Colombia

Executive Summary

With improving security conditions in metropolitan areas, a market of 50 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. Colombia ranked 67 out of 190 countries in the “Ease of Doing Business” index of the World Bank’s 2020 Doing Business Report.

The Colombian economy contracted for the first time in more than two decades in 2020, with the effects of COVID-19 and lower oil prices resulting in a 6.8 percent decline in GDP. Measures to alleviate the pandemic’s effects led to a temporary suspension of Colombia’s fiscal rule and the deficit surpassing eight percent of GDP for 2020, with a similar deficit expected in 2021.

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 2012 U.S.-Colombia Trade Promotion Agreement (CTPA) has strengthened bilateral trade and investment. Colombia’s dispute settlement mechanisms have improved through the CTPA and several international conventions and treaties. Weaknesses include protection of intellectual property rights (IPR), as Colombia has yet to implement certain IPR-related provisions of the CTPA. Colombia became the 37th member of the Organization for Economic Cooperation and Development (OECD) in 2020, bringing the obligation to adhere to OECD norms and standards in economic operations.

The Colombian government has made a concerted effort to develop efficient capital markets, attract investment, and create jobs. Restrictions on foreign ownership in specific sectors still exist. FDI inflows increased 25.6 percent from 2018 to 2019, with a third of the 2019 inflow dedicated to the extractives sector and another 21 percent to professional services and finance. Roughly half of the Colombian workforce in metropolitan areas is employed in the informal economy, a share that increases to four-fifths in rural areas. Unemployment ended 2020 at 17.3 percent, a 4.3 percentage point increase from a year prior.

Since the 2016 peace agreement between the government and the Revolutionary Armed Forces of Colombia (FARC), Colombia has experienced a significant decrease in terrorist activity. Several powerful narco-criminal operations still pose threats to commercial activity and investment, especially in rural zones outside of government control.

Corruption remains a significant challenge. The Colombian government continues to work on improving its business climate, but U.S. and other foreign investors have voiced complaints about non-tariff, regulatory, and bureaucratic barriers to trade, investment, and market access at the national, regional, and municipal levels. Investors also note concern at a heavy reliance by the national competition and regulatory authority (SIC) on decrees to remedy perceived problems.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2020 92 of 180 http://www.transparency.org/research/cpi/overview 
World Bank’s Doing Business Report 2020 67 of 190 http://www.doingbusiness.org/en/rankings 
Global Innovation Index 2020 68 of 131 https://www.globalinnovationindex.org/analysis-indicator 
U.S. FDI in partner country ($M USD, historical stock positions) 2019 $8,264 https://apps.bea.gov/international/factsheet/ 
World Bank GNI per capita 2019 $6,510 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). The economic liberalization reforms of the early 1990s 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 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. Priority sectors include business process outsourcing, software and IT services, cosmetics, health services, automotive manufacturing, textiles, graphic communications, and electric energy. ProColombia’s “Invest in Colombia” web portal offers detailed information about opportunities in agribusiness, manufacturing, and services in Colombia (www.investincolombia.com.co/sectors ). The Duque administration – including senior leaders at the Presidency, ProColombia, and the Ministry of Commerce, Industry, and Trade – continue to stress Colombia’s openness to foreign investors and aggressively market Colombia as an investment destination.

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 Colombian constitution and foreign investment regulations, foreign investment in Colombia receives the same treatment as an investment made by Colombian nationals. 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. Foreign investment in national television is limited to a maximum of 40 percent ownership of an operator.

Accounting, Auditing, and Data Processing: To practice in Colombia, providers of accounting services must register with the Central Accountants Board and have uninterrupted domicile in Colombia for at least three years prior to registry. 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. Foreign banks must establish a local commercial presence and comply with the same capital and other requirements as local financial institutions. Every investment of foreign capital in portfolios must be through a Colombian administrator company, including brokerage firms, trust companies, and investment management companies.

Fishing: A foreign vessel may engage in fishing 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.

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.” Colombia prohibits foreign ownership of commercial ships licensed in Colombia. 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, unless there are no capable Colombian-flag vessels.

Other Investment Policy Reviews

The WTO most recently reviewed Colombia’s trade policy in June 2018. https://www.wto.org/english/tratop_e/tpr_e/tp472_e.htm 

Business Facilitation

New businesses must register with the chamber of commerce of the city in which the company will reside. Applicants also register using the Colombian tax authority’s (DIAN) portal at: www.dian.gov.co  to obtain a taxpayer ID (RUT). Business founders must visit DIAN offices to obtain an electronic signature for company legal representatives, and obtain – in-person or online – an authorization for company invoices from DIAN. In 2019, Colombia made starting a business a step easier by lifting a requirement of opening a local bank account to obtain invoice authorization. Companies must submit a unified electronic form to self-assess and pay social security and payroll contributions to the Governmental Learning Service (Servicio Nacional de Aprendizaje, or SENA), the Colombian Family Welfare 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.

According to the World Bank’s “Doing Business 2020” report, recent reforms simplified starting a business, trading across borders, and resolving insolvency. According to the report, starting a company in Colombia requires seven procedures and takes an average of 10 days. Information on starting a company can be found at http://www.ccb.org.co/en/Creating-a-company/Company-start-up/Step-by-step-company-creation ; https://investincolombia.com.co/how-to-invest.html ; and http://www.dian.gov.co .

Outward Investment

Colombia does not incentivize outward investment nor does it restrict domestic investors from investing abroad.

Dominican Republic

Executive Summary

Foreign direct investment (FDI) plays an important role for the Dominican economy, and the Dominican Republic is one of the main recipients of FDI in the Caribbean and Central America. The government actively courts FDI with generous tax exemptions and other incentives to attract businesses to the country. Historically, the tourism, real estate, telecommunications, free trade zones, mining, and financing sectors are the largest FDI recipients. In January 2020, the government announced a special incentive plan to promote high-quality investment in tourism and infrastructure in the southwest region and, in February 2020, it passed a Public Private Partnership law to catalyze private sector-led economic growth.

