COLOMBIA: An Introduction

Colombia Overview - Chambers

Government

The present government, led by President Iván Duque, has continued to consolidate its leadership style, characterised by quick and comprehensive decisions on the day-to-day challenges the country is facing. The main issues where presidential action was required related to open matters in certain road construction projects; passing the tax reform of state finance law; implementation of the peace agreements; submitting the national plan law and the budget and having them approved by Congress; and facing numerous challenges related to the organisation of several protest movements.

Elections

October 2019 elections for assemblies and governors of provinces, councils and mayors of municipalities

The midterm elections are regarded as the first test of approval for the government and as a major battle among the two major trends in the country, in a political ideological match marked by the resurgence of the left. As usual, the election of the Bogotá mayor will be one of the most disputed. While the mayor of the city has no authority over the national government, the importance of the city as the largest contributor to the country’s economy makes the mayorship a decisive position in the country. The main issues the mayor of Bogotá will face will be the construction of the city's metro and the overhaul of the transportation and mobility systems. The selection of the contractor for this large project is already underway, with about 10 companies registered to submit offers.

National Development Plan

The government succeeded in having the plan approved by Congress. The National Development Plan was passed as Law 955 of 2019, entitled “Pact for Colombia, Pact for Fairness.” The law considers entrepreneurship, equity and legality the pillars of the plan. The 336 articles of the document prioritise pension system reform to increase the contributors from 40% to 50%, allocation of resources to the post-conflict peace process, as well as a tax on liquor and energy subsidies for certain lower income sections of the population. Environmental matters were given high priority in the plan, in particular due to the necessary reduction of the coca plantations and the subsequent reforestation of the areas.

Several tax benefits were given for R+D, technology and innovation, as well as for the film industry and the so-called orange economy. The National Tax Benefits Council (Consejo Nacional de Beneficios Tributarios – CNBT) will approve MSEs projects for R+D, giving them tax credits for 50% of their investments in the taxable year. The same entities will also enjoy a tax credit for 50% of the salaries paid to PhDs employed to develop the same activities. The benefits for the movie filming industry will continue, whereby the government will reimburse 40% of the value of film services rendered in Colombia, as well as 20% of the expenses on transport and hotels; these benefits are complemented by a maximum income tax deduction of 35% on the value of the investments in movie-filming activities in Colombia. The orange economy (creative industries ranging from music to theatre, sports, performing arts and cultural activities) will enjoy (in addition to other tax benefits to companies created for the purpose) up to 50% income tax deductions for investing in orange economy zones, organised by municipalities.

Another important tax exemption applies to dividend payments at the local level, where the 7.5% tax will not apply if there is a registered group and control declaration registered with the corresponding Chamber of Commerce.

Laws and regulations

Major laws passed and important regulations

- Special Justice for Peace (JEP) law, regulating the operation of the peace process court, was passed by Congress and finally signed by the President after controversial objections to the law submitted by the President were rejected by Congress.

- Orange economy law, providing tax and other benefits as part of the regulations of the law creating the orange economy as a separate and important industry in the country.

- Creation of the Science and Technology Ministry. This ministry was created to give higher importance to entrepreneurship, science and technology developments and to provide additional funds and support for R+D in the country.

Peace agreement developments

 - Steps towards implementation. The government continued taking steps for the implementation of peace agreements, in particular the assignment of funds to comply with the provision of assistance to victims of violence, and the creation of a new national cadaster for the country, which should help the reincorporation of victims to their place of origin.

Foreign Direct Investments and foreign trade

The central bank announced that USD3,335 million was invested in the country as FDI in the Q1 of 2019, which meant an increase of 68.6% in comparison with the same period last year. The investments were 56.1% in industrial and trade sectors, and 43.9% in the mining and energy sectors. The former attracted investments of USD1,872 million. The trade balance of the country continues to show a deficit. As of 20 June this year, it was USD2,822 million (exports of USD13,460 million and imports of USD16,282 million). Panellists participating in the LatinFocus Consensus Forecast project that exports will grow 6.9% in 2019. In 2020, panellists project export growth moderating to 6.3%.

WEF and OECD-related developments

An affiliate of the WEF Centre for the Fourth Industrial Revolution was created in Medellín, Colombia, as a joint effort with the government, the mayorship of Medellín, Ruta N, an important technology and innovation entity in the municipality of Medellín, and the World Economic Forum. The Centre in Colombia decided to give priority to research into artificial intelligence, blockchain technology and the Internet of things (IoT).

Colombia adhered to the OECD Principles on AI and the Recommendation of the Council on Artificial Intelligence in May this year. This is congruent with the priorities chosen by the government for the Fourth Industrial Revolution Centre in Medellín.

Ernesto Cavelier,

Socio Posse Herrera Ruiz