With increased security, 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 South America. While the Colombian government has taken significant steps to open the country to global trade and investment, the country’s rate of GDP growth declined to 2 percent in 2016, after an average GDP growth rate over 4 percent for the past decade. In the World Bank’s 2017 Ease of Doing Business Report, Colombia ranked 53 out of 190 countries and fourth in the region, behind Mexico, Chile, and Peru. Since 2014 Colombia has also struggled to adapt to the sustained dip in world oil prices, its largest export, and a significant devaluation of the peso.
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 and intellectual property rights protections have improved. However, the proliferation of piracy and counterfeit products are significant challenges, and among the primary reasons Colombia remains on the U.S. Trade Representative’s Special 301 Watch List.
The Colombian government has made a concerted effort to develop efficient capital markets, attract investment, and create jobs. In December 2016, President Santos approved a long awaited tax reform bill that entered into force on January 1, 2017. The increased revenue from the reform will help Colombia lower the country’s growing fiscal deficit and was key to maintaining Colombia’s BBB investment-grade credit rating for the time being. Restrictions on foreign ownership in specific sectors still exist. FDI increased 16 percent 2016 relative to 2015, largely due to increased investment in the agricultural, electricity, transport and financial services sectors, despite continued reduced investment in the extractives industry. Colombia’s average annual unemployment rate ended a seven year consecutive decline, rising to 9.2 percent in 2016. About 49 percent of the workforce is in the informal economy according to the National Administrative Department of Statistics (DANE). Colombia enjoys a skilled workforce throughout the country, as well as managerial-level employees who are often bilingual.
Security in Colombia has improved significantly in recent years, with kidnappings down 93 percent from 1999 to 2015. In 2016, Colombia experienced a significant decrease in terrorist activity, due in large part to a bilateral cease-fire between government forces and Colombia’s largest terrorist organization, the Revolutionary Armed Forces of Colombia (FARC). 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. Colombian government figures show that the number of terrorist acts decreased 55 percent from 2015 to 2016. Worries remain that new criminal actors, instead of the government, could take over former FARC areas. Despite the National Liberation Army (ELN) conducting ongoing negotiations with the government in Quito, Ecuador, beginning in January 2017, the group continues a low-cost, high-impact asymmetric insurgency. ELN attacks, including continued attacks on energy infrastructure and bombings in Bogota in 2017, alongside powerful narco-criminal group operations, are posing a threat to commercial activity and investment, especially in rural zones where government control is weaker. Coca production has dramatically increased since 2015, increasing by 67 percent.
Several majority state-owned enterprises, including electric utility company ISA, are considered models of professional management, competition, and excellent corporate governance. However, corruption remains a significant challenge in Colombia, as illustrated by a recent regional scandal involving Brazilian construction giant Odebrecht, which paid significant bribes to secure infrastructure contracts. The World Economic Forum’s Global Competitiveness Index (2016-2017) placed Colombia at 61 out of 138 countries. The report cited security and corruption as among the biggest challenges for doing business in Colombia. The Colombian government continues to work on improving its business climate, but over the past year 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.
|TI Corruption Perceptions Index||2016||90 of 176||http://www.transparency.org/
|World Bank’s Doing Business Report “Ease of Doing Business”||2016||53 of 190||doingbusiness.org/rankings|
|Global Innovation Index||2016||63 of 128||https://www.globalinnovationindex.org/
|U.S. FDI in partner country ($M USD, stock positions)||2015||USD 6,157||https://www.bea.gov/
|World Bank GNI per capita||2015||USD 7,140||http://data.worldbank.org/
1. Openness To, and Restrictions Upon, Foreign Investment
Policies Towards Foreign Direct Investment
The Colombian government actively encourages foreign direct investment (FDI). In the early 1990s, the country began economic liberalization reforms, which provided for national treatment of foreign investors, lifted controls on remittance of profits and capital, and allowed foreign investment in most sectors. Colombia imposes the same investment restrictions on foreign investors that it does on national investors. Generally, foreign investors may participate in the privatization of state-owned enterprises without restrictions. All FDI involving the establishment of a commercial presence in Colombia requires registration with the Superintendence of Corporations (Superintendencia de Sociedades) and the local chamber of commerce. All conditions being equal during tender processes, national offers are preferred over foreign ones. Assuming equal conditions among foreign bidders, those with major Colombian national workforce resources, significant national capital, and /or better conditions to facilitate technology transfers are preferred.
Procolombia is the government entity that promotes international tourism, foreign investment, and non-traditional exports in Colombia. Procolombia assists foreign companies that wish to enter the Colombian market and addresses specific needs, such as identifying contacts in the public and private sectors, organizing visit agendas, and accompanying companies during visits to Colombia. All services are free of charge and confidential. Business process outsourcing, software and IT services, cosmetics, health services, automotive manufacturing, textiles, graphic communications, and electric energy receive special priority. Procolombia’s “Invest in Colombia” web portal offers detailed information for opportunities in agribusiness, manufacturing, and services in Colombia: .
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 are 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 operator; customs brokerage; postal and courier services; merchandise warehousing; merchandise transportation under customs control; international cargo agents; public service companies including sewage and water works, waste disposal, electricity, gas and fuel distribution, and public telephone service; insurance firms; legal services; and special air services including aerial fire-fighting, sightseeing, and surveying.
According to the World Bank’s Investing Across Sectors indicators, among the 14 countries in Latin America and the Caribbean covered, Colombia is one of the most open economies to foreign equity ownership. With the exception of TV broadcasting, all other sectors covered by the indicators are fully open to foreign capital participation. Foreign ownership in TV broadcasting companies is limited to 40 percent. Companies publishing newspapers can have up to 100 percent foreign capital investment; there is a requirement, however, for the director or general manager to be a Colombian national.
According to the Constitution and foreign investment regulations, foreign investment in Colombia receives the same treatment as an investment made by Colombian nationals. Any investment made by a person who does not qualify as a resident of Colombia for foreign exchange purposes will qualify as foreign investment. Foreign investment is permitted in all sectors, except in activities related to defense, national security, and toxic waste handling and disposal. There are no performance requirements explicitly applicable to the entry and establishment of foreign investment in Colombia. However, there are export incentives relating to the operation of free trade zones.
