners, can partner with them. Colombia’s science, technology, and innovation investment as percentage of GDP was 0.5 percent in 2017, down from 0.62 percent in 2016.

In the December 2016 tax reform, the Colombia government created two tax incentives to support investment in the 344 municipalities most affected by the armed conflict (ZOMAC). The first incentive allows small businesses and microbusinesses that both invest in ZOMACs and meet a series of other criteria to be exempt from paying any taxes from 2017 to 2021, while medium and large-sized businesses will pay 50 percent of their normal taxes during that same time frame. The second component entitled Works for Taxes (Obras por Impuestos) allows the private sector to directly fund infrastructure investment in lieu of paying taxes.

Foreign Trade Zones/Free Ports/Trade Facilitation

To attract foreign investment and promote the importation of capital goods, the Colombian government uses a number of drawback and duty deferral programs. One example is free trade zones (FTZs). As of the end of 2017, there were 108 FTZs (including permanent, single company and special types). These have generated development of new infrastructure of services for industry with more than 840 companies in 63 municipalities and 19 geographic departments. While DIAN oversees requests to establish FTZs, the Colombian government is not involved in their operations.

Decree 2147 of 2016 integrated the regulatory framework for FTZs dating back to 2007, and made clarifications to certain processes without significant changes. With the December 2016 tax reform, the government revised tax treatment of companies operating FTZs, maintaining a preferential corporate income tax for FTZ’s, but increased it from 15 to 20 percent. (Certain FTZ users were grandfathered in at the 15 percent rate.) Other changes include VAT exemption for raw materials, inputs, and finished goods sold from the national customs territory to the FTZs, as long as those purchases are directly related to the corporate purpose. By contrast, no matter the purpose of the purchase, companies not located in the FTZs are affected by VAT. The 2016 tax reform increased VAT from 16 to 19 percent, and eliminated the Income Tax for Equality (CREE), a nine percent tax on company profits over 800 million pesos (approximately USD 275,000) designed to contribute to employment generation and social investments.

In return for these and other incentives, every permanent FTZ must meet specific investment and direct job creation commitments, depending on their total assets, during the first three years of the project. Special FTZ zones are required to invest and generate a number of direct jobs depending on the economic sector. According to Colombian Statistics Department (DANE), in 2017, total exports of to the permanent FTZs and the special permanent FTZs were USD 2.2 billion, a 27.2 percent decrease from 2016. In 2017, imports to FTZs increased 3.6 percent to USD 2.1 billion.

Performance and Data Localization Requirements

Performance requirements are not imposed on foreigners as a condition for establishing, maintaining, or expanding investments. The Colombian government does not have performance requirements, impose local employment requirements, or require excessively difficult visa, residency, or work permit requirements for investors. Under the CTPA, Colombia grants substantial market access across its entire services sector.

Colombia issued new implementing regulations for its Data Protection Law 1581 of 2012. The SIC, under the Deputy Office for Personal Data Protection, is the Data Protection Authority (DPA) and has the legal mandate to ensure proper data protection. The SIC issued a circular on August 10, 2017 defining adequate data protection and responsibilities of data controllers with respect to international data transfers. The circular details several general criteria reflecting the SIC’s view of adequate data protection and also provides a list of countries, which includes the United States, that meet the SIC’s data protection guidelines.

In Colombia, software and hardware are protected by IPR (Direccion Nacional de Derecho de Autor – DNDAhttp://www.derechodeautor.gov.co/). There is no obligation to submit source code for registered software. However, if the IT provider is contracting with the Colombian government, the source code must be provided to the entity that the government IT provider is contracting. The SIC launched a national database registry in November 2015 to implement Law 1581 pertaining to personal information protection and management. It requires data storage facilities that hold personal data to comply with government requirements for security and privacy, and data storage companies have one year to register. The SIC enforces the rules on local data storage within the country through audits/investigations and imposed sanctions.

5. Protection of Property RightsShare    

Real Property

The 1991 Constitution explicitly protects individual rights against state actions and upholds the right to private property.

Secured interests in real property, and to a lesser degree movable property, are recognized and generally enforced after the property is properly registered. In terms of protecting third party purchasers, such as one of the cases cited under investment disputes, existing law is inadequate. The concept of a mortgage, trust, deed, and other types of liens exists, as does a reliable system of recording such secured interests. Deeds present legal risks due to the prevalence of transactions that have never been registered with the Public Instruments Registry.

