Colombia
Executive Summary
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 2019 Doing Business Report, Colombia ranked 65 out of 190 countries in the “Ease of Doing Business” index.
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 was on the U.S. Trade Representative’s 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 the price of oil, its largest export, collapsed in 2014, and to adjust to a concomitant devaluation of the peso. President Ivan Duque took office in August 7, 2018. The new administration passed a tax reform on December 2018, aimed at alleviating the tax burden on companies, increasing private investment, and strengthening economic growth.
Restrictions on foreign ownership in specific sectors still exist. FDI decreased 20.4 percent from 2017 to 2018, with more than half of the 2018 inflow dedicated to the extractives, finance, and transportation sectors. Roughly half of the Colombian workforce is in the informal economy, and unemployment registered at 9.7 percent for 2018.
Security in Colombia has improved significantly in recent years, with kidnappings down from 3,572 cases in 2000 to 170 cases in 2018. 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), another terrorist organization, and the government have stalled, and the ELN continues its attacks on energy infrastructure and security forces. The ELN is one of several powerful narco-criminal operations that poses a threat to commercial activity and investment, especially in rural zones outside of government control. Despite improved security conditions, coca production is at the highest levels since the 1990s.
Corruption remains a significant challenge in Colombia. The World Economic Forum’s Global Competitiveness Index (2018) ranked Colombia 60 out of 137 countries. 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: Key Metrics and Rankings
| Measure | Year | Index/Rank | Website Address |
| TI Corruption Perceptions Index | 2018 | 99 of 180 | http://www.transparency.org/research/cpi/overview |
| World Bank’s Doing Business Report | 2019 | 65 of 190 | http://www.doingbusiness.org/en/rankings |
| Global Innovation Index | 2018 | 63 of 126 | https://www.globalinnovationindex.org/analysis-indicator |
| U.S. FDI in partner country ($M USD, stock positions) | 2017 | $ 7,200 | http://www.bea.gov/international/factsheet/ |
| World Bank GNI per capita | 2017 | $ 5,890 | http://data.worldbank.org/indicator/NY.GNP.PCAP.CD |
1. Openness To, and Restrictions Upon, Foreign Investment
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 offers. Assuming equal conditions among foreign bidders, those with major Colombian national workforce resources, significant national capital, and/or better conditions to facilitate technology transfers are preferred.
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 by addressing specific needs, such as 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 electric energy are priority sectors. ProColombia’s “Invest in Colombia” web portal offers detailed information about 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 services; 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.
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 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 ten 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.
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 ownership of companies operating in the sector. 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 (IPRs) through a multilateral organization such as the OECD, WTO, or UNCTAD.
Business Facilitation
New businesses must first register with the chamber of commerce of the city in which the company will reside. Applicants also register using the Colombian tax authority’s portal at www.dian.gov.co. Apart from 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 Compensación 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 went down six spots from 59 to 65 in the World Bank’s 2019 “Ease of Doing Business” index. 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.
12. OPIC and Other Investment Insurance Programs
OPIC made its first investment in Colombia in 1985 and has supported more than 70 projects in Colombia since 2005. OPIC has seven active projects and is exploring several more. OPIC’s largest project in Colombia is a USD 250 million toll road project in the southern part of Colombia known as the Rumichaca-Pasto road. As of end 2018, OPIC’s active investments in Colombia totaled USD 718 million. Additional information can be found at www.opic.gov .