P 112026Z FEB 09
FM AMEMBASSY BOGOTA
TO SECSTATE WASHDC PRIORITY 6970
INFO DEPT OF TREASURY WASHDC
USDOC WASHDC
CIMS NTDB WASHDC

UNCLAS BOGOTA 000437 
 
 
STATE FOR EEB/IFD/OIA NHATCHER AND GHICKS 
 
E.O. 12958:N/A 
TAGS: EINV ECON OPIC KTDB USTR EFIN KIPR PGOV CO
SUBJECT:  REVISION: COLOMBIA-2009 INVESTMENT CLIMATE STATEMENT 
 
REF: (A) 08 STATE 123907 (B) BOGOTA 157 
 
¶1. This is a revised copy of the 2009 Colombia Investment Climate 
Statement (ref B).  Please note minor changes in paragraphs 11 
(Banking, Insurance and Telecommunications sections), 41, 48, 51 and 
¶71.  Post will submit text via email to EEB/IFD/OIA and include in 
the 2009 Country Commercial Guide as requested.  [Note: Charts are 
omitted from cable due to formatting requirements.] 
 
Openness to Foreign Investment 
------------------------------ 
 
¶2. The Government of Colombia actively encourages foreign direct 
investment.  In the early 1990s the country began an economic 
liberalization reform, which provided for national treatment of 
foreign investors, lifted controls on remittance of profits and 
capital, and allowed foreign investment in every sector except for 
defense, national security, and the processing and disposal of 
toxic, radioactive, or hazardous waste products.  Foreign investment 
in television concessions and nationwide private television 
operators, radio broadcasting, movie production, maritime agencies, 
national airlines, and shipping companies is limited to minority 
stakes.  Portfolio investment in financial, hydrocarbon, and mining 
sectors are 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 
permitted. 
 
¶3. The Ministry of Trade, Industry, and Tourism formulates foreign 
investment policy in coordination with the Ministry of Finance and 
Public Credit, taking into account the guidelines of the Council on 
Economic and Social Policy (CONPES).  The primary regulations 
governing foreign investment in Colombia are Law 9 of 1991, Decree 
2080 of 2000, Resolutions 51, 52, and 53 of the CONPES and 
Resolution 21 of the Board of Directors of the Central Bank. 
Generally, foreign investors may participate in privatization of 
state-owned enterprises without restrictions.  Colombia imposes the 
same investment restrictions on foreign investors that it does on 
national investors.  A commercial presence in the country (defined 
as a registered place of business, a branch, or an agent) is a 
standard requirement for conducting business in Colombia.  Foreign 
investors can participate without discrimination in 
government-subsidized research programs.  In fact, most Colombian 
government research has been done in connection with foreign 
institutions. 
 
¶4. Investment screening has been eliminated, and the registration 
requirements that still exist are generally just formalities.  Under 
Decree 1844 of 2003, the type of investment, its ultimate 
destination, and the type of currency determines the registration 
requirements.  Foreign investments must be registered with the 
Central Bank's foreign exchange office within three months of the 
transaction date to ensure repatriation of profits and remittances 
and to access official foreign exchange.  All foreign investors, 
like domestic investors, must obtain a license from the Commission 
of Companies and register with the local Chamber of Commerce. 
 
¶5. Since 2002, the Uribe administration has stepped up efforts to 
open the economy.  Liberalization has progressed furthest in 
telecommunications, accounting/auditing, energy, and tourism, and to 
a lesser extent in legal services, insurance, distribution services, 
advertising, and data processing.  Colombian law restricts the 
movement of personnel in several professional areas, such as 
architecture, engineering, law, and construction.  For firms with 
more than ten employees, no more than ten percent of the general 
workforce and 20 percent of specialists can be foreign nationals. 
Nevertheless, attempts are underway to liberalize areas where 
restrictions remain in force. 
 
¶6. Colombia has a comprehensive legal framework for business. 
Colomba'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.  However, the judicial system remains hampered by procedural 
requirements, time-consuming practices, and corruption. 
 
¶7. Accoring to the United Nations Conference on Trade and 
Development (UNCTAD), a high level of legal instability arising from 
the frequent issuing of regulations and administrative rulings has 
impeded investment in Colombia.  To address the issue, Colombia's 
congress passed Laws 962 and 963 in 2005.  Law 962 simplified 
existing administrative procedures and provided for the review of 
new procedures.  Law 963 offers investors the opportunity to enter 
into so-called "legal stability contracts" with the State.  These 
contracts guarantee that the laws applicable to the investment at 
the time the investment is entered into will remain in effect for a 
period between three and 20 years, depending on the type and amount 
of the investment.  The minimum dollar value of the investment must 
reach USD 1.2 million, and those seeking to benefit from this law 
are required to pay a fee based on the investment.  The law benefits 
investments in manufacturing, agriculture, tourism, mining, 
petroleum, telecommunications, construction, electricity production 
and transmission, port and railroad development, and other 
activities approved by a special committee.  Colombia's foreign 
direct investment legal framework also incorporates binding norms 
(Decisions 291 and 292) resulting from its membership in the Andean 
Community of Nations (CAN), the 1995 Treaty on Free Trade with 
Mexico and Venezuela (G-3 Treaty), and the 2006 Trade 
Complementarity Agreement with Chile. 
 
¶8. In November 2006, the United States and Colombian Governments 
signed the U.S.-CTPA (United States-Colombia Trade Promotion 
Agreement).  In June 2007, the U.S. and Colombia signed a protocol 
of amendment regarding labor, environment and intellectual property. 
 The Colombian Congress ratified the agreement and the protocol in 
¶2007.  The Colombian Constitutional Court certified the U.S.-CTPA as 
conforming to the Colombian Constitution in July 2008.  The 
U.S.-CTPA was awaiting ratification in the U.S. Congress as of 
December 2008.  The U.S.-CTPA will improve legal security and the 
investment environment, as well as eliminate tariffs and other 
barriers in goods and services trade between the United States and 
Colombia.  The agreement grants investors the right to establish, 
acquire, and operate investments in Colombia on an equal footing 
with local investors and investors of other countries.  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.  Protections for U.S. investments would be 
backed by a transparent and binding international arbitration 
mechanism.  Investor-state arbitration would be available for 
breaches of investment agreements. 
 
¶9. Currently, the ATPA as amended by the Andean Trade Preference and 
Drug Eradication Act (ATPDEA), provides duty-free entry of 
approximately 6,500 product categories from Colombia into the U.S. 
Previously excluded products such as vacuum-packed tuna fish and 
certain textile and apparel products now enjoy duty-free access to 
the U.S. market, conditioned on compliance with government 
requirements.  The President can expand the list of included 
products with approval from an advisory committee and concurrence 
from the U.S. International Trade Commission.  Goods must meet a 
value-added requirement of 35 percent, up to 15 percent of which may 
be accounted for by U.S. content in terms of cost or value.  In 
October 2008, the U.S. Congress renewed ATPDEA benefits for Colombia 
through December 31, 2009. 
 
¶10. Colombia exported goods worth USD 3.5 billion under ATPDEA in 
¶2007.  Total Colombian exports to the U.S. were USD 9.4 billion in 
2007, up 8.6 percent compared to previous year.  Colombian exports 
under the ATPDEA program during this period were 37 percent of total 
Colombian exports to the U.S.  U.S. exports to Colombia totaled USD 
8.4 billion in 2007. 
 