Besides financial incentives, the country’s membership in the Central America Free Trade Agreement-Dominican Republic (CAFTA-DR) is one of the greatest advantages for foreign investors. Observers credit the agreement with increasing competition, strengthening rule of law, and expanding access to quality products in the Dominican Republic. The United States remains the single largest investor in the Dominican Republic. CAFTA-DR includes protections for member state foreign investors, including mechanisms for dispute resolution.

Despite the negative macroeconomic impacts of the pandemic, international indicators of the Dominican Republic’s competitiveness and transparency held steady. Foreign investors report numerous systemic problems in the Dominican Republic and cite a lack of clear, standardized rules by which to compete and a lack of enforcement of existing rules. Complaints include allegations of widespread corruption; requests for bribes; delays in government payments; weak intellectual property rights enforcement; bureaucratic hurdles; slow and sometimes locally biased judicial and administrative processes, and non-standard procedures in customs valuation and classification of imports. Weak land tenure laws and government expropriations without due compensation continue to be a problem. The public perceives administrative and judicial decision-making to be inconsistent, opaque, and overly time-consuming. Corruption and poor implementation of existing laws are widely discussed as key investor grievances.

U.S. businesses operating in the Dominican Republic often need to take extensive measures to ensure compliance with the Foreign Corrupt Practices Act. Many U.S. firms and investors have expressed concerns that corruption in the government, including in the judiciary, continues to constrain successful investment in the Dominican Republic.

In August 2020, President Luis Abinader became the 54th President of the Dominican Republic, presiding over the first change in power in 16 years. Taking office with bold promises to rein in corruption, the government quickly arrested a slew of high-level officials from the previous administration implicated in corruption—people who under prior governments would have been considered untouchable. It remains to be seen whether Abinader will deliver on more complex commitments, such as institutional reforms to advance transparency or long-delayed electricity sector reform.

The Dominican Republic, an upper middle-income country, contracted by 6.7 percent in 2020 and concluded the year with a 7.7 percent deficit thanks to the pandemic. The IMF and World Bank project growth for 2021 at 4.0-4.8 percent.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2020 137 of 180 http://www.transparency.org/research/cpi/overview 
World Bank’s Doing Business Report 2020 115 of 190 http://www.doingbusiness.org/en/rankings 
Global Innovation Index 2020 90 of 131 https://www.globalinnovationindex.org/analysis-indicator 
U.S. FDI in partner country ($M USD, historical stock positions) 2019 $2,604 https://apps.bea.gov/international/factsheet/factsheet.cfm?Area=207&UUID=8544e377-fb53-42fe-a16e-01c425113446 
World Bank GNI per capita 2019 $8,080 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD 

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Towards Foreign Direct Investment

The Dominican Republic presents both opportunities and challenges for foreign investment. The government strongly promotes inward FDI and has prioritized creating a sound enabling environment for foreign investors. While the government has established formal programs to attract FDI, a lack of clear rules and uneven enforcement of existing rules can lead to difficulties.

The Dominican Republic provides tax incentives for investment in tourism, renewable energy, film production, Haiti-Dominican Republic border development, and the industrial sector. The country is also a signatory of CAFTA-DR, which mandates non-discriminatory treatment, free transferability of funds, protection against expropriation, and procedures for the resolution of investment disputes. However, some foreign investors indicate that the uneven enforcement of regulations and laws, or political interference in legal processes, creates difficulties for investment.

There are two main government agencies responsible for attracting foreign investment, the Export and Investment Center of the Dominican Republic (CEI-RD) and the National Council of Free Trade Zones for Export (CNZFE). CEI-RD promotes foreign investment and aids prospective foreign investors with business registration, matching services, and identification of investment opportunities. It publishes an annual “Investment Guide of the Dominican Republic,” highlighting many of the tools, incentives, and opportunities available for prospective investors. The CEI-RD also oversees “ProDominicana,” a branding and marketing program for the country launched in 2017 that promotes the DR as an investment destination and exporter. CNZFE aids foreign companies looking to establish operations in the country’s 75 free trade zones for export outside Dominican territory.

There are a variety of business associations that promote dialogue between the government and private sector, including the Association of Foreign Investor Businesses (ASIEX).

Limits on Foreign Control and Right to Private Ownership and Establishment

Foreign Investment Law No. 16-95 states that unlimited foreign investment is permitted in all sectors, with a few exceptions for hazardous materials or materials linked to national security. Private entities, both foreign and domestic, have the right to establish and own business enterprises and engage in all legal remunerative activity. Foreign companies are not restricted in their access to foreign exchange, there are no requirements that foreign equity be reduced over time or that technology be transferred according to defined terms, and the government imposes no conditions on foreign investors concerning location, local ownership, local content, or export requirements. See Section 3 Legal Regime for more information.

The Dominican Republic does not maintain a formalized investment screening and approval mechanism for inbound foreign investment. Details on the established mechanisms for registering a business or investment are elaborated in the Business Facilitations section below.

Other Investment Policy Reviews

The Dominican Republic has not been reviewed recently by multilateral organizations regarding investment policy. The most recent reviews occurred in 2015. This included a trade policy review by the World Trade Organization (WTO) and a follow-up review by the United Nations Conference on Trade and Development (UNCTAD) regarding its 2009 investment policy recommendations.

