Colombia Market Entry

Colombia Market Entry

Subchapters:

  • Market entry
  • Forms and conditions of operation on the market
  • Marketing and Communications
  • Issues of intellectual property protection
  • Public procurement market
  • Payment terms, payment ethics and resolution of commercial disputes
  • Visas, fees, specific conditions of travel to the territory
  • Employment of citizens from the Czech Republic
  • Fairs and events

Market entry

According to cheeroutdoor.com, the key to success in the Colombian market is finding a trusted local representative. They work on a commission basis, in a smaller volume on their own account with nationwide scope or for some regions. With a local partner, a large part of the unbearable administrative burden associated with dealing with complicated import conditions and finding all kinds of documents with the corresponding formal requirements is eliminated. The Foreign Office of PaulTrade can help you find a local representative.

In order to import into the country, one of the subjects of the business relationship must be registered as an importer. This involves registration with the local chamber of commerce and the entity must have a unique tax number called RUT. Most often, the local importer takes on this responsibility. Furthermore, according to the customs code of the goods, the company must check whether it is not subject to special regulatory requirements of the relevant authorities (ICA, INVIMA, Ministry of Mining, etc.).

Recently, the situation in the possibilities of providing favorable loans to importers has improved, especially for investment units. In many cases, however, there is still a noticeable little interest of Czech producers in this distant, albeit relatively solvent, Latin American market. The persistent weaknesses of Czech exporters include insufficient pre-sales business service, absence of advertising, non-participation in exhibitions, fairs and specialized events, weak sales and representative network, lack of catalogues, difficult warranty, assembly and repair service and complex supply of spare parts.

Czech companies also often underestimate the legal, logistical and customs aspects of entering the market.

A favorable commodity structure of demand, compatible with the potential export offer of the Czech Republic, can be added to the permanent advantages of mutual economic relations. So far, Colombia has successfully continued to liberalize the local market and has sustained economic growth. Current socio-economic tensions, however, mean certain question marks over these hitherto stable determinants. S&P downgraded Colombia to BB+ and other agencies are expected to downgrade as well throughout 2021.

Forms and conditions of operation on the market

The main form of activity of Czech companies on the market is through a trusted local partner. In case of interest in establishing a local branch, a notarial entry is required at the location of the branch’s headquarters, indicating the type of business activity in Colombia, the amount of authorized capital and the location of the main office. In order to obtain a notarial entry, the following is required:

  • partnership agreement of the partners on the establishment of the company
  • registration of the act and documents that prove the registration of the company in the commercial register at the chamber of commerce in the place of the company’s headquarters
  • registration of the organization’s official books (general ledger, cash register, etc.) at the Chamber of Commerce
  • application for RUT tax registration number at the DIAN tax office
  • opening a current account in the name of the company to deposit foreign capital
  • registering the investment in the international technical department of the central bank within 3 months of making the investment; portfolio investments
  • they must be registered with the central bank within 30 days of the date of sale of the currency on the foreign exchange market
  • any changes in registration must be approved by the central bank

In Colombia, the most common forms of companies are:

  • joint stock company (SA)
  • limited liability company (SRL)
  • simplified joint stock company (SAS)
  • a branch of a foreign company
  • consortia

There are also other forms (limited partnership, etc.), but they are used very rarely. In order to establish an office, representation, joint venture, etc., the law stipulates the obligation to use the services of local specialized law firms.

Marketing and communication

In the country, all forms of promotion are used for the presentation of products and services, i.e. radio, television, advertisements, professional publications, daily press and advertising. An equally important part is promotion at points of sale and in taxi service vehicles. A key moment for a partner’s decision-making is the presentation of products at exhibitions, fairs and specialized events.

Preparation of materials in Spanish is an absolute necessity for all forms of marketing. Complex texts should be avoided in marketing communications. Virtually all Colombians are literate, but even in regional comparisons, they struggle to understand more complex written text.

In order to carry out the acquisition, it is advisable for Czech applicants to enter into business cooperation with Colombian partners to equip the embassy and the PaulTrade office with a sufficient number of catalogs, prospectuses, price information, reference sheets and other business-technical promotional material in the Spanish language, and possibly provide sufficient additional information about its production and commercial possibilities.

We also recommend that Czech companies consult with the embassy and PaulTrade about their business plans in the territory before starting business cooperation with Colombian partners. It is also important to calculate in advance the expenses for samples for companies, including their transportation.

