major macro economic indicators
|2016||2017||2018 (e)||2019 (f)|
|GDP growth (%)||2.0||1.8||2.7||3.3|
|Inflation (yearly average, %)||7.5||4.3||3.2||3.4|
|Budget balance (% GDP)||-4.0||-3.6||-3.1||-2.7|
|Current account balance (% GDP)||-4.3||-3.3||-3.0||-2.7|
|Public debt (% GDP)||46.0||47.4||47.6||47.1|
(e): Estimate. (f): Forecast.
- Ports on two oceans
- Large population (almost 50 million)
- Plentiful natural resources (coffee, oil and gas, coal, gold)
- Significant tourism potential
- Institutional stability
- Sensitivity to raw material price movement; the US economic situation
- Relatively undiversified economy (in terms of manufacturing)
- Shortcomings in road and port infrastructures, due to historically low levels of investment
- Problematic security situation due to drug trafficking
- Structural unemployment, poverty and inequality; deficient educational and health care systems
Activity is expected to gain some further strength in 2019
After three years of decelerating activity due to the collapse in oil prices since mid-2014, GDP improved in 2018 thanks to a rebound in prices. Growth was also underpinned by an improvement in exports and household consumption due to the deceleration in inflation and an expansionary fiscal policy. Nevertheless, investments disappointed, with infrastructure investments suffering from some delays due to challenges in achieving financial closure.
The forces present in 2018 should persist in 2019. Private investments should also report higher momentum with the end of the electoral period (pro-business President Ivan Duque took office in August 2018) and with the rise observed in capital goods imports. Nonetheless, possible downside risks are related to the possibility of an escalation in protectionist global trade war and a deepening of the recent sell-off in emerging markets. Moreover, the relatively higher global risk aversion in 2018 prompted some depreciation of the Colombian peso (a movement that is likely to persist in 2019). As inflationary pressures arise from the improvements in domestic demand, some tightening to the monetary cycle will likely be observed this year.
While external deficit narrows, fiscal account remains under close watch
After hitting its worst point in 2016 in the wake of the collapse in oil prices, the current account deficit has since narrowed. In parallel, while oil prices registered a strong improvement during part of 2018, the positive spillover effect on the external account was partly offset by higher imports and by the widening of income deficit (higher profits registered by foreign energy companies). Moreover FDI have comfortably covered this deficit. Nevertheless, there are some risks to be monitored in case of a strong shift in investors’ mood toward emerging markets. Colombia counted with an external debt of 37% of GDP as of July 2018. Moreover, foreign capital funds are major holders of the domestic public debt bonds (for instance it held roughly 27% of the TES bond by the end of 2017). In this regard, in order to contain this contagion risk as well as the risk associated with the possible end in 2020 of the IMF Flexible Line Agreement of USD 11.4 billion, the government announced in September 2018 a program of buying dollars to improve reserves (sit at roughly 15% of GDP in October 2018). The fiscal deficit has slightly improved in the last two years, following a tax reform in December 2016 and rebounding oil prices (oil revenues, which represented 3.3% of GDP in 2013, dropped to roughly 0.6% in 2016, and are estimated to reach 1.2% of GDP in 2019). While the country should be able to continue reducing its deficit in 2019, the long term sustainability of public debt is subject to a new tax reform.
The new right-wing President should assure the pro-business environment in the country
Iván Duque, from the centre-right Democratic Center, took office on August 7, 2018. Business-friendly, Mr Duque is a US-educated lawyer who previously worked at the Inter-American Development Bank, and also served as a Senator for Bogotá. He is politically affiliated to former President Álvaro Uribe (2002-10), who is one of the loudest critics of the peace agreement signed between the Colombian government and the former guerrilla group Revolutionary Forces of Colombia (FARC). Mr Duque has inherited several challenges, including bringing economy back to potential growth, leading on the necessary fiscal consolidation, fighting a record level of cocaine production and rising crime rates, as well as a fragile peace process with the FARC. He must also deal with the wave of Venezuelans fleeing from the crisis in their country: UN figures indicate that over 1.6 million Venezuelans have migrated to Colombia since 2015. According to Colombian figures, this wave costs the country roughly 0.5% of its GDP per year.
Mr Duque has pledged to focus on structural reforms, notably for taxes and pensions. In mid-December 2018, after weeks of discussion, Congress approved a revised version of the tax reform. The approved project will increase revenue by COP 7.8 trillion (approximately 0.7% of GDP), almost half of the COP 14 trillion (1.3% of GDP) needed to cover the budget deficit of 2019. In this way, the government will need to freeze spending to meet its fiscal target for 2019. The leaner reform makes it more likely that another tax overhaul will be needed in the coming years.
Last update : February 2019
The Colombian laws that talk about payment guaranty have been developed under general guideline known as “Proyecto INTAL” which is LATAM based. It has been slightly modified, taking into account orientation of AngloSaxon system of general law of Geneva 1930.
The rules of securities in Colombia, ruled under title II of decret 410 of March 27 1971 became effective in January 1/ 1972 known as “Codigo de Comercio”.
The invoice is the security tittle which is most frequently used as main for debt collection inColombia. In event of default, as long as invoices contain all law regulations it should be effective for Collection. In case of refusal payment from debtor is mandatory original invoice to legal processes.
When a sale has been done the seller ought to issue one original invoice and two copies. The original one must be kept by the seller to be used for legal issues, other copy handed to buyer and the other is used for accounting record.
Other securities that could be used are bill of exchange, Check, promissory note, payment agreement, bond, bill of landing, or waybill. By invoices or any other security an executor procedure can be started by lawsuit before a judge who issues a writ of execution. Then debtor is notified, if the debtor refuses to pay up the court officer will issue a property order attachment, this order can also be executed on vehicles, bank accounts, shares or some contracts.
For transactions of high value, payments are made through a national interbank network called SEBRA (Electronic bank of the republic) It uses a system of real time settlement. SEBRA turns use two systems CEDEC (Check Clearing System) and CENIT (National Electronic interbank compensation.). For low payments cash and check are used primarily, although the use of electronic payments has had high growth in recent years.
Recovery for the extra-judicial form begins with telephone contact to the debtor, along with sending a letter by e-mail or certificated mail, we request the payment of the debt immediately. In this first phase we indicate to the debtor that if he pays in this moment he will be saving the penalty interest, charges and legal fees.
In this instance we get the payment of the debt or else the signing of a settlement agreement, which is best option considering the cost and complexity of the legal Colombian system.
If debtor is not contacted by telephone or written, we review the feasibility of a visit to the debtors address in order to verify the physical condition of his company and initiate the study of a legal process if the payment is refused.
When debtor does not make the payment of the debt, we do the study of the securities, estates, bank accounts of the debtor or his co-debtors, legal budges study, and judicial history of the debtor.
The case is submitted to the attorney who is responsible for establishing the executive process making a seizure of property prior to the notice of demand.
For the application of the demand, the lawyer is responsible for delivering the judge all the facts and documents justifying the debt, which then the debtor will be required to conciliation. In these processes the defendant may appeal and for that reason the process is long and costly in Colombia.
The code of civil procedure, in the third book rules the presentation of claims classifying them according to minimum account, lowest amount and highest amount. According to that classification it designates the instance that is going to handle the claim.
In case of insolvency or bankruptcy, the process must be filed with the “Superintendencia de Sociedades”with the requirements of the law 1116 of 2006, who ought to assign the case to an agent or liquidator according to the situation of the debtor company.