Foreign investors face specific exceptions and restrictions in the following sectors:
Media: Only Colombian nationals or legally constituted entities may provide radio or subscription-based television services. For National Open Television and Nationwide Private Television Operators, only Colombian nationals or legal entities may be granted concessions to provide television services. Colombia’s national, regional, and municipal open-television channels must be provided at no extra cost to subscribers. Foreign investment in national television is limited to a maximum of 40 percent ownership of the relevant operator. Satellite television service providers are only obliged to include within their basic programming the broadcast of government-designated public interest channels. Newspapers published in Colombia covering domestic politics must be directed and managed by Colombian nationals.
Accounting, Auditing, and Data Processing: To practice in Colombia, providers of accounting services must register with the Central Accountants Board; have uninterrupted domicile in Colombia for at least three years prior to registry; and provide proof of accounting experience in Colombia of at least one year. No restrictions apply to services offered by consulting firms or individuals. A legal commercial presence is required to provide data processing and information services in Colombia.
Banking: Foreign investors may own 100 percent of financial institutions in Colombia, but are required to obtain approval from the Financial Superintendent before making a direct investment of ten percent or more in any one entity. Portfolio investments used to acquire more than five percent of an entity also require authorization. Foreign banks must establish a local commercial presence and comply with the same capital and other requirements as local financial institutions. Foreign banks may establish a subsidiary or office in Colombia, but not a branch. Every investment of foreign capital in portfolios must be through a Colombian administrator company, including brokerage firms, trust companies, and investment management companies. All foreign investments must be registered with the Central Bank.
Fishing: A foreign vessel may engage in fishing and related activities in Colombian territorial waters only through association with a Colombian company holding a valid fishing permit. If a ship’s flag corresponds to a country with which Colombia has a complementary bilateral agreement, this agreement shall determine whether the association requirement applies for the process required to obtain a fishing license. The costs of fishing permits are greater for foreign flag vessels.
Private Security and Surveillance Companies: Companies constituted with foreign capital prior to February 11, 1994 cannot increase the share of foreign capital. Those constituted after that date can only have Colombian nationals as shareholders.
Telecommunications: Barriers to entry in telecommunications services include high license fees (USD 150 million for a long distance license), commercial presence requirements, and economic needs tests. While Colombia allows 100 percent foreign ownership of telecommunication providers, it prohibits “callback” services.
Transportation: Foreign companies can only provide multimodal freight services within or from Colombian territory if they have a domiciled agent or representative legally responsible for its activities in Colombia. International cabotage companies can provide cabotage services (i.e. between two points within Colombia) “only when there is no national capacity to provide the service” according to Colombian law. Colombia prohibits foreign ownership of commercial ships licensed in Colombia and restricts foreign ownership in national airlines or shipping companies to 40 percent. FDI in the maritime sector is limited to 30 percent. The owners of a concession providing port services must be legally constituted in Colombia and only Colombian ships may provide port services within Colombian maritime jurisdiction; however, vessels with foreign flags may provide those services if there are no capable Colombian-flag vessels.
Other Investment Policy Reviews
In the past three years, the government has not undergone any third-party investment policy reviews through a multilateral organization such as the Organization for Economic Co-operation and Development (OECD), World Trade Organization (WTO), or the United Nations Conference on Trade and Development (UNCTAD).
New businesses have to first register with the chamber of commerce of the city in which the company will reside. Since May 2008, applicants can go online to register at the tax authority’s portal . The portal provides access to information and speeds up the process of starting a business. The chambers of commerce portals also offer clear and complete information (in English) on the business registration process. Beside the registration with the chamber and the tax authority, companies must register a unified form to self-assess and pay social security and payroll contributions. The unified form can be submitted electronically to the Governmental Learning Service (Servicio Nacional de Aprendizaje, or SENA), the Colombian Family Institute (Instituto Colombiano de Bienestar Familiar, or ICBF) and the Family Compensation Fund (Caja de Compensacion Familiar). After that, companies must register employees for public health coverage, affiliate the company to a public or private pension fund, affiliate the company and employees to an administrator of professional risks and affiliate employees with a severance fund.
Colombia went up 19 spots from 80 to 61 on the 2017 Doing Business report in terms of starting a business. According to the report, starting a company in Colombia requires six procedures and takes an average of nine days, a considerable improvement in number of procedures and days over the past two years. Information on starting a company can be found on the CCB or on the Invest in Colombia .
Procolombia, the government’s FDI promotion agency, also promotes Colombian investment abroad. The “Colombia Invests” web portal ( ) offers detailed information for opportunities in the priority sectors of agribusiness, manufacturing, and services for Colombian investors in a range of countries. Procolombia also offers a network of foreign contacts and plans commercial missions.
2. Bilateral Investment Agreements and Taxation Treaties
The U.S.-Colombia CTPA entered into force on May 15, 2012 and improves legal security and the investment environment while eliminating tariffs and other barriers to trade in goods and services. The agreement grants investors the right to establish, acquire, and operate investments on an equal footing with local investors as well as investors of other countries with bilateral investment treaties or investment chapters in free trade agreements with Colombia. It also provides U.S. investors in Colombia protections that foreign investors have under the U.S. legal system, including due process and the right to receive fair market value for property in the event of an expropriation.
Colombia has thirteen free trade agreements or agreements of economic cooperation that include investment chapters with: United States, , European Union, Canada, Chile, Costa Rica, Cuba, Mexico, South Korea, CAN (Andean Community of Nations – Peru, Ecuador, Bolivia), the Pacific Alliance (Colombia, Chile, Mexico and Peru), EFTA (European Free Trade Area –Switzerland, Liechtenstein, Norway and Iceland), Mercosur (Brazil, Uruguay, Paraguay, and Argentina), and Central America’s Northern Triangle (El Salvador, Honduras, and Guatemala). Colombia has subscribed trade agreements with Panama and Israel but they have not yet been ratified. There are ongoing FTA negotiations with Japan and Turkey. Another five agreements are being explored with Australia, China, the Dominican Republic, India, and Singapore. Additionally, Colombia has stand-alone bilateral investment treaties in force with China, India, Peru, Spain, Switzerland, the United Kingdom, and Japan.
Colombia has double taxation treaties with Spain, Chile, Switzerland, Canada, India, Portugal, Mexico, South Korea, France and the Czech Republic. Talks have concluded successfully with Belgium. Colombia is currently negotiating double taxation agreements with Germany, the Netherlands, Japan, Panama, and the United States.
