Annual Report on Exchange Arrangements and Exchange Restrictions, 2007
Chapter

COLOMBIA

Author(s):
International Monetary Fund. Monetary and Capital Markets Department
Published Date:
October 2007
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(Position as of May 31, 2007)

Status under IMF Articles of Agreement
Article VIIIDate of acceptance: August 1, 2004.
Exchange Measures
Restrictions and/or multiple currency practicesThe staff report for the 2006 Article IV consultation with Colombia states that as of October 16, 2006, Colombia maintained the following two exchange measures subject to Fund approval under Article VIII: (a) an exchange restriction arising from a special foreign exchange regime for the hydrocarbon sector that limits the availability of foreign exchange for branches of foreign corporations that choose to participate in the regime, and (b) a multiple currency practice and an exchange restriction arising from a tax on remittances abroad of nonresident income which is withheld when the foreign exchange is purchased. (Country Report No. 06/408)
International security restrictionsNo.
References to legal instruments and hyperlinksn.a.
Exchange Arrangement
CurrencyThe currency of Colombia is the Colombian peso.
Other legal tenderVarious commemorative gold coins are also legal tender.
Exchange rate structureUnitary.
Classification
Managed floating with no predetermined path for the exchange rateAll foreign exchange transactions are conducted at a market-determined exchange rate. The Banco de la República (BR) intervenes in the foreign exchange market to adjust the level of international reserves, limit excess volatility of the exchange rate, and influence the speed of adjustment of the nominal exchange rate.
Exchange taxNo.
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). Effective May 7, 2007, the overall gross exposure of each participant in the derivative foreign exchange market may not exceed 500% of their total capital.
References to legal instruments and hyperlinkswww.banrep.gov.co/politica_cambiaria/index.html.
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 hydrocarbons 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.



