Preparing to Export
Market-entry and Start-up Considerations
Once you have decided that entering the Colombian market is right for your company, you will need to identify how best to do it. Should you establish a presence in the country, appoint a distributor/agent or just deal directly with end customers from outside the country? The answer will depend on your product and your ambitions.
Trade Missions/Overseas Events
In some cases, taking part in overseas events such as trade shows or missions is an effective way for you to test markets, attract customers, appoint agents or distributors and make sales. UK Trade & Investment helps companies to attend trade shows worldwide and take part in trade missions to overseas markets. Trade missions are usually arranged in conjunction with sectoral bodies in the UK such as trade associations or with the British and Colombian Chamber of Commerce, based in London.
If your company is small or medium sized and Colombia is a new market for you then you may be eligible for financial support to visit the country under UK Trade & Investment's Market Visit Support scheme.
UK Trade & Investment also periodically arranges events in Colombia around specific sectors or to help promote recently arrived companies to reach out to their potential customers. Details of these events are published on the UK Trade & Investment website. Alternatively, the UK Trade & Investment team in Colombia will be willing to provide you with details of planned events.
Agents and Distributors
To export successfully to Colombia, you will probably need to employ an agent or distributor. An agent is a company's direct representative in a market and is paid commission, while a distributor sells products on to customers after buying them from the manufacturer - their income comes from the margin they can make on resale.
Employing an agent or distributor can have several advantages and can greatly reduce the set-up costs and time taken to enter the market. By employing an agent or distributor, you gain the experience of a seasoned local who will have expert local knowledge and contacts and you will have someone on the ground to look after your interests.
However, there are some drawbacks to this approach. Employing a third party will raise the cost of your products in the market and you will also lose some control over sales and/or marketing.
Using a distributor may also increase the risk of your product being copied or counterfeited. Some of the larger agents and distributors may manage so many product lines that not enough attention is given to yours. Consequently, as sales develop, you may wish to open a representative office or some other form of permanent representation.
To manage agents and distributors properly, you will need to identify the agent or distributor that is right for you. The box to the right provides a checklist of issues which you should take into account when looking for a suitable agent or distributor.
Once you have chosen an agent or distributor, you will want to ensure that your products receive a fair share (or more than a fair share) of the agent's attention. This can be achieved by:
visiting as regularly as possible at senior management level - this shows interest in and commitment to the agent and the market. This will also provide you with an opportunity to learn about conditions in the market and see how your products are faring. This is particularly important in Colombia, where it is beneficial to develop strong personal relationships to do business;
working closely with your agents and distributors to show them how they can profit from your products;
helping to prepare marketing and sales plans for your agent;
providing regular training for the sales staff and after-sales training for the technical staff in the UK;
linking performance to incentives and agreeing milestone targets.
Direct & Indirect Investment
There are both direct and indirect investment options in Colombia. Direct investments are those made through a newly created corporate entity or by acquiring equity participation in existing Colombian companies.
Indirect investments are those made by foreign investors in the financial and security markets where there are no requirements to establish or acquire participation in a Colombian company.
Colombian law provides several means by which foreign companies can engage in permanent commercial operations in Colombia. The three most commonly resorted vehicles are the opening of a foreign company branch (FCB) and the incorporation of a share corporation (SA) or simplified share corporation (SAS).
In legal terms, an FCB is an extension of the head office and for several purposes, is considered the same legal person under Colombian law. This is particularly important for companies looking to bid for state contracts as it allows them to use the experience of their head office as if it were their own.
In contrast, a corporation (whether SA or SAS) would be a new local company that is separate from any parent organisation. The SAS is a relatively new option which is intended to simplify the processes of incorporation and of the basic functions of a company (for example decisions, meetings, liquidation etc).
If you are looking to set up a local company, we strongly advise that you take the necessary legal advice to choose the most appropriate business model. The registration process has to be done before the chamber of commerce for the city in which you are operating. Parts of the process can be carried out online at www.crearempresa.com.co (Spanish only).
Joint ventures do exist in Colombia but are not the norm. Temporary partnerships for specific projects are relatively common in areas such infrastructure/construction.
Other Sources of Assistance
In addition to the services of UK Trade & Investment, a wide variety of non-subsidised private sector advice is available for companies wishing to do business in Colombia. This ranges from the business services provided by the big international professional services firms to specific services provided by specialist operators. Many of the large banks and accountancy firms provide reports on the Colombian economy.
The range of services available from the private sector includes company structuring advice, marketing, translation and interpreting, website design, partner selection, due diligence, legal services, advice on intellectual property rights and outsourcing. Some consultancies also offer more in-depth assistance on developing a strategy for Colombia and operational management.
The British and Colombian Chamber of Commerce in London and the Cámarade Comercio Colombo Británica in Bogotá also provide services to UK companies and work closely with UK Trade & Investment.
British and Colombian Chamber of Commerce
2 Belgrave Square
Tel: +44 (0)207 235 2106
Cámara de Comercio Colombo Británica
Calle 104 # 14 A-45 Of. 301
Tel: +57 (1) 256 2833
6th floor, 2 Conduit Street
London W1X 2SB
Tel: +44 (0)207 491 3535
Proexport is the Colombian investment and export promotion agency. Its office in London provides assistance to companies looking to make significant investments in the Colombian market.
The importance of good quality, independent legal advice, as in any foreign market, cannot be emphasised enough. It is essential to take this into consideration at the early stages of doing business in Colombia. Always seek good quality, independent legal advice before starting or signing anything that could have legal implications for your company, such as contracts or representation agreements. Specialist legal advice on the protection of intellectual property rights is also recommended and there are a number of highly qualified patent agents' firms available.
Legal advice can be expensive, but it is money well spent. It is far better to ensure that your interests in Colombia are fully protected than to leave yourself vulnerable to untoward consequences - which can be even more expensive to sort out.
The UK Trade & Investment office in Colombia is able to provide a list of lawyers that you may want to consider using.
Source - UKTI