Colombia

Colombia has an open economy that has experience remarkable growth in recent years, making it an attractive market for international investors thanks to its strategic enclave, its natural resources and the momentum and attraction of its urban centres.

A dynamic and open market offering great opportunities

Colombia has proven to be an attractive country for foreign direct investment. Public policies have improved for the private sector; these include the formalisation of employment, cutting red tape, driving public-private partnerships and the development of its infrastructures. Colombia joined the OECD in 2020 which meant greater protection of the investor. Gustavo Petro coming to power as President of Colombia (2022-2026) – and as the first leftwing president in the history of the country – has created certain uncertainty with the arrival of new investments in sectors such as extractive industry. The country continues to have social problems and of violence, and an economy closely linked to exporting raw materials.

Growth of the country’s economy slowed down to 0.6% in 2023 and 1.1% is expected for 2024. The annual GDP is forecast to grow at 3% from 2025 to 2028. The context of the slowdown of the rise of inflation will lead to greater household spending, which together with the external demand driven by the growth of the global economic will drive domestic growth. The increase in social spending, but with limits due to the budgetary deficit, will be another of the factors driving the Colombian economy.

The country continues to be highly dependent on exports of commodities, mainly oil. Imports have risen due to greater demand by the domestic market. As regards the trade balance, the current account deficit with respect to the GDP is forecast to increase by 2.9% in 2024 and 3.4% in 2028. A rise is expected in the country’s inflow of foreign currency from the remittances sent by migrant workers, mainly from the USA, the revenue from oil exports and the income from inbound tourism. There is little likelihood of Colombia failing to pay its debts due to the constant flow of foreign direct investment, the facility of its access to the financial markets and to the country’s international reserves.

Colombia is considered a favourable destination for inflows of foreign investment in different sectors, particularly communications, infrastructure, manufacturing, trade and services. There is good potential in energy sector, particularly in renewable energy projects, due to the current government’s commitment to reducing the use of fossil fuels and potential alternative energy sources such was wind and solar power and hydrogen. In the services sector, opportunities may emerge from the implementation of the social policies that the current government has announced.

Even though Colombia’s economy largely depends on its extractive industries, its geographical position as a link between the Pacific and the Atlantic and its free trade agreements make it an attractive country for international investors. The country is expected to show economic growth in 2024, thanks, partly, to a laxer fiscal policy and lower inflation that will boost consumer spending. Oil exports, which usually account for half the country’s total exports, will grow in the short term due to the Russian oil embargo by certain countries. In the future, the country will have to continue to work on cutting the corruption rates to continue to be attractive to international investors.

The new government policies are expected to impact trade in the medium term, mainly due to the rise in tax rates for oil companies and higher taxes on the very wealthy. Given the current government’s effort to reduce inflation, the positive effects of its actions are likely to be notable in the coming years. One of the government’s most controversial policies is its ban on coal mining, affecting one of the country’s main industries.

The current government is driving an economic transition to shift the country away from its dependency on fossil fuels. This transition will be complex, due to the strategic importance of that industry for the country’s economy. The boost to renewable energy, particularly to green hydrogen, is expected to create great opportunities in the near future. Colombia has multiple free trade agreements with other countries in the region and has eliminated several trade barriers, which has made the country more attractive for investors. Furthermore, Colombia protects investments and the properties of the investors, which means it is a highly attractive country for foreign investors.

Colombia has similar tariffs to those of Mexico, but higher to those of many other countries of Latin America such as Chile and Peru. Three tariff rates have been established for imports from countries with which it has no type of free market agreement: 0-5% on capital goods, industrial goods and raw materials not produced in Colombia; 10% on manufactured products, with some exceptions; and 15-20% for consumer goods. There are certain strategic products with special tariffs, such as iron, steel and other metals or organic chemical products. Furthermore, the regulations on importing machinery and chemical products for the mining sector are very strict, with complicated registration processes and rigorous technical requirements. The government is applying measures to lower tariffs and increase imports and exports.

Corruption is the main legal risk in Colombia. Even though the government is applying measures to solve it, corruption drives away investors due to the reputational and legal risk that may tangle up multinational companies. Administrative systems have been streamlined in recent years, making the process to register and to wind up companies much easier. The Colombian market lacks strong intellectual property legislation and has an ineffective legal system when handling disputes; the legal risks of Colombia could therefore be a problem for foreign investors.

Contact office

Maria Ángeles Guerra

Business Manager

BASQUE DELEGATION IN COLOMBIA

Cra.7#73-47, Piso 10 oficina 1001, Bogota D.C

+57 31 5324 8708

ma-guerra@euskadi.eus

* Office hours:

Monday to Friday: 8.00 a.m. to 5.00 p.m.

Latest news

See more

How can we help you?

At Basque Trade & Investment, we help you with your internationalisation process, whether you need personalised services and if you are looking for information to expand your company abroad.
CONTACT US