Annual Report on Exchange Arrangements and Exchange Restrictions 2005
Chapter

COLOMBIA

Author(s):
International Monetary Fund. Monetary and Capital Markets Department
Published Date:
September 2005
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(Position as of December 31, 2004)

Status Under IMF Articles of Agreement
Article VIIIDate of acceptance: August 1, 2004.
Exchange Arrangement
CurrencyThe currency of Colombia is the Colombian peso.
Other legal tenderVarious commemorative gold coins are also legal tender.
Exchange rate structureUnitary.
Classification
Independently floatingAll foreign exchange transactions are conducted at a market-determined exchange rate. The Banco de la República (BR) may intervene in the foreign exchange market to adjust the level of international reserves or control the volatility of the exchange rate.
Exchange taxRemittances of profits and payments for technical services abroad are subject to remittance taxes of 7% and 10%, respectively.
Exchange subsidyNo.
Forward exchange marketDerivative contracts are permitted on underlying commodity and financial transactions to cover exchange rate, interest rate, or shareholder index price risks. The types of contracts permitted include standardized stock exchange contracts and over-the-counter contracts (forwards and swaps).
Arrangements for Payments and Receipts
Prescription of currency requirements
Use of foreign exchange among residentsThe use of foreign exchange among residents is prohibited, with the exception of (1) transactions between mineral sector companies (e.g., coal, nickel, gas, and oil) and service companies inherently related to the hydrocarbon sector; (2) sales of fuel for international transportation; (3) purchases and sales of oil and gas produced domestically by Ecopetrol and other entities refining oil on an industrial scale; and (4) payments in foreign exchange between residents made through current clearing accounts opened for this purpose. Effective July 27, 2004, residents in the country may purchase and sell foreign currency professionally, in cash or traveler’s checks, after enrolling in the commercial registry and the registry of foreign currency buyers and sellers. Authorization does not include the direct or indirect offer of professional services such as the marketing of checks or securities in foreign currency, international payments, money orders and remittances, or any type of channeling through the exchange market for third parties. Residents in the country may not advertise themselves or use any denomination that gives the impression they are foreign currency exchange dealers. Effective October 22, 2004, exchange market intermediaries (EMIs) are required to adopt the necessary procedures for clearing and/or settling their interbank transactions in foreign currency, so as to reduce the risks involved in such settlements.
Payments arrangements
Regional arrangementsSettlements between Colombia and the other LAIA countries may be conducted through accounts maintained within the framework of the multilateral clearing system of the LAIA. República Bolivariana de Venezuela requires a LAIA agreement for its trade with Colombia.
Administration of controlAdministration of control is exercised by the MOF, BR, the Superintendency Banks (SB), the Superintendency of Securities and Exchange, the Superintendency of Corporations, and the National Bureau of Revenue and Customs.
International security restrictionsNo.
Payments arrearsNo.
Controls on trade in gold (coins and/or bullion)No.
Controls on exports and imports of banknotesEffective August 23, 2004, imports and exports of domestic or foreign currency (except those by the BR) in excess of the equivalent of $10,000 must be effected through security transport companies or exchange market intermediaries.
On exports
Domestic currencyYes.
Foreign currencyYes.
On imports
Domestic currencyYes.
Foreign currencyYes.
Resident Accounts
Foreign exchange accounts permittedYes.
Held domesticallyThese accounts may be opened by travel and tourist agencies, international shipping companies, port and airport service companies in free trade areas, bonded warehouses, and public and private companies conducting technical cooperation programs. Effective June 18, 2004, public or private companies conducting international technical cooperation programs with the national government may receive foreign currency deposits in amounts disbursed by international cooperation agencies.
Held abroadTransactions that are required to be channeled through the exchange market, such as those relating to debt, investment, purchases of derivatives, and trade-related operations, must use registered accounts with the BR. Unregistered accounts are used for all other transactions.
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 deposits in foreign currency from nonresident individuals and firms, diplomatic and consular missions, and multilateral organizations and their officials.
Domestic currency accountsFinancial institutions are authorized to receive trade-related deposits from nonresident individuals or firms and, effective June 12, 2004, remittances from workers abroad for purchases of housing.
Convertible into foreign currencyNo.
Blocked accountsNo.
Imports and Import Payments
Foreign exchange budgetNo.
Financing requirements for imports
Advance payment requirementsFinancing of advance import deposits, except for imports of capital goods, may be subject to a deposit, but it is currently set at zero.