According to Amnesty International, as of November 2015, eight million hectares had been abandoned or acquired illegally, equivalent to 14 percent of the Colombian territory. The government estimates that approximately 6.5 million hectares of land are affected by violent usurpation. Around 18 percent of land owners do not have clear title. The Colombian government is working to title these plots and has started a formalization program for land restitution.

In the seven years that the Law on Victims and Land Restitution has been in force, between 2011 and 2018, the government has received nearly 112,000 restitution claims, corresponding to 99,155 properties and around 290,000 hectares. Of these, the “Land Restitution Unit” (URT) created by the 2011 law has studied 58,291 cases and has transferred 14,851 cases for review by a restitution judge. As of March 2018, there have been 6,986 cases resolved by these judges, covering 5,598 properties. With the entry into force of the 2016 peace deal with the FARC, the government is confident restitution efforts will be more effective since former violent areas become more accessible and population can start land restitution processes without much fear, although security in those areas remains a latent challenge. While some landowners who received their formal land titles have been threatened by illegal armed groups, the government confirms that the vast majority of land restitution beneficiaries have returned and stayed on their parcels, accessing a two-year subsidy for the implementation of productive projects provided by the Land Restitution Unit.

The URT’s work is complementary to the work of the National Land Agency which deals with property titles to peasants and minorities communities so they can have access to land and to the formalization of their rights. The Agency was created at the end of 2015 to implement many of the commitments established in the peace deal with the FARC on formalization of rural land and aimed to formalize the property of 50,000 Colombian families in 2017. Thanks to the implementation of the multipurpose cadaster, a massive strategy to formalize rural property, the agency formalized the properties of 71,000 rural families by end 2017.

In March 2017, the Colombia's Prosecutor’s Office announced the recovery of 277,000 hectares from property of dissidents and ex-combatants of the FARC guerrillas, and from illicit drugs. The area is equivalent to 2,270 square kilometers or an extension almost three times larger than the city of New York (787 square kilometers). Colombia ranked 60 out of 190 economies for ease of registering property, according to the 2018 Doing Business report, down seven spots since 2017.

Intellectual Property Rights

Colombia’s lack of meaningful progress on implementation of IPR provisions of the United States-Colombia Trade Promotion Agreement (CTPA), led the U.S. Trade Representative to downgrade Colombia listing it on the Special 301 Priority Watch List in 2018. In 2017, USTR conducted an Out-of-Cycle Review of Colombia focused on certain provisions of the CTPA and monitoring the implementation of Colombia’s NDP. In 2018, Colombia will be subject to another Out-of-Cycle Review on the same IPR implementation issues of the CTPA and the NDP to determine whether a change in status to Watch List would be appropriate.

In Colombia, the granting, registration, and administration of IPR are carried out by four primary government entities. The SIC acts as the Colombian patent and trademark office. The Colombian Agricultural Institute (ICA) is in charge of issuing plant variety protections and data protections for agricultural products. The Ministry of Interior administers copyrights through the National Copyright Directorate (DNDA). The Ministry of Health and Social Protection handles data protection for products registered through the National Food and Drug Institute (INVIMA). Colombia is subject to Andean Community Decision 486 on trade secret protection, which is fully implemented domestically by the Unfair Competition Law of 1996.

Colombia made no significant changes to its institutional IPR framework in 2017. Decree 1162 of 2010 created the National Intellectual Property Administrative System and the Intersectorial Intellectual Property Commission (CIPI). The CIPI serves at the interagency technical body for IPR issues, but has not issued any recent policy documents. The last comprehensive interagency policy for IPR issues (Conpes 3533) was issued by the National Planning Department in 2008. Colombia’s National Development Plan (NDP) for 2014-2018 contains a requirement to develop an IPR enforcement policy, but Colombia has yet to publish such a policy.

The patent regime in Colombia currently provides for a 20-year protection period for patents, a 10-year term for industrial designs, and 20- or 15-year protection for new plant varieties, depending on the species. Colombia has been on the U.S. Trade Representative’s Special 301 Watch List every year since 1991 but is not listed in the notorious markets report. Special 301 reports can be found at https://ustr.gov/issue-areas/intellectual-property/Special-301. As in prior years, stakeholder submissions for the 2018 Special 301 report (currently being drafted) cited concerns about Colombia’s regulation of the pharmaceutical sector.

The CTPA improved standards for the protection and enforcement of a broad range of IPR. Such improvements include state-of-the-art protections for digital products such as software, music, text, and videos; stronger protection for U.S. patents, trademarks, and test data; and prevention of piracy and counterfeiting by criminalizing end-use piracy. Colombia is a member of the Inter-American Convention for Trademark and Commercial Protection. Various procedures associated with industrial property, patent, and trademark registration are available at http://www.sic.gov.co/propiedad-Industrial.

