Colombia - Commercial Guide
Market Challenges

Learn about barriers to market entry and local requirements, i.e., things to be aware of when entering the market for this country.

Last published date: 2019-10-13
The majority of U.S. made products are not subject to import duties under the U.S.-Colombia Trade Promotion Agreement (TPA). For those products still subjected to import duties, most will see tariffs incrementally phased out by the year 2023. Despite the elimination of many market barriers by the TPA, U.S. companies still face challenges to doing business in Colombia. This is particularly the case with extractive industries like oil/gas and mining as well as professional services. Moreover, Colombia has been on the United States Trade Representative (USTR) Special 301 “Watch List” every year since 1991, reflecting ongoing challenges in the enforcement of intellectual property rights (IPR). In April 2018, Colombia was downgraded by USTR to “Priority Watch List” status due primarily to ongoing IPR concerns related to copyright protections and pharmaceuticals, among other issues. 
Environmental licenses must be obtained in order to execute certain projects in sectors such as mining and oil exploration, and the process is often time-consuming, burdensome, and can take up to several years to complete, with many licenses never actually being granted. Companies in these sectors must frequently go through a process called consulta previa in which indigenous and other ethnic groups must be consulted before projects can be carried out in their communities. This process can also take up to several years with many projects ultimately being denied. The iniciativa popular, or local referendum, is a mechanism used by local communities to oppose activities by companies in the extractive industries. Several recent high-profile cases resulted in the shuttering of major operations, such as South Africa mining concern Anglo Gold Ashanti’s USD 2 billion La Colosa project that the company was forced to abandon in 2017 after a local referendum banned mining in the municipality.   
A ruling in 2016 by Colombia’s Constitutional Court allows local government officials broad authority to stop projects in the oil/gas and mining industries out of concern for the environment, among other justifications. Since the ruling, local governments have established “protected areas” where U.S. companies in the extractive industries had operations, thus suspending these projects indefinitely. The pervasiveness of informal and illegal mining in Colombia and the environmental damage that accompany it tarnish the image of the mining industry in general and generate resistance to legitimate mining concerns that adhere to environmental standards and labor regulations.
Regulations and standards are another area of concern for U.S. businesses in Colombia. There is a tendency for regulations to change without adequate notification given to the World Trade Organization, industry, and other relevant stakeholders. Moreover, the comment period normally required for stakeholders to voice their opinions on the proposed regulatory change tends to be insufficient. Consequently, U.S. companies are sometimes uncertain how to comply with new regulations and some recently proposed regulations have blocked U.S. companies from the Colombian market entirely. In the area of standards, there have been proposals to adopt European standards at the exclusion of U.S. standards as well as proposals to require standards tests to be conducted by Colombian testing laboratories when no such laboratories exist in Colombia.  
The government procurement process in Colombia remains a barrier for many U.S. companies as a lack of transparency and competitive bidding conditions in the public tender process have resulted in U.S. bidders being excluded from key projects such as infrastructure development and project management. The Colombian government is making efforts to address this issue through the establishment of government procurement agencies such as Colombia Compra Eficiente (Colombia Buys Efficiently) and through initiatives such as the Global Procurement Initiative (GPI), a USTDA partnership that encourages Colombian contracting authorities to focus on long term value and transparency in public procurement.
Although the TPA eliminated most barriers to U.S. exports of manufactured products, barriers still exist for U.S. professional services firms in Colombia:
  • Only firms licensed under Colombian law may provide legal services; foreign law firms can operate in Colombia by forming a joint venture with a Colombian law firm and operating under the licenses of the Colombian lawyers in the firm.
  • Economic needs tests are required when foreign providers of professional services operate temporarily; residency requirements restrict trans-border trade of certain professional services such as accounting, bookkeeping, auditing, architecture, engineering, urban planning, and medical and dental services.
  • A commercial presence is required to provide information processing services and to bid on Colombian government contracts.
  • Telecommunications barriers to entry include cross subsidies, the requirement for a commercial presence in Colombia, and an economic needs test.
  • In order to offer services, international banking institutions are required to maintain a commercial presence in Colombia through subsidiary offices.
  • Insurance companies are restricted from offering policies to underwrite risk on government sponsored infrastructure projects due to Colombian regulations that do not recognize insurance policies as equivalent to bank guarantees.