2009 UNCTAD – https://unctad.org/en/pages/PublicationArchive.aspx?publicationid=6343 

2015 WTO – https://www.wto.org/english/tratop_e/tpr_e/s319_e.pdf

2015 UNCTAD – https://unctad.org/en/PublicationsLibrary/diaepcb2016d2_en.pdf

Business Facilitation

Foreign investment does not require any prior approval in the Dominican Republic, but once made it must be registered with the CEI-RD. Investments in free zones must be registered with the CNZFE, which will notify the CEI-RD.  Foreign investment registration is compulsory, but failure to do so is not subject to any sanction.  In the World Bank’s “Doing Business” report, the Dominican Republic’s overall ranking for ease of doing business fell from 102 in 2019 to 115 in 2020, reflecting stagnant performance in several of the indicator categories.

Law No. 16-95 Foreign Investment, Law No. 98-03 on the Creation of the CEI-RD, and Regulation 214-04 govern foreign investment in the Dominican Republic and require an interested foreign investor to file an application form at the offices of CEI-RD within 180 calendar days from the date on which the foreign investment took place. The required documents include the application for registration, containing information on the invested capital and the area of the investment; proof of entry into the country of the foreign capital or physical or tangible goods; and documents of commercial incorporation or the authorization of operation of a branch office through the setting up of legal domicile in the country.  The reinvestment of profits (in the same or a different firm) must be registered within 90 days. Once the documents have been approved, the CEI-RD issues a certificate of registration within 15 business days subject to the payment of a fee which varies depending on the amount of the investment.

Lack of registration does not affect the validity of the foreign investment; but the fact that it is needed to fulfil various types of procedures, makes registration necessary in practice. For example, the registration certificate has to be presented to repatriate profits or investment in the event of sale or liquidation and to purchase foreign exchange from the authorized agencies for transfers abroad, as well as to process the residency of the investor.  In April 2021, CEI-RD launched an online Registry of Foreign Direct Investment, which aims to streamline and make the registration processes more transparent to investors. For more information on becoming an investor or exporter, visit the CEI-RD ProDominicana website at https://prodominicana.gob.do .

The Dominican Republic has a single-window registration website for registering a limited liability company (SRL by its Spanish acronym) that offers a one-stop shop for registration needs ( https://www.formalizate.gob.do/ ). Foreign companies may use the registration website. However, this electronic method of registration is not widely used in practice and consultation with a local lawyer is recommended for company registrations. According to the “Doing Business” report, starting a SRL in the Dominican Republic is a seven-step process that requires 16.5 days. However, some businesses advise the full incorporation process can take two to three times longer than the advertised process.

In order to set up a business in a free trade zone, a formal request must be made to the CNZFE, the entity responsible for issuing the operating licenses needed to be a free zone company or operator. CNZFE assesses the application and determines its feasibility. For more information on the procedure to apply for an operating license, visit the website of the CNZFE at http://www.cnzfe.gov.do .

Outward Investment

There are no legal or government restrictions on Dominican investment abroad, although the government does little to promote it. Outbound foreign investment is significantly lower than inbound investment. The largest recipient of Dominican outward investment is the United States.

Ecuador

Executive Summary

The government of Ecuador under President Moreno has focused on reducing the size of the public sector and its influence on the economy and sought private sector investment to drive economic growth. Facing serious budget deficits and the economic fallout from the COVID-19 pandemic, the Moreno Administration rationalized the size of government, merged ministries, and reduced the number of state-owned enterprises. Other cost-cutting measures include reducing fuel subsidies and reducing the number of public employees. Still, Ecuador is saddled with a very large public sector, and Moreno has committed to continue government spending on social welfare programs. In September 2020, the International Monetary Fund approved a $6.5 billion, 27-month Extended Fund Facility for Ecuador, and has already disbursed $4 billion to aid in economic stabilization and reform. The IMF program is in line with the government’s efforts to correct fiscal imbalances and to improve transparency and efficiency in public finance. The economy will likely be slow to recover as the Central Bank estimates an 8.8 percent GDP contraction in 2020 and 3.1 percent projected growth in 2021. By the end of 2020, only 34 percent of the eligible working age population was fully employed.

To increase private sector engagement in the economy and attract Foreign Direct Investment (FDI), the Ecuadorian government passed a Productive Development Law containing tax incentives in 2018 to spur investment, changed tax and regulatory policies for mining, and issued new Public-Private Partnership regulations to increase private investment in infrastructure projects. Ecuador is a dollarized economy that has few limits on foreign investment or repatriation of profits, with the exception of a five percent currency exit tax, and is actively seeking foreign investors. It has a population that views the United States positively, and the Moreno Administration has expanded bilateral ties and significantly increased cooperation with the United States on a broad range of economic, security, political, and cultural issues.

Despite these efforts, FDI inflow to Ecuador has remained very low compared to other countries in the region, due to a number of problems, most notably corruption. Ecuador is ranked in the bottom third of countries surveyed for Transparency International’s Perceptions of Corruption Index. President Moreno declared the fight against corruption as a top priority. The independent judicial branch prosecuted government officials, including two of Moreno’s former vice presidents, as well as individuals involved in the Odebrecht and other corruption scandals. Ecuador’s highest court upheld convictions against former President Rafael Correa and 19 others in 2020 for a bribery scheme involving contributions by private companies to finance his political party illegally. Economic, commercial, and investment policies are subject to frequent changes and can increase the risks and costs of doing business in Ecuador.

Sectors of Interest to Foreign Investors

Petroleum: Per the 2008 Constitution, all subsurface resources belong to the state, and the petroleum sector is dominated by one state-owned enterprise (SOE) that cannot be privatized. To improve efficiencies, the government may offer concessions of its refineries and issue production-sharing contracts for oil exploration and exploitation. The government has gradually reduced its consumer fuel subsidies since May 2020 by aligning domestic fuel prices with international prices. The Ecuadorian government held a successful public tender for oil production-sharing contracts (Intracampos I) in 2019 and reportedly plans to move to production sharing contracts as the standard for future tenders.