Colombia has outstanding CTPA commitments related to IPR. In January 2013, the constitutional court declared Law 1520 of 2012 implementing several of these requirements (specifically related to copyright law and internet service provider liability) unconstitutional on procedural grounds. In response, the Santos administration decided to present separate bills to Congress. In the case of copyright law reform, MINCIT published a new version of the bill in August 2016 for public consultation. The Santos administration then introduced the legislation to Congress in October 2017; it is currently pending.

Regarding other CTPA requirements, Colombian officials report that legislation regulating internet service providers on issues such as compulsory takedown of online content and the protection of intermediaries with “safe harbor” provisions for unintentional copyright infringement will not be introduced until after the enactment of copyright reform. Amendments to the Copyright Law made it into decree form as of April 2018, pending final legislation. Colombia still needs to meet its international agreement commitments in order to comply with CTPA provisions, including commitments to address the challenges of online piracy and accession to the International Union for the Protection of New Varieties of Plants (UPOV 91). Colombia’s constitutional court declared accession to UPOV 91 unconstitutional in December 2012 due to lack of consultation with Afro-Colombian and indigenous communities. Colombia also maintains that the existing Andean Community Decision 345 is in effect and equivalent to UPOV 91. The IP-intensive U.S. pharmaceutical and medical device industries have expressed concerns regarding the policies of Colombia. The United States continues to monitor Colombia’s implementation of certain provisions of the NDP that could undermine innovation and IP systems, particularly those that would condition pharmaceutical regulatory approvals on factors other than safety or efficacy.

Colombia’s success combating counterfeiting and IPR violations has been limited. A 2015 law increased penalties for those involved in running contraband, but more effective implementation is needed. Colombian law does not provide sufficient authorities to law enforcement officials (police, customs, and prosecutors) for effectively inspecting and seizing goods, or investigating smugglers and counterfeiters. Colombian authorities did make a number of high-profile seizures of contraband (including counterfeit) goods in 2017. However a number of industry stakeholders have noted that counterfeit goods remain widely available in Colombia’s San Andresitos markets. Enforcement in the digital space remains weak as well, with large piracy websites and mobile applications based in Colombia.

Regarding responsibility for prosecutions, the specialized IPR unit in the Attorney General’s office (the UNPIT) was abolished in a 2014 restructuring. It remains the case that criminal IPR cases are generally assigned randomly to non-specialized national prosecutors.

Resources for Rights Holders

Embassy point of contact:

U.S. Embassy Bogota
Economic Section
Carrera 45 #22B-45
Bogota, Colombia
(571) 275-2000
BogotaECONShared@state.gov

Country/Economy resources:

6. Financial SectorShare    

Capital Markets and Portfolio Investment

The Colombian Stock Exchange (BVC) is the main market for trading and security transactions in Colombia. The BVC is a private company listed on the stock market. The BVC, as a multi-product and multi-market exchange, offers trading platforms for the stock market, along with fixed income and standard derivatives. The BVC also provides listing services for issuers. The BVC is part of the Latin American Integrated Market (MILA) along with the Mexican Stock Exchange, the Lima Stock Exchange and the Santiago Stock Exchange. BVC market capitalization has risen from USD 14 billion in 2003 to USD 121 billion in 2017. In the face of a lame-duck government and inflexible spending commitments, Standard & Poor’s downgraded Colombia’s credit rating to BBB- in December 2017. Moody’s maintained their lowest investment-grade evaluation but modified the outlook from “stable” to “negative” in February 2018. Foreign investors can participate in capital markets by negotiating and acquiring shares, bonds, and other securities listed by the Foreign Investment Statute. These activities must be conducted by a local administrator, such as trust companies or Financial Superintendency authorized stock brokerage firms. Foreign investment capital funds are forbidden from acquiring more than ten percent of the total amount of a Colombian company's outstanding shares. Foreigners can establish a bank account in Colombia as long as they have a valid visa and Colombian government identification.

The market has sufficient liquidity for investors to enter and exit sizeable positions. The central bank respects IMF Article VIII and does not restrict payments and transfers for current international transactions. The financial sector in Colombia offers credit to nationals and foreigners that comply with the requisite legal requirements.