3. Legal Regime
Transparency of the Regulatory System
The Colombian legal and regulatory systems are generally transparent and consistent with international norms. The commercial code and other laws cover broad areas including banking and credit, bankruptcy/reorganization, business establishment/conduct, commercial contracts, credit, corporate organization, fiduciary obligations, insurance, industrial property, and real property law. The civil code contains provisions relating to contracts, mortgages, liens, notary functions, and registries. There are no identified private sector associations or nongovernmental organizations leading informal regulatory processes. The ministries generally consult with relevant actors, both foreign and national, when drafting regulations, but not always and sometimes with for very limited time lapses. Proposed laws are typically published as drafts for public comment, though not always, and the complexity of the subject is not necessarily taken into account.
Enforcement mechanisms exist, but historically the judicial system has not taken an active role in adjudicating commercial cases. The Constitution establishes the principle of free competition as a national right for all citizens and provides the judiciary with greater administrative and financial independence from the executive branch. Colombia has completed its transition to an oral accusatory system to make criminal investigations and trials more efficient. The new system separates the investigative functions assigned to the Office of the Attorney General from trial functions. Lack of coordination among government entities as well as insufficient resources complicate timely resolution of cases.
Colombia is a member of UNCTAD’s international network of transparent investment procedures (see and Colombia’s website ). Foreign and national investors can find detailed information on administrative procedures applicable to investment and income generating operations including the number of steps, name, and contact details of the entities and people in charge of procedures, required documents and conditions, costs, processing time, and legal bases justifying the procedures.
International Regulatory Considerations
Since 2013, Colombia has been following a roadmap for accession to the, OECD. Colombia is part of the WTO, and the government generally notifies all draft technical regulations to the WTO Committee on Technical Barriers to Trade. Regionally Colombia is a member of organizations such as the Inter-American Development Bank (IADB), the Andean Community of Nations (CAN), the Union of South American Nations (UNASUR) and the Pacific Alliance.
Legal System and Judicial Independence
Colombia has a comprehensive legal system. Colombia’s judicial system defines the legal rights of commercial entities, reviews regulatory enforcement procedures, and adjudicates contract disputes in the business community. The judicial framework includes the Council of State, the Constitutional Court, the Supreme Court of Justice, and the various departmental and district courts, which are also overseen for administrative matters by the Superior Judicial Council. The 1991 constitution provided the judiciary with greater administrative and financial independence from the executive branch. Colombia has a commercial code and other laws covering broad areas including banking and credit, bankruptcy/reorganization, business establishment/conduct, commercial contracts, credit, corporate organization, fiduciary obligations, insurance, industrial property, and real property law. Regulations and enforcement actions are appealable through the different stages of legal court process in Colombia.
Laws and Regulations on Foreign Direct Investment
Colombia has a comprehensive legal framework for business and FDI which incorporates binding norms resulting from its membership in the Andean Community of Nations as well as other free trade agreements and bilateral investment treaties. Colombia’s judicial system defines the legal rights of commercial entities, reviews regulatory enforcement procedures, and adjudicates contract disputes in the business community. The judicial framework includes the Superintendence of Industry and Commerce (SIC), the Council of State, the Constitutional Court, the Supreme Court of Justice, and the various departmental and district courts, which are also overseen for administrative matters by the Superior Judicial Council. The 1991 Constitution provided the judiciary with greater administrative and financial independence from the executive branch. However, except for the SIC’s efficient exercise of judicial functions, the judicial system in general remains hampered by time-consuming bureaucratic requirements and corruption.
Presidential Decree 119 of January 26, 2017 updated the regime (Decree 1068 of 2015) for foreign investments to increase competitiveness, export to more destinations worldwide, and promote investment by Colombians abroad. Among the main changes are the facilitation of several procedures for investors and the improvement of mechanisms for the Central Bank (Banco de la Republica), the tax authority (DIAN) and other authorities to supervise investment inflows. The decree also eliminates deadlines and unnecessary classifications of registration by type of investment. The new regime also revised the concept of “resident” and “nonresident” for tax related purposes. To be considered a resident, investors must remain in national territory for 183 days during calendar year, including days of entry and exit of the country. Also, every foreign investor must have a representative in Colombia with legal powers to comply with tax and exchange rate rules and to satisfy other requests for information. The Central Bank will be issuing implementing regulations for the new regime, which has a transition period of six months.
Competition and Anti-Trust Laws
The SIC is Colombia’s national competition authority and has been strengthened over the last five years by adding additional personnel, including economists, and lawyers. The SIC issued landmark anti-competitiveness fines in 2015, including against a sugar cartel. More recently the SIC has sanctioned a rice cartel, three of the biggest telecommunication companies in the region, and truck transport operators for anticompetitive practices. The SIC has imposed sanctions totaling approximately USD 400 million on around 400 individuals and companies in the last four years for unfair competition practices. In 2016, the SIC sanctioned cartels operating in the sectors of baby diapers, soft paper and notebooks, imposing fines of over USD 150 million. The SIC also sanctioned several sectors for violations of consumer rights such as misleading advertising or noncompliance with warranty agreements including telecommunications, furniture and home appliances, tourism, technology, automotive and construction.
Expropriation and Compensation
Article 58, numeral 4 of the Constitution governs indemnifications and expropriations and guarantees owners’ rights for legally-acquired property. For assets taken by eminent domain, Colombian law provides a right of appeal both on the basis of the decision itself and on the level of compensation. The Constitution does not specify how to proceed in compensation cases, which remains a concern for foreign investors. The Colombian government has sought to resolve such concerns through the negotiation of bilateral investment treaties and strong investment chapters in free trade agreements, such as the CTPA.
ICSID Convention and New York Convention
Colombia is a member of the New York Convention on Investment Disputes, the International Center for the Settlement of Investment Disputes (ICSID), and the Multilateral Investment Guarantee Agency. Colombia is also party to the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards. The new National and International Arbitration Statute (Law 1563), modeled after the United Nations Commission on International Trade Law (UNCITRAL) Model Law, took effect in October 2012.