Mining: The Ecuadorian government has reduced taxes in the mining sector to attract FDI. Presidential Decree 475, published in October 2014, reduced the windfall tax and sovereign adjustment calculations. The Organic Law for Production Incentives and Tax Fraud Prevention, passed in December 2014, included provisions to improve tax stability and lower the income tax rate in the mining sector. The previous Correa administration also developed mining sector incentives such as fiscal stability agreements, limited VAT reimbursements, remittance tax exceptions, and mechanisms for companies to recover their investments before certain taxes are applied.

Electricity: The government plans to offer concessions to develop wind, solar, hydro, biomass, biogas, geothermal, biofuel, combined cycle, and gas fired electrical generation plants to further diversify the energy matrix. It is also exploring possibilities to connect to the electrical grid the oil and shrimp sectors, which largely use independent generation capacity, and improve the cross-border electrical transmission connection with Peru. Non-hydro renewable energy projects in Ecuador are eligible for U.S. International Development Finance Corporation (DFC) financing.

Telecommunications: The government is finalizing the valuation model for 4G bands (700 and 2.5ghz) following consultations with the International Telecommunications Union and the U.S. Federal Communications Commission. Ecuador’s telecommunications regulator Arcotel plans to publish the new valuation model as well as an updated fee schedule for telecommunications services by the end of April 2021. The spectrum auctions for the 4G bands will take place under the new administration as well as any 5G valuation model, deployment, and commercial rollout. The current government is considering a concession of the state-owned telecommunications company CNT, as well as diversification of its core network hardware away from Chinese vendors.

ECommerce: In 2020, ECommerce sales comprised approximately two percent of Ecuadorian GDP – one percentage point higher than in 2019. The COVID-19 pandemic provoked an overnight digital transformation in the country changing consumer habits and business strategies. While many Ecuadorians are interested in purchasing online, they are limited in their ability to receive international shipments due to logistics and customs problems upon arrival in Ecuador. The Ministry of Production launched the National E-Commerce Strategy in 2021, establishing a framework for facilitating the digital transformation in the country. The strategy focuses on strengthening the current legal framework, capacity building for small and medium enterprises (SMEs), and improving logistics and payment gateway capabilities.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2020 92 of 198 http://www.transparency.org/research/cpi/overview
World Bank’s Doing Business Report 2019 129 of 190 http://www.doingbusiness.org/en/rankings
Global Innovation Index 2020 99 of 129 https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, stock positions) 2019 $619 https://apps.bea.gov/international/factsheet/factsheet.cfm
World Bank GNI per capita 2019 $6,090 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Towards Foreign Direct Investment

Ecuador is open to FDI in most sectors. The 2008 Constitution established that the state reserves the right to manage strategic sectors through state-owned or -controlled companies. The sectors identified are energy, telecommunications, non-renewable natural resources, transportation, hydrocarbon refining, water, biodiversity, and genetic patrimony (i.e. flora, fauna and ancestral knowledge). Although in recent years Ecuador took steps to attract FDI, its overall investment climate remains challenging as economic, commercial, and investment policies are subject to frequent change. From January to September 2020 (latest information available), FDI flows to Ecuador amounted to USD 897 million, 45 percent more than 2019 levels (USD 619 million) but still 36 percent lower than 2018 levels (USD 1.4 billion). FDI continues to be lower compared to other countries in the region.

There are no laws or practices that discriminate against foreign investors, but the legal complexity resulting from the inconsistent application and interpretation of existing laws and regulations increases the risks and costs of doing business in Ecuador. Under the prior Correa administration, disputes involving U.S. companies were politicized, especially in sensitive areas such as the energy sector. This resulted in several high-profile international investment dispute cases, with companies awarded damages in international arbitral rulings against Ecuador in the last few years. In addition, several cases are pending final arbitral rulings.

Limits on Foreign Control and Right to Private Ownership and Establishment

Foreign and domestic private entities are allowed to establish and own business enterprises and engage in all forms of remunerative activity, with limitations in strategic sectors as enumerated in the Constitution. There are no investment screening mechanisms for inbound investment, and the Ecuadorian government actively seeks international investors. One hundred percent foreign equity ownership is allowed.

For license and franchise transactions, no limits exist on royalties that may be remitted, although financial outflows are subject to a five percent capital exit tax. All license and franchise agreements must be registered with the National Service for Intellectual Property Rights (SENADI). In addition to registering with the Superintendence of Companies, Securities, and Insurance, foreign investors must register investments with Ecuador’s Central Bank for statistical purposes.

Other Investment Policy Reviews

Ecuador conducted a trade policy review with the World Trade Organization in March 2019; information can be found at https://www.wto.org/english/tratop_e/tpr_e/tp483_e.htm.

In the past three years, Ecuador has not conducted an investment policy review with the Organization for Economic Cooperation and Development (OECD) or the United Nations Conference on Trade and Development (UNCTAD).

Business Facilitation

In 2018, Ecuador folded ProEcuador (https://www.proecuador.gob.ec/), the entity that is responsible for promoting economic development through exports, imports, and investment in Ecuador, into the Ministry of Production, Foreign Trade, Investments and Fisheries (MPCIEP). ProEcuador is now a Vice Ministry within MPCIEP and has 27 offices in 23 countries, including three in the United States. Ecuador is ranked 129th out of 190 countries in the World Bank’s Ease of Doing Business report for 2020, with particularly low rankings for Starting a Business (177), Resolving Insolvency (160), and Paying Taxes (147).