Money and Banking System

In 2005, Colombia consolidated supervision of all aspects of the banking, financial, securities, and insurance sectors under the Financial Superintendency. Colombia has an effective regulatory system that encourages portfolio investment. According to the Financial Superintendency, as of December 2017, the combined estimated assets of Colombia’s major banks totaled USD 225 billion.

Market analysts generally consider Colombia’s financial system to be strong by regional standards. The financial sector as a whole is investing in new risk assessment and portfolio management procedures. As of December 2017, two private financial groups, the Sarmiento Group (Grupo Aval) and the Business Group of Antioquia (Bancolombia), together own over half of all Colombian banking assets. Grupo Aval controls about 27 percent of the sector and Bancolombia controls about 26 percent. Total foreign-owned bank assets account for approximately 28 percent of the sector.

Commercial banks are the principal source of long-term corporate and project finance in Colombia. Loans rarely have a maturity in excess of five years. Unofficial private lenders play a major role in meeting the working capital needs of small and medium-sized companies. Only the largest of Colombia’s companies participate in the local stock or bond markets, with the majority meeting their financing needs either through the banking system, by reinvesting their profits, or through credit from suppliers.

Colombia’s central bank, Banco de la Republica, is charged with managing inflation and unemployment through monetary policy. Foreign banks are allowed to establish operations in the country. As of the end of 2017, the Financial Superintendence had not approved of the use of blockchain technology in financial transactions.

In order to operate in Colombia, foreign banks must set up a Colombian branch. Colombian banks generally have multiple correspondent banking relationships with U.S. banks, and none of those relationships are known to be in jeopardy at this time.

Foreign Exchange and Remittances

Foreign Exchange Policies

There are no restrictions on transferring funds associated with FDI. Foreign investment into Colombia must be registered with the central bank in order to secure the right to repatriate capital and profits. Direct and portfolio investments are considered registered when the exchange declaration for operations channeled through the official exchange market is presented, with few exceptions. The official exchange rate is determined by the central bank. The rate is based on the free market flow of the previous day. Colombia does not manipulate its currency to gain competitive advantages.

Remittance Policies

Repatriations of profits are permitted without restrictions. The government permits full remittance of all net profits regardless of the type or amount of investment. Foreign investments must be channeled through the foreign exchange market and registered with the central bank’s foreign exchange office within one year to be able to repatriate or reinvest the proceeds. There are no restrictions on the repatriation of revenues generated from the sale or closure of a business, reduction of investment, or transfer of a portfolio. Colombian law authorizes the government to restrict remittances in the event that international reserves fall below three months’ worth of imports. International reserves have remained well above this threshold for decades.

Sovereign Wealth Funds

In 2012, Colombia began operating a sovereign wealth fund (SWF) called the Savings and Stabilization Fund (FAE), which is administered by the central bank with the objective of promoting savings and economic stability in the country. The fund can administer up to 30 percent of annual royalties from the extractive industry. The fund was valued at USD 3.7 billion in 2017 from an initial value of USD 500 million in 2012. The government transfers royalties not dedicated to the fund to other internal funds to boost national economic productivity through strategic projects, technological investments, and innovation. At the end of 2017, the FAE was invested in 90 percent AAA sovereign bonds. There are no known negative ramifications for U.S. investors in the Colombian market due to FAE investment activities. The FAE is not a member of the International Forum of Sovereign Wealth Funds (http://www.ifswf.org/our-members), and is not one of the 30 SWFs that has voluntarily upholds the Santiago Principles’ standards for governance and risk management.

7. State-Owned EnterprisesShare    

Since the Department of National Planning issued Conpes 3851 in 2015, the government of Colombia has concentrated its industrial and commercial enterprises under the supervision of the Ministry of Finance. By the end of 2016, the number of state-owned enterprises (SOEs) reached 119, with a combined value of USD $ 20.3 billion. Of the 199 companies under government ownership, the government is the majority shareholder of 40 companies, and a minority shareholder in the remaining 79. Of all the companies with any government ownership, 36 are in the transportation sector, 23 in energy, 18 in agriculture, 16 in finance and 9 in communications. Among the most notable companies with a government stake are Ecopetrol (Colombia’s majority state-owned and privately run oil company), ISA, Banco Agrario de Colombia, Bancoldex, and La Previsora. The value of the assets of the majority-owned companies by the government stands at USD $ 80 billion. SOEs competing in the Colombian market do not receive non-market based advantages from the government. The Ministry of Finance updates their annual report on SOEs every June.