Investor-State Dispute Settlement
Domestic law allows contracting parties to agree to submit disputes to international arbitration, provided that the parties are domiciled in different countries, the place of arbitration agreed to by the parties is a country other than the one in which they are domiciled, the subject matter of the arbitration involves the interests of more than one country, and the dispute has a direct impact on international trade. The law lets parties set their own arbitration terms including location, procedures, and the nationality of rules and arbiters. Foreign investors have found the arbitration process in Colombia complex and dilatory, especially with regard to enforcing awards. However, some progress has been made on the number of professionals and arbitrators with ample experience on trade transnational transactions, arbitrage centers with cutting edge infrastructure and administrative capacity (around 340 arbitration and conciliation centers across the country) and courts that progressively more accepting of arbitration processes. The Chamber of Commerce of Bogota handles 75 percent of all arbitration cases in the country; all arbitration tribunals in total handle around 600 cases a year.
There were four pending investment disputes in 2016, one of which went to court in 2007 and is still under dispute. The case that went to court, which started in 1994, involves a U.S. marine salvage company. The company has sued the Colombian government through for not allowing it to access its property in Colombian territory on grounds of national patrimony protection, a process that resulted in a Colombian Supreme Court decision in 2007, but has not yet been resolved. The second case involves a U.S plane allegedly abandoned in Colombian territory in 2010. The U.S. owner has been trying to claim his property since 2012. Colombian authorities maintain that the plane is now the property of the Colombian government, according to national regulations on abandoned aircraft and have requested to U.S. authorities to deregister the aircraft as it has become Colombia’s property. The third case involves a U.S. citizen alleging lack of restitution for land seized by the government in the course of an investigation into a prior owner. The last case involves a U.S. agro-industrial company that acquired state land in Colombia; the Colombian government asserts the land was acquired in violation of state lands law. The case is still pending resolution.
Separately, a Spanish energy company which is the majority owner of a Colombian utility company initiated arbitration proceedings before UNCITRAL in March 2017 after the government ordered the liquidation of the electricity supplier. The company asserted that the move constituted expropriation without compensation, though the government cited mismanagement, an inability to service its debts, and failure to provide reliable electricity to the northern coast of Colombia as justification for its actions.
According to the Doing Business 2017 report, the time from the moment a plaintiff files the lawsuit until actual payment and enforcement of the contract averages 1288 days, the same as in 2016. Traditionally, most court proceedings are carried out in writing and only the evidence-gathering stage is carried out through hearings, including witness depositions, site inspections, and cross-examinations. The government has accelerated proceedings and reduced the backlog of court cases by allowing more verbal public hearings and creating alternative court mechanisms. The new Code of General Procedure that entered into force in June 2014 also establishes an oral proceeding which is carried out in two hearings, and there are now penalties for not ruling in the time limit set by the law. Enforcement of an arbitral award can take between six months and one and a half years; a regular judicial process can take up to seven years for private parties and upwards of 15 years in conflicts with the State. Thus, arbitration results are cheaper and much more efficient. According to the Doing Business report, Colombia has made enforcing contracts easier by simplifying and speeding up the proceedings for commercial disputes. In 2017, Colombia improved three positions in the enforcing contracts category of the report, from 177 to 174.
International Commercial Arbitration and Foreign Courts
Foreign judgments are recognized and enforced in Colombia once an application is submitted to the Civil Chamber of the Supreme Court. In 2012, Colombia approved the use of the arbitration process when new legislation based on the UNCITRAL Model Law was adopted. The statute stipulates that arbitral awards are governed by both domestic law as well as international conventions (New York Convention, Panama Convention, etc.). This has made the enforcement of arbitral awards easier for all parties involved. Arbitration in Colombia is completely independent from judiciary proceedings, and once arbitration has begun, the only competent authority is the arbitration tribunal itself. The CTPA protects U.S. investments by requiring a transparent and binding international arbitration mechanism and allowing investor-state arbitration for breaches of investment agreements if certain parameters are met. The judicial system is notoriously slow, leading to many foreign companies to include international arbitration clauses in their contracts.
Colombia’s 1991 Constitution grants the government the authority to intervene directly in financial or economic affairs, and this authority provides solutions similar to U.S. Chapter 11 filings for companies facing liquidation or bankruptcy. Colombia’s bankruptcy regulations have two major objectives: to regulate proceedings to ensure creditors’ protection, and to monitor the efficient recovery and preservation of still-viable companies. This was revised in 2006 to allow creditors to request judicial liquidation, which replaces the previous forced auctioning option. Now, inventories are valued, creditors’ rights are taken into account, and either a direct sale takes place within two months or all assets are assigned to creditors based on their share of the company’s liabilities. The insolvency regime for companies was again revised in 2010 to make proceedings more agile and flexible and allow debtors to enter into a long-term payment agreement with creditors, giving the company a chance to recover and continue operating. Bankruptcy is not criminalized in Colombia. In 2013, a bankruptcy law for individuals whose debts surpass fifty percent of their assets value entered into force.
Restructuring proceedings aim to protect the debtors from bankruptcy. Once reorganization has begun, creditors cannot use collection proceedings to collect on debts owed prior to the beginning of the reorganization proceedings. All existing creditors at the moment of the reorganization are recognized during the proceedings if they present their credit. Foreign creditors, equity shareholders including foreign equity shareholders, and holders of other financial contracts, including foreign contract holders, are recognized during the proceeding. Established creditors are guaranteed a vote in the final decision. According to the Doing Business 2017 report, Colombia takes an average of 1.7 years—the same as OECD high income countries—to resolve insolvency; the average time in Latin America is 2.9 years.
4. Industrial Policies
The Colombian government offers investment incentives such as income tax exemptions and deductions in specific priority sectors. During the last decade, it has committed to providing more incentives and stability for investors. Investment incentives through free trade agreements between Colombia and other nations include national treatment and most favored nation treatment of investors; establishment of liability standards assumed by countries regarding the other nation’s investors, including the minimum standard of treatment and establishment of rules for investor compensation from expropriation; establishment of rules for transfer of capital relating to investment; and specific tax treatment.
The government offers tax incentives to all investors, such as preferential import tariffs, tax exemptions, and credit or risk capital. Some fiscal incentives are available for investments that generate new employment or production in areas impacted by natural disasters, and companies can apply for these directly with participating agencies. Tax and fiscal incentives are often based on regional considerations. Border areas have special protections due to currency fluctuations in neighboring countries, which can harm local economies. National and local governments also offer special incentives, such as tax holidays, to attract specific industries.