Residents 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 may not advertise themselves as or use any denomination that gives the impression they are foreign currency exchange dealers. Exchange market intermediaries (EMIs) must adopt the necessary procedures for clearing and/or settling their interbank transactions in foreign currency, to reduce the risks involved in such settlements. EMIs who are registered with the BR and comply with the established requirements are allowed to distribute and sell prepaid debit cards or similar instruments issued by foreign financial institutions. EMIs are authorized to conduct business in exchange rate derivatives with nonresidents who hold foreign investments registered with the BR or who have offered issues on Colombia’s public securities market. Effective May 31, 2006, payment in foreign currency is permitted for foreign-currency-denominated derivatives.
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 an LAIA agreement for its trade with Colombia.
Administration of controlSurveillance over exchange rate policies implemented by the board of directors of the BR is exercised by the Superintendency of Corporations, National Bureau of Revenue and Customs, and Financial Superintendency (SF), which, effective January 1, 2006, replaced the Superintendency of Securities and Exchange and the Superintendency of Banks.
Payments arrearsNo.
Controls on trade in gold (coins and/or bullion)No.
Controls on exports and imports of banknotesImports 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 exportsYes.
On importsYes.
References to legal instruments and hyperlinkswww.banrep.gov.co/reglamentacion/rg_regimen1.htm; External Resolution 8 of 2000, Articles 82 and 79.
Resident Accounts
Foreign exchange accounts permittedYes.
Held domesticallyThese accounts may be opened only 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. 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 accounts registered 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.
References to legal instruments and hyperlinkswww.banrep.gov.co/reglamentacion/rg_regimen1.htm; External Resolution 8 of 2000, Article 59.1.d.
Nonresident Accounts
Foreign exchange accounts permittedOnly financial 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 accountsOnly financial institutions are authorized to receive trade-related deposits from nonresident individuals or firms and remittances from workers abroad for purchases of housing.
Convertible into foreign currencyNo.
Blocked accountsNo.
References to legal instruments and hyperlinkswww.banrep.gov.co/reglamentacion/rg_regimen1.htm; External Resolution 8 of 2000, Articles 11, 18, and 59.
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 requirement, 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 chicken parts; edible chicken offal; seasoned and frozen chicken parts; some pharmaceutical products for controlled drugs and precursor chemicals for narcotics production; weapons and ammunition; used tires; scrap rope and cords; special aircraft; and warships.
Negative listThe following imports are prohibited: chemical, biological, and nuclear weapons; and merchandise prohibited to be imported by international agreements.
Licenses with quotasQuotas have been set for sweets, cocoa, chocolates, and other prepared foodstuffs containing cocoa; infant formula; and meat products under the CAN-MERCOSUR agreement.
Quotas were applied to some men’s clothing items from the People’s Republic of China during April-June 2006 and to some other men’s clothing items during October 2006- January 2007.
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 10.1%.
State import monopolyNo.
References to legal instruments and hyperlinkswww.mincomercio.gov.co/VBeContent/home.asp.
Exports and Export Proceeds
Repatriation requirementsExport proceeds must be repatriated within six months of receipt of payment for the 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 currently set at zero.
Documentation requirementsAll proceeds from the export of goods are to be handled via EMIs or checking accounts outside Colombia that are registered with the BR. Information on the shipping documents and the custom declaration must be submitted.
Export licensesNo.
Export taxesNo.
References to legal instruments and hyperlinkswww.banrep.gov.co/reglamentacion/rg_regimen1.htm; Resolution 8 of 2000, Article 8.
Payments for Invisible Transactions and Current Transfers
Controls on these transfers
Investment-related payments
Prior approvalNet profits from portfolio investments may be transferred without limitation. 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’ worth of imports.
References to legal instruments and hyperlinkshttp://juriscol.banrep.gov.co; Law 9 of 1991, Article 15; Decree 4210 of 2004; Decree 4477 of 2005.
Proceeds from Invisible Transactions and Current Transfers
Repatriation requirementsNo.
Restrictions on use of fundsNo.
References to legal instruments and hyperlinkshttp://juriscol.banrep.gov.co; Decree 2080 of 2000; www.banrep.gov.co/documentos/reglamentacion/pdf/Decreto2080de2000ysusmodific.Ene13de2006.pdf.
Capital Transactions
Controls on capital transactionsYes.
Repatriation requirementsn.a.
Surrender requirementsn.a.
Controls on capital and money market instrumentsEffective June 13, 2006, the MOF lifted the requirement that redemptions of portfolio investments be restricted for a period of one year from the date of investment. In addition, net profits and income from portfolio investments may be transferred without limitation. Effective May 23, 2007, portfolio inflows are subject to an unremunerated reserve requirement (URR) of 40% to be held in the BR for six months. Investors have the option of early withdrawal, but with substantial penalties.
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 prior approval of the SF.
Sale or issue locally by nonresidentsThese transactions are subject to prior approval of the SF.
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 Colombia.
Sale or issue abroad by residentsPrior approval of the SF 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 it involves investments in portfolio funds managed by brokerage firms or trust companies.
Sale or issue locally by nonresidentsThese transactions require SF 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 Colombia.
Sale or issue abroad by residentsThese transactions require the prior approval of the SF.
On money market instrumentsThe regulations governing bonds or other debt securities apply.
On collective investment securitiesThe regulations governing bonds or other debt securities apply.
