Guide To Investing In Colombia
Colombia is located in the north west of South America and is the only country with coastal access to both the Pacific and Caribbean Sea / Atlantic Oceans. The country is bordered by Panama, Venezuela, Brazil, Peru and Ecuador. Geographically, its national territory is divided into two main regions with plains and lowlands in the east and the Andes Mountain Range in the west.
Colombia is ethnically diverse, its people descending from the original native inhabitants, Spanish colonists, Africans and 20th-century immigrants from Europe and the Middle East, all contributing to a diverse cultural heritage. This has also been influenced by Colombia’s varied geography, and the imposing landscape of the country has resulted in the development of very strong regional identities. The majority of the urban centres are located in the highlands of the Andes mountains, but Colombian territory also encompasses Amazon rainforest, tropical grassland and both Caribbean and Pacific coastlines.
Colombia is the fourth largest economy in Latin America and the only country among its peers that is part of the CIVETS group of six leading emerging markets. It is an accessing member to the OECD. Colombia has a diversified economy with macroeconomic stability and favorable growth prospects.
Ecologically, Colombia is considered one of the world’s 17 megadiverse countries, and of these, the most biodiverse per square kilometer.
Resource Extraction Sector in Colombia
The current government, led by President Juan Manuel Santos has included mining in its economic development plan as a driver for the future of Colombia’s economy. The mining sector has identified eleven strategic minerals to aid the government’s exploration promotion program which are:
The mining sector currently contributes 2.4 per cent to Colombia’s growth domestic product (compared to Chile at 15 per cent) and the government sees opportunities in the potential 80 per cent of territory dedicated to mine exploration which is completely unexplored.
In May 2013, Colombia was ranked the seventh best destination for mining investment in the world and the fourth in Latin America in 2012 according to the Behre Dolbear group. (Source: National Agency of Mining, Exploring Opportunities, May 2013).
Colombia is also rich in fossil energy resources and major exports include mineral fuels, oils, distillation products, precious stones, forest products, machinery, electronics, military products, aircraft, ships, motor vehicles, metal products, ferro-alloys, petrochemicals, agrochemicals, inorganic salts and cement. Colombia is a regionally significant coal producer and strong exporter of coal. Colombia’s coal products are recognised worldwide for their low ash & sulphur content and high volatiles & energy values. At the end of 2011, Colombia had 6.75 billion metric tons of proven coal reserves, which accounted for 0.8% of the world total and represented the largest proven reserves of coal in Latin America (Source: US Geological Survey, 2011 Minerals Yearbook, The Mineral Industry of Colombia, October 2012).
In 2011, Colombia was estimated to be the world’s 10th ranked nickel-producing country, and the Cerro Matoso operation (99.94% owned by BHP Billiton Ltd. of Australia) was reported by BHP Billiton to be the world’s second ranked producer of ferro-nickel. (Source: US Geological Survey, 2011 Minerals Yearbook, The Mineral Industry of Colombia, October 2012).
Colombia is the world’s sixth largest platinum and world’s largest exporter of emeralds with approximately 55% of global production. The Colombian Andean system holds gold bearing hydrothermal systems of high potential and continues to attract 2% of total global nonferrous exploration expenditures. (Source: National Agency of Mining, Colombia)
Introduction to Investing in Colombia
Colombia is a country on a full development path, with a stable and dynamic economy, with excellent macroeconomic indicators, fiscal discipline, important structural reforms and strong public commitments in offering investment incentives, business stability and profitability.
In June 2014, the World Bank ranked Colombia as the most business friendly country in Latin America and 34th in the world. (Source: Doing Business Rankings)
Colombia has developed International instruments for the protection of foreign investment such as Promotion and Protection Agreements that have been signed with several countries.
Colombia is a party to a number of international conventions and treaties governing the promotion and protection of foreign investments which serve to create a stable and attractive environment for investors.
Colombia has already eight trade agreements in force with 16 countries, including Canada, United States, Switzerland, South Korea, Argentina, Brazil, Chile, Mexico, Peru, Salvador, Guatemala, Honduras, Ecuador, Bolivia, Uruguay, Paraguay and Liechtenstein; a further three, Norway, South Korea and the EU, are undergoing congressional approval. Trade agreements are also currently being negotiated with Turkey, Israel, Costa Rica, Panama and the Pacific Alliance and scoping exercises are being undertaken with Japan and China.