Special tax exemptions have existed since 2003 and range from ten to thirty years. Income tax exemptions for investments in tourism cover new hotels constructed between 2003 and 2017, and remodeled and/or expanded hotels though 2017, for a period of 30 years, and for ecotourism services through 2023. New forestry plantations and sawmills also have benefitted from income tax exemptions since 2003. Late yield crops planted through 2014 are tax exempt for ten years from the beginning of the harvesting. Electricity from wind power, biomass, and agricultural waste are tax exempt until January 1, 2018, as are 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 Colciencias (Colombia’s agency for promoting science, technology, and innovation) must grant its certification.
Foreign investors can participate without discrimination in government-subsidized research programs, and most Colombian government research has been conducted with foreign institutions. R&D incentives include Value-Added Tax exemptions for imported equipment or materials used in scientific, technology, or innovation projects, and qualified investments may receive tax credits up to 175 percent. A 2012 reform of Colombia’s royalty system allocates ten percent of the government’s revenue to science, technology, and innovation proposals executed by subnational governments. Although only subnational governments can submit a project, anyone, including foreigners, can partner with them. Colombia’s science, technology and innovation investment as percentage of GDP was 0.62 percent in 2016; Colombia’s R&D investment for 2015 was 0.239 percent of GDP, 4.4 percent less than in 2014.
Foreign Trade Zones/Free Ports/Trade Facilitation
To attract foreign investment and promote the import of capital goods, the Colombian government uses a number of drawback and duty deferral programs. One example is free trade zones (FTZs). As of January 2017, there were 104 FTZs (including permanent, single company and special types). These have generated development of new infrastructure of services for industry with more than 800 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 in one document the regulatory framework for FTZs dating back to 2007, and made clarifications to certain processes without significant changes. Tax treatment of companies operating FTZs was revised with the December 2016 tax reform. The reform maintained a preferential corporate income tax for FTZ’s, but increased 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 Free Trade Zones, 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 new tax reform increased VAT from16 to 19 percent. The reform also eliminated the Income Tax for Equality (CREE), a nine percent tax on company profits over 800 million pesos (approximately USD 275,000) designed to contribute to employment generation and social investments.
In return for these and other incentives, every permanent FTZ must meet specific investment and direct job creation commitments, depending on their total assets, during the first three years of the project. Special FTZ zones are required to invest and generate a number of direct jobs depending on the economic sector. According to DANE, in 2016, total exports of 35 permanent FTZs and 60 special permanent FTZs were USD 3 billion, a 47 percent increase from 2015. In 2016, imports to FTZs decreased 14 percent to USD 2 billion. The trade balance for 2016 registered a surplus of USD 1.1 billion in FTZs; in 2015 there was a deficit of USD 209 million in FTZs.
Performance and Proposed Data Protection Requirements
Performance requirements are not imposed on foreigners as a condition for establishing, maintaining, or expanding investments. The Colombian government does not have performance requirements, impose local employment requirements, or require excessively difficult visa, residency, or work permit requirements for investors. Under the CTPA, Colombia grants substantial market access across its entire services sector.
Colombia is issuing new 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 draft circular on February 28, 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 excludes the United States, that meet the SIC’s data protection guidelines. This circular would affect contracting of public cloud services under the National Procurement Office’s Colombia Compra Eficiente Program. The agency requires a defined legal framework on cloud services to develop the necessary regulations for the public tender processes and exclusion of the United States from the list of countries complying with data protection standards could preclude U.S. firms from bidding for public cloud contracts.
The government currently requires local data storage only for government entities and does so using its service contract with a private company. In Colombia, software and hardware are protected by intellectual property rights (Direccion Nacional de Derecho de Autor – ). 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.
5. Protection of Property Rights
The 1991 Constitution explicitly protects individual rights against state actions and upholds the right to private property.
Secured interests in real property, and to a lesser degree movable property, are recognized and generally enforced after the property is properly registered. In terms of protecting third party purchasers, such as one of the cases cited under investment disputes, existing law is inadequate. The concept of a mortgage, trust, deed, and other types of liens exists, as does a reliable system of recording such secured interests. Deeds, however, present some legal risk due to the prevalence of transactions that have never been registered with the Public Instruments Registry.
According to Amnesty International, as of November 2015 eight million hectares had been abandoned or acquired illegally, equivalent to 14 percent of the Colombian territory. The government estimates that approximately 6.5 million hectares of land are affected by violent usurpation. Around 18 percent of land owners do not have clear title. The Colombian government is working to title these plots and has started a formalization program for land restitution.
In the five and a half years that the Law on Victims and Land Restitution has been in force, between 2011 and 2016, the government has received 102,292 applications for restitution, corresponding to 86,638 properties and around 200,000 hectares, of which 5,008 properties have been resolved by judges. In 2016 the Land Restoration Unit (URT), a unit created for only ten years to focus on land restitution for displaced by armed conflict population solved around 15,000 cases. With the entry into force of the peace deal with the FARC, Colombia’s largest rebel group, the Government is confident restitution efforts will be more effective since former violent areas become more accessible and population can start land restitution processes without much fear, although security in those areas remains a latent challenge. Some landowners who received their formal land titles have been threatened by illegal armed groups. Most of the land that needs to be formalized and returned to title owners is located at the south of the country.
The URT’s work is complementary to the work of the National Land Agency which deals with property titles to peasants and minorities communities so they can have access to land and to the formalization of their rights. The Agency was created at the end of 2015 to implement many of the commitments established in the peace deal with the FARC on formalization of rural land and aims to formalize the property of 50,000 Colombian families in 2017.
In March 2017, the Colombia’s Prosecutor’s Office announced the recovery of 277,000 hectares from property of dissidents and ex-combatants of the FARC guerrillas, and from illicit drugs. The area is equivalent to 2,270 square kilometers or an extension almost three times larger than the city of New York (787 square kilometers). Colombia ranked 53 out of 190 economies for ease of registering property, according to the 2017 Doing Business report, the same ranking it received in 2016.