A newly created company will at a minimum be required to register with the Superintendence of Companies, Securities, and Insurance (http://www.supercias.gob.ec/), the municipal government, the Internal Revenue Service, and the Social Security Institute. The registry with the Superintendence of Companies is a completely online process as of April 2019. The incorporation of companies in Ecuador grew almost eight percent in 2020 (10,800 new companies), propelled by the introduction of the simplified joint-stock company (SAS). The SAS came into effect in May 2020 following the enactment of the Organic Law on Entrepreneurship and Innovation.

Outward Investment

Ecuador does not restrict domestic investors from investing abroad. ProEcuador (see above) is responsible for promotion of outward investment from Ecuador. Foreign investments are subject to a currency exit tax of five percent.

In February 2017, voters passed a government-backed referendum prohibiting elected officials and public servants from having financial dealings in tax havens and other suspect jurisdictions. The list includes several U.S. states and territories that do not have state income taxes. The prohibition entered into force in September 2017.

The United States and Ecuador signed the Protocol on Trade Rules and Transparency in December 2020 under the Ecuador-U.S. Trade and Investment Council Agreement (TIC). The agreement updates the TIC with new annexes in four areas: Trade Facilitation and Customs Administration, Good Regulatory Practices, Anti-Corruption, and SMEs. The Protocol awaits legislative ratification (as of April 2021).

El Salvador

Executive Summary

Since President Nayib Bukele took office on June 1, 2019, his administration has sought to attract foreign investment and has taken steps to reduce cumbersome bureaucracy and improve security conditions. The COVID-19 pandemic complicated implementation of reforms and dampened investment.

To respond to COVID-19, the Government of El Salvador (GOES) implemented several emergency measures, including travel restrictions beginning in February 2020 and a nationwide lockdown from March to June 2020. Unclear or conflicting wording among the numerous emergency decrees created uncertainty, complicated business operations, and increased the risks of inadvertent non-compliance. The discretionary application of emergency measures and severe penalties for non-compliance contributed to the uncertainty. Lockdown measures disrupted and limited business operations with even manufacturers of medical supplies and other essential products unable to receive formal permission to reopen. The Supreme Court found the GOES phased reopening decrees to be unconstitutional, mandating a complete nationwide reopening of the economy at the end of August 2020.

As a result of the lockdown and worldwide recession, El Salvador lost approximately 20 percent of formal jobs in 2020. El Salvador’s Gross Domestic Product (GDP) is forecasted to drop by 8.5 percent in 2020 according to the Central Bank, with recovery to pre-pandemic production in 2022.

Following the reopening, perceptions of the investment climate began to slowly recover. However, political gridlock and electoral uncertainty dampened business confidence. The victory of President Bukele’s New Ideas Party in the February 28 legislative and municipal elections should remove obstacles to governability during the remaining three years of Bukele’s presidential term. With a large majority of the seats in the Legislative Assembly, Bukele should be able to pass legislation and reforms. His administration has pledged to enact legislation to strengthen institutions and improve the regulatory environment to spur investment and create jobs. Policies and reforms, however, will take time to implement and show results.

Commonly cited challenges to doing business in El Salvador include the discretionary application of laws and regulations, lengthy and unpredictable permitting procedures, as well as customs delays. El Salvador has lagged its regional peers in attracting foreign direct investment (FDI). The sectors with the largest investment have historically been textiles and retail establishments, though investment in energy has increased in recent years.

The Bukele administration has proposed several large infrastructure projects, which could provide opportunities for U.S. investment. The GOES has established a technical working group to help prioritize investment projects and attract private sector participation. Project proposals include enhancing road connectivity and logistics, expanding airport capacity and improving access to water and energy, as well as sanitation. Having inherited a large public debt, the Bukele administration has begun pursuing Public-Private Partnerships (PPPs) to execute infrastructure projects. El Salvador awarded its first PPP project in October 2020 to expand the cargo terminal at the international airport. The contract award is pending legislative approval. It launched a second PPP to install highway lighting and video surveillance in January 2020 and extended the deadline to submit bids until March 15, 2021 due to COVID-19. With these two PPPs, the Bukele administration delivered on its commitment under the Millennium Challenge Corporation (MCC) Compact, which ends April 30, 2021.

As a small energy-dependent country with no Atlantic coast, El Salvador relies on trade. It is a member of the Central American Dominican Republic Free Trade Agreement (CAFTA-DR) and the United States is El Salvador’s top trading partner. Proximity to the U.S. market is a competitive advantage for El Salvador. As most Salvadoran exports travel by land to Guatemalan and Honduran ports, regional integration is crucial for competitiveness. Although El Salvador officially joined the Customs Union established by Guatemala and Honduras in 2018, implementation has stalled. The Bukele administration announced in 2020 that it would prioritize bilateral trade facilitation with Guatemala.

The Bukele administration has taken initial steps to facilitate trade. In 2019, the government of El Salvador (GOES) relaunched the National Trade Facilitation Committee (NTFC), which produced the first jointly developed private-public action plan to reduce trade barriers. The plan contains 60 strategic measures focused on simplifying procedures, reducing trade costs, and improving connectivity and border infrastructure. In 2020, NTFC technical committees continued working to implement the action plan, as well as develop a national trade facilitation strategy. However, the NFTC has not presented progress on the action plan. The NFTC did not convene in 2020.

Table 1
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2020 104 of 180 http://www.transparency.org/research/cpi/overview 
World Bank’s Doing Business Report “Ease of Doing Business” 2020 91 of 190 http://www.doingbusiness.org/rankings 
Global Innovation Index 2020 92 of 131 http://www.globalinnovationindex.org/content/page/data-analysis 
U.S. FDI in partner country ($M USD, stock positions) 2019 3,380 https://apps.bea.gov/international/factsheet/factsheet.cfm 
World Bank GNI per capita 2019 4,000 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD 

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Toward Foreign Direct Investment

The GOES recognizes the benefits of attracting FDI. El Salvador does not have laws or practices that discriminate against foreign investors. The GOES does not screen or prohibit FDI. However, FDI levels still lag behind regional neighbors, except for Nicaragua. The Central Bank reported net FDI inflows of $232.95 million at the end of September 2020.

