Chapter

COLOMBIA

Author(s):
International Monetary Fund. Monetary and Capital Markets Department
Published Date:
September 2004
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(Position as of April 30, 2004)
Status Under IMF Articles of Agreement
Article XIVYes.
Exchange Arrangement
CurrencyThe currency of Colombia is the Colombian peso.
Other legal tenderVarious commemorative gold coins are also legal tender.
Exchange rate structure ClassificationUnitary.
Independently floatingAll foreign exchange transactions are conducted at a market-determined exchange rate. The Banco de la República (BR) quotes buying and selling rates for certain currencies on the basis of the buying and selling rates for the dollar in markets abroad. The Superintendency of Banks (SB) calculates a representative market exchange rate based on the weighted average of purchases and sales effected by foreign exchange market intermediaries, excluding teller and forward transactions. The government purchases foreign exchange for all public debt payments and other expenditures under the same conditions as other authorized local intermediaries.
Exchange taxRemittances of earnings by existing oil and non-oil foreign investments are subject to a 7% surtax, unless earnings are reinvested within five years. Effective December 29, 2003, the 3% withholding tax imposed on foreign exchange receipts from personal services and other transfers was eliminated.
Exchange subsidyNo.
Forward exchange marketResidents are permitted to buy forward coverage against exchange rate risks with respect to foreign exchange debts in convertible currencies registered with the BR. Residents may also deal in over-the-counter forward swaps and options in dollars.
Arrangements for Payments and Receipts
Prescription of currency requirements
Use of foreign exchange among residentsThe use of foreign exchange in internal transactions among residents is forbidden, with the exception of (1) transactions between and among mineral sector firms (e.g., coal, nickel, gas, and oil) and services-related firms; (2) sales of fuel used in international transportation; (3) purchases and sales of oil and gas by Ecopetrol and companies engaged in downstream and upstream activities; (4) authorized local insurance and reinsurance contracts; (5) charges related to international transport services and payments through special accounts registered with the BR; and (6) payments in foreign exchange between residents through foreign exchange accounts.
Payments arrangements
Regional arrangementsSettlements between Colombia and the other LAIA countries are conducted through accounts maintained within the framework of the multilateral clearing system of the LAIA.
Clearing agreementsOn June 30, 2003, the reciprocal credit agreement maintained with China expired.
Barter agreements and open accountsThese are prohibited.
Administration of controlThe MOF enforces ex post control and supervision over exchange transactions. The BR maintains accounting records on foreign investments in Colombia and debts abroad, and tracks transfers of profits, dividends, and commissions. The SB, the Superintendency of Financial Associations, and the Superintendency of Securities and Exchange (SSE) are also responsible for the supervision of exchange regulations. Effective February 14, 2003, non-bank currency dealers are defined as those having the authority to buy and sell foreign currencies but not to transfer currencies to third parties through the foreign exchange market; effective August 8, 2003, they are authorized to buy and sell traveler’s checks.
International security restrictionsNo.
Payments arrearsNo.
Controls on trade in gold (coins and/or bullion)No.
Controls on exports and imports of banknotesExcept for the BR, all imports and exports of domestic and foreign currency must be effected through authorized intermediaries. Travelers are allowed to take out or bring in domestic and foreign currency notes freely, but for amounts exceeding the equivalent of US$10,000, a customs declaration must be submitted. Effective February 14, 2003, imports and exports of other monetary instruments exceeding the equivalent of US$10,000 are also subject to customs declaration.
Resident Accounts
Foreign exchange accounts permittedYes.
Held domesticallyThese accounts are restricted to travel agencies, international transport companies, companies and stores in free trade areas, nonresident companies and their employees working in Colombia, diplomatic missions, and multilateral entities and their employees.
Held abroadResidents are allowed to hold these accounts freely, although BR registration is required for payments from these accounts for debt, investments, purchases of derivatives, and trade-related operations.
Accounts in domestic currency held abroadn.r.
Accounts in domestic currency convertible into foreign currencyNo.
Nonresident Accounts
Foreign exchange accounts permittedFinancial institutions are authorized to receive current account deposits in foreign currency from nonresident individuals or firms. Balances in these accounts may be used without restriction, but quarterly reports, including balances, must be submitted to the BR and, effective February 14, 2003, also to the SB.
Domestic currency accountsFinancial institutions are authorized to receive trade-related deposits into current accounts in foreign currency from nonresident individuals or firms. Effective December 17, 2003, balances in these accounts may be used without restriction; however, transactions in these accounts must be reported to the BR and the SB on a quarterly basis.
Blocked accountsNo.
Imports and Import Payments
Foreign exchange budgetNo.
Financing requirements for importsImporters may purchase foreign exchange directly from the exchange market. In addition, they may use the proceeds from deposits held abroad or make payments with international credit cards. Lending for import finance may be conducted by a foreign seller, a foreign financial institution, or an authorized intermediary only. Temporary imports may be financed under financial leasing for capital with a term of more than 12 months, as defined by the BR. Financing for import payments that are to be settled in more than six months is considered foreign debt.
Documentation requirements for release of foreign exchange for importsAll payments for imports must be conducted through authorized intermediaries or foreign exchange accounts with appropriate transport documentation and a customs declaration.
Import licenses and other nontariff measures
Positive listYes.
Negative listThere is a global free list applicable to all countries, and most imports are free of restrictions. The Ministry of Trade, Industry and Tourism (MTIT), however, may administer licensing requirements with respect to imports under special customs regimes, imports subject to antidumping controls, and imports subject to compensatory policies or safeguards. Imports of the following goods are subject to licensing requirements: fresh, chilled, or frozen poultry and poultry offal; prepared and preserved poultry; pharmaceutical and chemical products; ingredients for drug manufacture; weapons and ammunitions; second-hand tires; ropes and string; special airship vehicles; and warships.