Privatization Program

Colombia has privatized SOEs under article 60 of the Constitution and Law Number 226 of 1995. This law stipulates that the sale of government holdings in an enterprise should be offered to two groups: first to cooperatives and workers’ associations of the enterprise, then to the general public. During the first phase, special terms and credits have to be granted, and in the second phase, foreign investors may participate along with the general public. Colombia’s main privatizations have been in the electricity, mining, hydrocarbons, and financial sectors, and in January 2016, the government sold its majority stake in Isagen, the country’s third-largest energy generator, to Canadian firm Brookfield Asset Management for USD 2 billion. The government views stimulating private sector investment in roads, ports, electricity, and gas infrastructure as a high priority. The government is increasingly turning to concessions and utilizing public-private partnerships (PPPs) as a means for securing and incentivizing infrastructure development.

The Colombian government prioritized a fourth-generation infrastructure program (4G) focused on highway construction with PPP opportunities valued at USD 17 billion. In order to attract investment and promote PPPs, on November 22, 2013, the Colombian government signed a new infrastructure law clarifying provisions for frequently cited obstacles to participate in PPPs including environmental licensing, land acquisition, and the displacement of public utilities. The law puts in place a civil procedure that facilitates land expropriation during court cases, allows for expedited environmental licensing, and clarifies that the cost to move or replace public utilities affected by infrastructure projects falls to private companies. Foreign investment has played a substantial role in the 4G program, and the program has thus far been praised for its transparency and competitiveness.

Municipal enterprises operate many public utilities and infrastructure services. These municipal enterprises have engaged private sector investment through concessions. There are several successful concessions involving roads. These kinds of partnerships have helped promote reforms and create a more attractive environment for private, national, and foreign investment.

8. Responsible Business ConductShare    

In December 2015, the Colombian government released its National Action Plan on Business and Human Rights, which responds to the UN Guiding Principles on Business and Human Rights and the OECD’s Guidelines for Multinational Enterprises (https://www.business-humanrights.org/en/un-guiding-principles/implementation-tools-examples/implementation-by-governments/by-type-of-initiative/national-action-plans). Colombia also adheres to the corporate social responsibility (CSR) principles outlined in the OECD Guidelines for Multinational Enterprises. CSR cuts across many industries and Colombia encourages public and private enterprises to follow OECD CSR guidelines. Beneficiaries of CSR programs include students, children, populations vulnerable to Colombia's armed conflict, victims of violence, and the environment. Larger companies structure their CSR programs in accordance with accepted international CSR principles. International governmental and non-governmental organizations, including the State Department, have recognized companies in Colombia for the success of some of their CSR initiatives.

Overall, Colombia has adequate environmental laws, is proactive at the federal level in enacting environmental protections, and does not waive labor or environmental regulations to attract investors. However, the Colombian government struggles with enforcement, particularly in more remote areas. Geography, lack of infrastructure, and lack of state presence all play a role, as does a general shortage of resources in national and regional institutions. The Environmental Chapter of the CTPA requires Colombia to maintain and enforce environmental laws, protect biodiversity, and promote opportunities for public participation.

In parallel with its OECD accession process, the Colombian government has been working with the organization in a series of assessments in order to develop the implementation the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Afflicted and High-Risk Areas, especially related to gold mining. The Colombian government is undergoing an extensive campaign to formalize illegal gold mining operations throughout the country. The government is also taking steps to address mercury use in mining, and is coordinating with the U.S. Embassy in Bogota and other international partners to prepare for the total ban on mercury use in mining as called for by Decree 1658 of 2013. Colombia is in the final stages of its accession to the Minamata Convention on Mercury and plans to officially join the convention by the end of 2018. In March 2018, the U.S. Embassy in Bogota signed a comprehensive memorandum of understanding with the government to formalize existing cooperation on reducing illegal gold mining and the negative social, health, and environmental impacts of that industry.

Buyers, sellers, traders, and refiners of gold may wish to conduct additional due diligence as part of their risk management regimes to account for the influx of illegally mined Colombian gold into existing supply chains. Throughout the country, Colombian authorities have taken steps to dismantle illegal gold mining operations that are responsible for negative environmental, criminal and human health impacts; and that fuel trafficking in persons and other crimes. The Colombian government has focused its efforts on transnational criminal elements involved in the production, laundering, and sale of illegally mined gold, and the fraudulent documentation that is used to obscure the origin of illegally mined gold.