The Exports and Investment Promotion Agency of El Salvador (PROESA) supports investment in seven main sectors: textiles and apparel; business services; tourism; aeronautics; agro-industry; light manufacturing; and energy. PROESA provides information for potential investors about applicable laws, regulations, procedures, and available incentives for doing business in El Salvador. Websites: https://investelsalvador.com/  and http://www.proesa.gob.sv/investment/sector-opportunities .

The National Association of Private Enterprise (ANEP), El Salvador’s umbrella business chamber, serves as the primary private sector representative in dialogues with GOES ministries. http://www.anep.org.sv/ .

In 2019, the Bukele administration created the Secretariat of Commerce and Investment, a position within the President’s Office responsible for the formulation of trade and investment policies, as well as coordinating the Economic Cabinet. In addition, the Bukele administration created the Presidential Commission for Strategic Projects to lead the GOES major projects.

Limits on Foreign Control and Right to Private Ownership and Establishment

Foreign citizens and private companies can freely establish businesses in El Salvador.

No single natural or legal person – whether national or foreign – can own more than 245 hectares (605 acres) of land. The Salvadoran Constitution stipulates there is no restriction on foreign ownership of rural land in El Salvador, unless Salvadoran nationals face restrictions in the corresponding country. Rural land to be used for industrial purposes is not subject to the reciprocity requirement.

The 1999 Investments Law grants equal treatment to foreign and domestic investors. With the exception of limitations imposed on micro businesses, which are defined as having 10 or fewer employees and yearly sales of $121,319.40 or less, foreign investors may freely establish any type of domestic business. Investors who begin operations with 10 or fewer employees must present plans to increase employment to the Ministry of Economy’s National Investment Office.

The Investment Law provides that extractive resources are the exclusive property of the state. The GOES may grant private concessions for resource extraction, though concessions are infrequently granted.

Other Investment Policy Reviews

El Salvador has been a World Trade Organization (WTO) member since 1995. The latest trade policy review performed by the WTO was published in 2016 (document: WT/TPR/S/344/Rev.1). https://docs.wto.org/dol2fe/Pages/FE_Search/FE_S_S006.aspx?Query=(@Symbol=%20wt/tpr/s/*)%20and%20((%20@Title=%20el%20salvador%20)%20or%20(@CountryConcerned=%20el%20salvador))&Language=ENGLISH&Context=FomerScriptedSearch&languageUIChanged=true# 

https://docs.wto.org/dol2fe/Pages/FE_Search/FE_S_S006.aspx?Query=(@Symbol=%20wt/tpr/s/*)%20and%20((%20@Title=%20el%20salvador%20)%20or%20(@CountryConcerned=%20el%20salvador))&Language=ENGLISH&Context=FomerScriptedSearch&languageUIChanged=true# 

The latest investment policy review performed by the United Nations Conference on Trade and Development (UNCTAD) was in 2010. http://unctad.org/en/Docs/diaepcb200920_en.pdf

Business Facilitation

El Salvador has various laws that promote and protect investments, as well as providing benefits to local and foreign investors. These include: the Investments Law, the International Services Law; the Free Trade Zones Law; the Tourism Law, the Renewable Energy Incentives Law; the Law on Public Private Partnerships; the Special Law for Streamlining Procedures for the Promotion of Construction Projects; and the Legal Stability Law for Investments.

Business Registration

Per the World Bank, registering a new business in El Salvador requires nine steps taking an average of 16.5 days. According to the World Bank’s 2020 Doing Business Report, El Salvador ranks 148 in the “Starting a Business” indicator. El Salvador launched an online business registration portal in 2017 designed as a one-stop shop for registering new companies. The online portal allows new businesses the ability to formalize registration within three days and conduct administrative operations online. The portal ( https://miempresa.gob.sv/ ) is available to all, though services are available only in Spanish.

The GOES’ Business Services Office (Oficina de Atención Empresarial) caters to entrepreneurs and investors. The office has two divisions: “Growing Your Business” (Crecemos Tu Empresa) and the National Investment Office (Dirección Nacional de Inversiones, DNI). “Growing Your Businesses” provides business advice, especially for micro-, small- and medium-sized enterprises. The DNI administers investment incentives and facilitates business registration.

Contact information:

Business Services Office
Telephone: (503) 2590-5107
Address: Boulevard Del Hipódromo, Colonia San Benito, Century Tower, 7th Floor , San Salvador. Schedule: Monday-Friday, 7:30 a.m. – 3:30 p.m.
Crecemos Tu Empresa
E-mail: crecemostuempresa@minec.gob.sv
Website: http://www.minec.gob.sv/ 

The National Investment Office:

Stephanie Argueta de Rengifo , National Director of Investments, sargueta@minec.gob.sv;
Sandra Llirina Sagastume de Sandoval, Deputy Director of Special Investments , llirina.sagastume@minec.gob.sv Christel Schulz, Business Climate Deputy, cdearce@minec.gob.sv 
Laura Rosales de Valiente, Deputy Director of Investment Facilitation, lrosales@minec.gob.sv
Telephone: (503) 2590-5116/ (503) 2590-5264.