Import registrations are granted automatically, although import registrations by some public sector agencies are screened by the MTIT to determine whether local substitutes are available. Both import licenses and registrations are generally valid for six months; import licenses for capital goods are valid for 12 months. Import licenses may be extended once for three months, but licenses for specially produced capital goods or goods in short supply may be extended for successive three-month periods. Imports of chemical, biological, and nuclear arms; nuclear residue; toxic waste; and goods banned by international treaties to which the country is a signatory are prohibited.
Other nontariff measuresControls are enforced for sanitary, health, or environmental protection purposes.
Import taxes and/or tariffsWith certain exceptions, imports are subject to the CET of the Andean Pact. The simple average tariff rate is approximately 10.7%.
State import monopolyNo.
Exports and Export Proceeds
Repatriation requirementsYes.
Surrender requirementsAll proceeds that are repatriated must be surrendered to an authorized intermediary within six months or maintained in foreign accounts.



Exports of coffee are subject to the following provisos: (1) the minimum surrender price is the sales price shown on the export declaration; (2) exporters must pay a coffee contribution on the basis of international market prices; (3) the National Coffee Committee—composed of the ministers of finance and agriculture and the managing director of the Colombian Coffee Growers’ Association—has the right to establish a physical coffee contingent on the basis of international coffee prices; and (4) for export-type coffee, the National Coffee Committee must establish a domestic price expressed in pesos per cargo of 125 kilograms.
Financing requirementsIf export proceeds are due more than 12 months after the export declaration, they are classified as credit operations. When payments are made in advance and delivery is due more than four months later they are classified as foreign debt and are subject to a deposit requirement.
Documentation requirementsControls are enforced for sanitary, health, and environmental protection purposes.
Export licensesNo.
Export taxesNo.
Payments for Invisible Transactions and Current Transfers
Controls on these transfers
Investment-related payments
Prior approvalCapital investments must be registered with the BR before profits may be repatriated. Annual transfers of profits abroad and repatriations of capital are not restricted, but they may be temporarily restricted if international reserve holdings of the BR fall below the equivalent of three months’ imports.
Quantitative limitsThe limit on contractual interest rates for public debt is determined by the BR, which sets the maximum applicable rate, taking several factors into account, including country risk and the international liquidity situation.
Proceeds from Invisible Transactions and Current Transfers
Repatriation requirementsNo.
Restrictions on use of fundsNo.
Capital Transactions
Controls on capital transactionsYes.
Controls on capital and money market instrumentsEffective August 15, 2003, external financing obtained by authorized intermediaries in connection with the simultaneous purchase and sale of financial titles is no longer required to be conducted through the exchange market.
On capital market securities
Shares or other securities of a participating nature
Purchase locally by nonresidentsThe purchase of 10% or more of the shares of a domestic financial institution requires the prior approval of the SB. Foreign investments in the form of placement of shares in a fund established to invest in the stock exchange and in debt papers issued by the financial sector are permitted.
Sale or issue locally by nonresidentsAll sales and issues are subject to the prior approval of the SSE.
Bonds or other debt securities
Purchase locally by nonresidentsNonresidents must establish an investment fund to purchase these securities. Purchases by nonresidents may not exceed 20% of the total issue, and the maturities of securities with a fixed interest rate must be less than two years. These transactions must be effected through an authorized intermediary or foreign exchange account.
Sale or issue locally by nonresidentsThese transactions require prior SSE approval. At least 20% of the total issue of debt securities by a nonresident must be in external markets.
Sale or issue abroad by residentsThese transactions must be reported to the BR, and the issue requires the prior approval of the SSE.
On money market instrumentsThe regulations governing capital market securities apply.
On collective investment securitiesThe regulations governing capital market securities apply.
Controls on derivatives and other instrumentsThe issuance of securities index derivatives is allowed.
Purchase locally by nonresidentsPurchases are allowed only by foreign investors registered with the BR, and domestic risks must be covered in the local market.
Sale or issue locally by nonresidentsThese transactions are not allowed.
Purchase abroad by residentsResidents are allowed to make these transactions with professional brokers with a minimum nominal portfolio value of the equivalent of US$1 billion.
Controls on credit operations
Commercial credits
To residents from nonresidentsCommercial trade finance may be extended only by a nonresident seller, an authorized intermediary, or a foreign financial institution. Commercial loans for exports and services are subject to reserve requirements. Payments on commercial loans must be carried out through an authorized intermediary or a foreign exchange account. In the case of advance payments, if delivery is due more than four months later, the operation is classified as a foreign debt, and therefore is subject to a deposit requirement.