Intellectual Property Rights
In Colombia, the granting, registration, and administration of IPR are carried out by four different government entities. The SIC acts as the Colombian patent and trademark office. The Colombian Agricultural Institute (ICA) is in charge of issuing plant variety protections and data protections for agricultural products. The Ministry of Interior administers copyrights through the National Copyright Directorate (DNDA). The Ministry of Health and Social Protection handles data protection for products registered through the National Food and Drug Institute (INVIMA). While each of these entities experiences significant financial and technical resource constraints, the SIC is well-run and the second fastest office in the world for patent applications. Colombia is subject to Andean Community Decision 486 on trade secret protection, which is fully implemented domestically by the Unfair Competition Law of 1996.
Colombia made no significant changes to its institutional IPR framework in 2016. Decree 1162 of 2010 created the National Intellectual Property Administrative System and the Intersectorial Intellectual Property Commission (CIPI). The CIPI serves at the interagency technical body for IPR issues, but has not issued any recent policy documents. The last comprehensive interagency policy for IPR issues (Conpes 3533) was issued by the National Planning Department in 2008. Colombia’s National Development Plan (NDP) for 2014-2018 contains a requirement to develop an IPR enforcement policy, but Colombia did not publish such a policy in 2016.
The patent regime in Colombia currently provides for a 20-year protection period for patents, a 10-year term for industrial designs, and 20- or 15-year protection for new plant varieties, depending on the species. Colombia has been on the U.S. Trade Representative’s Special 301 Watch List every year since 1991 but is not listed in the notorious markets report. Special 301 reports can be found at . Stakeholder submissions for the 2017 Special 301 report prominently cited concerns about Colombia’s regulation of the pharmaceutical sector, including weak patent enforcement and discretion for compulsory licensing.
The CTPA improved standards for the protection and enforcement of a broad range of IPR. Such improvements include state-of-the-art protections for digital products such as software, music, text, and videos; stronger protection for U.S. patents, trademarks, and test data; and prevention of piracy and counterfeiting by criminalizing end-use piracy. Colombia is a member of the Inter-American Convention for Trademark and Commercial Protection. Various procedures associated with industrial property, patent, and trademark registration are available at .
Colombia has outstanding CTPA commitments related to copyright protection. In January 2013, the constitutional court declared Law 1520 of 2012 implementing several CTPA-related commitments (including copyrights, TV programming quotas, and IPR enforcement measures) unconstitutional on procedural grounds. In response, the Santos administration decided to present separate bills to Congress. A subsequent effort to pass TV programming quotas was not approved after four debates in Congress, and shelved by the Santos Administration in June 2015. MINCIT did make progress on copyright protection in 2016, publishing in August a version of the bill for public consultation. Industry stakeholders have noted that it succeeds in introducing the concept of statutory damages for copyright infringement, but falls short in some other areas, failing to compel takedown of online content or protect intermediaries with important “safe harbor” provisions for unintentional copyright infringement. Following the close of public comments in September 2016, Colombia has not moved to introduce the legislation to Congress. Colombia now expects to introduce the copyright bill in 2017.
Absent this and other legislation, Colombia continues to fall short on CTPA commitments. The CTPA deadline to establish copyright liability for circumventing technological protections was May 15, 2013, and the deadline to establish copyright liability for misuse/altering information was November 15, 2014. Colombia has yet to establish additional criminal procedures for counterfeiting, due May 15, 2013, which it plans to address with the copyrights bill or another law that permits changing its penal code. The Internet Service Providers (ISPs) legislation, another CTPA requirement, was due May 15, 2013. A bill was introduced in 2011, but was shelved because it passed only one of the mandatory four debates within the required timeframe.
Colombia did take an important step toward meeting its CTPA obligations in 2016 by finalizing its accession to the Budapest Treaty on the International Recognition of the Deposit of Microorganisms for the Purposes of Patent Procedure. The treaty entered into force with respect to Colombia in July 2016. Colombia did not make progress in 2016 on another international agreement that it needs to sign in order to comply with CTPA provisions: the International Union for the Protection of New Varieties of Plants (UPOV 91). Colombia’s constitutional court declared accession to UPOV 91 unconstitutional in December 2012 due to lack of consultation with Afro-Colombian and indigenous communities. Consultations are expected to occur in 2017. Colombia also maintains that the existing Andean Community Decision 345 is in effect and equivalent to UPOV 91.
In terms of investigations, Colombia’s success against counterfeiting and IPR violations remains limited. The Fiscal and Customs Police (POLFA) launched “Plan Choque” in 2014 to collaborate with the National Police on operations, and has begun working more closely with the private sector in recent years. Despite occasional press reports of successful seizures of contraband hard goods (often counterfeit medicines, alcohol, and consumer products such as shoes), such products remain widely available in Colombia’s “San Andresitos” markets. The Colombian Tax and Customs Authority (DIAN) has identified 319 illegal terrestrial entry points on the borders with Venezuela and Ecuador, most of which are difficult to control due to security concerns related to illegal armed groups. A 2015 law increased penalties for those involved in running contraband, but more effective implementation is needed. Colombian law continues to limit the ability of law enforcement (police, customs, and prosecutors) to effectively combat counterfeiting because they do not have ex officio authority to effectively inspect, seize and destroy counterfeit goods, nor an integrated multi-agency system to investigate smugglers and counterfeiters. Enforcement in the digital space remains weak as well.
Regarding responsibility for prosecutions, the specialized IPR unit in the Attorney General’s office (the UNPIT) was abolished in a 2014 restructuring. It remains the case that criminal IPR cases are generally assigned randomly to non-specialized national prosecutors. The two exceptions to assign a case to an attorney from the old UNPIT unit are when a major crime organization is involved or cases of nationwide scope.
Resources for Rights Holders
U.S. Embassy point of contact:
Economic Section, U.S. Embassy Bogota
Carrera 45 #22B-45
- American Chamber of Commerce in Colombia:
- Council of American Companies in Colombia:
- Local attorneys list: http://bogota.usembassy.gov/attorneys.html
6. Financial Sector
Capital Markets and Portfolio Investment
The Colombian Stock Exchange (BVC) is the main forum for trading and security transactions in Colombia. The BVC is a private company listed on the stock market. The BVC, as a multi-product and multi-market exchange, offers trading platforms for the stock market, along with fixed income and standard derivatives. The BVC also provides listing services for issuers. The BVC is part of the Latin American Integrated Market (MILA) along with the Mexican Stock Exchange, the Lima Stock Exchange and the Santiago Stock Exchange. BVC market capitalization has risen from USD 14 billion in 2003 to USD 100.2 billion in 2016. Colombia maintained a BBB ‘Investment Grade’ credit rating by Fitch and Standard and Poor’s thanks to sound macroeconomic fiscal management including the 2016 tax reform. Foreign investors can participate in capital markets by negotiating and acquiring shares, bonds, and other securities listed by the Foreign Investment Statute. These activities must be conducted by a local administrator, such as trust companies or Financial Superintendency authorized stock brokerage firms. Foreign investment capital funds are forbidden from acquiring more than ten percent of the total amount of a Colombian company’s outstanding shares. Foreigners can establish a bank account in Colombia as long as they have a valid visa and Colombian government identification.
