Foreign direct investment (FDI) in Colombia

FDI in Figures

According to UNCTAD's 2022 World Investment Report, FDI inflows to Colombia grew by 26% in 2021, to USD 9.4 billion, mainly led by inflows in the manufacturing sector, transport, logistics, communication services, and the mining and hydrocarbon industries. Over the same period, the stock of FDI reached USD 218.9 billion, while the number of Greenfield Investments in the country grew to 139 (compared to 111 in 2020). The US is the largest investor in the country, while the EU is the largest supplier of FDI geographically. The sectors attracting the most FDI are oil and mining, financial and professional services and manufacturing. The country's large-scale social protests and the downgrading of its investment rating have weighed heavily on FDI inflows.

According to the Economist Business Environment, Colombia ranks 53 out of the 82 countries reviewed for their investment climate. The Colombian government actively encourages FDI, and it establishes the same investment regulations on foreign investors that it does on national ones. Recently, the government introduced a special tax regime for mega-investments, providing tax breaks and other fiscal incentives. Furthermore, the government is working on implementing more measures to make doing business in Colombia easier, which include the creation of a one-stop shop for investors to centralise and speed up procedures and the strengthening of the country's tax-exempt zones. Opportunities in the infrastructure sector are numerous since the Colombian government launched in 2012 the “4G” plan, Latin America’s biggest infrastructure program, amounting to around USD 5.5 billion. The government launched in 2019 the “5G network” plan in order to developed a higher connectivity for its growing digital sector. This sector showed signs of FDI dynamism when Teleperformance (France) and Amazon (US) announced plans to increase their business operations in the country, while in the customer experience sector, Alorica (US), Transcom (Sweden) and TDCX (Singapore) announced new openings. Moreover, special taxes policies have been set up for any investment in creative and innovative activities/sectors. According to ProColombia, the government’s investment promotion agency, some of the most significant investments made in the country recently involved Chinese companies, such as the acquisition of  Neo Lithium Corp by Zijin Mining for USD 380 million, and the construction of the Bogota metro system, which is being led by China Harbor Engineering Co.

What to consider if you invest in Colombia

Strong Points

Advantages for FDI in Colombia:

• Colombia has economic and political stability that has allowed it to maintain steady and stable growth and gradually create a business-friendly environment, despite internal security conflicts.
• The country has an attractive emerging economy that relies in particular on abundant natural resources (coffee, oil, gold), a young, skilled and competitive workforce, a booming tourism sector and free trade agreements (including within the Pacific Alliance created in 2012 as well as with the European Union, the United States and South Korea).
• The geographical position of the country is a strategic point between the different markets of the region but also with southeast Asia.
• The country has modern port and airport infrastructures, thus facilitating trade.
• The population of 51.4 million (IMF, 2021) is a significant consumer market with rising incomes.
• A skilled labour force.
• The banking and financial systems are generally sound, independent and robust.
• The peace agreement with the FARC (the oldest and largest guerrilla movement in Latin America) shows that Colombia wants to rid itself of the risks associated with drug trafficking and armed struggle, thus ensuring a secure environment for foreign companies and investors.

Weak Points

Among the main factors that are detrimental to foreign direct investment are:

• Relatively random application of intellectual property rights
• A lack of transparency in many calls for tenders
• The largescale informal sector
• Security risk remains the main obstacle to the country's development, but the peace agreement signed with the FARC rebel group should help significantly improve the situation.
• The Colombian economy, which is not very diversified, remains highly dependent on commodity prices and sensitive to the US economic situation (the United States being the country's main trading partner).

Government Measures to Motivate or Restrict FDI

The Colombian government actively encourages foreign direct investment (FDI). Colombia imposes the same investment restrictions on foreign investors that it does on national investors. But, all conditions being equal, during tender processes national offers are preferred over foreign ones.

Today the Colombian government is reaping the rewards of the policy it implemented to secure democracy, whose objective is to create favourable economic conditions in order to once again give investors confidence, especially foreign investors. In this context and after the establishment of many free trade agreements (for example the Pacific Alliance, the United States and the EU), the government continues to make efforts to consolidate, liberalise and diversify its economy. Major tax reform was introduced in 2016 aimed mainly at simplifying the tax system and at the same time increasing the tax revenues of the state. Finally, the various tax reforms passed during the decade have all tended to reduce the tax burden on companies (by lowering taxes on profits to 25% for example) as well as a considerable reduction in customs duties.

The "Commitment to Colombia" program aims to keep investments on an upswing, regardless of the disturbances caused by the COVID-19.  This government strategy is based on two pillars: tax incentives for investors and the optimization of business processes. 

Bilateral investment conventions signed by Colombia

Colombia has signed 19 bilateral investment treaties. For more information, consult the Investment Policy Hub's Colombia page.