Controls on derivatives and other instrumentsEffective May 31, 2006, payment in foreign currency is authorized for foreign currency derivatives. Authorized foreign currency derivatives include all derivative instruments denominated in currencies quoted on Bloomberg, Reuters, or Telerate. Effective May 7, 2007, the overall gross exposure of each participant in the derivative foreign exchange market may not exceed 500% of their total capital.
Purchase locally by nonresidentsOnly foreign investors registered with the BR and foreign companies that have offered issues on Colombia’s public securities market are allowed to purchase cover from EMIs, who are the only authorized providers.
Sale or issue locally by nonresidentsSales or issues of derivatives may be conducted only with professional counterparts registered with futures markets from OECD countries or with companies in derivative operations valued at least at $1 billion (notional amount).
Purchase abroad by residentsResidents may conduct these transactions with professional counterparts with contracts nominally valued at the equivalent of at least $1 billion a year.
Sale or issue abroad by residentsOnly EMIs and stock exchanges may offer derivatives on the exchange rate (futures or forward cover).
Controls on credit operations
Commercial credits
To residents from nonresidentsPrivate import trade financing may be extended only by a nonresident seller, an intermediary authorized by the BR, or a foreign financial institution. 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, which is 40%, effective May 7, 2007 (previously, zero), to be held in the BR for six months. Effective May 7, 2007, external borrowing to prefinance exports is subject to an 11% URR to be held in the BR for one year. The URR is indexed to the exchange rate.
Financial credits
To residents from nonresidentsResidents may obtain loans in foreign currency only from financial entities outside Colombia that are approved by the BR and an EMI. Effective May 7, 2007, financial credits to residents are subject to a 40% URR to be held for six months in the BR. Official financing of the public sector is exempted.
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 SF are permitted to invest in financial and insurance companies outside Colombia, subject to prior approval by the SF.
Inward direct investmentThe purchase of 10% or more of the shares in a domestic financial institution requires the approval of the SF. 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’ worth of imports.
Controls on real estate transactionsNo.
Controls on personal capital transactions
Loans
To residents from nonresidentsResidents may obtain loans in foreign currency only from financial entities outside Colombia that are approved by the BR, an EMI, and the foreign supplier. Financial credit may be subject to prior deposit requirements (currently zero).
References to legal instruments and hyperlinkswww.banrep.gov.co/reglamentacion/rg_regimen1.htm; Resolution 8 of 2000, Articles 42.3, 16, 23, and 38; www.banrep.gov.co/reglamentacion/rg_cambia3.htm; External Regulatory Circular DODM-144; http://juriscol.banrep.gov.co; Law 9 of 1991.
Provisions Specific to the Financial Sector
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 banksCredit institutions (banks) may invest in any type of financial asset abroad, except for instruments issued by their subsidiaries. Financial institutions monitored by the SF are permitted to invest in financial and insurance companies outside Colombia, subject to prior approval by the SF.
In banks by nonresidentsPurchases exceeding 10% of the capital of a domestic bank require prior authorization of the SF.
Open foreign exchange position limitsThe maximum and minimum limits are 20% and 5%, respectively, of average net worth over three business days. The upper limit for net foreign assets in cash is 50% and the lower limit is zero of average net worth over three business days. Effective May 7, 2007, the overall gross exposure of each participant in the foreign exchange derivative market may not exceed 500% of their total capital.
Provisions specific to institutional investors
Insurance companies
Limits (max.) on investment portfolio held abroadUp to 30% of an insurance company’s portfolio may be invested in securities issued or backed by agents abroad.
Pension funds
Limits (max.) on investment portfolio held abroadCompanies managing obligatory pension and severance funds may not invest more than 20% of the value of their portfolio in securities issued by entities abroad.
Currency-matching regulations on assets/liabilities compositionThere is a limit of 30% on the short position of pension funds.
Investment firms and collective investment funds
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.
References to legal instruments and hyperlinkswww.superfinanciera.gov.co.
Changes during 2006
Arrangements for payments and receiptsJanuary 1. The SF replaced the Superintendency of Securities and Exchange and the Superintendency of Banks.
May 31. Payment in foreign currency was permitted for foreign-currency-denominated derivatives.
Capital transactions
Controls on capital and money market instrumentsJune 13. The MOF lifted the requirement that redemptions of portfolio investments be restricted for a period of one year from the date of investment. In addition, net profits and income from portfolio investments may be transferred without limitation.
Controls on derivatives and other instrumentsMay 31. Payment in foreign currency was authorized for foreign currency derivatives. Authorized foreign currency derivatives include all derivative instruments denominated in currencies quoted on Bloomberg, Reuters, or Telerate.
Changes during 2007
Exchange arrangementMay 7. The overall gross exposure of each participant in the foreign exchange derivative market may not exceed 500% of their total capital.
Capital transactions
Controls on capital and money market instrumentsMay 23. Portfolio inflows are subject to a URR of 40% to be held in the BR for six months.
Controls on derivatives and other instrumentsMay 7. The overall gross exposure of each participant in the foreign exchange derivative market may not exceed 500% of their total capital.
Controls on credit operationsMay 7. Advance payments of more than four months were made subject to a 40% deposit requirement to be held in the BR for six months. External borrowing to prefinance exports was made subject to an 11% URR to be held in the BR for one year. Financial credits to residents were made subject to a 40% URR to be held in the BR for six months.

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