Colombia’s goal is to reach more than 1.5 billion people by 2014, by means of Trade Agreements covering more than 50 countries and thereby obtain preferential access to over 1.5 billion consumers.
Can foreign companies invest in Colombian resources?
Foreign companies interested in investing in exploration and mining activities in Colombia are required to have a legal representative established in Colombia in order to submit proposals for mining concessions. The company must have a branch office, affiliate or subsidiary in the country to sign contracts.
In principle, Colombian legislation does not require a minimum capital contribution to incorporate commercial companies. This implies that the capital contribution is set by the shareholders or partners, as the case maybe, regarding the activities that the company plans to carry out in Colombia.
All foreign investment in Colombia, investment of Colombian capital abroad, foreign debts, import and export of goods, granting of guarantees and collateral in foreign currency and cross-border derivative transactions are operations that must be formalised through Colombia’s foreign exchange market. To do so, the foreign investor must register foreign investment with the Colombian Central Bank which allows the foreign investor to enjoy remittance rights.
Major mining companies with presence in Colombia:
|Company||Target Resource||Country of Origin|
|BHP Billiton||Coal, Ferronickel||Australia|
|Anglo America||Coal||South Africa|
|Anglo Gold Ashanti||Gold||South Africa|
|Gran Colombia Gold||Gold||Canada|
Colombian Corporate Legal Framework
- Corporate law in Colombia enjoys great legal stability as laws have progressed with the passage of time.
- Investors who wish to engage in permanent business in Colombia must, as a general rule, channel their investments through a legal vehicle, such as a corporation or a foreign company branch. Non-resident individuals who want to invest in Colombia are excluded from this requirement, as they can appoint a power of attorney to act on their behalf.
- Colombia commercial law is flexible and modern with regard to corporations, and it allows the creation of sole shareholder investment vehicles, whereby the liability of the sole shareholder is limited to the amount of the corresponding contribution.
- Foreign investors do not require a local partner of investor. With few exceptions, the entire equity of a corporate entity can be foreign owned and there are no legal restrictions on its subsequent repatriation.
- The incorporation of a legal vehicle is simple, expeditious and does not require prior government authorisation.
Customs and Foreign Trade Regime
- Colombia’s customs regulations provide a special import-export program for the manufacturing, agribusiness and services sectors known as Plan Vallejo.
- Colombia has negotiated thirteen (13) free trade agreements with sixty-one (61) countries in the past few years, thereby providing a broad spectrum of potential markets for Colombia companies.
- Colombia uses different types of importation regimes designed to satisfy most of the needs of companies established in Colombia.
- Colombia has a network of free-trade zones which benefit companies established therein.
- All foreigners entering Colombia must appear before the immigration authority with their passport and the relevant Colombia visa, if one is required.
- If no visa is required to enter Colombia, the Immigration authority, in full use of its discretionary powers, may grant entry and permanence permits to foreign visitors who have no intention of establish residency in the country.
- All foreign nationals who intend to practice a profession or engage in a regulated activity are required to have a temporary permit, validation of their university degree, and obtain a professional license, if required.
- The migration policy promotes the entry of those foreigners with technical, professional or intellectual qualifications and experience that can contribute to the development of economic, scientific, cultural or educational activities that benefit the country. Likewise, it welcomes foreigners who can contribute capital to be invested in the incorporation of companies or in lawful activities that create employment, increase exports and are in the national interest.
- Employment contracts executed in Colombia, regardless of the nationality of the parties, are governed by local law.
- At the end of each year, the Government determines the legal monthly minimum wage.
- Under Colombian Labour Law, there are payments which must be considered as being part of the base salary package, regardless of the will of the parties, such as commissions or bonuses for meeting targets.
- Both national and foreign employees, resident in Colombia and legally bound by an employment agreement are required to join and contribute to the social security system.
- Colombian laws protect the rights of owners of private property.
- Colombian nationals and foreigners have equal obligations and rights regarding the purchase of real estate property. Real Estate transactions do not imply for foreign investors any additional tax, legal, or financial burdens.
- Land use in Colombia must comply with land planning regulations.
(Sourced from Legal Guide to Doing Business in Colombia 2014)