¶11. The following sectors have been identified as having 
restrictions to foreign investment: 
 
Accounting, Auditing and Data Processing: In order to practice in 
Colombia, providers of accounting services must register with the 
'Central Accountants Board' ('Junta Central de Contadores'); have 
uninterrupted domicile in Colombia for at least three years prior to 
registry; and provide proof of accounting experience in Colombia of 
at least a year (Law 43 of 1990, Article 3). 
 
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. 
 
Advertising, Radio and Television Services: For National Open 
Television and Nationwide Private Television Operators, only 
Colombian nationals or legal entities, organized as 'Public 
Corporations' ('Sociedades Ansnimas- S.A.') may be granted 
concessions to provide open television services. Foreign Capital in 
any open television concession venture is limited to a maximum of 40 
percent (Law 014 of 1991, article 37; Law 680 of 2001, articles 1 
and 4;  Law 335 of 1996, articles 13 and 24; Law 182 of 1995, 
articles 37, 47 and 48). The decision to offer new concessions for 
the provision of open national television is based on an economic 
needs test. 
 
Open television programming is subject to the following 
restrictions: 70 percent of programming between 7:00 p.m. and 10:30 
p.m. (Prime Time) must be nationally-produced; the rate is 50 
percent of programming broadcast between 10:30 p.m. and midnight, as 
well as between 10:00 a.m. and 7:00 p.m. There are no local-content 
requirements for advertising on Colombian open television, but the 
National Television Commission charges foreign-made ads double the 
national rate for airtime. 
 
Foreign investors must be actively engaged in television operations 
in their country of origin in order to participate in programming 
activities in Colombia (Law 182 of 95 and Law 375 of 1996). 
Television, radio broadcasting, movie production, and movie 
reproduction fall under national-treatment limits. 
 
A maximum of ten percent foreign participation in local TV 
productions is allowed and the participation of foreign artists in 
local TV productions is dependent upon reciprocity requirements. 
National TV programs can be directed by foreign directors, in which 
case the screen writers and starring actors must be Colombian 
nationals (if the director is Colombian then some writers and/or 
starring actors may be foreign nationals). 
 
Regional television services may only be provided by State-owned 
entities, while regional and local television operators are 
compelled to have their broadcasting consist of at least 50 percent 
nationally-produced content. Community television services may only 
be provided by organized communities, legally constituted in 
Colombia as foundations, cooperatives, associations or corporations, 
subject to civil law. (Law 182 of 1995, article 37). 
 
Only Colombian nationals or legally constituted legal entities may 
offer subscription-based television services, who must offer 
Colombia's national, regional and municipal open-television channels 
at no extra cost to subscribers (Law 680 of 2001, articles 4 and 11; 
Law 182 of 1995, article 42; Law 335 of 1996, article 8). Satellite 
television service providers are only obliged to include within 
their basic programming, the broadcast of channels of public 
interest for the Colombian State. If non-satellite subscription 
service providers broadcast advertisements different from those of 
the original broadcast, they are subject to comply with the minimum 
percentage of nationally produced content established for open 
television concessions. 
 
Concessions to provide radio broadcasting services can only be 
granted to Colombian nationals or private entities legally 
constituted in Colombia. (Law 80 of 1993, article 35; Decree 1447 of 
1995, articles 7, 9, and 18). Foreign operators are limited by law 
to 25 percent ownership of radio broadcast programs. 
 
Newspapers published in Colombia covering domestic politics must be 
directed and managed by Colombian nationals (Law 29 of 1994, article 
13). 
 
Banking: Foreign companies may own 100 percent of financial 
institutions in Colombia, but are required to obtain approval from 
the 'Financial Superintendence' ('Superintendencia Financiera') 
(Organic Statutes of the Financial System, article 88) before making 
a direct investment of 10 percent or more in any one entity. 
Portfolio investments used to acquire more than 5 percent of an 
entity also require authorization. 
 
The use of foreign personnel in financial institutions is limited to 
administrators, legal representatives, and technicians.  Foreign 
banks may establish a subsidiary or representation office in 
Colombia, but not a branch.  All foreign and national banks, as well 
as foreign subsidiaries, must be constituted as 'Mercantile Public 
Corporations' ('Sociedades Econsmicas Mercantiles') or 'Cooperative 
Associations'. 
 
Foreign banks must establish a local commercial presence and comply 
with the same capital and other requirements as local financial 
institutions.  Colombian legislation limits the operation of banks 
and other financial institutions by separating fiduciary, investment 
banking, commercial loans, leasing, and insurance services from 
banking services.  Current legislation (Law 389 of 1997) permits 
banking institutions to develop such activities in the same 
office/building, but the management of such services must be 
separate. 
 
Banks operating in Colombia are subject to a minimum capital 
requirement, promulgated through Law 510 of 1999, Law 795 of 2003 
and the 'Organic Statutes of the Financial System' (article 80); all 
of which grant the government the right to intervene in institutions 
that fail to meet minimum performance requirements.  Institutions 
are also required to register with the Financial Institutions 
Guarantee Fund, FOGAFIN (an FDIC-equivalent). 
 
Decree 2951 of 2004 establishes that foreign institutions must 
create a commercial presence if their promotions target Colombian 
residents.  A banking relationship with a Colombian resident and a 
financial entity abroad is permitted if the relationship was 
initiated by the Colombian resident without any publicity or 
promotion in Colombia. 
 
All portfolio investments of foreign capital in Colombia must be 
done through a Foreign Capital Investment Fund; all foreign 
investments, either new or additions, must be registered with the 
Central Bank (Banco de la Republica), along with the 'Currency 
 
Exchange Declaration" (Decree 2080 of 2000, articles 26 and 27). 
 
Customs Services: To engage in the following customs services, a 
person or his legally responsible representative must be domiciled 
in Colombia: customs intermediation, postal and courier services 
intermediation, merchandise warehousing, merchandise transportation 
under customs control, international cargo agent, 'Permanent Customs 
User'  ('Usuario Aduanero Permanente') or 'High Frequency Exporter' 
('Altamente Exportador'). (Decree 2685 of 1999, articles 74 and 
76). 
 
Electricity: Only companies legally constituted in Colombia prior to 
July 12, 1994 may engage in the simultaneous generation, 
distribution, and/or transmission of electricity (Law 143 of 1994, 
article 74). 
 
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 (Decree 2526 
of 1991). 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. The 
costs of fishing permits are greater for foreign flag vessels. 
 
Hydrocarbons and Mining: In order to provide services directly 
associated to exploration and exploitation of minerals and 
hydrocarbons in Colombia, any legal entity constituted under the 
laws of another country must establish a branch, affiliate or 
subsidiary in Colombia, unless the service will be provided for less 
than one year (Law 685 of 2001, articles 19 and 20). 
 
