Colombia

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

131

* 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 centralized republic. Its political system is based upon

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

dent for a four-year term, with possible reelection for an additional term, and 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 civil rights of citizens, as well as on the social role of the

state. Although historically Colombia operated as a two-party system composed of

the Liberal and the Conservative parties, the 1991 Constitution afforded participa-

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

multiparty system in which the traditional political movements control less than

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

did not originate from either one of the traditional parties.

Colombia has approximately 47 million people distributed among 32 “depart-

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

CHAPTER 5

132 Chapter 5

official language, but various indigenous communities still maintain their aborigi-

nal languages.

Over 90 percent of the population belongs to the Roman Catholic Church.

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

religious affiliation.

The Constitution assigns an important role to private enterprise and respects

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

tors that had historically been in the hands of government, including power gen-

eration and distribution, telecommunications, and water and sewer services. Many

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

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

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

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

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

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

bian economy was liberalized and opened to trade in the global scenario. Colom-

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

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

extent, Africa. Colombia has entered into a network of free-trade agreements that

encompasses nations including the United States, Canada, the European Union,

Korea, and virtually all of Latin America. Colombia is also a founding member

of the Pacific Alliance with Mexico, Peru, and Chile. The Pacific Alliance is an

open and non-exclusive deep integration area that 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 Alliance represent 50 percent of

all trade within the Latin American/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 is no

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

originate from natural resources, mainly coal (production in excess of 90 million

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

The Colombian currency is the peso (COP). The exchange rate varies daily in

accordance with supply and demand in the exchange market. At present, one USD

is equivalent to 2,400 pesos.

Colombia is located in the northwest tip of South America. It occupies

1,138,910 square kilometers and is the largest country with a Caribbean coastline.

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

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

(Caribbean Sea) and the Pacific Oceans. Colombia’s territory also includes the San

Andres and Providencia archipelago of islands located in the Caribbean Sea, as

well as the Gorgona and Malpelo islands in the Pacific.

In light of the importance that the world community attaches to the envi-

ronment, it is worth mentioning that due to Colombia’s position as a land bridge

Colombia 133

between North America and South America, nearly 14 percent of the species of

flora and fauna accounted for by scientists on a global scale are found in Colom-

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

country ranks fourth with 2.2 percent of the world’s total water supply, includ-

ing 1,200 permanent rivers, 1,640 lagoons and lakes, and 1,940 swamps. Fur-

thermore, Colombia’s 58 national natural parks, wildlife sanctuaries, and other

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

landmass.

During the past 50 years, Colombia has experienced an internal conflict with

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

National Liberation Army (ELN), that has left millions of victims and close to

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

guerrillas to end the conflict.

ESTABLISHING A BUSINESS PRESENCE

Permanent Structures

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

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

provides a regulation regarding “permanent businesses” for cases in which foreign

entities undertake business directly in Colombia. Thus, the Commercial Code lists

some of the most common activities that are considered and qualify as permanent.

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

nent as well, analyzed on a case-by-case basis. The Commercial Code considers the

following activities to be permanent:

• the opening of a local establishment or a business office in the country; the

law specifically mentions that these include technical or consultancy offices

• participating as contractor in the construction industry or in the rendering

of services

• obtaining a governmental concession or participating in any way in the

exploitation of natural resources

Colombian law affords different options for the incorporation of a local entity

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

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

Corporations

The capital of a corporation is divided into shares, which are freely negotiable

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

the remaining shareholders. The corporation requires that there be at least five