COLOMBIA GUIDE
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Expanding into Colombia offers many opportunities to international companies. The country is “open for business” and looking to play a broader role in global economies. The Colombian Government is continuing to develop an increasingly welcoming attitude towards private enterprise and entrepreneurial activity. Consumerism is growing in this upper-middle income market, along with development in the electronics, chemicals, services and high-tech sectors, thanks to a highly-educated and well-motivated workforce. Traditional economic strengths still lie in mining for gold and precious gems, oil and petrochemicals, coffee, textile and agriculture.
Colombia has many free trade agreements on the global economic front, including with the US and European Union. It is a member of the Pacific Alliance trading bloc, among other regional trade organisations like the Mercosur. Colombia’s geographical location in the northwest of South America adds to its trading potential. There is a Caribbean coastline to the north leading to the Atlantic, a Pacific coast to the west, and the land border with Panama is the route to Central and North America. Colombia also has land borders with Brazil, the region’s leading economy, and Ecuador, Peru and Venezuela.
Expanding into Colombia can bring excitement to the possibilities and significant stress to ensure the entity with the country’s rigid legal structures and laws. Ensuring compliance without sufficient knowledge of the country’s laws also adds to the stress of getting your new entity off the ground and ready to test new markets. Going at it without the proper support can increase the costs, time and risks involved. Global expansion is a step to make for any business, regardless of what you wish to achieve. The opportunities that can come with an expansion can be stimulating as well as intimidating and confusing, especially when you consider all the registration procedures that need to be done and the documentation required.
Each new market brings new challenges. These can be worked through more efficiently and cost-effectively with the support of a Professional Employer Organisation (PEO) such as Bradford Jacobs, primarily through our Employer of Record (EOR) framework. This can be best utilised when businesses are just beginning their expansion process and require more information before incorporating an entity and fully establishing themselves in that market.
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Colombia – The Economy
The economy of Colombia is the fourth largest in Latin America as measured by gross domestic product. Colombia has experienced a historic economic boom over the last decade. Throughout most of the 20th century, Colombia was Latin America’s 4th and 3rd largest economy when measured by nominal GDP, real GDP, GDP (PPP), and real GDP at chained PPPs. Between 2012 and 2014, it became the 3rd largest in Latin America by nominal GDP.
As of 2018, the GDP (PPP) per capita has increased to over US$14,000, and the actual gross domestic product at chained PPPs increased from US$250 billion in 1990 to nearly US$800 billion. Poverty levels were as high as 65% in 1990 but decreased to under 30% by 2014 and 27% by 2018. They had decreased by an average of 1.35% per year since 1990.
Petroleum is Colombia’s main export, representing over 45% of Colombia’s exports. Manufacturing represents nearly 12% of Colombia’s exports and grows at around 10% yearly. Colombia has the fastest-growing information technology industry worldwide and the longest fibre optic network in Latin America. Colombia also has one of the largest shipbuilding industries in the world outside Asia. Modern industries like shipbuilding, electronics, automobile, tourism, construction, and mining, grew dramatically during the 2000s and 2010s.
However, most of Colombia’s exports are still commodity-based. Colombia is Latin America’s second-largest producer of domestically made electronics and appliances, following Mexico. Colombia had the fastest-growing major economy in the western world in 2014, behind only China worldwide. Since the early 2010s, the Colombian government has shown interest in exporting modern Colombian pop culture to the world (which includes video games, music, films, television shows, fashion, cosmetics, and food) to diversify the economy and entirely change the image of Colombia. This has inspired a national campaign similar to the Colombian Wave.
The number of tourists in Colombia grows by over 12% every year. Colombia is projected to have over 15 million tourists by 2023.
Small and Medium-Sized Companies
Small and Medium-Sized Enterprises (SMEs) represent an essential part of the Colombian economy, although they are not well documented in official statistics. In particular, there is insufficient periodic data on their characteristics, evolution, or overall contribution to the economy – in most cases, SMEs tend to be bundled with micro-enterprises in official statistics.
