Colombia is making headlines as an emerging economic power in Latin America, though the extent of its potential is underplayed in the United States. As the third largest economy in Latin America, Colombia is poised for drastic modernization and technological innovation. The country’s developing business environment offers valuable opportunities for US companies looking to do business in Colombia into the foreseeable future.
Infrastructure improvements are developing the major cities in Colombia, facilitating greater connection between commercial hubs. Though welcoming to US companies expanding their horizons, Colombia’s business environment can still seem complex to new market entrants. We outline top tips for US companies doing business in Colombia.
1. Identify the market potential for doing business in Colombia
Colombia’s earnings report shows GDP growth of 3.3% for the third quarter of 2019, matching market expectations. Yearly forecasts from the International Monetary Fund (IMF) are looking promising, reinforcing business confidence in the country’s ability to expand further going into 2020.
Colombia’s natural riches make it one of the most biodiverse in the world, and this is reflected in its trade. The country’s main exports include coffee, petroleum, and cut flowers. Colombia benefits from free trade with the US thanks to a solid partnership, and the US is also its largest import partner.
Compared with other countries in the region that continue to struggle with political and economic unrest, Colombia is a relatively stable and reliable market for multinationals looking to move into the area.
Technology and innovation
Great potential lies in Colombia’s penchant for technology and innovation, which is supported by its recently introduced Orange Economy initiative. This initiative aims to facilitate the growth of the nation’s ‘creative’ industries, which include media, culture, visual arts, and software development. This push for greater creativity and innovation has seen Colombia rise to become one of the largest tech hubs in Latin America.
Another key area for commercial potential lies in the modernization of Colombia’s staple sectors, such as mining and agriculture. Though it’s one of the most diverse countries on the planet, Colombian agribusiness or mining actors don’t necessarily have the most effective or efficient methods of operation. Colombia is ready to introduce new technologies to support its farming families and mining companies implement sustainable, efficient business practices.
There’s great potential for US companies doing business in Colombia in the coming years, across a range of traditional and emerging sectors.
2. Understand your visa requirements
In 2017, Colombia restructured its visa program, establishing 21 different types of visas for individuals. Make sure to partner with an experienced local lawyer who can offer guidance on which of the available business visas best suit your needs, and explain the requirements and your responsibilities under that visa.
Foreign employees in Colombia
Note that once your foreign hires receive their working visa, they will need to obtain a cedula – this is the local form of identification. This is mandatory for foreign people working or doing business in Colombia. You’ll need this cedula to open a bank account, and salespeople may even ask for it in stores when making larger purchases such as televisions and mobile phones.
Reforming visa processes
As neighboring Venezuela continues to grapple with economic and political issues, the Colombian government has taken actions to ensure that Colombia is integrating Venezuelan migrants by reforming the visa process to ensure that they can be employed, start their own businesses, and enroll in schools and higher education.
Government spending to accommodate for the influx of migrants has been flexible, as it’s viewed favorably for labor, due to domestic demand for services. Be aware that during this time, some visa processes may change, affecting your own requirements for obtaining a visa. Working with a trusted legal expert will ensure you are up to date on any changes to foreign investor and business visa policies.
3. Expect bureaucracy
Successive Colombian governments are taking steps to weed out corruption, but they’re not there yet. Complex bureaucratic procedures are therefore commonplace in Colombia, and the legal frameworks behind setting up a company, obtaining visas and bank accounts, and tax procedures are not all straightforward.
To incorporate a company in Colombia, you must partner with a local lawyer to ensure you’re doing what you need to in order to comply with the law. Avoid unexpected hurdles and administrative delays with the right support to save time and cost. Many of the required procedures for doing business in Colombia involve physical interaction with agencies, including the Public Notary who apostilles or ‘notarizes’ company and personal documents. Most of the official documentation for yourself and your company must also be translated into Spanish.
4. Speak the language
Being able to speak at least some Spanish will instantly improve the ease of your interactions with local institutions and employees. Though you can expect to find a talent pool of skilled workers in Colombia that have learned English, you’ll also encounter many who are Spanish-speaking only. Not being able to communicate in the local tongue will slow you down, and make it difficult to engage with Colombian authorities during the company incorporation and visa processes.
Understanding Spanish will also support your social integration into the country. In Colombia, even business partnerships rely heavily on strong interpersonal connections.
5. Cash transactions dominate
Building credit is notoriously difficult for the typical Colombian or foreign resident. Upon observation, many consumers still pay with cash. The idea of building credit and paying with credit is not the same in this country as it is in the United States. High-interest rates, bank fees, and heavy bureaucratic tape turn people off using electronic financial mechanisms. Though these attitudes are starting to shift in the central business districts with the introduction of fintech (financial technology) innovation, dealing in cash is still a widespread practice in Colombia.
One common way to build credit in Colombia is starting a pre-paid cell service plan. Note that you’ll need the cedula mentioned above (under the visa requirements section) to open credit.
6. The American brand carries high prestige
American influence remains strong in this nation, which improves chances for success for US companies doing business in Colombia. The influence is palpable: you’ll hear US artists on the radio, films on big screens, and brands on menus, clothing, and billboards. The US brand is highly respected and in-demand among local consumers.
Companies with US origin can enjoy that extra added value of their product or service to Colombians.
7. Take advantage of a consumer market of 50 million
Colombia boasts a population size of almost 50 million people. Colombia’s capital, Bogotá, holds a workforce of 4.6 million alone that are young, skilled, and educated. That number is only rising as higher education institutions also see sustained, continued enrollment. The working age population accounts for approximately 80% of the overall population.
US companies have many opportunities to pursue in Colombia, and their success is supported by a high demand for the American brand. The government’s modernization agenda welcomes new tech, infrastructure, and innovative business models. Don’t wait for competitors to identify and capitalize on this thriving market; engage with local legal providers and ensure success for your expansion by doing business in Colombia.
Do business in Colombia with Biz Latin Hub
It’s important for entrepreneurs and investors to know their rights, responsibilities and obligations under Colombian law in order to make the most of this exciting commercial environment. Though opportunities are many and various in the country, you’ll first need to take all necessary steps to incorporate your company and comply with commercial, taxation, visa, and other regulations.
At Biz Latin Hub, our team of local and expatriate experts in Colombia have the depth of experience and knowledge needed to ensure you can start commercial operations as quickly as possible. We offer a full suite of market entry and back-office services that are customized to your business needs. We’ll ensure your business is compliant with local law every step of the way.
Reach out to us today here at Biz Latin Hub for advice on how we can enable you to do business in Colombia.
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