9. CorruptionShare    

Corruption is a serious obstacle for companies operating or planning to invest in Colombia. According to the WEF Global Competitiveness Index (2017-2018), corruption is the most problematic factor affecting competitiveness, followed by high tax rates and inefficient government bureaucracy. The NGO Transparency International reported that Colombian citizens’ perception of the level of corruption in the country remained constant in 2017, scoring 37 out of 100 (where higher scores indicate less corruption). Advances elsewhere in the world meant that its ranking fell from 90th to 96th out of the 180 countries surveyed. Customs, taxation, and public works contracts are commonly-cited sectors where corruption exists.

In December 2016, the U.S. Department of Justice announced that Brazilian construction conglomerate Odebrecht had paid USD 800 million in bribes over six years regionally, including USD 11 million in Colombia, in order to win infrastructure contracts. As one of the biggest corporate corruption cases in history, the case has generated intense media coverage in Colombia, and several senior members of both the Santos and Uribe Administrations are under investigation. Through the course of the investigation, the known bribe total in Colombia was subsequently increased to USD 37 million. On March 14, 2017, President Santos acknowledged that Odebrecht illegally donated funds to his 2010 campaign, though he denied awareness of the act at the time. His opponent in the 2014 election, Oscar Ivan Zuluaga, withdrew from the 2018 presidential election after being implicated in the scandal. Two high-priority infrastructure projects are on hold as a result of the corruption revelations, though other highway modernization projects critical to implementation of the peace continue. At least 23 public officials have been implicated in the scandal. The judicial influence–peddling scandal mentioned above, commonly known as the “Cartel of the Robe,” and numerous other reports of official corruption made public over the past year have also kept the subject in the public discourse.

In January 2017, President Santos issued decree 092 to prohibit direct public contracts with non-profit organizations. The Secretariat for Transparency estimates that more than USD 400 million in public resources are committed to contracts with foundations and NGOs; contracting with these entities has commonly been abused to steal public resources. Despite the prominence of this topic over the past year, legislation sought by the Santos Administration has stalled in Congress. These include proposed laws related to whistleblower protection, lobbying reform, and establishment of a beneficial ownership registry for corporations.

Colombia has adopted the OECD Convention on Combating Bribery of Foreign Public Officials, and is a member of the OECD Anti-Bribery Committee. It also passed a domestic anti-bribery law in 2016. It has signed and ratified the UN Anticorruption Convention. Additionally, it has adopted the OAS Convention against Corruption. The CTPA protects the integrity of procurement practices and criminalizes both offering and soliciting bribes to/from public officials. It requires both countries to make all laws, regulations, and procedures regarding any matter under the CTPA publicly available. Both countries must also establish procedures for reviews and appeals by any entities affected by actions, rulings, measures, or procedures under the CTPA.

Resources to Report Corruption

Useful resources and contact information for those concerned about combating corruption in Colombia include the following:

  • The Transparency and Anti-Corruption Observatory is an interactive tool of the Colombian government aimed at promoting transparency and combating corruption available at http://www.anticorrupcion.gov.co/;
  • The National Civil Commission for Fighting Corruption or Comision Nacional Ciudadana para la Lucha Contra la Corrupcion (CNCLCC) was established by Law 1474 of 2011, so civil society can discuss and propose policies and actions to fight corruption in the country. Transparencia por Colombia is the technical secretariat of the commission. http://ciudadanoscontralacorrupcion.org/es/inicio;
  • The national chapter of Transparency International, Transparencia por Colombia: http://transparenciacolombia.org.co/;
  • The Presidential Secretariat of Transparency advises and assists the president to formulate and design public policy about transparency and anti-corruption. This office also coordinates the implementation of anti-corruption policies. http://wsp.presidencia.gov.co/secretaria-transparencia/Paginas/default.aspx/.

10. Political and Security EnvironmentShare    

Security in Colombia has improved significantly over the past 17 years. Colombia experienced a significant decrease in terrorist activity, due in large part to a bilateral ceasefire between government forces and Colombia’s largest terrorist organization, the Revolutionary Armed Forces of Colombia (FARC). On November 26, 2016, President Santos signed a renegotiated peace agreement with the FARC to end half a century of confrontation, after the original peace accord was rejected in an October 2016 plebiscite. Congressional approval of a peace accord between the government and the FARC on November 30, 2016 put in motion a six-month disarmament, demobilization, and reintegration process, in part allow the FARC to become a legal political organization. In practice, this process lasted 10 months. FARC demobilization could bring greater development opportunities to rural regions. Since the November 2016 peace accord with the FARC, 7,000 guerrillas have disarmed (over 11,000 are participating in the process, including militia and former prisoners), key implementing legislation has passed, and a UN special political mission has begun verifying security guarantees and FARC reintegration. Security forces estimate roughly 1,000 combatants (FARC dissidents) have chosen not to participate in the process.