In 2003, the Colombian government separated regulatory 
responsibilities from Ecopetrol, the state owned oil company, and 
assigned them to the National Hydrocarbons Agency ('Agencia Nacional 
de Hidrocarburos' - ANH).  The ANH administers Colombia's 
competitive process, allowing Ecopetrol to compete side-by-side with 
foreign firms for hydrocarbon contracts.  Foreign companies may 
assume up to 100 percent of investment and risk activities in all 
exploration and production contracts.  Oil companies may obtain the 
right to exploit fields for 30-years or until depleted, as well as 
extend previous association contracts. 
 
A sliding-scale royalty rate on oil projects establishes a five 
percent royalty rate on the smallest oil fields and an upper limit 
of 30 percent on larger fields.  The lower royalty rate encourages 
investments by small- and medium-sized operators, since more than 80 
percent of Colombia's fields contain less than 50 million barrels. 
The reforms have helped to renew interest in Colombia's oil 
exploration sector, with the government signing a record 100 
contracts in 2008. 
 
Insurance: Colombia permits 100 percent foreign ownership of 
insurance firm subsidiaries.  Firms must have a local commercial 
presence to sell policies other than those for international travel 
or reinsurance.  Colombia sets annual minimum capital requirements 
to establish an insurance company.  Colombia denies market access to 
foreign marine insurers. 
 
Legal: Provision of legal services is limited to those firms 
licensed under Colombian law. Foreign law firms can enter the market 
by forming joint ventures with local law firms. 
 
Private Security and Surveillance Companies: Only those companies 
constituted under Colombian law as 'Limited Responsibility 
Societies' or 'Private Security and Surveillance Cooperatives' may 
provide security and surveillance services in Colombia; and their 
shareholders may only be Colombian nationals. Those 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 (Decree 356 
of 1994, articles 8, 12, 23 and 25). 
 
Public Services: Any 'Domestic Public Services' company must be 
established as an 'Empresa de Servicios Publicos- ESP', domiciled in 
Colombia and legally constituted under Colombian law as a 
corporation (Law 142 of 1994, articles 1, 17, 18, 19 and 23). In 
this regard, the category 'public services' encompasses sewage and 
water works, waste disposal, electricity, gas and fuel distribution, 
public telephony and complementary activities (public long distance 
services and mobile telephony in rural areas). In granting licenses 
and concessions, any company, in which a local organized community 
has a majority stake, will be preferred above companies presenting 
equivalent proposals to provide public services for that community. 
 
Special Air Services: Only Colombian nationals or legal entities 
domiciled in Colombia may offer special air services within 
Colombian territory; as well as own any airship registered to 
provide special air services (Commercial Code, Articles 1795 and 
1864).  Special Air Services include any non-transportation air 
services, such as aerial fire-fighting, sightseeing, surveying, 
etc. 
 
Telecommunications:  Only companies legally constituted in Colombia 
may be granted concessions to provide telecommunications services in 
Colombia (Law 671 of 2001, Decree 1616 of 2003, articles 13 and 16; 
Decree 2542 of 1997, article 2; Decree 2926 of 2005, article 2). 
Colombia currently permits 100 percent foreign ownership of 
telecommunication providers.  However, in WTO negotiations, Colombia 
specifically prohibited "callback" services.  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. 
 
The Ministry of Communications may require an economic needs test 
for the approval of licenses in voice, facsimile, e-mail, and other 
value-added services.  The parameters that determine "an economic 
needs test" are not clearly established in Colombian legislation. 
Colombia also maintains a system of cross subsidies where, for 
example, long-distance telephony subsidizes local telephony.  Low 
(subsidized) prices of local telephony and high restrictive costs in 
the provision of long-distance telephony limit the entry of new 
competitors. 
 
The U.S.-CTPA would liberalize the sector by prohibiting 
anti-competitive cross-subsidization, requiring transparent 
licensing procedures, ensuring interconnection at reasonable rates, 
and protecting the confidentiality of commercially sensitive 
information obtained as a result of interconnection arrangements. 
Under the U.S.-CTPA, U.S. firms will be able to lease lines from 
Colombian networks on non-discriminatory terms and re-sell 
telecommunications services of Colombian suppliers to build a 
customer base. 
 
In August 2008, the National Television Commission (CNTV) chose the 
European (DVB-T system) standard for Land Digital Television (TDT); 
the TDT will be free and open, and may cover about 90 percent of the 
population.  Separately, Colombia expects to open a public tender in 
early 2009 for the launch of a third private TV channel. 
 
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 "only when there is no national capacity to 
provide the service," according to Colombian law. Cargo reserve 
requirements in transport have been eliminated.  However, the 
Ministry of Commerce reserves the right to impose restrictions on 
foreign vessels of those nations that impose reserve requirements on 
Colombian vessels. Trans-border transportation services are also 
restricted in Colombia. 
 
Article 1458 of the Commercial Code of 1971 prohibits any foreign 
ownership interest in commercial ships licensed in Colombia. 
Article 1490 of the Commercial Code restricts the percentage of FDI 
in maritime entities to 30 percent, and Article 1426 restricts 
foreign ownership in national airline or shipping companies to 40 
percent. 
 
As for port services, the owners of a concession to provide port 
services must be legally constituted in Colombia as a 'Public 
Corporation' ('Sociedad Ansnima- S.A.') (Law 1 of 1991, articles 
5.20 and 6). Only Colombian ships may provide port services within 
Colombian maritime jurisdiction; although vessels with foreign flags 
may provide those services if there are no Colombian-flag vessels 
capable of doing so (Decree 1423 of 1989, article 38). 
 
Travel and Tourism Agencies: Foreigners must be domiciled in 
Colombia in order to provide travel and tourism agency services 
within the Country (Law 32 of 1990, article 5). This does not apply 
to the services provided by tour guides. 
 
Waste Disposal Services: No foreign investment is allowed in 
activities associated with processing, disposition or disposal of 
toxic, dangerous or radioactive waste not produced in the country 
(Decree 2080 of 2000, article 6). 
 
¶12. Other factors which may impact investment: Colombia's 1991 
Constitution (articles 334 and 335), grants the Colombian State the 
power of 'economic intervention.'  This power, which was initially 
developed through Law 550 of 1999 and extended through Law 922 of 
2006, provided solutions similar to U.S. "Chapter 11" filings for 
companies with financial problems, which faced possible liquidation 
or bankruptcy.  These laws were substituted by Law 1116 of 2006, 
which establishes the current 'Company Insolvency Regime' and 
replaced the company liquidation Law 222 of 1995. 
 
¶13. Law 1116 of 2006 complements the strict regulations on companies 
imposed by restructuring agreements contemplated in Law 550 of 1999 
(e.g., financial operations unrelated to the company's activity may 
not be performed without previous authorization from all the parties 
involved in the transactions); with requirements of more precise 
information with regard to the companies that decided to seek 
insolvency protection or undergo liquidation. 
 
¶14. Law 1116 of 2006 also provides for 'Judicial Liquidation', which 
can be requested by a company's creditors, and replaces the forced 
auctioning of the company's assets for as low as 70 percent of their 
true value.  Instead, inventories are valued, creditors rights are 
taken into account, and a 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. As of January 2008, COP 83,064 
million (about 42 million USD) was the total amount of liabilities 
of the 33 companies filing for Law 1116. 
 
