Those who have discovered Colombia and are considering living or investing in the country should take a number of things into account before taking the big leap. Doing so will help to avoid losing money or other disappointments while increasing your chances of making a successful move.
Being aware of the investment options, business climate, economic conditions, and visa options is very important in making sound, smart decisions that are right for those who decide on moving or investing.
Here are five things that you should know before relocating to or investing in Colombia:
Visas
Colombia has a wide variety of visas available to foreigners. Most expats already know about the tourist visa, the business visa and the investor visa, but there are lesser known, equally useful visas for potential ex-pats and investors such as the retirement visa and the entrepreneur’s visa.
To be eligible for a retirement visa – besides the usual requirements of a valid passport (good for at least three months) and a couple of passport-size photos – you just need to provide proof in the form of an official document from a foreign government or company stating that you receive a monthly pension.
For an entrepreneur’s visa you must first write a letter requesting the visa stating why you should receive it and you must also provide documents that prove your competency in your specific business field/industry (e.g. college degree, certificates, etc.) Any professional licenses issued by the governing body of that profession must also be provided.
For a list of all Colombian visas, visit the Colombian General Consulate webpage. The information is available in English and Spanish.
Stock Exchange
Colombia’s stock exchange is known as the Bolsa de Valores de Colombia (BVC) and was formed in 2001 via a merger of the Bogotá Stock Exchange, the Medellín Stock Exchange and the Cali-based Western Stock Exchange. It is measured by the General Index (IGBC as it is abbreviated in Spanish) which is a capitalization-weighted index of the stocks traded on the BVC.
Click here to open the latest information about the IGBC and compare it to other indices. For example, if you use the “Advanced Options” to compare it to the three major American indices, you will see that the IGBC has outperformed all of these over the last five years.
Steps to integrate Colombia’s, Peru’s and Chile’s stock markets have already been put in motion signaling a promising future for the region.
Although significant regulatory and tax barriers still exist, the three countries are pushing forward with the plans and hope to have investors trading across the three markets by the end of 2011. In Colombia, new laws have been passed and others are in the making to offer tax breaks to those investing in hotels and small businesses.
Doing Business
Every year the World Bank releases its Doing Business report. The report is a detailed analysis of the business-friendliness of 183 countries around the world. Included in the report are all of the G-20 nations as well as a number of emerging economies.
Of the 183 nations analyzed in 2010, Colombia ranks 5th in investor protection. Colombia jumped 20 places from 2009 in this category, 28 places for ease of paying taxes (although it should be noted that its overall rank in this category is 115), and 27 places for ease of registering property.
These and a range of other factors make Colombia the most business-friendly economy in all of Latin America according to the World Bank.
In setting up a business in Colombia you have various options much like America and Europe.
You can set up a business as a sole proprietor or you can set up various types of corporations or sociedades.
The newest and most preferable type of corporation is the Sociedad por Acciones Simplificadas or SAS which was created by the Law 1258 of 2008.
The SAS was designed to be more flexible while reducing costs and paperwork. There are no capital requirements nor is there a need to have any certain number of employees to create a SAS. Furthermore, a SAS is created via a private document instead of the typical escritura pública.
One of the most significant benefits is that there is no need to state a “social reason” which has traditionally limited the activities of companies. A SAS with no stated social reason is free to engage in any licit business activity.
For more information about the SAS, read Law 1258 of 2008 (Spanish).
The biggest downfall to doing business in Colombia is the Colombian tax code.
The long list of taxes includes: the social security fund, the municipal tax, corporate income tax, payroll tax, financial transactions tax, fuel tax, vehicle tax, real estate tax, stamp duty, labor risk insurance, welfare security system tax, and the value added tax (VAT) which add up to a total of 20 payments per year equaling, on average, 78.7% of profits.
For a more detailed breakdown of these taxes, see the tax section of the World Bank’s Doing Business in Colombia report.
Real Estate
As a natural result of an ever-improving economy, Colombia’s real estate market is heating up.
Prices for new constructions (houses and apartments) grew at a rate of 10.75% in 2008 (the last year for which there is data) according to Colombia’s National Administrative Statistics Department (DANE).
While these growth rates are relatively high, many analysts believe them to be sustainable as long as the Colombian economy continues to grow at a healthy rate.
However, it should be noted that real estate and money-laundering scams are prevalent in Colombia, especially in the popular Cartagena or Medellin’s Poblado dictrict, so do your homework and get an independent opinon before buying. This way you make sure that you are not being swindled or are entering a speculative real estate bubble.
Foreign Direct Investment (FDI)
Over the last ten years, Colombia has caught the eye of international investors all around the world.
FDI in 2000 was reported by the World Bank at $2.39 billion U.S. dollars. Colombia’s central bank expects that number to reach an approximate $10 billion U.S. dollars in 2010 translating to a 318% increase over that period.
American multinational Hewlett-Packard, a leading computer, printer and imaging products manufacturer, recently announced plans to open a Global Service Center in Medellín creating some 1,000 jobs in the first stage of the project.
So what does it all mean?
While foreign tourists and investors alike are arriving in ever-increasing numbers to Colombia, there is much to consider before dedicating time and money in this Andean nation.
Whether it’s a new investment opportunity in a Colombian company, a business idea or a great piece of property, it is important to thoroughly research any potential move before taking action in order to mitigate risks as much as possible.
Author Matthew Helm is an American who moved to Colombia where he started the website relocationcolombia.com, specialized in information for potential ex-pats and investors.