The Productive Development Fund (FONDEPRO) provides grants to small enterprises to strengthen competitiveness. Website: http://www.fondepro.gob.sv/ 

The National Commission for Micro and Small Businesses (CONAMYPE) supports micro and small businesses by providing training, technical assistance, financing, venture capital, and loan guarantee programs. CONAMYPE also provides assistance on market access and export promotion, marketing, business registration, and the promotion of business ventures led by women and youth. Website: https://www.conamype.gob.sv/ 

The Micro and Small Businesses Promotion Law defines a microenterprise as a natural or legal person with annual gross sales up to 482 minimum monthly wages, equivalent to $146,609.94 and up to ten workers. A small business is defined as a natural or legal person with annual gross sales between 482 minimum monthly wages ($146,609.94) and 4,817 minimum monthly wages ($1,465,186.89) and up to 50 employees. To facilitate credit to small businesses, Salvadoran law allows for inventories, receivables, intellectual property rights, consumables, or any good with economic value to be used as collateral for loans.

El Salvador provides equitable treatment for women and under-represented minorities. The GOES does not provide targeted assistance to under-represented minorities. CONAMYPE provides specialized counseling to female entrepreneurs and women-owned small businesses.

Outward Investment

While the government encourages Salvadoran investors to invest in El Salvador, it neither promotes nor restricts investment abroad.

Peru

Executive Summary

The government of Peru (GOP)’s sound fiscal management and support of macroeconomic fundamentals contributed to the country’s region-leading economic growth since 2002. However, the COVID-19 pandemic caused a severe economic contraction of over 11 percent in 2020. In response, the GOP implemented a $39.5 billion stimulus plan in July 2020, which amounted to 19 percent of GDP. To finance the increased spending, the annual deficit grew to 8.9 percent of GDP in 2020, but the Ministry of Economy and Finance (MEF) projects that it will stabilize to 4.8 percent of GDP in 2021. GOP’s debt as a percentage of GDP increased from 26.8 percent in 2019 to 35 percent in 2020. Peru’s COVID-19 response and the perseverance of its macroeconomic stability led the IMF to project that Peru will grow its GDP by 8.5 percent in 2021, the highest growth forecast in the region. Net international reserves remained strong at $73.9 billion and inflation averaged 1.8 percent in 2020. Private sector investment comprised more than two-thirds of Peru’s total investment in 2020.

Peru fosters an open investment environment, which includes strong protections for contractual rights and property. Peru is well integrated in the global economy including with the United States-Peru Trade Promotion Agreement (PTPA), which entered into force in 2009. Through its investment promotion agency ProInversion, Peru seeks foreign investment in its infrastructure sector and free trade zones. Prospective investors would benefit from seeking local legal counsel in navigating Peru’s complex bureaucracy.

Corruption, social conflict, and congressional populist measures negatively affects Peru’s investment climate. Transparency International ranked Peru 94th out of 180 countries in its 2020 Corruption Perceptions Index. In 2020, Peru’s health minister and foreign minister resigned after admitting they irregularly received Sinopharm trial vaccines, along with former president Vizcarra. Social conflicts also adversely affect the investment climate. According to the Ombudsman, there were 145 active social conflicts in Peru as of January 2021 of which 66 were in the mining sector. Citing, in part, a recent congressional passage of populist measures, and the possibility of future executive-legislative tension, Fitch Ratings revised the rating outlook on Peru’s Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDR) to negative from stable in December of 2020.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2020 94 of 180 http://www.transparency.org/research/cpi/overview 
World Bank’s Doing Business Report 2020 76 of 190 https://www.doingbusiness.org/en/doingbusiness 
Global Innovation Index 2020 76 of 131 https://www.globalinnovationindex.org/analysis-indicator 
U.S. FDI in partner country ($M USD, historical stock positions) 2019 $7,470 https://www.bea.gov/international/di1usdbal 
World Bank GNI per capita 2019 $6,740 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD 

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Towards Foreign Direct Investment

Peru seeks to attract investment – both foreign and domestic – in nearly all sectors.. Peru reported $2 billion in Foreign Direct Investment (FDI) in 2020 and seeks increased investment for 2021. It has prioritized $6 billion in public-private partnership projects in transportation infrastructure, electricity, education, broadband expansion, gas distribution, health, and sanitation.

Peru’s Constitution of 1993grants national treatment for foreign investors and permits foreign investment in almost all economic sectors. Under the Peruvian Constitution, foreign investors have the same rights as national investors to benefit from investment incentives, such as tax exemptions. In addition to the Constitution of 1993, Peru has several laws governing FDI including the Foreign Investment Promotion Law (Legislative Decree (DL) 662 of September 1991) and the Framework Law for Private Investment Growth (DL 757 of November 1991). Other important laws include the Private Investment in State-Owned Enterprises Promotion Law (DL 674) and the Private Investment in Public Services Infrastructure Promotion Law (DL 758). Article 6 of Supreme Decree No. 162-92-EF (the implementing regulations of DLs 662 and 757) authorized private investment in all industries except within natural protected areas and weapons manufacturing.

Peru and the United States benefit from the United States-Peru Free Trade Agreement (PTPA), which entered into force on February 1, 2009. The PTPA established a secure, predictable legal framework for U.S. investors in Peru. The PTPA protects all forms of investment. U.S. investors enjoy the right to establish, acquire, and operate investments in Peru on an equal footing with local investors in almost all circumstances. https://ustr.gov/trade-agreements/free-trade-agreements/peru-tpa

The GOP created the investment promotion agency ProInversion in 2002 to manage privatizations and concessions of state-owned enterprises and natural resource-based industries. The agency currently manages private concession processes in the energy, education, transportation, health, sanitation, and telecommunication sectors, and organizes international roadshow events to attract investors. Major recent and upcoming concessions include ports, water treatment plants, power generation facilities, mining projects, electrical transmission lines, oil and gas distribution, and telecommunications. Project opportunities are available on ProInversion’s website: https://www.proyectosapp.pe/default.aspx?ARE=1&PFL=0&sec=30. Companies are required to register all foreign investments with ProInversion.

