Colombian governments have traditionally welcomed private companies, privatization and foreign investment, including Colombia international trade. This attitude was reinforced when the economy “opened” in the early 1990s in a process geared to internationalize the country. The opening of the economy sparked important changes in legislation on foreign investment, the exchange rate, the financial sector, the labor regime and taxes that brought the country in line with international globalization trends.
Equal Treatment for Local and Foreign Investors
Article 100 of Colombia’s Constitution guarantees equal treatment for local and foreign investors. Based on the principle of equal treatment, discriminatory regimes for foreigners or for foreign direct investment are prohibited.
Methods of Investment
Foreign investment in Colombia can be carried out in different ways:
- In money, by importing foreign currency which will be exchanged into national currency, whether to carry out a direct contribution to the capital of a company, or to acquire third party’s rights and/or shares they own on existing companies.
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- In-kind, this may be in tangible goods as in intangible goods. In the first case (tangible goods), the contribution is made through non-reimbursable import of machinery, equipment or other physical goods to company’s capital. In the second case (intangible goods), the contribution to the company’s capital may consist on technological contributions, trademarks and patents, among others.
- By means of capitalization of funds in national currency with right to remit them abroad, such as, amounts transferred abroad on the concept of external credits, reimbursable imports, profits entitled to be remitted, royalties owed for trademarks and patents license contracts, and, in general, technology transfer contracts entered into with foreigners that are registered with the competent Colombian authorities.
Limits on Foreign Investment
In general, there are no limits on foreign investment in Colombia. A foreign investor may hold up to 100% of the equity of a Colombian company. In fact, foreign investment is welcome in all sectors except: activities related to defense and national security, and the processing and disposal of toxic or radioactive waste not produced in Colombia.
The following sectors are regulated by special rules:
- Financial and insurance sector
- Hydrocarbons and mining sector
- Telecommunications
Requirements for Notification, Registration, Approval or Authorization of Foreign Investment
All foreign capital investments, including additional investments, capitalization, reinvestment of profits, and remittance of profits and capital, must be registered with the Central Bank (Banco de la República) for foreign investors to exercise their foreign exchange rights under the law. Registration requirements vary, depending on whether the investment is a foreign direct investment or portfolio investment.
The foreign investment registration procedure is simple and it is made before the Central Bank (Banco de la República) by the foreign investor, its attorney, or whoever represents its interests. Depending whether it is a direct or portfolio investment, and in the manner it is made, the terms and conditions for the registration are different, such as it is indicated below.
The general rule is that the registration of the foreign investment is automatic with the submittal of Exchange Declaration for International Investment (Form No. 4 of the Central Bank) before the Exchange Market Intermediary or by crediting the account and preparing the exchange declaration when the foreign currencies are channeled through offset current accounts. In the other events, the registration requires submittal of the application and the support documents before the Central Bank or the application submittal and the evidence of the compliance of the requirements of the investment before this same entity.
For more detailed and updated information about investing in Colombia, visit Coinvertir, a mixed public-private entity with participation from the Colombian Government, created to promote and facilitate foreign investment in the country. Coinvertir provides extensive information on Colombia’s foreign investment and legal framework.