This is a best prospect industry sector for this country. Includes a market overview and trade data.
Last Published: 8/17/2018
Overview
On August seventh, 2018, President-elect Ivan Duque Marquez will take position as leader of Colombia and Commander-in-Chief of the Armed Forces. The top priorities of his government in the defense sector have yet to be revealed. However, persistent problems will continue to shape the new administration’s agenda: record high coca production, public safety issues attributed to the ELN guerrilla group, criminal organizations (BACRIM), and instability in Venezuela.

President-elect Duque has lived in the United States for over a decade, and he is familiar with the laws in the United States that govern American companies and business ethics, such as the U.S. Foreign Corrupt Practices Act. One of Duque’s priorities will likely be fighting corruption in public entities, which is pervasive in the Colombian government and has been the focus of the press and the Colombian public over the last few years, especially in light of the recent Odebrecht scandal that exposed endemic corruption across Latin America. A focus on corruption could open opportunities for U.S. companies in the provision of goods and services such as training and seminars. Outgoing President Santos recently signed an agreement to join as a Global Partner of the North Atlantic Treaty Organization (NATO). Colombia would be the first Latin American partner in this alliance, and the expectation is that the agreement will promote a more transparent procurement process.     

The defense sector had a sluggish year in 2018, mostly due to the Law of Guarantees (Ley de Garantias), a law that restricts public funds being spent during election periods. Colombia’s defense budget did increase slightly in 2018 to USD 9.7 billion and was one of the country’s few Ministries that did not suffer budget cuts. Of this total, USD 350 million is earmarked for purchases of equipment and hardware. For 2018, the budget continues to be focused on maintaining operative foot of force that is needed to cover the rural zones formerly occupied by the demobilized FARC guerrillas. Additionally, Colombia’s Armed Forces continue to transform into a traditional force that protects national sovereignty from external threats, instead of fighting an internal conflict against armed guerrilla groups. 

The Peace Agreement with FARC and Post Conflict
The demobilized guerrilla group FARC has converted itself into small political party that has had no official army since the peace deal was signed in 2017. There is a dissident faction of the FARC that did not demobilize, and their numbers are estimated to be from 1,000 to 2,000 members. This dissident FARC group has resumed kidnapping and drug smuggling activities, especially along the Colombia-Ecuador border area. The government is investing significant resources in the reintegration process of former combatants but has also warned that FARC dissidents who do not join the formal peace process will be treated as criminals and will forfeit all benefits given by the peace treaty. The peace accord could be modified by the new government that takes office in August since President-elect Duque has opposed some details of the deal that he sees as being too lenient on crimes committed by former combatants.

Record Levels of Coca Production
Over the past year, Colombia has seen an increase in coca production of approximately 11% to a record high estimate of 209,000 hectares. There are many reasons for the increase, but the prohibition of aerial spraying of coca crops is seen by many as the main contributor. The Colombian Government banned aerial spraying over concerns that the chemical agent used in spraying, glyphosate, was carcinogenic. Now eradication is carried out manually, which is labor-intensive, dangerous, and slow. Colombia’s rugged and mountainous geography makes manual eradication difficult and the landscape is riddled with landmines and IEDs. The Colombian Armed Forces are being tasked with clearing landmines, manual eradication of coca, and the protection of the eradicators. At the start of 2017, the government promised to eradicate 100,000 hectares of coca crops by the end of the year. However, sources stated that by the end of the year the government had only reached 20% of the goal. The use of drones for aerial spraying is now being discussed and carried out in small, pilot projects. Due to their maneuverability and accuracy of spraying smaller plots of land, drones may jumpstart the aerial spraying program.   
 
ELN Peace Negotiations
Peace talks are ongoing with Colombia’s largest remaining guerilla group known as the National Liberation Army, or ELN. Negotiations were taking place in Ecuador but have moved to Cuba, which is where the peace deal was reached with the FARC in 2017. During the first few months of 2018, there were bombings around the city of Barranquilla that targeted three police stations, fatally wounding five officers and injuring 41 people. Outgoing President Santos and Defense Minister Villegas have encouraged stronger military operations to retaliate against the ELN, and the peace negotiations are expected to be complex and slow.  
 
