Colombia

• Author: Carlos Urrutia Valenzuela - Tomás Holguín
• Pages: 131-178

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* The following additional memb ers of Brigard & Urrutia have contributed to this chapter:

Laura Carreño, Tomás Holguín (corpora te); María Fernanda Castellanos (i ntellectual property

and information technol ogy); María Catalina Jarami llo (taxes); Catalina Santos (labor and

employment); Francisco Uribe (real estate); Alejandro G arcía (antitrust); Richard Galindo

and Giovanni Acosta (contracts and p roduct liability); Susana Hidvegi and María Victoria

Munevar (insolvency and litigation); Omar M artínez and Andrés Felipe Parra (regulatory and

government procurement); Laura Villaveces (stock exchange regulations); José Francisco

Mafla (customs); Irene Velandia (Internet regulation); and Natalia Hernández (environmental).

Colombia

Carlos Urrutia Valenzuela

Tomás Holguín

Brigard & Urrutia*

COUNTRY OVERVIEW

Colombia is organized as a ce ntralized republic. Its pol itical system is based upon

strong democratic institut ions. They include the election by popul ar vote of a presi-

dent for a four-year term, with possible reele ction for an additional term, a nd a

Congress composed of two cha mbers, the Senate and the House of Representatives.

Colombia’s Constitution was the subject of a major reform enacted in 1991 by the

Constituent Assembly with t he participation of all the major parties, including rep -

resentatives from the former guerr illa group M19. The new Constitution places sig-

nificant emphasis on the civ il rights of citizens , as well as on the social role of the

state. Although historic ally Colombia operated as a two-pa rty system composed of

the Liberal and the Cons ervative parties, the 1991 Constitution afforded part icipa-

tion to minorities and new politic al movements. As a result, Colombia is today a

multiparty system i n which the traditional polit ical movements control less than

50 percent of the members of Congress, a nd for the past three terms , the president

did not originate from either one of the tradit ional parties.

Colombia has approximately 47 million people distributed a mong 32 “depart-

ments.” Bogota is the capital city, with over 7.5 million inhabitants. Spa nish is the

CHAPTER 5

132 Chapter 5

official langua ge, but various indigenous communities still maint ain their aborigi-

nal languages.

Over 90 percent of the population belongs to the Roman C atholic Church.

However, the Constitution provides for freedom of religion, and t he state has no

religious affiliation.

The Constitution assig ns an important role to private enterprise a nd respects

the principle of private property. Since the 1990s, t he state has retreated from sec-

tors that had historically be en in the hands of government, i ncluding power gen-

eration and distribution, telecommunications, and water and sewer ser vices. Many

of the government-owned entities that u ntil recently had absolute control of their

respective markets have by now been privatize d, and new players actively partici-

pate in an environment of free compet ition. As a result, the role of government

today is that of a regulator that supervi ses and brings order to the markets.

Until the early 1990s, C olombia’s economy was heavily dependent upon

exports of coffee. However, with the advent of the 1991 Constit ution, the Colom-

bian economy was liberalized a nd opened to trade in the global scen ario. Colom-

bia is an active member of the World Trade Organization and mainta ins dynamic

relations with the major economies of Europe , Asia, the Americ as, and, to a lesser

extent, Afric a. Colombia has entered into a network of free-t rade agreements that

encompasses nations including the Un ited States, Canada , the European Union,

Korea, and virtually all of Latin A merica. Colombia is also a foundi ng member

of the Pacific Allia nce with Mexico, Peru, and Chile. The Pacific A lliance is an

open and non-exclusive deep integration area t hat seeks to advance progressively

toward the free movement of goods, services , people and capital among the mem-

ber nations. Together, the members of the Pacific All iance represent 50 percent of

all trade within t he Latin Americ an/Caribbean region, 36 percent of the region’s

GDP, and 41 percent of foreign investment flows.

Colombia’s economy has diversified significantly, to the point that coffee i s no

longer the leading export product . Indeed, today Colombia’s main export products

originate from natura l resources, mainly coal (production in excess of 90 m illion

tons for 2013) and oil (production of over one million barrels per day for 2013).

The Colombian currenc y is the peso (COP). The exchange rate varies da ily in

accordance with supply and demand in t he exchange market. At present, one US D

is equivalent to 2,400 pesos.

Colombia is located in the northwest t ip of South America. It occ upies

1,138,910 square kilometers and is the largest cou ntry with a Caribbe an coastline.

Colombia’s territory borders Venezuela, Brazil, Peru, Ecuador, and Pana ma. Addi-

tionally, Colombia has over 1,500 kilometers of coastline on each of the Atlantic

(Caribbean Sea) and the Pacific O ceans. Colombia’s territory also includes the Sa n

Andres and Providencia arch ipelago of islands located in the Ca ribbean Sea, as

well as the Gorgona and Malpelo isla nds in the Pacific.

In light of the import ance that the world community attaches to the envi-

ronment, it is worth mentioning t hat due to Colombia’s position as a land bridge

Colombia 133

between North A merica and South A merica, nearly 14 percent of the species of

flora and fauna accounted for by scientis ts on a global scale are found i n Colom-

bia, which makes it the second-most biologically diverse countr y in the world. The

country ranks fourth with 2. 2 percent of the world’s total water supply, includ-

ing 1,200 perm anent rivers, 1,640 lagoons and la kes, and 1,940 swamps. Fu r-

thermore, Colombia’s 58 national natural parks, wild life sanctu aries, and other

reserves occupy over 10 million hect ares, equivalent to 11 percent of the country’s

landmass.

During the past 50 year s, Colombia has experienced a n internal conflict with

guerrilla forces, the Revolutionary Armed Force s of Colombia (FARC) and the

National Liberation Army (E LN), that has left m illions of victim s and close to

200,000 deaths. Currently, the government is in the proc ess of negotiating with the

guerrillas to end the con flict.

ESTABLISHING A BUSINESS PRESENCE

Permanent Structures

Colombia has improved in reducing the requirements to formalize the incorpora-

tion of companies in the countr y. It is important to point out that Colombian law

provides a regulation regarding “perm anent businesses” for cases in wh ich foreign

entities undertake busi ness directly i n Colombia. Thus, the Commercial Code lists

some of the most common activities t hat are considered and qualif y as permanent.

This list is not exhaustive and, therefore, other activit ies may be considered perma-

nent as well, analyzed on a cas e-by-case basis. The Commercial Code considers t he

following activities to be per manent:

• the opening of a local est ablishment or a business offic e in the country; t he

law specifically mentions t hat these include technic al or consultancy off ices

• participating as contrac tor in the construct ion industry or in the renderi ng

of services

• obtaining a governmenta l concession or participating i n any way in the

exploitation of natura l resourc es

Colombian law affords different options for the i ncorporation of a local entity

in the country: (i)subsidiary companies, such as a lim ited liability company, a cor-

poration, and simplified stock compa ny, and (ii)the branch of a foreign company.

Corporations

The capital of a corporation is divided into sha res, which are freely negoti able

by endorsement, unless the bylaws provide for a right of fi rst refusal in favor of

the remaining sha reholders. The corporation requires t hat there be at least five