¶15. Privatization regime:  In recent years, Colombia has proceeded 
with the privatization of State-owned enterprises under Article 60 
of the Constitution and Law No. 226 of 1995.  This Law stipulates 
that the sale of the State holdings in an enterprise should be 
completed in two phases, the first for the "solidarity" sector 
(comprised of cooperatives and workers associations) and the second 
for the general public.  During the first phase, special conditions 
with regard to term and credit have to be granted to the 
"solidarity" sector.  In the second phase, the general public may 
participate, including foreign investors. 
 
¶16. Colombia's main privatizations have concentrated in the 
electricity, mining, and hydrocarbons and financial sectors.  In 
addition, the government has attached a high priority to encouraging 
private sector investment in roads, ports, electricity, and gas 
infrastructure concessions.  Public-private partnerships are 
increasingly the government's favored option for infrastructure 
development. 
 
¶17. In Colombia, municipal enterprises run many public utilities and 
infrastructure services.  These municipal enterprises have sought to 
engage private sector investment through concessions.  There are 
successful cases in roads (the urban transportation integrated 
system for the Pereira - Dosquebradas - La Virginia metropolitan 
area), water, sanitation, ports (Port of Cartagena), and electricity 
services (Empresas de Medelln).  These kinds of partnerships have 
helped promote reforms and create an attractive environment for 
private national and foreign investment. 
 
Conversion and Transfer Policies 
-------------------------------- 
 
¶18. No restrictions apply to transferring funds associated with 
foreign direct investment.  However, foreign investment into 
Colombia must be registered with the Central Bank within three 
months of the transaction date to secure the right to repatriate 
capital and annual profits.  If investments are registered, 
repatriation is permitted without any limits.  The government 
permits full remittance of all net profits regardless of the type or 
amount of investment (previously limited to 100 percent of the 
registered capital).  Recent tax reform eliminated the seven percent 
tax to profit remittances.  There are no restrictions on the 
repatriation of revenues generated from 1) the sale or closure of a 
business, 2) a reduction of investment, or 3) 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.  Reserves have been well above that 
level for decades. 
 
¶19. In 2005, the Colombian government attempted to stem speculative 
capital flows by mandating that foreign portfolio investment should 
remain in-country for at least one year.  In 2007 the central bank 
replaced that mandate with a six-month deposit requirement for 
companies acquiring external loans.  These measures were removed in 
¶2008. 
 
Expropriation and Compensation 
------------------------------ 
 
¶20. Colombian law guarantees indemnification in expropriation cases. 
 The Colombian Constitution guarantees the rights of property that 
has been legally acquired, although it does allow for assets to be 
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.  However, 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 of free trade agreements, such as the 
U.S.-CTPA. 
 
Dispute Settlement 
------------------ 
 
¶21. Law 315 of 1996 authorizes the inclusion of an international 
binding arbitration clause in contracts between foreign investors 
and the GOC, and Decree 1818 of 1998 allows for alternative dispute 
resolution.  The 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 by 
the parties is a country other than the one where 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 allows the parties to set 
their own arbitration terms including location, procedures, and the 
nationality of rules and arbiters.  International arbitration is not 
allowed for the settlement of investor-state disputes arising from 
the Legal Stability Contracts (Law 963/05, mentioned above), even 
for foreign investors. 
 
¶22. Foreign investors have found the arbitration process in Colombia 
complex and dilatory, especially with regard to enforcement of 
awards.  Despite Colombia's commitment to international arbitral 
conventions and its domestic legal framework for arbitration and 
resolution of disputes, foreign companies continue to endure lengthy 
dispute settlement processes.  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 (MIGA). 
 
Performance Requirements and Incentives 
--------------------------------------- 
 
¶23. There are no performance requirements explicitly applicable to 
FDI entry and establishment.  However, there are export incentives 
relating to the operation of special or free zones. 
 
¶24. Incentives: In 2002, Colombia accepted the WTO Committee on 
Subsidies and Countervailing Measures' decision to phase out all 
export subsidies in free trade zones by December 31, 2006.  However, 
free trade zones and special import-export zones maintain their 
special customs and foreign exchange regimes.  In 2005, the GOC 
issued Law 1004 which imposed a 15 percent income tax on free zones 
(lower than the normal 33 percent tax) after December 31, 2006. 
 
¶25. Since 1983, Colombia has had in place a trade promotion 
mechanism known as CERTs ('Tax Rebate Certificate'), which was 
initially conceived to help in promoting exports but was later 
transformed into an instrument to counter the negative effects of 
exchange rate fluctuations on exporters' cash flows.  CERTs are 
freely negotiable instruments issued by Colombia's Central Bank 
(Banco de la Repblica- BanRep), whose purpose is to reimburse sums 
equivalent to the full or partial tax payments made by an exporter; 
CERTs can be used for the payment of income taxes, customs duties, 
VAT, or other form of taxes or contributions.  Since its inception, 
the government was free to establish the percentage of the exported 
FOB value that it would credit to an exporter under the CERTs 
mechanism, ranging, for example, from 12 percent in 1985, to 0 
percent in 2002, to 4 percent in 2007 and 2008. The government also 
has the discretion to determine which product section headings and 
subheadings are eligible to apply for CERTs. Exports to Andean 
Community, Panama, Aruba, Bonaire, and Curacao are excluded from the 
program. 
 
¶26. In 2002, the CERTs program was suspended, due to the 
incompatibility of the high rates of reimbursement with Colombia's 
WTO commitments, as well as the program's high cost to the 
government, estimated at approximately USD 120 million at the time 
of suspension.  The program was reactivated in June 2007, in 
reaction to the impact of Colombian peso's appreciation on 
exporters' revenues.  CERTs were set at 4 percent to support 
textiles, clothing, shoes, leather manufacturing, plastics, foods, 
graphic arts, autoparts, furniture and jewelry industries.  From 
2007-2008 the GOC opened 8 CERTS tranches, making payments that 
amounted to approximately USD 185 million up to the first semester 
of 2008 and authorized an additional USD 25 million for the second 
half of 2008. 
 
¶27. The flower-exporting sector in Colombia has benefited from four 
incentive/subsidy programs since 2005, which amount to approximately 
USD 210 million.  In general terms, these programs reward producers 
either for hedging their exports, implementing sanitary programs, 
maintaining their workforce or for obtaining credits to support 
their activities.  The Exchange Rate Hedge Incentive ('Incentivo de 
Cobertura Cambiaria'- ICC) was created in 2004 to counter the 
negative effects of peso appreciation on exporters' cash flows by 
paying beneficiaries an amount equal to approximately ten percent of 
FOB exports hedged against exchange rate fluctuation.  The Sanitary 
Measures Incentive ('Incentivo Sanitario Flores y Follaje'- ISFF) 
was started in 2007 as a direct subsidy to improve phytosanitary 
conditions and protect employment by paying producers approximately 
USD 3,514 for every hectare of cultivated flowers that fulfilled the 
'Integral Plague Management Plan' as long as they provided proof of 
retention of at least 80 percent of their workforce.  The Salary 
Protection Program for Producers of Exportable Agricultural Goods 
'Programa Proteccisn Ingresos Productores de Bienes Agrcolas 
Exportables' was developed in 2008 to subsidize the purchase of 
hedging instruments by flower producers for up to 90 percent of 
their cost.  Finally, the 'Special Credit Line for Exporters' 
subsidizes part of agricultural exporters' interests derived from 
banking credits and fully guarantees the liabilities undertaken 
through the program. 
 