The market has sufficient liquidity for investors to enter and exit sizeable positions. The Central Bank respects IMF Article VIII and does not restrict payments and transfers for current international transactions. The financial sector in Colombia offers credit to nationals and foreigners that comply with the requisite legal requirements.
Money and Banking System
In 2005, Colombia consolidated supervision of all aspects of the banking, financial, securities, and insurance sectors under the Financial Superintendency. Colombia has an effective regulatory system that encourages portfolio investment. According to the Financial Superintendency, as of December 2016, the combined estimated assets of Colombia’s major banks totaled USD 183 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 2016, 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. The Sarmiento Group (Grupo Aval) controls about 27 percent of the sector and the Business Group of Antioquia (Bancolombia) about 26 percent. Total foreign-owned bank assets account for approximately 28 percent of the sector.
Commercial banks are the principal source of long-term corporate and project finance in Colombia. Loans rarely have a maturity in excess of five years. Unofficial private lenders play a major role in meeting the working capital needs of small and medium-sized companies. Only the largest of Colombia’s companies participate in the local stock or bond markets, with the majority meeting their financing needs either through the banking system, by reinvesting their profits, or through credit from suppliers.
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.
If investments are officially registered, repatriations of profits are permitted without restrictions. The government permits full remittance of all net profits regardless of the type or amount of investment. Foreign investments must be channeled through the foreign exchange market and registered with the Central Bank’s foreign exchange office within one year to be able to repatriate or reinvest the proceeds. There are no restrictions on the repatriation of revenues generated from the sale or closure of a business, reduction of investment, or transfer of a portfolio. Colombian law authorizes the government to restrict remittances in the event that international reserves fall below three months’ worth of imports. International reserves have remained well above this threshold for decades.
Sovereign Wealth Funds
In 2012, Colombia began operating a sovereign wealth fund called a savings and stabilization fund, administered by the Central Bank, with the objective of promoting savings and economic stability in the country. The fund can administer up to 30 percent of annual royalties from the extractive industry. The fund was valued at USD 3.4 billion in 2016, 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.
7. State-Owned Enterprises
The Colombia government owns 96 companies with a total asset value of USD 80 billion, equivalent to 32 percent of the national GDP. The largest state-owned companies are: Ecopetrol, which has a net worth of approximately USD 23 billion; Cenit Transportation and Logistics of Hydrocarbons S.A.S., with a net worth of USD 7 billion; Electrical Interconnection S.A. ESP – ISA, with a net worth of USD 2.8 billion; Oleoducto Central S.A., with a net worth of USD 2.6 billion; and the Refinery of Cartagena, with a net worth of USD 1.8 billion.
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 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.
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
Colombia 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 October 2014, the Minister of Environment and Sustainable Development signed the modification to decree 2820 on environmental licensing. With this change, the Colombian government hoped to streamline and optimize the issuance of permits for exploration and exploitation of natural resources in Colombia, though private sector contacts report that results have been mixed.
Corruption is a serious obstacle for companies operating or planning to invest in Colombia. According to the World Economic Forum (WEF) Global Competitiveness Index (2016-2017), corruption is the second most problematic factor affecting competitiveness, following high tax rates. The NGO Transparency International reported that Colombian citizens’ perception of the level of corruption in the country remained high in 2016, and a February 2017 Gallup poll showed it as the number one problem facing Colombia according to Colombians polled. In 2016 Colombia ties for 90 out of 176 countries in the Transparency International rankings, falling from 83 in 2015.
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 case has generated intense media coverage in Colombia as several senior members of both the Santos and Uribe administrations have come under investigation. On March 14, President Santos acknowledged that Odebrecht illegally donated funds to his 2010 campaign, though he denied awareness of the act at the time. His opponent in the 2014 election, Oscar Ivan Zuluaga, has withdrawn from the 2018 election after being implicated in the scandal. Two high-priority infrastructure projects are on hold as a result of the corruption revelations, though other highway modernization projects critical to implementation of the peace continue. Corruption appears likely to be a high-profile issue in 2018 presidential and legislative elections, with candidates potentially seeking to distance themselves from the Colombian president.
In response to the scandal, in January 2017 President Santos issued decree 092 to prohibit direct public contracts with non-profit organizations. The Secretariat for Transparency estimates that more than USD 400 million in public resources are committed to contracts with foundations and NGOs; contracting with these entities has commonly been abused to steal public resources. President Santos also announced the introduction of two anticorruption bills before Congress, one to set up fully public registers of company owners (a commitment made in May 2016 during the Anticorruption Summit in London) and the other to revise the penalties in corruption offenses.
Colombia has adopted the OECD Convention on Combating Bribery of Foreign Public Officials and is a member of the OECD Anti-Bribery Committee. It has signed and ratified the UN Anticorruption Convention. Additionally, it has adopted the Organization of American States (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.
Colombia still needs to improve legislation for the protection of whistleblowers and more transparent and reliable systems for public tenders. In August 2016, the government introduced a bill to congress outlining protections for whistleblowers. As of April 2017, congress has not debated the proposed bill. According to the 2016 report from the National Civil Commission for Fighting Corruption (CNCLCC), Colombia has made progress with the issuance of an anti-bribery law (enacted in February 2016 and in force starting March 2017) as part of the commitments for the accession to the OECD. The law establishes that the penal responsibilities can be transferred from the employees to companies, including managers and contractors bribing public servants of a foreign country.
Resources to Report Corruption
Useful resources and contact information for those concerned about combating corruption in Colombia include the following:
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, so civil society can discuss and propose policies and actions to fight corruption in the country. Transparencia por Colombia is the technical secretariat of the commission.
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. .