The actual size of the market is understated due to informality. Lack of access to finance has been cited as an important problem in recent surveys. However, there are significant differences in perceptions as to the size and causes of the financing gap. While there is strong evidence to support its existence following the 1999 crisis, the significant growth of this market in recent years raises some questions as to whether such perceptions remain valid.
One of the lessons of the last few years is that banks will expand SME lending on their own accord – despite the presence of essential constraints – when they perceive the attractiveness of this market and have begun to saturate easier (in terms of business model) market segments such as corporate and consumer lending. However, to ensure the sustainable growth of this market, continued solid macroeconomic performance and a stable and consistent policy framework in the financial sector have been identified as important considerations.
|
Country |
Colombia (the Republic of Colombia) |
|
Capital |
Bogotá |
|
No. of States/Provinces |
32 departments |
|
Principal Cities |
Barranquilla, Bogotá, Cali, Cartagena and Medellin. |
|
Language |
Spanish (and English in San Andrés and Providencia) |
|
Local Currency |
Colombian Peso (COP) |
|
Major Religion |
87% Christianity (of which 70% are Catholics)
11% No religion |
|
Date Format |
dd/mm/yyyy |
|
Time Zone |
Colombian Time (GMT-5) |
|
Country Dial Code |
+57 |
|
Population |
52 million (27th) |
|
Border Countries |
Venezuela (East), Brazil (Southeast), Ecuador (South), Peru (South), and Panama (Northwest). |
|
Tax Year |
Calendar Year (January 1 - December 31) |
|
VAT |
19% |
|
Minimum Wage |
Increased in 2022 to COP 1,000,000/month (EUR 198 - USD 203.57) |
|
Taxpayer Identification Numbers |
A nine-digit number is assigned to all persons who must pay taxes in Colombia. |
|
Leading Sectors |
Agriculture, livestock, manufacturing, electronics, construction, mining and energy. |
|
Main imports |
Machinery and transport equipment (39%);
Manufactured products (22%);
Chemicals and related products (17%);
Fuel, mineral lubricants and related products (10%)
Food and livestock (8%). |
|
Main exports |
Crude Petroleum ($7.46B)
Coal Briquettes ($4.13B)
Coffee ($2.54B)
Gold ($2.34B)
Refined Petroleum ($1.55B) |
|
Main trading partners |
The United States, China, Ecuador, Panama and Brazil. |
|
Government Type |
Unitary Presidential Republic
|
|
Current President |
Gustavo Petro |
The Sectors of the Colombian Economy
- Agriculture: Colombia is one of the five largest producers of coffee, avocado and palm oil and one of the ten largest producers of sugarcane, banana, pineapple and cocoa. Colombia produced, in 2018, 36.2 million tons of sugarcane (7th largest producer in the world), 5.8 million tons of palm oil (5th largest producer in the world), 3.7 million tons of banana (11th largest producer in the world) and 720 thousand tons of coffee (4th largest producer in the world, behind Brazil, Vietnam and Indonesia). Although its neighbour Brazil is the largest producer of coffee in the world (3.5 million tons produced in the same year), the advertising carried out by the country for decades suggests that Colombian coffee is of higher quality, which generates greater added value to the country’s product.[40] In the same year, Colombia produced 3.3 million tons of rice, 3.1 million tons of potato, 2.2 million tons of cassava, 1.3 million tons of maize, 900 thousand tons of pineapple, 670 thousand tons of onion, 527 thousand tons of tomato, 419 thousand tons of yam, 338 thousand tons of mango, 326 thousand tons of avocado, in addition to smaller productions of other agricultural products such as orange, tangerine, lemon, papaya, beans, carrot, coconut, watermelon.
- Livestock: Colombia is among the 20 largest producers worldwide in beef and chicken meat production. In Colombia, the exploitation and breeding of cattle are carried out on small and large farms. Black-eared white, casanareño, coastal with horns, romosinuano, chino santandereano and hartón del Valle are the Colombian breeds with the highest production. In 2013, livestock occupied 80% of productive land in Colombia. The livestock sector is one of the most outstanding in areas such as the Caribbean Region, where seven departments have livestock as their primary vocation.
