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
|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|
4. Industrial Policies
The Colombian government offers investment incentives, such as income tax exemptions and deductions in specific priority sectors, including the so-called “orange economy,” which refers to the creative industries, as well as agriculture and entrepreneurship. More recently, the government has offered additional incentives in an effort to generate investments in former conflict municipalities. 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, sector, or business size considerations. Border areas have special protections due to currency fluctuations in neighboring countries which can impact 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 10 to 30 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. Investments in ecotourism services benefit from income tax exemptions 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 10 years from the beginning of the harvesting. Electricity from wind power, biomass, and agricultural waste were tax exempt until January 1, 2018, as were river-based transportation services provided with certain shallow draft vessels and barges. 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 meet exemption requirements, the software must have its intellectual property rights protected, be based upon a high concentration of national scientific and technological research, and be certified by 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 (VAT) exemptions for imported equipment or materials used in scientific, technology, or innovation projects, and qualified investments may receive tax credits up to 175 percent. A 2012 reform of Colombia’s royalty system allocates 10 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.
In a tax reform passed in December 2016, the Colombian government created two tax incentives to support investment in the 344 municipalities most affected by the armed conflict (ZOMAC). Small and microbusinesses that invest in ZOMACs and meet a series of other criteria will be exempt from paying any taxes from 2017 to 2021, while medium and large-sized businesses will pay 50 percent of their normal taxes. The second component is entitled “works for taxes” (“Obras por Impuestos”), a program through which the private sector can directly fund infrastructure investment in lieu of paying taxes.
In the financing law of 2019 (tax reform), the Colombian government introduced exemption incentives in the payment of income tax for the new orange economy companies that invest more than COP 150 million in three years and that generate at least three jobs. In addition, it created incentives for new projects in the agricultural sector which will be exempt from income taxes for seven years. Finally, the law created an incentive for the tourism sector for the construction of new hotel infrastructure, and the benefits were extended to projects such as boat docks, theme parks, and eco and agro-tourism projects.
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 2018, there were 112 FTZs (including permanent, single company, and special types). These have generated development of new industry infrastructure for 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 in one document, and made clarifications to certain processes without significant changes. The government revised tax treatment of companies operating FTZs with the December 2016 tax reform, maintaining a preferential corporate income tax for FTZs while increasing it from 15 to 20 percent. FTZ users with contracts of legal stability will continue to pay 15 percent. 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 COP 800 million (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. Special FTZs are required to generate a certain number of direct jobs depending on the economic sector. According to the figures of the Colombian National Administrative Department of Statistics (DANE), FTZs reached cumulative exports valuing USD 28,346 million between 2005 and 2018. Between January and December of 2018, exports amounted to USD 2,812 million.
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.
In 2017, Colombia issued implementing regulations of 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 (Dirección Nacional de Derecho de Autor – DNDA – http://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, through a clause of the service contract, 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.
6. Financial Sector
Capital Markets and Portfolio Investment
The Colombian Stock Exchange (BVC) is the main forum for trading and securities 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 126 billion in the first quarter of 2019. 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 Superintendence-authorized stock brokerage firms. Foreign investment capital funds are forbidden from acquiring more than 10 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 Superintendence. Colombia has an effective regulatory system that encourages portfolio investment. According to the Financial Superintendence, as of December 2018, the combined estimated assets of Colombia’s major banks totaled USD 219 billion.
Colombia’s financial system is strong by regional standards. The financial sector as a whole is investing in new risk assessment and portfolio management procedures. As of December 2018, 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. No foreign bank is a major player in the Colombian financial 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 is charged with managing inflation and unemployment through monetary policy. Foreign banks are allowed to establish operations in the country. No block chain technology use in financial transactions is approved by the Financial Superintendence as of the end of 2018. In order to operate in Colombia, foreign banks must set up a Colombian branch. The Colombian central bank has a variety of correspondent banks abroad. No correspondent banking relationships are in jeopardy.
Foreign Exchange and Remittances
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.
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 in order for those investments to be repatriated or reinvested. 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 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 extractives industry. The fund was valued at USD 3.1 billion in 2018 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 2018, the FAE was invested in 67 percent AAA sovereign bonds. There are no known negative ramifications for U.S. investors in the Colombian market. According to the International Forum of Sovereign Wealth Funds (http://www.ifswf.org/our-members), Colombia is not one of the 30 nations that voluntarily upholds the Santiago Principles.
7. State-Owned Enterprises
Since 2015, the Government of Colombia has concentrated its industrial and commercial enterprises under the supervision of the Ministry of Finance. By the end of 2018, the number of state-owned companies reached 109, with a combined value of USD 23 billion. The 109 companies under government ownership fall under the following sectors: agricultural, energy, financial, hydrocarbons, health, telecommunications, transport, and tourism. The government is the majority shareholder of 39 companies and a minority shareholder in the remaining 70. 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 asset value of the majority state-owned companies stands at USD 84 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.
Colombia has privatized state-owned enterprises 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, with the exception of the Odebrecht scandal mentioned below, 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 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.
Corruption has been reported as a serious obstacle for companies operating or planning to invest in Colombia. Analyses of the business environment, such as the WEF Global Competitiveness Index, consistently cite corruption as a problematic factor, along with high tax rates, inadequate infrastructure, and inefficient government bureaucracy. Transparency International’s latest “Corruption Perceptions Index” released in January 2019 assigned Colombia a score of 36/100, down one point from 2018. The group’s analysis noted that corruption in the judiciary contributed to the drop. Overall, Colombia placed 99th of the 180 countries surveyed, a drop of three spots. Among OECD member states, only Mexico ranked lower. Customs, taxation, and public works contracts are commonly-cited areas where corruption exists.
In December 2016, one of the biggest corporate corruption cases in history broke when the U.S. Department of Justice announced that Brazil-based 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. The latter figure was subsequently increased to USD 37 million. 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 accord continue. At least 23 Colombian 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 kept the subject in the public discourse.
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 Comisión Nacional Ciudadana para la Lucha Contra la Corrupción (CNCLCC), was established by Law 1474 of 2011 to give civil society a forum to 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 Environment
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 FARC. On November 26, 2016, President Santos signed a peace agreement with the FARC to end half a century of confrontation. 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, which granted the FARC status as a legal political organization. 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. Currently the peace negotiations with the National Liberation Army (ELN), which began in February 2017, are suspended. This terrorist 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 weak. 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, kidnaps personnel, and destroys property of entities that refuse to pay for protection. The Colombian government estimates the ELN has 1,500 to 2,000 armed members.
11. Labor Policies and Practices
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 2018, the unemployment rate according to official government figures was 9.7 percent, a slight increase relative to the 2017 rate of 9.4 percent. According to DANE, 48.2 percent of the workforce was working in the informal economy at the end of 2018. 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.”
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. Homicides of unionists (social leaders) 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. In January 2018, the Department of Labor published the first periodic review of progress to address issues identified in the submission report. For additional information on labor law enforcement see Section 7 of Colombia’s Human Rights Report (https://www.state.gov/reports-bureau-of-democracy-human-rights-and-labor/country-reports-on-human-rights-practices/), and the Department of Labor’s Findings on the Worst Forms of Child Labor (http://www.dol.gov/ilab/reports/child-labor/colombia.htm ) and Lists of Goods Produced with Child or Forced Labor (http://www.dol.gov/ilab/reports/child-labor/list-of-goods/ ).
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 .
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
|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
*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%|
|“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%|
|International Organizations||1,006||3%||United Kingdom||302||1%||Canada||715||5%|
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 Information
U.S. Embassy Bogota
Carrera 45 #22B-45