¶28. In January 2007, the Ministry of Agriculture (MOA) started the 
'Agriculture Guaranteed Income Fund' ('Agro Ingreso Seguro- AIS') 
with the aim of protecting local producers, as well as to improve 
the overall competitiveness of the agricultural sector.  Four main 
programs constitute the AIS: 1) a special credit line to finance 
investments by all agricultural producers interested in modernizing 
and increasing their competitiveness, which guarantees an interest 
rate of DTF (Colombia's reference term-deposit savings rate) minus 2 
percent, for up to fifteen years; 2) the 'Rural Capitalization 
Incentive' ('Incentivo a la Capitalizacisn Rural- ICR'), through 
which discounts are granted for credits issued to undertake new 
investments in infrastructure construction, acquisition of machinery 
and equipment, and water resource management, among others; 3) the 
'Irrigation and Drainage Program' ('Convocatoria Pblica de Riego y 
Drenaje'), through which up to 80 percent of the costs of all 
projects destined to improve water resource management is covered by 
the MOA; and 4) the 'Technical Assistance Incentive' ('Incentivo a 
la Asistencia Tcnica'), which seeks to cover up to 80 percent of 
all technical assistance costs incurred by agricultural producers in 
project and credit structuring, good practices implementation, 
adequate sanitary and phytosanitary management, and post-harvest 
management.  For 2007, the total amount of leveraged credit through 
AIS resources was approximately USD 160 million, 127 percent of the 
goal.  For 2008, as of November 30, the total amount of resources 
amounted to approximately USD 246 million, 472 percent of the goal 
(http://www.sigob.gov.co/ind/indicadores.aspx ?m=532). 
 
¶29. Export credit: The foreign trade bank (BANCOLDEX) provides funds 
for working capital and equipment purchases dedicated to the 
production of exported goods.  BANCOLDEX also provides discount loan 
rates to foreign importers of Colombian goods. 
 
¶30. Import Licenses:  All imports must be registered, and a small 
percentage requires prior import licenses.  The "Registro de 
Importacisn" required for all imports is for record 
keeping/statistical purposes and are available at the Ministry of 
Foreign Trade and online.  Import licenses apply to closely 
monitored, sensitive products such as precursor chemicals and 
weaponry. 
 
¶31. Colombia imposes discretionary import licensing to ban imports 
of powder milk and poultry parts.  The Colombian Government also has 
local purchase requirements for rice, yellow corn, white corn, and 
cotton. The U.S.-CTPA would reduce or eliminate these requirements 
for U.S. exports. 
 
¶32. Most used goods, such as personal computers, cars, tires, and 
clothing, are effectively prohibited from import, and those allowed 
(e.g., used medical equipment) are subject to prior licensing. 
 
¶33. Promotion: PROEXPORT is the Government's foreign investment, 
tourism and export promotion agency.  It provides information on 
market access and business opportunities and organizes international 
trade shows and missions.  During the last few years, PROEXPORT has 
been making efforts to diversify Colombian exports, which have been 
traditionally concentrated in coffee, petroleum, coal, and flowers. 
PROEXPORT is similar to the United State Foreign Commercial Service 
in that it provides planning and training strategies for medium and 
small companies to overcome obstacles of exporting goods and 
services.  There are 14 PROEXPORT offices and four commercial 
representatives abroad, as well as eight regional offices in 
Colombia.  These offices attend and organize events, fairs, and 
provide commercial guides to enter foreign markets. 
 
¶34. Taxes: The main types of tax incentives offered include 
preferential import tariffs, tax exemptions, and credit or risk 
capital from the government.  Examples of tax incentives offered by 
the Colombian Government include the deductibility of income from 
new investments in the cultivation of fruits, anchovies, rubber, and 
cacao and in environmental enhancements and controls once these 
investments are accredited by the environmental authority.  Some 
fiscal incentives are available for investments that generate new 
employment or production in areas impacted by natural disasters. 
 
¶35. Tax and fiscal incentives are often based on regional 
considerations.  For example, border areas have certain protections 
because currency movements in neighboring countries can severely 
harm local economies.  Likewise, export-oriented companies and other 
industrial firms are provided fiscal and tax incentives where the 
general reduction in tariffs have hurt their businesses.  Local 
governments also offer special incentives such as tax holidays to 
attract industry from other areas.  Most applications for fiscal 
incentives are made directly to the agency involved.  Tax incentives 
do not require special application, companies need only to qualify 
under the rules indicated in the process of filing a tax return. 
 
¶36. Colombia also has numerous incentives that are not 
export-related.  Decree 2755 of 2003 provides tax holidays for 
approved projects or for desired outcomes in many industries 
including software development, electric energy sales generated from 
wind resources, biomass, or agricultural waste, forestry use of new 
plantations, investment in sawmills related to such plantations, and 
planting of wood-use trees, hydrocarbon seismic services, 
infrastructure and sale of properties dedicated to the public 
interest, pharmaceutical exploitation of new medicinal products, 
public utilities, water, electricity, local telecommunications, 
natural gas, tourism services in new hotels built between 2003 and 
2018, and shallow draft river transportation. 
 
¶37. Service Barriers: As mentioned above, the provision of legal 
services is limited to law firms licensed under Colombian law. 
Foreign law firms can operate in Colombia only by forming a joint 
venture with a Colombian law firm and operating under the licenses 
of the Colombian lawyers in the firm.  Colombia permits 100 percent 
foreign ownership of insurance firm subsidiaries.  Insurance 
companies must maintain a commercial presence in order to sell 
policies other than those for international travel or reinsurance. 
Economic needs tests are required when foreign providers of 
professional services operate temporarily in Colombia.  Moreover, 
residency requirements restrict trans-border trade of certain 
professional services, such as accounting, bookkeeping, auditing, 
architecture, engineering, urban planning, and medical and dental 
services.  For firms with more than ten employees, no mre than ten 
percent of the general workforce and 20 percent of specialists may 
be foreign nationals.  Companies seeking to sell information 
provision services must establish a commercial presence in Colombia. 
 Foreign educational institutions must have resident status in 
Colombia in order to receive operational authority from the Ministry 
of Education. 
 
¶38. Tariff Barriers: Many customs duties and most non-tariff 
barriers have been eliminated.  The U.S.-CTPA will dismantle 
remaining barriers upon entry into force or after a brief transition 
period.  Most duties have been consolidated into three tariff 
levels: Level 1 - zero to five percent for capital goods, industrial 
goods and raw materials not produced in Colombia; Level 2 - ten 
percent on manufactured goods with some exceptions; Level 3 - 15 to 
20 percent on consumer and "sensitive" goods. 
 
¶39. Exceptions include automobiles (35 percent duty) and many 
agricultural products, which are subject to a variable "price-band" 
import duty system.  When international prices surpass the 
price-band ceiling, tariffs are reduced; when prices drop below the 
price-band floor, tariffs are raised.  The price-band has affected 
local competitiveness and has dampened consumption via higher local 
prices.  Andean Community variable duties have become an important 
barrier to imports of U.S. products into Colombia, but would be 
eliminated or mitigated in the U.S.-CTPA.  Processed food imports 
from Chile and country members of the Andean Community (Peru, 
Ecuador, Bolivia, and Venezuela) enter duty-free. 
 