Documentation requirements for release of foreign exchange for importsAll payments for imports must be conducted through authorized intermediaries or current clearing accounts with appropriate shipping documents and customs declarations.
Import licenses and other nontariff measures
Positive listThere is a list of unrestricted imports applicable to all countries. The Ministry of Trade, Industry and Tourism is authorized to administer licensing requirements with respect to imports under special import-export regimes, imports subject to antidumping controls, and imports subject to set-off policies or safeguards. Imports of the following goods are subject to prior licensing requirements: fresh, chilled, or frozen poultry; edible poultry offal; prepared and preserved poultry; pharmaceutical and chemical products; weapons and ammunitions; used tires; scrap ropes and cords; special aircraft; and warships.
Negative listThe following imports are prohibited: chemical, biological, and nuclear weapons; precursor products for narcotics production; narcotics or drugs not authorized by the Ministry of Health; and merchandise prohibited for import by international agreements.
Other nontariff measuresControls are applied for sanitary, security, health, environmental protection, or national production purposes.
Import taxes and/or tariffsWith certain exceptions, imports are subject to the CET of the Andean Community. The simple average tariff rate is approximately 10.2%.
State import monopolyNo.
Exports and Export Proceeds
Repatriation requirementsExport proceeds must be repatriated within six months of shipment of goods.
Surrender requirementsExporters are allowed to retain foreign currency from exports in accounts abroad that are registered with the BR.
Financing requirementsIf export proceeds are due more than 12 months after the export declaration, the transactions are classified as credit operations. When proceeds are received in advance and delivery is due more than four months later, a deposit requirement may be imposed, but it is presently set at zero.
Documentation requirementsAll proceeds from the export of goods are to be handled via EMI or checking accounts outside the country that are registered with the BR. Information on the shipping documents and the custom declaration must be submitted.
Export licensesNo.
Export taxesNo.
Payments for Invisible Transactions and Current Transfers
Controls on these transfers
Investment-related payments
Prior approvalEffective December 14, 2004, redemptions of investments on the public securities market are not permitted for a year from the date of investment. However, net profits from portfolio investments may be remitted in periods of shorter than a year.
Transfers of profits and repatriations of capital from registered foreign investment may be temporarily restricted if international reserve holdings of the BR fall below the equivalent of three months’ imports.
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 December 14, 2004, redemptions of portfolio investments are restricted for a period of one year. However, net profits and income from portfolio investments may be transferred before one year elapses.
On capital market securities
Shares or other securities of a participating nature
Purchase locally by nonresidentsThe purchase of 10% or more of the stock of a Colombian financial institution requires the prior approval of the SB. The purchase of more than 20% of the entire issue of fixed-income securities maturing in less than two years is not allowed when involving portfolio investment funds managed by brokerage firms or trust companies authorized by the Securities Exchange Commissioner (SEC).
Sale or issue locally by nonresidentsThese transactions are subject to the prior approval of the SEC.
Purchase abroad by residentsCompanies managing obligatory pension and severance funds may not invest more than 20% of the value of their portfolio in securities issued by entities located outside the country.
Sale or issue abroad by residentsPrior approval from the SEC is required.
Bonds or other debt securities
Purchase locally by nonresidentsThe purchase of more than 20% of the entire issue of fixed-income securities maturing in less than two years is not allowed when involving investments in portfolio funds managed by brokerage firms or trust companies.
Sale or issue locally by nonresidentsThese transactions require SEC approval.
Purchase abroad by residentsCompanies managing obligatory pension and severance funds may not invest more than 20% of the value of their portfolio in securities issued by entities located outside the country.
Sale or issue abroad by residentsThese transactions require the prior approval of the SEC.
On money market instrumentsThe regulations governing bonds or other debt securities apply.
Purchase locally by nonresidentsThe purchase of more than 20% of the entire issue of fixed-income securities maturing in less than two years is not allowed when involving investments in portfolio funds managed by brokerage firms or trust companies.
Sale or issue locally by nonresidentsPrior approval from the SEC is required.
Purchase abroad by residentsCompanies managing obligatory pension and severance funds may not invest more than 20% of the value of their portfolio in securities issued by entities located outside the country.
Sale or issue abroad by residentsPrior approval from the SEC is required.
On collective investment securitiesThe regulations governing bonds or other debt securities apply.
Purchase locally by nonresidentsThe purchase of more than 20% of the entire issue of fixed-income securities maturing in less than two years is not allowed when involving investments in portfolio funds managed by brokerage firms or trust companies.
Sale or issue locally by nonresidentsPrior approval from the SEC is required.
