Doing Business In Colombia

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Finance and risk management

Currencies/Money

Getting paid

When exporting to Colombia, normal commercial rules should be followed. You should discuss the arrangements for security of payment with the international department of your UK bank or a UK-based bank that has offices in Colombia.

If you are a first-time exporter to Colombia, the standard method of receiving payment for your goods is by documentary Letter of Credit. The opening of the documentary Letter of Credit is based on the contract signed between the Colombian buyer and the foreign seller.

There are no problems regarding Letters of Credit opened by Colombian banks being accepted by foreign banks. The Colombian bank will make payment provided that the requirements of the Letter of Credit are met.

However, you should be aware that a Letter of Credit is a form of contract between two banks. A bank will make payment provided that the documents submitted to it are in strict compliance with the conditions of the Letter of Credit, this is regardless of the purchase contract. To prevent the possibility of a payment being made if the terms of the purchase contract are not met, the seller should check the Letter of Credit against the terms of the purchase contract and request amendments from the buyer if necessary.

Open Account and Bills for Collection are other payment methods commonly used between UK exporters and Colombian importers when a trustworthy relationship between the two parties has developed. Major exports and those requiring long-term finance will require specialist payment and financing.

 

Insurance

Bribery and corruption

There can be problems of bribery and corruption in Colombia. Bribery is illegal. It is an offence for a British national or someone who is ordinarily resident in the UK, a body incorporated in the UK or a Scottish partnership, to bribe anywhere in the world.

In addition, a commercial organisation carrying on a business in the UK can be liable for the conduct of a person who is neither a UK national nor resident in the UK or a body incorporated or formed in the UK. In this case it does not matter whether the acts or omissions which form part of the offence take place in the UK or elsewhere.

Colombia ranks joint 80th in the world in the 2011 Transparency International Corruption Perceptions Index (CPI), putting it slightly behind Brazil, alongside Peru and ahead of Argentina, Mexico and Venezuela. Other data from Transparency International suggests that the problem is most serious in the political field, although it is also present in business.

Visit the Business Anti-Corruption portal page www.business-anti-corruption.com, which provides advice and guidance about corruption in foreign markets and some basic but effective procedures you can follow to protect your company from it.

Commercial insurance in Colombia usually covers transportation insurance, financial insurance, fire insurance and multi-risk insurance.

The private sector provides credit insurance for exports of consumer goods, raw materials and other similar goods. Speak to your banker or insurance broker for more information, or contact the British Insurance Brokers' Association for impartial advice. Contact details are as follows:

British Insurance Brokers' Association
John Stow House
18 Bevis Marks
London
EC3A 7JB
Tel: +44 (0)870 950 1790
Email: enquiries@biba.org.uk
Website: www.biba.org.uk

Private sector insurance has some limitations though, particularly for sales of capital goods, major services and construction projects that require longer credit packages or are in riskier markets.

Commercial risk insurance for capital goods and major projects:

UK Export Finance is the UK's official export credit agency. Its aim is to help UK exporters of goods or services win business and complete contracts with confidence. UK Export Finance can support contracts valued as low as £20,000, and potentially up to hundreds of millions of pounds. The responsibility for providing insurance cover for consumer goods that are sold on credit of less than two years rests with private sector insurers.

UK Export Finance provides services such as:

  • insuring UK exporters against non-payment by their overseas buyers;

  • helping overseas buyers to purchase goods and/or services from UK exporters by guaranteeing bank loans to finance those purchases;

  • sharing credit risks with banks in order to assist exporters in the raising of tender and contract bonds, in accessing pre- and post-shipment working capital finance and in securing confirmations of Letters of Credit;

  • insuring UK investors in overseas markets against political risks.

UK Export Finance works closely with exporters, sponsors, banks and buyers to put together the right package for each contract. The full range of UK Export Finance facilities is available to support exports to and investments in Colombia.

To help those customers who are relatively new to exporting, UK Export Finance has a customer service team which is dedicated to helping new customers through the process of credit insurance and export finance.

For more detailed enquiries, please contact UK Export Finance's customer service team:
Tel:+44 (0)20 7512 7887      Email: customerservice@ecgd.gsi.gov.uk

 

Due diligence

Due diligence is a security measure that companies often choose to undertake in order to check the viability of potential new business before contracts are signed.

Due diligence is strongly advisable, particularly in connection with the acquisition of a shareholding interest either in a limited liability company or in corporation, and in the acquisition of all quotas of a limited liability company or shares of a corporation.

For practical purposes, it is recommended that due diligence covers all accounting, tax and legal issues concerning a particular business enterprise. Special attention should be given to ongoing, or threatened, commercial and tax claims at administrative and judicial level.

Wherever the purchase of property is involved, a review of relevant status of the land is crucial to establish that the seller has valid title and that the property is free and unencumbered. This is of particular importance in Colombia, given the history of displacement and cases of illegal acquisition of land.

 

Intellectual property rights

Colombia is a signatory to the main intellectual property treaties and is a member of the World Intellectual Property Organization. Its legal provisions are therefore generally consistent with international standards.

In principle, Colombia has a sound intellectual property rights and patent system that does not discriminate unduly against foreign companies. However, the effectiveness and impartiality of enforcement is variable and any legal processes will be both protracted and costly.

For companies whose business involves intellectual property, there are issues of piracy and contraband to consider, particularly for goods such as books, CDs, textiles, cosmetics and spare parts.

The UK Intellectual Property Office is the government body responsible for the national framework of intellectual property rights in the UK, comprising patent, designs, trademarks and copyright. If you are thinking about trading internationally, then you should consider registering your intellectual property rights abroad. For more details on intellectual property abroad, please visit the UK Intellectual Property Office website at: www.ipo.gov.uk

Further information is also available from the Colombia Intellectual Property Office within the Superintendencia de Industria y Comercio. They can be contacted at:

Globe Trotting

Superintendencia de Industria
y Comercio
Carrera 13 No. 27-00
Bogotá
Tel: +57 (1) 587 0000
Website: www.sic.gov.co
(English language option available)

 

Managing security and other risks

While most visits to Colombia are problem free, visitors should be aware that problems can arise. Colombia's cities are broadly similar to any large cities around the world, and the problems that visitors face are those that exist in all large cities. The FCO travel advice available through www.gov.uk/fco provides the latest information and advice for those visiting.

Colombia does still face the problems associated with drug trafficking and particularly in rural areas, an ongoing struggle between armed groups and the Government.

For companies that plan to operate in more rural areas of Colombia (for example those related to the extractive sector or agriculture), professional security advice will be an important part of your research work.

High-profile businesses can become targets and will need to consider adequate security for office buildings and high-level personnel. Most major office buildings and residential blocks in smarter areas of town have private security. Businesses operating outside of main cities will need to give adequate thought to protective security and take specialist advice.

Colombia has long given rise to justified human rights concerns. President Santos has taken a different approach from his predecessor, proposing and steering through landmark legislation to compensate victims of violence and restore land stolen during the conflict (when owners were often forcibly displaced). The Colombian Government is engaged in dialogue with human rights groups, and plans a national human rights conference, but there is a long way to go in terms of effective implementation, especially in remote areas where much abuse takes place.

In Colombia, as anywhere else, we encourage and expect British companies to respect human rights in the places where they do business. Both UK Trade & Investment and the Embassy provide advice for British companies to ensure that this happens.

Further information is available onthe Overseas Business Risk pages at: www.ukti.gov.uk

 

Source - UKTI

 

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