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 invoice is the security title most frequently used for debt collection in Colombia. When a sale has been made, the seller ought to issue one original invoice and two copies. The original must be kept by the seller to be used for legal issues. One copy is then handed to the buyer, and the other is kept by the seller for accounting records.
Other payment methods used in Colombia are bills of exchange, cheques, promissory notes, payment agreements, bonds, bills of landing, or waybills. They are commonly used in domestic business transactions, and tend to be considered as debt recognition titles that can facilitate access to fast-track proceedings before the courts.
Bank transfers are rapidly developing in Colombia. SWIFT bank transfers are becoming a very popular payment method for international transactions. 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 IntTerbank Compensation). For low-value payments, cash and cheque are primarily used.
The amicable phase is a recommended alternative to formal proceedings. Under Colombian law, conciliation or mediation hearings before commencing formal proceedings are mandatory. Pre-trial mediation must also be conducted in administrative litigation.
The creditor begins the amicable recovery process by reminding the debtor of the debt owed over the telephone. If this is unsuccessful, through an email or a registered letter the creditor subsequently requests immediate payment of the debt. If the debt is paid, the debtor will not bear the penalty interest, charges nor legal fees.
When the debt is certain and undisputed (such is the case for a bill of exchange), the creditor can initiate summary proceedings to obtain a payment order. The debtor must comply with the decision within 10 days or submit a defence.
The debtor must be notified through a writ that the judge has authorized the proceedings. The debtor must then answer the claim within 20 days. If the debtor fails to do so, the judge can render a default judgment depriving the defendant from their right to appeal. Otherwise, the court will invite the parties to attend a mediation proceeding in order to reach an agreement. If an agreement cannot be reached, the parties will present their arguments and evidences. Afterwards, the court will render a decision.
In principle, first instance decisions ought to be rendered within a year, while Courts of Appeal will render these within an additional six months period of time. Nevertheless, in practice, Colombian courts are unreliable, and it can take up to five years to obtain a first instance ruling and ten years for a full disputed lawsuit.
Enforcement of a Legal Decision
Domestic judgments become enforceable when all venues of appeal have been exhausted. Compulsory enforcement occurs through the seizure and auctioning of the debtor’s assets. Nevertheless, collection of the debt from a third party is possible through a garnishment order.
For foreign awards, domestic courts will normally enforce them provided that they have been recognized by the Supreme Court through the exequatur procedure. Colombian courts will not recognize foreign decisions issued in countries which do not recognize Colombian decisions.
Insolvency proceedings in Colombia are ruled by the 2006 Colombian Insolvency Act, which sets out reorganizations proceedings and judicial liquidation proceedings.
In cases of insolvency or bankruptcy, the process must be filed with the Superintendencia de Sociedades with the requirements of the law 1116 of 2006. The case will then be assigned to an agent or liquidator, according to the situation of the debtor company.
Out-of Court proceedings
Debtors may discuss debt restructuration agreements with their creditors before becoming insolvent. The final agreement must be validated by an insolvency judge.
The proceedings start by filling of a petition by the debtor, one or more of the creditors, or by the Superintendent. If admitted, the debtor is deemed insolvent and all enforcement claims are stayed. The reorganization plan is submitted by the debtor, and the creditors and the judge must approve it. The court may designate a “promoter” in order to manage the business.
This occurs as a result of a failure to reach a reorganization compromise, or when the debtor has failed to abide by the negotiated terms. It can be requested by the debtor and the creditors. A liquidator is appointed to establish a list of creditors’ claims and to manage the estate’s liquidation.