Right to Private Ownership and Establishment 
-------------------------------------------- 
 
¶40. Colombia's Constitution explicitly protects individual rights 
against state actions and upholds the right to private property. 
 
Protection of Property Rights 
----------------------------- 
 
¶41. Piracy continues to threaten legitimate intellectual property 
markets in Colombia, which has been on the Special 301 "Watch List" 
every year since 1991.  The registration and administration of 
intellectual property rights (industrial property and copyrights) in 
Colombia are carried out by three different government entities. 
The Superintendence of Industry and Commerce (SIC) acts as the 
Colombian patent and trademark office.  The agency suffers from 
inadequate financing and personnel, a high turnover rate, and a 
large backlog of trademark and patent applications, which has led to 
a large number of appeals.  The patent office at the Superintendence 
believes that the number of new patent and trademark applications 
(approximately 1,600 patent and 15,000 trademark requests per year) 
will double in the next two or three years. Although the SIC is 
making efforts to provide electronic registration services for 
patents, industrial designs, and trademarks, it still has important 
deficiencies, especially in personnel.  The Colombian Agricultural 
Institute (ICA) is in charge of the issuance of plant variety 
protection and agro-chemical patents.  The National Copyright 
Directorate is in charge of the issuance of literary copyrights. 
Each of these entities suffers from significant financial and 
technical resource constraints.  Moreover, the lack of uniformity 
and consistency in IPR registration and oversight procedures limits 
the transparency and predictability of the IPR enforcement regime. 
 
¶42. The U.S.-CTPA provides for improved standards for the protection 
and enforcement of a broad range of intellectual property rights, 
which are consistent with both U.S. standards of protection and 
enforcement and with emerging international standards.  Such 
improvements include state-of-the-art protections for digital 
products such as U.S. software, music, text, and videos, stronger 
protection for U.S. patents, trademarks, and test data, including an 
electronic system for the registration and maintenance of 
trademarks, and further deterrence of piracy and counterfeiting by 
criminalizing end-use piracy. 
 
¶43. Copyrights: Optical disc piracy of music and film entertainment 
product is extensive.  The publishing industry also suffers from 
widespread piracy, mostly in the form of illegal photocopying of 
academic textbooks in and around university and school campuses. 
Although Colombia has one of the lower software piracy rates in 
Latin America, piracy of both business and entertainment software 
continues to cause commercial harm to legitimate industry. 
 
¶44. The Colombian Congress has taken steps to increase criminal 
penalties and criminalize the circumvention of technological 
protection measures.  Unfortunately, the scope and frequency of law 
enforcement raids has not created a deterrent effect.  Most pirated 
products are distributed through hundreds of stalls in flea 
markets. 
 
¶45. Patents and Trademarks: The patent regime in Colombia currently 
provides for a 20-year protection period for patents and ten-year 
term for industrial designs; protection is also provided for new 
plant varieties.  However, U.S. companies have expressed concern 
that the GOC does not provide patent protection for new uses of 
previously known or patented products.  In 2002, the GOC issued 
Decree 2085, which improved the protection of confidential data for 
pharmaceutical and agro-chemical products.  Colombia is member of 
the Inter-American Convention for Trademark and Commercial 
Protection. 
 
¶46. Enforcement: Since 1995, Colombia's National Anti-Piracy 
Campaign has raised public awareness, conducted training, and 
promoted consumer education.  Law enforcement agencies cooperate 
with industry, but enforcement actions have concentrated in Bogot, 
Medelln, and Ccuta.  When arrests are made and cases prosecuted 
there are often lengthy delays in processing cases. 
 
¶47. In 2000, Colombia enacted fiscal enforcement legislation (Law 
No. 603) that requires Colombian corporations to include in their 
annual reports their compliance with copyright laws.  The 
Superintendence of Companies has the authority to audit the company 
and penalize it in case of non-compliance.  Any corporation that 
falsely certifies copyright compliance could face criminal 
prosecution.  In addition, the legislation treats software piracy as 
a form of tax evasion and empowers the DIAN to inspect software 
licenses during routine tax inspections. 
 
¶48. Legislation: Amendments to Colombia's 1982 copyright law have 
modernized the law, increased the level of criminal penalties for 
piracy, and expanded police authority to seize infringing product. 
Colombia has deposited its instruments of ratification for both the 
WIPO Copyright Treaty (WCT) and the WIPO Performances and Phonograms 
Treaty (WPPT). 
 
¶49. Colombia's criminal code includes copyright infringements as a 
crime with jail terms.  In 2006, amendments to the Criminal Code 
increased the maximum prison term from five to eight years with a 
corresponding rise in the minimum term from two to four years.  The 
code also contains provisions on the violation of technological 
protection measures and rights managements, both key obligations of 
the WIPO Treaties, but these violations are only punishable by 
fines. 
 
Transparency of Regulatory System 
--------------------------------- 
 
¶50. Colombian legal and regulatory systems are generally transparent 
and consistent with international norms.  The commercial code and 
freestanding laws incorporated by reference into the code cover such 
broad areas as 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, in addition to 
covering civil status, inheritance and other matters, also contains 
provisions relating to contracts, mortgages, liens, notary 
functions, and registries.  In Colombia the tendency has been to 
address new areas of legal and regulatory reach (like e-commerce) 
through separate statutory enactments that extend integrated 
regulation to these new areas, rather than amending the various 
existing codes. 
 
¶51. Enforcement mechanisms exist, but historically the judicial 
system has not taken an active role in adjudicating commercial 
cases.  The 1991 Constitution provided the judiciary with greater 
administrative and financial independence from the executive branch, 
and Colombian courts have tended to behave more independently and 
unpredictably.  Colombia has largely 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. 
 
Efficient Capital Markets and Portfolio Investment 
--------------------------------------------- ----- 
 
¶52. In Colombia, foreign investors are allowed to participate in the 
capital markets by negotiating and acquiring shares, obligatory 
bonds convertible into shares, other bonds, and other securities 
listed by the Foreign Investment Statute.  These activities must be 
conducted via a foreign investment capital fund, which must be 
administered by a local trust company or a stockbroker company that 
has been authorized to do so by the Financial Superintendence 
(Superfinanciera).  These funds must be used for the exclusive 
purpose of initiating securities transactions in the Colombian 
securities markets.  Foreign investment capital funds are not 
allowed to acquire ten percent or more of the total amount of a 
Colombian company's outstanding shares.  For omnibus funds (i.e. 
funds constituted as collective accounts with an undivided 
participation over the institutional investor's net worth), the 
limitation applies to each subaccount. 
 
