Colombia: Investing in Colombia
According to UNCTAD's World Investment Report 2023, FDI to Colombia grew by 82% to USD 17 billion in 2022, led by extractives; construction; finance; and transport, logistics and communication services. Over the same period, the stock of FDI reached USD 233.9 billion, around 68% of the country’s GDP. According to data by the Central Bank, the main investing countries are United States (21.3%), Spain (11.9%), Panama (11.4%), England (9.9%), Switzerland (6.1%); whereas the sectors receiving the most FDI are petroleum sector (22.8%), financial and business services (77.2%), manufacturing industries (17.0%), mining and quarrying (including coal - 16.0%), transportation, storage, and communications (13.8%). In the first three quarters of 2023, the country received around USD 12.7 billion in FDI (Central Bank).
he Colombian government actively encourages FDI, and it establishes the same investment regulations on foreign investors that it does on national ones. Recently, the government introduced a special tax regime for mega-investments, providing tax breaks and other fiscal incentives. Furthermore, the government is working on implementing more measures to make doing business in Colombia easier, which include the creation of a one-stop shop for investors to centralise and speed up procedures and the strengthening of the country's tax-exempt zones. Moreover, special taxes policies have been set up for any investment in creative and innovative activities/sectors. According to ProColombia, the government’s investment promotion agency, some of the most significant investments made in the country recently involved Chinese companies. On the negative side, corruption persists as a major obstacle. Despite Colombian government efforts to enhance the business environment, foreign investors raise issues regarding non-tariff barriers, regulations, and bureaucracy hindering trade, investment, and market entry across national, regional, and municipal levels. Stakeholders worry about regulatory decisions that seem to favor certain companies, creating an unequal competitive landscape. For any foreign direct investment intending to establish a commercial presence in Colombia, registration with both the Superintendence of Corporations and the local chamber of commerce is mandatory. In tender processes where conditions are equal, national offers take precedence over foreign ones. Similarly, among foreign bidders with equal conditions, those boasting substantial Colombian workforce resources, significant national capital, and/or better means to facilitate technology transfers are given preference. Foreign investment in the financial, hydrocarbon, and mining sectors is governed by special regimes, which include investment registration and concession agreements with the Colombian government. However, there are no restrictions on the amount of foreign capital allowed in these sectors. Moreover, several sectors require that foreign investors have a legal local representative and/or commercial presence in the country. Finally, Colombia ranks 66th among the 132 economies on the Global Innovation Index 2023 and 84th out of 184 countries on the latest Index of Economic Freedom.
Foreign Direct Investment | 2020 | 2021 | 2022 |
FDI Inward Flow (million USD) | 7,459 | 9,381 | 17,048 |
FDI Stock (million USD) | 212,299 | 219,498 | 233,919 |
Number of Greenfield Investments* | 113 | 139 | 152 |
Value of Greenfield Investments (million USD) | 2,473 | 4,317 | 1,777 |
Source: UNCTAD, Latest available data
Note: * Greenfield Investments are a form of Foreign Direct Investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.
Country Comparison For the Protection of Investors | Colombia | Latin America & Caribbean | United States | Germany |
Index of Transaction Transparency* | 9.0 | 4.1 | 7.0 | 5.0 |
Index of Manager’s Responsibility** | 7.0 | 5.2 | 9.0 | 5.0 |
Index of Shareholders’ Power*** | 8.0 | 6.7 | 9.0 | 5.0 |
Source: Doing Business, Latest available data
Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action.
Advantages for FDI in Colombia:
Among the main factors that are detrimental to foreign direct investment are:
Today the Colombian government is reaping the rewards of the policy it implemented to secure democracy, whose objective is to create favourable economic conditions in order to once again give investors confidence, especially foreign investors. In this context and after the establishment of many free trade agreements (for example the Pacific Alliance, the United States and the EU), the government continues to make efforts to consolidate, liberalise and diversify its economy. Major tax reform was introduced in 2016 aimed mainly at simplifying the tax system and at the same time increasing the tax revenues of the state. Finally, the various tax reforms passed during the decade have all tended to reduce the tax burden on companies (by lowering taxes on profits to 25% for example) as well as a considerable reduction in customs duties.
The "Commitment to Colombia" program aims to keep investments on an upswing, regardless of the disturbances caused by the COVID-19. This government strategy is based on two pillars: tax incentives for investors and the optimization of business processes.
Any Comment About This Content? Report It to Us.
© eexpand, All Rights Reserved.
Latest Update: May 2024