REVISION: COLOMBIA-2009 INVESTMENT CLIMATE STATEMENT

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