- Manufacturing: Although Colombia has been producing domestic appliances since the 1930s, it wasn’t until the late 1990s that Colombian corporations began exporting to neighbouring countries. One of Colombia’s largest producers of household appliances, HACEB has been producing refrigeration since 1940. Some domestic corporations include Challenger, Kalley, HACEB, Imusa, and Landers. In 2011, Groupe SEB acquired Imusa to expand to the Latin American market. Colombia manufactures for foreign companies as well, such as Whirlpool and GE. LG has also been interested in building a plant in Colombia. Colombia is also Latin America’s 3rd largest producer of appliances behind Mexico and Brazil and is proliferating.
- Electronics: Colombia is a major electronics producer in Latin America and South America’s 2nd largest high-tech market. Colombia is also the 2nd largest producer and exporter of electronics made by domestic companies in Latin America. Since the early 2000s, major Colombian corporations began exporting aggressively to foreign markets. These companies include Challenger, PcSmart, Compumax, Colcircuirtos, and Kalley. Colombia is the first country in Latin America to manufacture a domestically made 4K television. In 2014, the Colombian government launched a national campaign to promote the IT and Electronic sectors and invest in Colombia’s own companies. Although innovation remains low globally, the government sees heavy potential in the high-tech industry. It is investing heavily in education and innovation centres all across the nation. Because of this, Colombia could become a significant global electronics manufacturer and play an essential role in the global high-tech industry in the near future. In 2014, the Colombian government released another national campaign to help Colombian companies have a more significant share of the national market.
- Construction: recently has played a vital role in the economy and is increasing at almost 20% annually. As a result, Colombia sees a historic building boom. The Colombian government invests heavily in transport infrastructure through a “Fourth Generation Network” plan. The target of the Colombian government is to build 7,000 km of roads for the 2016–2020 period and reduce travel times by 30% and transport costs by 20%. A toll road concession program will comprise 40 projects and is part of a larger strategic goal to invest nearly $50bn in transport infrastructure, including railway systems. It will make the Magdalena river navigable again and improve port facilities and Bogotá’s airport. Long-term plans include building a national high-speed train network to improve competitiveness vastly.
- Mining & Energy: Colombia is well-endowed with minerals and energy resources. It has the largest coal reserves in Latin America and is second to Brazil in hydroelectric potential. Estimates of petroleum reserves in 1995 were 3.1 billion barrels (490,000,000 m3). It also possesses significant nickel, gold, silver, platinum, and emeralds. The country was the 12th largest coal producer in the world in 2018 and the 20th largest petroleum producer in 2019, with 791 thousand barrels/day. In mining, Colombia is the world’s largest producer of emeralds. The discovery of 2 billion barrels (320,000,000 m3) of high-quality oil at the Cusiana and Cupiagua fields, about 200 kilometres (120 mi) east of Bogotá, has enabled Colombia to become a net oil exporter since 1986.
Labour Authorities in Colombia
The primary legislation in Colombia regulating the relationship between employer and employees is the Labour Code (Código Sustantivo del Trabajo), last updated in 2021 and known as the Substantive Labour Code.
The Code is periodically updated by other Laws, Decrees and Amendments rather than by entire individual pieces of legislation. The Labour Code will regulate the company’s employment relationship with its staff regarding statutory minimums. However, case law, Decrees and Collective Bargaining Agreements (CBAs) can also apply.
These are vital considerations when hiring, onboarding and drawing up contracts with new staff.
Contracts Law in Colombia
- A contract, either verbal or in writing, must be agreed upon at the start of the onboarding process.
- Written contracts are recommended, but in the case of oral agreements, they must at least cover the role, salary and duration of employment.
- Fixed-term contracts must be in writing and can total a maximum of three years.
- Probationary periods must be confirmed in writing and cannot exceed two months for an open-ended contract or 20% of a fixed-term contract.
- Medical examinations by the company are compulsory for prospective employees, carried out at least three days before they are due to start work.
- The employee must sign documents in person, as digital signatures are not allowed.
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