Financial credits
To residents from nonresidentsThese transactions are allowed through foreign financial institutions or authorized intermediaries only and are subject to a deposit requirement.
Guarantees, sureties, and financial backup facilitiesEffective February 14, 2003, these instruments may be issued for purchases of raw petroleum and natural gas.
By residents to nonresidentsAll payments with guarantees must be effected through an authorized intermediary or foreign exchange accounts.
To residents from nonresidentsThese transactions must be reported to the BR and must be effected through authorized intermediaries or foreign exchange accounts, and are subject to deposit requirements.
Controls on direct investment
Outward direct investmentThese investments must be registered with the BR. Investments by Colombian financial entities and their shareholders are subject to prior approval from the SB. All payments related to foreign investment must be carried out through authorized intermediaries or foreign exchange accounts.
Inward direct investmentThese investments must be registered with the BR. Investments in Colombian financial entities are subject to prior approval from the SB. There is no ownership limit regarding foreign investment in Colombia. Investments in the defense sector and management of toxic and radioactive waste are prohibited.
Controls on liquidation of direct investmentNo.
Controls on real estate transactionsNo.
Controls on personal capital transactionsTemporary controls on personal capital transactions may be imposed if the international reserve holdings of the BR fall below the equivalent of three months’ imports.
Loans
To residents from nonresidentsOnly foreign sellers, authorized intermediaries, and authorized foreign financial institutions may extend commercial trade financing. These must be channeled through an authorized intermediary or foreign exchange accounts registered with the BR.
Provisions specific to commercial banks and other credit institutions
Maintenance of accounts abroadEffective February 14, 2003, public rediscount companies may maintain demand deposits abroad without registering with the BR.
Differential treatment of deposit accounts in foreign exchange
Reserve requirementsDeposits in foreign exchange are not subject to reserve requirements.
Investment regulations
Abroad by banksCredit institutions may invest in financial assets abroad, with the exception of instruments issued by their subsidiaries.
In banks by nonresidentsPurchases resulting in ownership exceeding 10% in a local financial institution require prior authorization of the SB. In the case of institutions undergoing privatization, the limit is 5%.
Open foreign exchange position limitsThe limits are +20% and -5% of net worth. The limit for net external assets in cash is 50% of net worth. Effective April 1, 2004, banks and foreign exchange market participants may not maintain negative positions in net external cash assets.
Provisions specific to institutional investors
Limits (max.) on investment portfolio held abroadLimits on portfolio investment by institutional investors are set according to the nature of the security, the type of funds, and the supervisory body.
Limits (min.) on investment portfolio held locallyLimits on portfolio investment by institutional investors are set according to the nature of the security, the type of funds, and the supervisory body.
Currency-matching regulations on assets/liabilities compositionThese is a limit of 20% on portfolio investments by pension funds.
Other controls imposed by securities lawsn.r.
Changes During 2003
Exchange arrangementDecember 29. The 3% withholding tax that applies to foreign exchange receipts from personal services and other transfers was abolished.
Arrangements for payments and receiptsFebruary 14. Nonbank foreign currency dealers were defined as having the authority to buy and sell currencies but not to transfer currencies through the foreign exchange market to third parties.



February 14. A customs declaration was required for the import or export of noncash monetary instruments exceeding the equivalent of US$10,000.



June 30. The reciprocal credit agreement maintained with China expired.



August 8. Nonbank foreign exchange dealers were authorized to buy and sell traveler’s checks.



February 14. Quarterly reports on nonresident accounts that are submitted to the central bank must be submitted to the SB also.



December 17. Controls on the use of balances deposited in nonresident foreign currency accounts were lifted.
Capital transactions
Controls on capital and money market instrumentsAugust 15. External financing obtained by authorized intermediaries in connection with the simultaneous purchase and sale of financial titles was no longer required to be conducted through the exchange market.
Controls on credit operationsFebruary 14. Guarantees and sureties were permitted to be issued for purchase of raw petroleum and natural gas.
Provisions specific to commercial banks and other credit institutionsFebruary 14. Public rediscount companies were permitted to maintain demand deposits abroad without registering with the BR.
Changes During 2004
Capital transactions
Provisions specific to commercial banks and other credit institutionsApril 1. Banks and foreign exchange market participants were prohibited from maintaining negative positions in net external cash assets.

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