1 – Quick Facts About Doing Business in Colombia
- Capital City: Bogotá
- Population: 46.736.728 (July 2015 est. The World Factbook)
- Language: Spanish but a growing number of people in the tourism and international business sectors do speak English
- GDP (purchasing power parity) 2015: USD $665 billion (The World Factbook)
- Unemployment Rate: 10.1% (March 2016, Trading Economics)
- Inflation: 7.93% (April 2016, Trading Economics)
- Currency: Colombian Peso (COP)
2- Colombia’s Economic Figures
- GDP (purchasing power parity): $665 billion (The World Factbook)
- GDP growth rate: 0.6 % (Trading Economics)
- GDP per capita (PPP): $14,000 (The World Factbook)
- GDP Composition by sector: Agriculture (6.4%), Industry (36.9%), Services (56.7%) (The World Factbook)
Largest Export Partners (2014)
- USA (26.3 %)
- China (10.5 %)
- Panama (6.6 %)
- Spain (5.8 %)
- India (5.1 %)
Largest Import Partners (2014)
- USA (28.5 %)
- China (18.4 %)
- Mexico (8.2 %)
Import Export Commodities
- Oil and coal exports account for 59% of total shipments
- Gold 5%
- Note: in recent years, other products such as chemicals, machinery and cut flowers have been gaining importance.
- Machinery and transport equipment (39% of total imports)
- Manufactured products (22%)
- Chemicals and related products (17%)
- Fuel, mineral lubricants and related products (10%)
- Food and livestock (8%)
3 – Economic Outlook
Colombia is the fourth largest economy in the region but their growth is slowing. This is due to fewer exports, less investment and a reduction in consumer consumption. The country is still expected to experience growth for the next several years but at a lower rate.
The administration is working to overcome the slower growth by implementing new tax reforms. The devaluation of the peso is also expected to help agricultural and industrial exports.
Trade and Economic Challenges
The country still has problems with transparency and open competition. The law restricting foreign labor and foreign businesses operating in Colombia is an issue. Corruption and pay inequality also contribute to the trade and economic challenges of Colombia.
The middle class is increasing but the gap between the rich and the poor is also growing. Intellectual property rights are not protected to an acceptable international level. Laws are weak to support the rights of all parties involved in contract disputes. This is deterring foreign investment and foreign businesses from opening a company in Colombian
Colombia’s investment grade is not as good as other large Latin American countries but this is improving with the introduction of the Private Public Partnership (PPP) law. This law provides investors with more security when a contract ends or defaults by contractors. Currently, both Standard & Poors and Fitch Group have provided Colombia with an investment grade of BBB-; whereas, Moodys rating is a Baa3.
Colombia is working to improve the infrastructure of the country. Many infrastructure investment opportunities exist throughout the country from land to air to sea. Many opportunities are in the industries of technology, agribusiness, manufacturing, and services.
According to the World Bank’s Doing Business 2016, Colombia ranks as the third best country in Latin America. This is based on factors such as ease of starting a business, ease of doing business, obtaining credit, paying taxes, enforcing contracts, and more.
Colombia’s Technology and Connectivity
Colombia has an above average Internet user penetration rate for Latin America at 59.1 percent. The total number of Internet users at the end of 2015 was 28, 475,560 million. The government is embracing technology as a way to move forward. The initiatives include investing into the technology sector, encouraging foreign direct investment, education programs, and a progressive agenda on cyber security. The government would like to triple the number of Internet users by 2018 and many of the biggest names in technology are considering opening locations in Colombia.
E-Commerce and Startups
Both e-commerce and startups have significant opportunities for the future in Colombia. E-commerce has started to grow in recent years; but, the market penetration remains small. E-commerce grew 40 percent from 2013 to 2014. Spending increased by $1 billion in the same 12-month period. Consumer confidence for online shopping is at an all-time high with both men and women shopping online at the same rate. With many significant roadway infrastructure projects in development, the ecommerce industry in Colombia has only just begun.
Colombia continues to be one of the best countries for startups in Latin America. In 2012, Medellini was named the most innovative city by the Wall Street Journal. Aside from Medellin, the Colombian government has created many support systems such as incubator and education programs. They continue to make it easier for foreign investment in the technology sector.
4 – Colombia’s Key Industries
The government has made it easier to borrow money allowing for growth in several industries. President Santos has also generated greater confidence by appointing strategic officials. Political stability, a growing economy, and improved safety standards have also contributed to growth. Colombia is set to have the second largest economic growth in Latin America in 2016.
Colombia has five economic hubs which are Barranquilla, Bogota, Cali, Cartagena and Medellin (most countries in Latin America only have one or two). This increases business opportunities for foreign companies
Colombia is self-sufficient for agriculture. The country has more agricultural exports than imports. The country is ideal for growing all types of vegetation because of its wide range of climates. One concern the country has is with the growing number of FTAs (free trade agreements). Their products are becoming less competitive which may result in a strained industry. The largest agricultural commodities at are bananas, cacao, coffee, cotton, flowers, rice, and sugar.
The Energy is big business in Colombia. Coal and oil and gas industries are lucrative areas of business for Colombia. The country also utilizes nuclear energy and alternative methodologies. Coal is the most crucial sector of the energy industry, but the country is beginning to look for greener alternatives.
The manufacturing industry continues to struggle as it depends on the international economy. Economists are encouraging to put in place policies to reduce the dependency on global markets. This would protect the national economy during future times of global crisis.
Colombia’s tourism has struggled for many years due to the misconceptions about its safety. In recent years, tourists are beginning to visit the country as more and more people are sharing their positive experiences. As a result, the industry is reaching record numbers and creating more and more jobs. Colombia is also a growing as a medical tourist destination for elective plastic surgery and other medical procedures.
Colombia has many companies listed on the Forbes Global 2000 list. Many of the largest employers are in the banking industry. The following are a sample of the largest employers in Colombia:
- Bavaria S.A.
- Banco Ganadero S.A.
- Aerovías Nacionales de Colombia
- Alcantarillado y Aseo
- Aliadas CF
- Ardila Lülle
- Ascredibanco S.A.
- Grupo Aval
- Banco Agrario de Colombia S.A.
- Banco Andino S.A.
- Banco Caja Social S.A.
- Banco Central Hipotecario
Industries such as banking, construction, energy & water, financial services, telecommunications, and transportation make up the majority of employment in Colombia. It is estimated that as of 2011, 62% of the population worked in services, 21% in industry, and 17% in agriculture.
5 – Time and Cost to Import into Colombia
The time and cost to import into Colombia varies. If your country is part of a free trade agreement with Colombia and your products are part of the agreement, minimal or no import tariffs or customs fees will apply. If your country is not a member of any bilateral agreement or trade bloc with Colombia, goods will be subject to import duties, sales tax, and on occasion an excise tax.
If the goods ship into a free trade zone, they can be accepted, repackaged, and exported without having to pay import fees. The transit time to Colombia will vary from a few days for ocean vessels from Miami, depending upon the port of destination in Colombia, to roughly a month for shipments originating in Asia. Keep in mind that Colombia ports are on both the Caribbean and the Pacific Ocean making it an ideal in-transitory stop for many South American shipments.
6 – General Business Taxes
The foreign corporate tax rate for any business that has not acquired the title of Permanent Establishment (PE) is 33 percent. Any international business that has PE status is taxed at 25 percent. Foreign companies and companies with branches in Colombia is taxed on income earned in Colombia; whereas, resident companies will be taxed and evaluated based on global profits.