Despite the National Liberation Army (ELN) conducting ongoing negotiations with the government in Quito, Ecuador, beginning in February 2017, the group continues a low-cost, high-impact asymmetric insurgency. ELN attacks, alongside powerful narco-criminal group operations, are posing a threat to commercial activity and investment, especially in some rural zones where government control is weaker. The ELN often focuses attacks on oil pipelines, mines, roads, and electricity towers to disrupt economic activity and pressure the government. The ELN also extorts businesses in their areas of operation, kidnap personnel, and destroy property of entities that refuse to pay protection or extortion. The government estimates the ELN has 1,500 to 2,000 armed members.

Colombian government statistics showed a 40 percent decrease in terrorist incidents from 2016 to 2017. This does not include incidents related to organized criminal groups.

11. Labor Policies and PracticesShare    

U.S. Department of State's Human Rights Reports: https://www.state.gov/j/drl/rls/hrrpt/.

An OECD report on Colombia’s labor market and social policies was published in January 2016. The report mentions progress on labor market reforms, but cites large income inequality and structural flaws in labor market policies, despite relatively low unemployment and high labor force participation. In 2017, the average annual unemployment rate according to official government figures was 9.4 percent, a slight increase relative to 2016’s rate of 9.2 percent. Approximately 64 percent of the working-age population actively participates in the labor force. According to DANE, 48.1 percent of the workforce was working in the informal economy at the end of 2017. Colombia has a wide range of skills in its workforce, as well as managerial-level employees who are often bilingual.

Labor rights in Colombia are set forth in its Constitution, the Labor Code, the Procedural Code of Labor and Social Security, sector-specific legislation, and ratified international conventions, which are incorporated into national legislation. Colombia’s Constitution guarantees freedom of association and provides for collective bargaining and the right to strike (with some exceptions). It also addresses forced labor, child labor, trafficking, discrimination, protections for women and children in the workplace, minimum wages, working hours, skills training, and social security. Colombia has ratified all eight of the International Labor Organization’s (ILO’s) fundamental labor conventions, and all are in force, including those related to freedom of association, equal remuneration, right to organize and collectively bargain, discrimination, minimum working age, forced labor, and prohibition of the worst forms of child labor. Colombia has also ratified conventions related to hours of work, occupational health and safety, and minimum wage. In 2013, Law 1636 was passed to increase protections and opportunities for Colombia’s unemployed population.

The 1991 Constitution protects the right to constitute labor unions. Pursuant to Colombia’s labor law, any group of 25 or more workers, regardless of whether they are employees of the same company or not, may form a labor union. Employees of companies with fewer than 25 employees may affiliate themselves with other labor unions. About four percent of the country’s labor force is unionized. The largest and most influential unions are composed mostly of public-sector employees, particularly of the majority state-owned oil company and the state-run education sector. Only 6.2 percent of all salaried workers are covered by collective bargaining agreements (CBAs), according to the OECD. The Ministry of Labor has expressed commitment to working on decrees to incentivize sectoral collective bargaining, and to strengthen union representation within companies and regulate strikes in the essential public services sector (i.e. hospitals).

Strikes, when held in accordance with the law, are recognized as legal instruments to obtain better working conditions, and employers are prohibited from using strike-breakers at any time during the course of a strike. After 60 days of strike action, the parties are subject to compulsory arbitration. Strikes are prohibited in certain “essential public services,” as defined by law, although Colombia has been criticized for having an overly-broad interpretation of “essential.” In September 2017, about 700 pilots from Colombia’s leading airline, Avianca, went on strike. The strike ended after 52 days, without any conclusive decision as to whether the action “interrupted an essential service”. Weeks later, Colombian courts ruled the strike illegal and, in March 2018, the airline fired more than 100 of the strikers. The Ministry of Labor has not intervened, as the pilots were ruled to have participated in an illegal strike.

Foreign companies operating in Colombia must follow the same hiring rules as national companies, regardless of the origin of the employer and the place of execution of the contract. No labor laws are waived in order to attract or retain investment. In 2010, Law 1429 eliminated the mandatory proportion requirement for foreign and national personnel; 100 percent of the workforce, including the board of directors, can be foreign nationals. Labor permits are not required in Colombia, except for minors of the minimum working age. Foreign employees have the same rights as Colombian employees. Employers may use temporary service agencies to subcontract additional workers for peaks of production. Employers must receive advance permission from the Ministry of Labor before undertaking permanent layoffs. The Ministry of Labor typically does not grant permission to lay off workers who have enhanced legal protections (those with work-related injuries or union leaders, for example). The Ministry of Labor has been cracking down on using temporary or contract workers for jobs that are not temporary in nature.