10. Political and Security Environment
Security in Colombia has improved significantly over the past 16 years. Colombia experienced a significant decrease in terrorist activity, due in large part to a bilateral cease-fire between government forces and the FARC. On November 26, 2016 President Santos signed a renegotiated peace agreement with the FARC to end half a century of confrontation, after the original peace accord was rejected in an October plebiscite. Congressional approval of a peace accord between the government and the FARC on November 30, 2016 put in motion a six-month disarmament, demobilization, and reintegration process, in part to become a legal political organization. Colombian government figures show that the number of terrorist acts decreased 55 percent from 2015 to 2016. Despite the National Liberation Army (ELN) conducting ongoing negotiations with the Colombian government in Quito, Ecuador, beginning in January 2017, the group continues a low-cost, high-impact asymmetric insurgency. ELN attacks, alongside powerful narco-criminal group operations, are posing a threat to commercial activity and investment, especially in rural zones where government control is weaker. Still, FARC demobilization could bring greater development opportunities to rural regions. The Colombian government estimates FARC insurgents at around 7,000 armed members and 7,000 to 8,000 support members known as “militias.” The FARC is currently undergoing demobilization and disarmament in concentration zones under supervision by the UN. The government and the UN estimate roughly five percent of FARC forces, or 300 to 500 FARC members are dissidents and are not complying with the peace agreement. The government estimates the ELN has 1,500 to 2,000 armed members. The ELN continues to attack oil pipelines, mines, roads, and electricity towers to disrupt economic activity and pressure the government. The ELN also extorts businesses in their areas of operation, kidnap personnel, and destroy property of entities that refuse to pay protection or extortion.
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 2016, the average annual unemployment rate according to official government figures was 9.2 percent, a slight increase relative to 2015’s rate of 8.9 percent. The truck transport strike of July 2016 accounts for some of the increase, in addition to a lower dynamic of employment generation from the construction sector. The unemployment rate is one of the highest in the region, but has steadily improved over the past several years. Approximately 64.7 percent of the working-age population actively participates in the labor force. According to DANE, 47.5 percent of the workforce was working in the informal economy at the end of 2016. 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. According to the OECD, only 6.2 percent of all salaried workers are covered by collective bargaining agreements (CBAs).. The Ministry of Labor is currently working on decrees to incentivize sectoral collective bargaining, and to strengthen union representation within companies and regulate strikes in the essential public services sector (i.e. hospitals).
Strikes, when held in accordance with the law, are recognized as legal instruments to obtain better working conditions, and employers are prohibited from using strike-breakers at any time during the course of a strike. After 60 days of strike action, the parties are subject to compulsory arbitration. Strikes are prohibited in certain “essential public services,” as defined by law, although Colombia has been criticized for having an overly-broad interpretation of “essential.” In July-August 2016, a 45-day strike by truck transport associations impacted the Colombian economy, clogging ports, slowing agricultural exports, and increasing inflation. The strike was motivated by the truckers’ desire to restrict the import of new vehicles. They alleged that excess transport capacity reduces the value of their own vehicles and affects their profitability. The strike ended with an agreement between the truckers and the government on cargo prices and modifications to the “scrappage” policy that regulates the import of new vehicles.
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 under-aged workers. Foreign employees have the same rights as Colombian employees. Employers may use temporary service agencies to subcontract additional workers for peaks of production. Employers must receive advance permission from the Ministry of Labor before undertaking permanent layoffs. The Ministry of Labor typically does not grant permission to lay off workers who have enhanced legal protections (those with work-related injuries or union leaders, for example). The Ministry of Labor has been cracking down on using temporary or contract workers for jobs that are not temporary in nature.
Reputational risks to investors come with a lack of effective and systematic enforcement of labor law, especially in rural sectors. In 2016, the Ministry of Labor imposed sanctions to around 1,000 companies for over USD 29 million for violations of labor law, including subcontracting and occupational health and safety violations as well as violations of freedom of association. The value of fines imposed against employers in 2016 was around 130 percent the value of fines imposed in 2015. The Ministry of Labor has publicly highlighted improvement in the increase of number of labor inspector positions, from 524 in 2011 to 904 in 2016, and an increased number of imposed sanctions. The Ministry has also highlighted increased social dialogue. Between 2011 and 2015, the number of collective bargaining conventions increased 165 percent, while collective pacts decreased 14 percent in the same period. Homicides of unionists have decreased in recent years but remain a concern. In January 2017, the U.S. Department of Labor issued a public report of review in response to a submission filed under Chapter 17 (the Labor Chapter) of the CTPA by the American Federation of Labor and Congress of Industrial Organizations and five Colombian workers’ organizations that alleged failures on the part of the government to protect labor rights in line with CTPA commitments. For additional information on labor law enforcement see Section 7 of Colombia’s Human Rights Report, and the Department of Labor’s and .
12. OPIC and Other Investment Insurance Programs
OPIC made its first investment in Colombia in 1985 and has supported more than 17 projects in Colombia since 2005, with investments totaling more than USD 2 billion. OPIC’s largest project in Colombia was a USD 140 million loan to a U.S. company to finance the installation and deployment of a fourth generation long-term evolution (“4G LTE”) wireless and fiber-optic broadband network for high-speed data communication. Additional information can be found at .
13. Foreign Direct Investment and Foreign Portfolio Investment Statistics
Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
Table 3: Sources and Destination of FDI
|Direct Investment from/in Counterpart Economy Data|
|From Top Five Sources/To Top Five Destinations (US Dollars, Millions)|
|Inward Direct Investment||Outward Direct Investment|
|Total Inward||13.593||100%||Total Outward||4.516||100%|
|Canada||2.163||16.1%||British Virgen Isl.||940||21%|
|“0” reflects amounts rounded to +/- USD 500,000.|
Table 4: Sources of Portfolio Investment
|Portfolio Investment Assets (June 2016)|
|Top Five Partners (Millions, US Dollars)|
|Total||Equity Securities||Total Debt Securities|
|All Countries||28.552||100%||All Countries||17.410||100%||All Countries||11.142||100%|
|United States||18.637||65%||United States||13.075||75%||United States||5.584||50%|
|International Organizations||841||3%||Cayman Islands||237||1%||Netherlands||533||5%|
14. Contact for More Information
U.S. Embassy Bogota
Carrera 45 #22B-45