The National Competitiveness Plan 2019 – 2030 outlines Peru’s economic growth strategy for the next decade and seeks to close the country’s $110 billion infrastructure gap. The plan was supplemented by a National Infrastructure Plan in July 2019, which identified 52 infrastructure projects keyed to critical sectors. Priority projects include two Lima metro lines, an expansion of Jorge Chavez International Airport, and multiple energy projects including electricity transmission lines. Peru reported in February 2021 that the energy projects had advanced significantly while many transport and agricultural projects suffered significant delays. Of note, the Ministry of Transportation prioritized the Fourth Metro Line and Central Highway, each multi-billion dollar projects, which were not included in the National Infrastructure Plan. Peru maintains an investment research portal to promote these infrastructure investment opportunities: https://www.mef.gob.pe/es/aplicativos-invierte-pe?id=5455

Although Peruvian administrations since the 1990s have supported private investments, Peru occasionally passes measures that some observers regard as a contravention of its open, free market orientation. In December 2011, Peru signed into law a 10-year moratorium on the entry of live genetically modified organisms (GMOs) for cultivation. In December 2020, the moratorium was extended an additional 15 years and will now remain enforced until 2035. Peru also implemented two sets of rules for importing pesticides, one for commercial importers, which requires importers to file a full dossier with technical information, and another for end-user farmers, which only requires a written affidavit.

Peru reformed its agricultural labor laws in 2020 impacting labor costs and tax incentives that could adversely affect investors in Peru’s agricultural sector. The U.S. Department of Agriculture estimated U.S. direct investment in the agriculture sector to reach $1.3 billion in 2021.

Limits on Foreign Control and Right to Private Ownership and Establishment

Peru’s Constitution (Article 6 under Supreme Decree No. 162-92-EF) authorizes foreign investors to carry out economic activity provided that investors comply with all constitutional precepts, laws, and treaties. Exceptions exist, including exclusion of foreign investment activities in natural protected reserves and military weapons manufacturing. Peruvian law requires majority Peruvian ownership in media; air, land and maritime transportation infrastructure; and private security surveillance services. Foreign interests cannot “acquire or possess under any title, mines, lands, forests, waters, or fuel or energy sources” within 50 kilometers of Peru’s international borders. However, foreigners can obtain concessions in these areas and in certain cases the GOP may grant a waiver. The GOP does not screen, review, or approve foreign direct investment outside of those sectors that require a governmental waiver.

Other Investment Policy Reviews

The World Trade Organization (WTO) published a Trade Policy Review (HYPERLINK “https://www.wto.org/english/tratop_e/tpr_e/tp493_e.htm” https://www.wto.org/english/tratop_e/tpr_e/tp493_e.htm) on Peru in October 2019. The WTO commented that foreign investors received the same legal treatment as local investors in general, although Peru restricted foreign investment on property at the country’s borders, and in air transport and broadcasting. The report highlighted the government’s ongoing efforts to promote public-private partnerships (PPPs) and strengthen the PPP legal framework with Organization for Economic Cooperation and Development (OECD) principles. The report noted that Peru maintained a regime open to domestic and foreign investment that fostered competition and equal treatment.

Peru aspires to become a member of the OECD and launched an OECD Country Program in 2014, comprising policy reviews and capacity building projects. The OECD published the Initial Assessment of its Multi-Dimensional Review in 2015 (https://www.oecd.org/countries/peru/multi-dimensional-review-of-peru-9789264243279-en.htm), finding that, in spite of economic growth, Peru “still faces structural challenges to escape the middle-income trap and consolidate its emerging middle class.” In every year since this study was published, Peru has enacted and implemented dozens of reforms to modernize its governance practices in line with OECD recommendations. Recent OECD studies on Peru include: Investing in Youth (April 2019), Digital Government (June 2019), Pension Systems (September 2019), Transport Regulation (February 2020), and Tax Transparency (April 2020). Peru has adhered to 45 of OECD’s 248 existing legal instruments, but its accession roadmap remains unclear.

Peru has not had a third-party investment policy review through the OECD or UNCTAD in the past three years.

Business Facilitation

The GOP does not have a regulatory system to facilitate business operations but the Institute for the Protection of Intellectual Property, Consumer Protection, and Competition (INDECOPI) reviews the enactment of new regulations by government entities that can place burdens on business operations. INDECOPI has the authority to block any new business regulation. INDECOPI also has a Commission for Elimination of Bureaucratic Barriers : https://www.indecopi.gob.pe/web/eliminacion-de-barreras-burocraticas/presentacion.

Peru allows foreign business ownership, provided that a company has at least two shareholders and that its legal representative is a Peruvian resident. Businesses must reserve a company name through the national registry, SUNARP, and prepare a deed of incorporation through a Citizen and Business Services Portal (https://www.serviciosalciudadano.gob.pe/). After a deed is signed, businesses must file with a public notary, pay notary fees of up to one percent of a company’s capital, and submit the deed to the Public Registry. The company’s legal representative must obtain a certificate of registration and tax identification number from the national tax authority SUNAT (www.sunat.gob.pe). Finally, the company must obtain a license from the municipality of the jurisdiction in which it is located. Depending on the core business, companies might need to obtain further government approvals such as: sanitary, environmental, or educational authorizations.

Outward Investment

The GOP promotes outward investment by Peruvian entities through the Ministry of Foreign Trade and Tourism (MINCETUR). Trade Commission Offices of Peru (OCEX), under the supervision of Peru’s export promotion agency (PromPeru), are located in numerous countries, including the United States, and promote the export of Peruvian goods and services and inward foreign investment. The GOP does not restrict domestic investors from investing abroad.

Investment Climate Statements
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