Issues of intellectual property protection

The issue of intellectual property is processed by the Decree of the Ministry of Trade, Industry and Tourism 486 listed at www.mincit.gov.co or also at www.comunidadandina.org

The topic of mental health is also partially covered by the Multilateral Trade Agreement between the EU and Colombia/Peru, which has been in force since August 2013.

In the matter of trademarks, we recommend registering the trademark locally as soon as possible so that the Czech company does not lose it. This has also happened to large multinational companies such as McDonald’s. For more detailed information on the issue of trademarks, you can also contact the Trade and Economic Department of the Embassy and the Foreign Office of PaulTrade.

Public procurement market

Public contracts are awarded on the basis of national or international tenders, in rare cases they can also be carried out directly, for supplies of goods that are strategically important for the state or in cases of sudden emergency and extraordinary events.

All Colombian entities that purchase with public money (federal government, departments, municipalities and organizations subordinate to them) are required to publish all information about contracts on the pages of the electronic public procurement system – Sistema Electrónico de Contratación Pública – SECOP. Through this online platform, all information about the public procurement contractor, specifications of the tender itself and requirements for potential suppliers and process specifications of the procurement are available. You can navigate the system with the help of this manual.

Potential suppliers to public contracts must meet certain qualitative criteria. Czech companies without a local entity in Colombia are obliged to authorize a representative who will act on their behalf in the relevant tender procedure. Since foreign companies usually enter public contracts in Colombia together with Colombian partners, it is important to mention the qualification requirement that applies to Colombian entities. This is the entry of the Colombian company on a special list of the Registro Nacional de Proponentes (RUP). The RUP is administered by a network of Colombian Chambers of Commerce.

The register contains basic information about each registered entity on its legal form, subject of activity and financial and organizational requirements. Furthermore, the entire history of participation in public contracts in Colombia, as well as any penalties or non-performance due to participation in these contracts, is entered into the register. Registered entities are required to regularly update information in the RUP between January 1 and April 5 of each new year.

If he does not do so in time, he loses his registration. Based on the registration, the Chamber of Commerce issues a certificate, which the Colombian bidder for a public contract must then document as part of the process. There is a range of exceptions when a public contract applicant does not have to be registered in the RUP system. One of them is precisely the case when it is a non-Colombian (e.g. a Czech entity) entity, which then has to document all the details separately within a specific tender procedure.

One of the important conditions for participation in the selection process is the applicant’s obligation to take out insurance with a Colombian insurance company (the so-called Poliza de Seriedad). This condition also applies to foreign entities. The insurance policy is to guarantee the requesting Colombian public institution that, if the applicant succeeds in the selection process, it will live up to its commitment. The amount of the insurance can be around 1% of the total price of the tender, which can mean a significant financial burden for the company.

In some fields, for the purposes of the selection procedure, it is necessary to have the necessary certifications (e.g. INVIMA certification for medical devices, etc.). All required certifications within the framework of a public contract are listed in the SECOP system. All documentation required for participation in a public contract must be adapted to local standards and customs.

We therefore recommend Czech exporters to use the services of a local partner when participating in a public contract. Depending on the situation, the Embassy of the Czech Republic in Bogotá or the local PaulTrade Foreign Office can help with the selection of a reliable local partner.

Public tender procedures in projects financed by the World Bank, IDB and international financial institutions, especially in the fields of infrastructure, environmental protection, energy and agriculture, are mostly controlled by traditional large foreign companies or consortia that have built up extensive local contacts, have quality information at their disposal, and have the support of local governments and also own long-term strategy in the region and sufficient funds for an effective lobby.

Payment terms, payment ethics and resolution of commercial disputes

Most often, the deal is arranged on the basis of prepayment, 30-50% is paid at the time of the order and the rest against the documents after the shipment of the goods. Any maturities are risky and if there is nothing to spare and a maturity must be offered, we recommend using receivables insurance. For larger types of orders, an irrevocable confirmed letter of credit a la vista with deferred maturity can be used. It is necessary to take into account that the involvement of Colombian banks in the entire process will significantly increase the price of the entire transaction.

For credit deliveries of investment goods from the Czech Republic, it is recommended to require the widest possible assurance of the return of the delivery, bank guarantees, bank guarantees and the use of the possibility of early sale of the receivable before its maturity (forfaiting, factoring for repeated shipments) and government guarantees for the supply of investment and technological units.