Reputational risks to investors come with a lack of effective and systematic enforcement of labor law, especially in rural sectors. In 2017, the Ministry of Labor imposed over USD 10 million in sanctions to companies for violations of labor law, including subcontracting and occupational health and safety violations as well as violations of freedom of association. The Ministry also has highlighted increased social dialogue. Homicides of unionists have decreased in recent years but remain a concern. In January 2017, the U.S. Department of Labor issued a public report of review in response to a submission filed under Chapter 17 (the Labor Chapter) of the CTPA by the American Federation of Labor and Congress of Industrial Organizations and five Colombian workers’ organizations that alleged failures on the part of the government to protect labor rights in line with CTPA commitments. For additional information on labor law enforcement see Section 7 of Colombia’s Human Rights Report, and the Department of Labor’s Findings on the Worst Forms of Child Labor and Lists of Goods Produced with Child or Forced Labor.

12. OPIC and Other Investment Insurance ProgramsShare    

OPIC made its first investment in Colombia in 1985 and has supported more than 70 projects in Colombia since 2005, with investments totaling USD 2.7 billion. OPIC has three active projects and is exploring several more. OPIC’s largest project in Colombia is a USD 236 million project to modernize Colombian power generation facilities. As of end 2017, OPIC is investing USD 622 million in Colombia. Additional information can be found at www.opic.gov.

13. Foreign Direct Investment and Foreign Portfolio Investment StatisticsShare    

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country

 

Host Country Statistical Source*

USG or International Statistical Source

USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other

Economic Data

Year

Amount

Year

Amount

 

Host Country Gross Domestic Product (GDP) ($M USD)

2017

$329,000

2016

$322,000

www.imf.org

Foreign Direct Investment

Host Country Statistical Source*

USG or International Statistical Source

USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other

U.S. FDI in partner country ($M USD, stock positions)

2017

$2,121

2017

$180

BEA data available at http://bea.gov/international/direct_
investment_multinational_
companies_comprehensive_data.htm

Host country’s FDI in the United States ($M USD, stock positions)

2017

$-71.5

2017

$0

BEA data available at http://bea.gov/international/direct_
investment_multinational_
companies_comprehensive_data.htm

Total inbound stock of FDI as % host GDP

2017

4.4%

2017

N/A

N/A

*Data from the Colombian Statistics Departments, DANE, (https://www.dane.gov.co/) and the Colombian central bank (http://www.banrep.gov.co).


Table 3: Sources and Destination of FDI

Direct Investment from/in Counterpart Economy Data

From Top Five Sources/To Top Five Destinations (US Dollars, Millions)

Inward Direct Investment

Outward Direct Investment

Total Inward

14,518

100%

Total Outward

3,690

100%

Spain

2,615

18%

Panama

741

20%

United States

2,121

15%

Luxemburg

592

16%

Mexico

1,717

12%

Mexico

437

12%

Panama

1,464

10%

Bermuda

411

11%

United Kingdom

1,282

9%

Holland

340

9%

"0" reflects amounts rounded to +/- USD 500,000.


Table 4: Sources of Portfolio Investment

Portfolio Investment Assets

Top Five Partners (Millions, US Dollars) (June 2017)

Total

Equity Securities

Total Debt Securities

All Countries

33.731

100%

All Countries

20.752

100%

All Countries

12.979

100%

United States

23.535

69.8%

United States

16.338

78.7%

United States

7.197

55.5%

Luxembourg

3.749

11.1%

Luxembourg

3.609

17.4%

Mexico

1.077

8.3%

Mexico

1.101

3.3%

Cayman Islands

181

0.9%

International Organizations

852

6.6%

International Organizations

852

2.5%

United Kingdom

174

0.8%

Germany

488

3.8%

United Kingdom

578

1.7%

Malta

129

0.6%

Peru

430

3.3%

Table 4: Data from IMF’s Coordinated Direct Investment Survey. Source: http://data.imf.org/?sk=B981B4E3-4E58-467E-9B90-9DE0C3367363&sId=1481568994271

14. Contact for More InformationShare    

U.S. Embassy Bogota
Economic Section
Carrera 45 #22B-45
Bogota, Colombia
(571) 275-2000
BogotaECONShared@state.gov