How to Invest and Exchange Foreign Currency in Colombia
In Colombia, foreign investment is protected by four principles: equal treatment between nationals and foreigners, the universality of investment opportunities, the automaticity of investments, and stable investment conditions.
Following these principles, investment protection is based on the international investment agreements Colombia has celebrated with other countries or regions for promoting foreign direct investment and maintaining favorable conditions for foreign investors.
While each different agreement has its own clauses, they generally contain some standard obligations:
- National treatment: Foreign companies shall not be treated less favorably than Colombian ones.
- Nations with more favorable treatment: Foreign companies shall not be treated less favorably than their counterparts from other nations who also invest in Colombia.
- Minimum level of treatment: Refers to offering a minimum level of treatment that is measured by having fair and equitable treatment and full protection and security.
- Free transfer: The State protects the free flow of transfers and the entry or exit of investments, profits, and income.
- Prohibition of expropriation without compensation: This is divided into direct and indirect expropriations. Direct expropriations refer to the act of expropriation itself, while indirect ones refer more to an interference of the free use of the property.
- Dispute settlement: A clause that authorizes the investor to go directly to international courts.
The exchange regime refers to the rules for foreign exchange that enter or exit the country that must be reported to the Bank of the Republic and channeled through Exchange Market Intermediaries (IMC, Intermediarios del Mercado Cambiario).
Among others activities and actions, foreign direct investment – which is the primary goal of countries seeking to attract foreign investment – is considered to include the acquisition of shares, fiduciary businesses, real estate, contributions from investors through concession contracts, collaborations and other services.
After being channeled by an exchange market intermediary, investments must be registered with the Bank of the Republic. Information on the transaction must correspond to the day the currency was purchased and sold. Corrections or modifications to these registration reports also must be processed with the exchange market intermediary that issued the initial transaction declaration.
Direct or portfolio investments made in a foreign currency will be understood as automatically registered via the transaction declaration information. Among other similar rights, this registration grants the investor the right to: reinvest profits or retain surpluses, withdraw freely convertible currency abroad, and send sums abroad in the amount deriving from gains on the investment or on the company’s liquidation.
Keep in mind
- There are some investments that belong to the free or unregulated market that do not need to be reported; however, they can be channeled voluntarily through an intermediary from the exchange market or the Bank of the Republic.
- Failure to report an investment that is required to be reported to exchange market authorities can have negative consequences when withdrawing profits or income that derives from operations.
- Clearing accounts are channeling alternatives for bank accounts in foreign currencies that have been opened in financial entities abroad by Colombian residents.
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