The application of a lien on the goods until full payment between the Czech supplier and the end user can be considered as insufficient security, due to the vastness of the territory of Colombia and the possible free movement of people and goods throughout the country, when the goods can be difficult to locate and seize, while the costs on the very seizure of the object of the contract, regardless of the significant security risks are high and the risk of loss disproportionately large.

In case of non-payment of goods, the local legal office should be contacted. Judicial processes in Colombia are not inherently discriminatory against a foreign entity, but they tend to be lengthy. An agreement with a business partner, even at the cost of additional costs, is always the preferred solution.

Visas, fees, specific conditions for traveling to the territory

The length of the permitted visa-free stay for citizens of the Czech Republic depends on the purpose of the stay and is provided on the basis of an entry stamp indicating the length of stay issued at the airport. For tourism, a visa-free stay of 90 days is permitted, with the possibility of an extension for another 90 days, while this permitted length of stay applies to each calendar year.

For the purpose of academic activities, participation in seminars, conferences, exhibitions, during short-term studies, medical stays, a visa-free stay of 180 days within a calendar year is permitted ( more information on conditions of entry and visa-free stay ). All actions connected with consular and visa activities for the Czech Republic are performed by the Colombian Embassy in Vienna.

Long-term risk areas are the border with Ecuador, the department of Choco and the cities of Buenaventura and Tumaco. Among the areas with an increasing security risk due to the immigration of Venezuelans, in particular, the border area with Venezuela, especially Norte de Santander, Arauca, Vichada and Guainia. Cases of robberies of tourists are not exceptional either, even in otherwise safe tourist destinations such as Bogota and Santa Marta.

If it is not necessary, we recommend that you limit your movement outside at night and do not carry valuables, large amounts of cash or original travel documents with you. In general, big cities are places with more crime. It is better to order a taxi in advance by phone or special phone applications.

The Embassy in Bogotá recommends that all travelers inform themselves about the current security conditions on the website of the Ministry of Foreign Affairs of the Czech Republic and register in the database for travelers DROZD.

Employment of citizens from the Czech Republic

Foreign citizens contracted with Colombian or foreign companies must have a so-called temporary work visa (TP-4) and a signed employment contract. This visa is valid for the duration of the employment contract, but for a maximum period of 3 years and allows multiple entries into the territory of Colombia. The first visa of this type or a visa after the expiry of the previous visa must be applied for exclusively at Colombian consular offices abroad.

If it is a second or subsequent visa and it is applied for before the expiry of the previous visa, the application can be submitted in the capital Bogotá.

In order to carry out a work activity or an activity regulated and specified in the visa, the foreigner must meet all the legal requirements as an ordinary Colombian citizen. In the event that the work visa granted is valid for more than 3 months, the foreigner must apply for registration in the register of foreigners and the issuance of a foreigner’s card (Cédula de Extranjería) already in Colombia.

The minimum wage in Colombia is 908,526 COP (approx. 5,120 CZK). Deductions from an employee’s salary are governed by the Colombian Labor Code. Currently, pension insurance is 12% (8% employer + 4% employee), health insurance is 12.5% ​​(8.5% employer + 4% employee). In addition, the employer must pay 4% to the recreation fund, parafiscal contributions in the amount of 5% and contributions to the occupational risk fund, which are graded according to the riskiness of the profession, but the minimum is 2.4%.

In preparation for an occupational accident, treatment costs are covered from the occupational risk fund. Every employee is entitled to free basic health care, which is at a relatively good level in Colombia, by virtue of paying health insurance.

Fairs and events

The most important fairs and exhibitions:

  • Expodefensa – a regularly held defense fair in Bogotá
  • Expoconstrucción y Expodiseño – a specialized biennial trade fair in the construction and design sector in Bogotá
  • Alimentec – the annual food fair in Bogotá
  • Meditech – a specialized biennial trade fair for medical devices in Bogotá
  • Feria Internacional de Bogotá – the biennial international industrial fair in Bogotá

In addition to the mentioned fairs, specialized regional exhibitions are also organized in the country:

  • Colombia Moda – clothing and textile industry fair in Medellín
  • F-AIR – aviation industry fair in Medellin
  • Colombia Minera – mining industry fair in Medellín
  • ACODAL – water management, water treatment and purification fair in Cartagena

Colombia Market Entry