¶53. Colombia's financial system is well developed by regional 
standards.  Two private financial groups own almost one-half of all 
bank assets: the Sarmiento Group (Grupo Aval) control about 
one-quarter, and the Sindicato Antioqueo Group (Bancolombia) 
one-fifth.  Foreign-owned banks also account for one-fifth of sector 
assets.  In 2005, Colombia consolidated supervision of the banking 
and securities sectors under the Financial Superintendence.  The 
Financial Superintendence oversees the four types of Colombian 
credit institutions: commercial banks which provide short- and 
medium-term lending for business and individuals, mortgage banks 
which finance housing construction projects and purchases, financial 
corporations (corporaciones financieras) which lend for long-term 
industrial projects, and commercial financing companies (compaas 
de financiamiento commercial) that finance the purchase of equipment 
and durable consumption goods through commercial loans or leasing. 
Non-credit financial institutions include private pension and 
severance funds, trust funds, stockbrokerage houses, and insurance 
companies. 
 
¶54. As of October 2008, the estimated total assets of the country's 
main banks amounted to approximately USD 80 billion, according to 
the Financial Superintendence.  Past-due loans accounted for 3.8 
percent of the total portfolio, compared with 3.3 percent in 
November 2007.  Banks' return on equity was 22 percent.  The 
Colombian financial system registered profits of approximately USD 
2.1 billion between January and October 2008. 
 
¶55. The number of financial institutions in Colombia has fallen by 
almost half since the 1998-99 financial crisis, due to mergers and 
acquisitions.  As a result, the new institutions have begun 
broadening their distribution structures and offering clients more 
flexible schedules and branch offices.  The financial sector as a 
whole is investing in new methodologies for risk assessment and 
portfolio management. 
 
¶56. Following the crisis of 1998-99, bailouts for failing banks were 
partially financed through a controversial tax on financial 
transactions.  The tax was originally set at 0.002 percent but has 
since been increased to 0.004 percent.  The tax on financial 
transactions is applied to all withdrawals from checking and savings 
accounts, including accounts with the Central Bank.  Savings 
accounts for the purchase of low-income housing, transactions on the 
inter-bank market, and the sale or purchase of foreign currency are 
exempt from the tax.  Electronic securities transactions, including 
stock market transactions, are also exempt from the tax. 
 
¶57. Colombia's capital markets remain underdeveloped, but are 
growing.  The principal source of long-term corporate and project 
finance are financial corporations and sometimes, commercial banks. 
However, loans with a maturity in excess of five years are scarce. 
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 through the 
banking system, by reinvesting their profits, and through suppliers' 
credit.  Corporate bond issues have risen, but remain small and 
limited to blue-chip companies.  Institutional investors, 
particularly private pension funds that mobilize the largest share 
of national savings (accounting for nine percent of GDP), 
concentrate their holdings in government paper and AAA-rated 
commercial paper.  In February 2008, the Financial Superintendence 
issued a regulation (Circular 005), which increased the amount of a 
pension fund portfolio that can be invested in stocks to 40 percent. 
 In 2001, stock exchanges in Bogot, Cali and Medelln were merged 
to create the Bolsa de Valores Colombia (BVC), located in Bogota. 
The BVC is regulated by the Financial Superintendence, which 
oversees market intermediaries, brokers' fees, and financial 
disclosures of listed companies. 
 
¶58. The Capital markets legislation enacted in 2005 has helped to 
deepen the capital markets through improved corporate governance, 
protection of the rights of minority shareholders, and more 
transparent information standards.  Market capitalization has risen 
from $14.1 billion US in 2003 (equivalent to 16 percent of GDP), to 
$77.3 billion US (49 percent of GDP) in 2008. 
 
Political Violence 
------------------ 
 
¶59. Violence, including political violence, has diminished 
dramatically in recent years.  Government of Colombia figures show 
the number of homicides in Colombia from January through November 
2008 (14,928) was the lowest in over 20 years, and that the number 
of kidnappings in the same period (389) was 21 percent lower than 
the number for 2007, and substantially less than the 2,882 
kidnappings reported in 2002. 
 
¶60. Most violence characterized as political is attributed to one of 
three terrorist groups, all of whom the U.S. has designated as 
Foreign Terrorist Organizations.  Violence by these groups has also 
declined, as more of their members demobilize.  From January to 
November 2008, 2,847 Revolutionary Armed Forces of Colombia (FARC) 
members and 365 National Liberation Army (ELN) members demobilized. 
In 2006, the United Self-Defense Forces (AUC) completed its 
demobilization of 32,000 former paramilitaries, and government 
reintegration programs are providing health, education, and 
psychological assistance to the demobilized. 
 
¶61. The long-running internal conflict has caused significant 
population displacement.  Between three and four million people (out 
of a population of 45 million) have been displaced since 1985. 
Displacements have averaged nearly 250,000 per year for the period 
2003-2007.  In 2008, Colombian assistance to IDPs increased to about 
USD 550 million US, a ten percent increase from the previous year. 
 
Corruption 
---------- 
 
¶62. The government's Comptroller General estimates that corrupt 
activity drains USD 6 billion per year from Colombia's economy. 
 
¶63. The local chapter of Transparency International (TI) has 
implemented a number of anti-corruption measures, including ethics 
and entrepreneurial programs in an effort to reverse these trends. 
The ethics program seeks to develop a managerial development tool 
for small and medium enterprises to promote ethical practices and 
transparency.  The entrepreneurial program seeks to build a culture 
of ethics via leadership, entrepreneurial ethics training, and the 
creation of reporting and consulting systems.  TI also created a 
program titled Integrity Islands, which consists of the mitigation 
of corruption risks in specific organizational processes. 
 
¶64. From 2001 to 2006, USAID provided USD 15 million for 
anti-corruption programs.  Since then, USAID has incorporated 
anti-corruption strategies in its rule of law, human rights, and 
governance programs.  Activities supported include: promotion of 
local governments' transparency and accountability in conflictive 
regions, reforms to enhance transparency of the national budget 
process, assistance to the Offices of the Inspector General, 
Prosecutor General, and Attorney General to prosecute corruption in 
regions emerging from conflict, implementation of accountability 
principles in the justice sector, and assistance to increase citizen 
oversight of local and national government processes related to 
human rights, justice, and political competition. 
 
Bilateral Investment Agreements 
------------------------------- 
 
¶65. Colombia has stand-alone bilateral investment treaties (BITs) in 
force with Peru and Spain.  Colombia also has investment chapters in 
many of its free trade agreements, which are either in force 
(Mexico) or likely to come on-line in the future (the U.S., 
Guatemala, Honduras, El Salvador, Chile, Canada Switzerland, Norway, 
Iceland and Liechtenstein).  Colombia signed a BIT with China in 
November, 2008 and is negotiating BITs with several Asian and 
European countries. 
 
OPIC and Other Investment Insurance Programs 
-------------------------------------------- 
 
¶66. The Overseas Private Investment Corporation (OPIC) is an agency 
of the U.S. government that helps U.S. businesses invest overseas, 
fosters economic development in new and emerging markets, 
complements the private sector in managing risks associated with 
FDI, and supports U.S. foreign policy. 
 
¶67. OPIC made its first investment in Colombia in 1985 and has since 
made investments totaling USD 2 billion in a variety of sectors. 
OPIC signed a Memorandum of Understanding with ProExport Colombia in 
September 2007 in order to establish an outreach program targeting 
small business investors in Colombia.  Since the signing, OPIC has 
established a working relationship with ProExport, training staff 
and members on OPIC programs.  In addition to 
infrastructure-oriented projects, OPIC seeks to support investment 
in Colombia, particularly low and middle income housing development, 
access to credit for small and medium size businesses, and renewable 
energy. 
 
