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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 

2. Bilateral Investment Agreements and Taxation Treaties

BITs or FTAs:

Colombia has 13 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. 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.

 Bilateral Taxation Treaties:

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, and Panama, and has expressed strong interest in renewing negotiations with the United States.

8. Responsible Business Conduct

In December 2015, the Colombian government released their 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. Companies in Colombia have been recognized on an international level for their CSR initiatives, including by the State Department.

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 faces challenges in formalizing illegal gold mining operations throughout the country. The government is also taking steps to address mercury use in mining, banning the use of mercury in mining as of July 2018. Colombia will phase out mercury use from all other industries by 2023. Colombia ratified the Minamata Convention on Mercury in March 2018, and is in the final stages of its accession to the treaty.  In March 2018, the Governments of the United States and Colombia signed a comprehensive memorandum of understanding to formalize existing cooperation on reducing illegal gold mining and its negative social, health, and environmental impacts.

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. 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.

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

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

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) N/A N/A 2018 $336.940   https://www.imf.org   
Foreign Direct Investment Host Country Statistical Source* USG or International Statistical Source USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country ($M USD, stock positions) 2018 $2.482 2017 -$66 BEA data available at https://www.bea.gov/international/direct-investment-and-multinational-enterprises-comprehensive-data  
Host country’s FDI in the United States ($M USD, stock positions) 2018 $516 N/A N/A BEA data available at https://www.bea.gov/international/direct-investment-and-multinational-enterprises-comprehensive-data  
Total inbound stock of FDI as % host GDP 2018 3.3% 2017 18.8% UNCTAD data available at

https://unctad.org/en/Pages/DIAE/World%20Investment%20Report/Country-Fact-Sheets.aspx  

*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 – 2018

Direct Investment From/in Counterpart Economy Data 2018
From Top Five Sources/To Top Five Destinations (US Dollars, Millions) 2018
Inward Direct Investment Outward Direct Investment
Total Inward 11,010 100% Total Outward 5,121 100%
United States 2,482.6 23% Mexico 880.5 17%
Spain 1,445.2 13% Holland 681.0 13%
England 1,351.7 12% Panama 557.1 11%
Panama 1,149.4 10% United States 516.7 10%
Switzerland 891.6 8% Chile 457.4 9%
“0” reflects amounts rounded to +/- USD 500,000.

Data from the Colombian central bank (http://www.banrep.gov.co).


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 38,963 100% All Countries 24,228 100% All Countries 14,735 100%
United States 25,654 66% United States 17,699 73% United States 7,955 54%
Luxembourg 4,649 12% Luxembourg 4,573 19% Mexico 1,025 7%
Mexico 1,040 3% Ireland 650 3% International Organizations 994 7%
International Organizations 1,006 3% United Kingdom 302 1% Canada 715 5%
Canada 783 2% Cayman Islands 237 1% France 711 5%

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

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