Purchase abroad by residentsCompanies managing obligatory pension and severance funds may not invest more than 20% of the value of their portfolio in securities issued by entities located outside the country.
Sale or issue abroad by residentsPrior approval from the SEC is required.
Controls on derivatives and other instruments
Purchase locally by nonresidentsOnly purchases by foreign investors registered with the BR are allowed, and domestic risks must be covered in the local market.
Purchase abroad by residentsResidents may conduct these transactions with professional counterparts with contracts nominally valued at least $1 billion per year.
Sale or issue abroad by residentsOnly exchange market intermediaries and stock exchanges may offer derivatives on the exchange rate (futures or forward cover).
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 nonresidentsResidents of the country may obtain loans in foreign currency only from financial entities outside the country that are approved by the BR and EMI. Financial credit is subject to prior deposit requirements (currently zero).
Guarantees, sureties, and financial backup facilities
By residents to nonresidentsThese facilities are authorized only when associated with exchange market transactions.
Controls on direct investment
Outward direct investmentFinancial institutions monitored by the SB are permitted to invest in financial and insurance companies outside the country, subject to prior approval by the SB.
Inward direct investmentThe purchase of 10% or more of the shares in a domestic financial institution requires the approval of the SB. Investments in the defense sector and in the handling of toxic and radioactive substances are not permitted.
Controls on liquidation of direct investmentThe terms of recovery of a registered investment and remittance of profits may be temporarily changed if the BR’s international reserves fall below three months of imports.
Controls on real estate transactionsNo.
Controls on personal capital transactions
Loans
To residents from nonresidentsResidents of the country may obtain loans in foreign currency only from financial entities outside the country that are approved by the BR, EMI, and the foreign supplier. Financial credit may be subject to prior deposit requirements (currently zero).
Provisions specific to commercial banks and other credit institutions
Differential treatment of deposit accounts in foreign exchange
Reserve requirementsDeposits in foreign currency are not subject to reserve requirements.
Investment regulations
Abroad by banksFinance companies may invest in financial assets abroad in instruments issued by their subsidiaries.
In banks by nonresidentsPurchases exceeding 10% of the capital of a domestic finance company require prior authorization of the SB.
Open foreign exchange position limitsThe maximum and minimum limits are +20% and –5% of net worth, respectively. Effective January 31, 2004, the upper limit for net foreign assets in cash is 50% of net worth.
Provisions specific to institutional investors
Limits (max.) on securities issued by nonresidentsCompanies managing obligatory pension and severance funds may not invest more than 20% of the value of the portfolio in securities issued by nonresidents.
Limits (max.) on investment portfolio held abroadCompanies managing obligatory pension and severance funds may not invest more than 20% of the value of the portfolio in securities issued by nonresidents.
Limits (min.) on investment portfolio held locallyInvestment of foreign funds in fixed-income securities maturing in less than two years may not exceed 20% of the original amount of the same issue.
Currency-matching regulations on assets/liabilities compositionThere is a limit of 20% on the short position of pension funds.
Other controls imposed by securities lawsn.r.
Changes During 2004
Status under IMF Articles of AgreementAugust 1. Colombia accepted the obligations of Article VIII, Sections 2, 3, and 4, of the IMF’s Articles of Agreement.
Arrangements for payments and receiptsJuly 27. Residents in the country could purchase and sell foreign currency professionally, in cash or traveler’s checks, after enrolling in the commercial registry and the registry of foreign currency buyers and sellers.
August 23. Imports and exports of domestic or foreign currency (except those by the BR) in excess of the equivalent of $10,000 were required to be effected through security transport companies or exchange market intermediaries.
October 22. EMIs were required to adopt the necessary procedures for clearing and/or settling their interbank transactions in foreign currency, so as to reduce the risks involved in such settlements.
Resident accountsJune 18. Public or private companies conducting international technical cooperation programs with the national government were authorized to receive foreign currency deposits in amounts disbursed by international cooperation agencies.
Nonresident accountsJune 12. The use of remittances from workers abroad for purchases of housing through nonresident peso accounts was authorized.
Payments for invisible transactions and current transfersDecember 14. Redemptions of portfolio investments were restricted for a period of a year from the date of investment; however, net profits could be remitted before one year elapsed.
Capital transactionsDecember 14. Redemptions of portfolio investments were restricted for a period of a year from the date of investment; however, net profits could be remitted before one year elapsed.
Provisions specific to commercial banks and other credit institutionsJanuary 31. Banks and other credit institutions were not permitted to hold more than 50% of net worth in foreign assets.

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