¶68. In addition to offering finance and insurance, OPIC has several 
investment funds that are eligible to invest in Colombia.  These 
funds target a wide range of sectors, including energy, banking, 
financial services, communications, transportation, consumer goods 
and housing.  Additional information can be found at 
(www.opic.gov). 
 
Labor 
----- 
 
¶69. Colombia has abundant unskilled and semi-skilled labor 
availability for work throughout the country.  It has equally 
abundant skilled and managerial level employees, in many cases 
bilingual. 
 
¶70. Labor permits are not required in Colombia, except for 
under-aged workers.  In order to work, minors between 14 and 17 
years old must be authorized by a labor inspector from the Ministry 
of Social Protection, upon request by their parents.  Minors are 
only authorized to work in non-dangerous occupations. 
 
¶71. Pursuant to Colombian Labor Law, any group of 25 or more 
workers, regardless of whether they are employees of the same 
company or not, may constitute a labor union.  Employees of 
companies with fewer than 25 employees may affiliate themselves with 
other labor unions.  Over half of Colombia's labor force belongs to 
the informal sector.  About ten percent of the country's formal 
labor force is unionized.  The largest and most influential unions 
are composed mostly of public employees, particularly in the 
state-owned oil industry and the state-run education sector.  The 
Constitution protects the right to constitute labor unions, and 
union members have a special legal protection that prevents them 
from being fired for forming unions.  Some union officials are 
allowed to dedicate some or all of their working hours to union 
business.  Strikes are recognized as legal instruments to obtain 
better working conditions.  Strikes in sectors considered essential 
public services, such as the Central Bank and some Social 
Security-related activities, are illegal. 
 
¶72. 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. 
 
¶73. Colombian Companies may hire foreign employees after certifying 
compliance with the legal national-foreign employee ratio (pursuant 
to Colombian Labor Law, in companies with more than ten employees, 
Colombian nationals must occupy at least 80 percent of all 
managerial level positions and 90 percent of non-managerial 
positions), which will allow the employee to obtain a Temporary Work 
Visa.  Foreign employees have the same rights as Colombian 
employees. 
 
¶74. Pursuant to Colombian Labor Law, trial periods may not exceed 
two months for indefinite term contracts and no more than 20 percent 
of the total term of fixed term contracts.  During the trial period, 
an employee may be dismissed by the employer without the payment of 
the legal indemnification. 
 
¶75. Labor contracts may be terminated without previous notice.  The 
effects of termination vary depending on cause for termination and 
type of contract.  A contract might be terminated with just cause by 
the employer in the case of an employee's violation of legal and 
contractual obligations or internal regulations.  In any other 
event, the contract can be terminated without just cause, but the 
employer must pay legally specified indemnification. 
 
¶76. Working hours are limited to 48 hours per week, distributed in a 
maximum of six days per week.  With the proper authorization, 
granted by the Ministry of Social Protection, an employee may work 
up to 12 hours of overtime per week.  Employees in management 
positions are not subject to such restriction. 
 
Foreign-Trade Zones/Free Trade Zones 
------------------------------------ 
 
¶77. To attract foreign investment and promote the importation of 
capital goods, the Colombian government uses a number of drawback 
and duty deferral programs.  One example of such programs is the 
"free trade zones (FTZ)" mechanism, which the Government of 
President Uribe has sought to turn into a magnet for investment and 
domestic job creation.  In 2005, Colombia's Congress passed a 
comprehensive FTZ modernization law that opened investment to 
international companies, allowed one- company or stand-alone FTZs, 
and permitted the designation of pre-existing plants as FTZs. 
 
¶78. Since 2005, the number of FTZs jumped from five to 40 in October 
2008, with exports of approximately USD 1.5 billion per year in 2007 
and more than 350 companies in operation. The Ministry of Commerce 
administers requests for establishing FTZs, but the government does 
not participate in their operation. 
 
¶79. Companies within Free Trade Zones enjoy a series of benefits 
such as a preferential 15 percent corporate income tax and exemption 
from customs duties and value-added taxes on imported materials. In 
return for these and other incentives, every FTZ project must meet 
specific investment and job creation commitments within three years 
for new projects and five years for pre-existing investments. 
Requirements range from a minimum of USD 17 million in new 
investments and 500 jobs for agro-industrial projects, to USD 34.5 
million in minimum new investment and 150 jobs created for 
manufacturing projects.  Job creation requirements may be lowered by 
15 positions for every additional USD 3 million invested, with a 
minimum requirement of 50 jobs created.  Commitments since 2007 add 
up to some 140,000 expected new jobs and approximately USD 
5.2billion in new investments. 
 
Foreign Direct Investment Statistics 
------------------------------------ 
 
¶80. The total stock of foreign investment reached USD 53 billion in 
June 2008.  Average annual net FDI flows from 1994 to 2007 amounted 
to USD 3.8 billion, while total FDI in 2007 reached a record USD 9.4 
billion. 
 
¶81. By sector, the biggest recipients of FDI in 2007 were petroleum, 
manufacturing, finance and mining. The trend of strong flows into 
oil and minerals continued into the first semester of 2008, with 
expectations of FDI for the year reaching USD 9 billion. 
Nevertheless, slower global and domestic growth expected for 2009 
have led to forecasts of reduced FDI inflows. 
 
¶82. At the end of 2007, the United States was the single largest 
source of foreign investment both in terms of total stock of FDI 
(15.43 percent); and total FDI flows for the year (15.37 percent). 
Meanwhile, the European Union has also been a major source of FDI 
for Colombia, with strong flows from Spain and France in particular. 
FDI from Brazil, Panama, Mexico and Chile have continued to gain in 
importance over the last few years. 
 
Web Resources 
------------- 
 
Andean Development Corp. (CAF) : www.caf.com  & 
www.comunidadandina.org 
ANDI (National Industries Association):  www.andi.com.co 
ANIF (Financial Entities Association):  www.anif.org 
Banco de la Republica (Central Bank):  www.banrep.gov.co 
Banking Association:  www.asobancaria.com 
Financial Superintendent: www.superfinanciera.gov.co 
Bogot Chamber of Commerce:  www.ccb.org.co 
Proexport (Foreign Investment Promoter):  www.proexport.gov.co 
Colombian Customs and Income Tax Offices:  www.dian.gov.co 
Colombian Government :  www.gobiernoenlinea.gov.co 
CREG (Energy and Gas Regulatory Commission):  www.creg.gov.co 
DANE (Statistics Bureau) :  www.dane.gov.co 
EXIMBANK :  www.exim.gov 
FENALCO (Merchants Association):  www.fenalco.com.co 
Inter American Development Bank:   www.iadb.org 
National Planning Department:  www.dnp.gov.co 
OPIC:  www.opic.gov 
Presidency of the Republic  web.presidencia.gov.co 
State Comptroller: 
http://www.contraloriagen.gov.co/html/home/ho me.asp 
State Contracting Information System/SICE: 
http://www.sice-cgr.gov.co/ 
Superintendence of Corporations:  www.supersociedades.gov.co 
Superintendence of Industry and Commerce:  www.sic.gov.co 
World Bank:  www.worldbank.org 
 
BROWNFIELD