The Rise of “Bandas Criminales”, or “BACRIM” (Criminal Organizations)
Colombia’s criminal organizations are composed mostly of former right-wing paramilitary groups, small trafficking organizations, and FARC dissidents, who have been fighting to control areas used in the cultivation and production of illicit drugs, illegal mining operations, and illegal logging. BACRIM do not espouse any ideology other than profits and personal enrichment. Some of the most notable BACRIM organizations are the Clan del Golfo, Los Pelusos, and Los Rastrojos. One of the priorities of the Colombian Armed Forces is to take control of the remote parts of the country and establish a government presence to thwart further advances by the BACRIMs. Many of these areas have never had a stable government presence and have been under the control of the FARC and other criminal organizations. 
 
Security in Urban Areas
As life in rural Colombia is experiencing a relative moment of tranquility, the cities have suffered a surge in violence, mostly caused by the demobilization of paramilitaries and guerilla groups. This violence is often focused on drug-related vendettas and is a major challenge for the National Police. In some cities, such as the port city of Buenaventura, violent crime has reached the point where the military has assumed many responsibilities of the police force.
 
Regional Issues: Venezuela and Nicaragua
In early 2017, the Venezuelan Armed Forces occupied a small area of Colombia for a period of four days under the pretense that the Arauca River, which acts as a natural border, had changed its course and thus changed the border between the two countries. The act was seen by many as a desperate attempt by the Government of Venezuela to shift attention from a deteriorating domestic situation, where food shortages and an autocratic President Maduro are fomenting social unrest, massive street protests, and violence that have created one of Latin America’s largest refugee crises in history. The combination of Venezuela’s chaotic economy suffering from hyperinflation (which has made food and healthcare inaccessible for many) and Colombia’s criminal insurgency has led to high criminal activity within the Colombia-Venezuela border. As the crisis in Venezuela appears to have no end or solution, many inhabitants have fled to other countries such as Colombia, the United States, Spain, and other South American countries. As of December 2017, there are an estimated 660,000 reported Venezuelans in Colombia, which has put strains on Colombia’s healthcare system and police force. More recent estimates put the number of Venezuelan refugees in Colombia at more than 1 million. 
 
In another border dispute, Nicaragua and Colombia disagree over maritime boundaries in the Caribbean Sea, where Colombia exercises sovereignty over the islands of San Andres and Providencia. The International Court at The Hague has sided with Colombia’s claim of sovereignty over the San Andres Archipelago, but not with Colombia’s claim that the 82nd meridian west is the maritime border between the two nations. The issue continues to be tense but has not dominated news headlines in recent years.
 
The Government of Colombia’s 2018 Defense and Police budget is focused on modernizing the Armed Forces. Ongoing conflicts will sustain spending of approximately 3.6% of the country’s annual economic output on training and equipment for the military and police. Overall, the 2018 defense budget received an annual 8.2% increase. According to Colombia’s Defense Minister, the increase in the budget will prepare the country for any threat and fully support the peace process with the FARC. The budget will allow for the slow replacement and maintenance of ageing equipment, the building of new police stations (battalions and commandos), upgrades to communication equipment, and support for demining brigades. Villegas added that part of the resources will be used to maintain the number of active personnel currently enlisted as well as upgrade the main military hospital and military housing.
 
The Colombian Armed Forces have a budget of USD 9.7 billion, which is equivalent to a little over eight percent of the total Colombian budget for 2018. Most of the defense budget will be designated for operational activities, such as payroll, procurement of basic goods and services, and pensions. Only USD 350 million (about three percent) will be invested in strengthening the security and strategic capacity of the Armed Forces through the purchase of new equipment.
 
The internal and external defense and security structure is composed of the Army, Navy (includes Marines and Coast Guard), Air Force, and the National Police. Under Plan Colombia, significant U.S. funding, technical assistance, and equipment support have been provided to Colombian-led counter narcotics programs for drug eradication and interdiction. Plan Colombia expired in 2012, but American support remains critical to Colombia’s Armed Forces, which today mostly comes from the U.S. State Department’s INL division (International Narcotics and Law Enforcement Affairs). 

Despite the peace accord with the FARC, the Colombian government continues to spend on military training and the fight against narco-terrorism, trade in contraband, and to secure at-risk areas using the National Police. Colombia is especially committed to developing security surveillance and enforcement in remote regions of the country such as La Guajira, Arauca, Choco, Putumayo, Nariño, Cauca, and Meta, areas where the government has exercised little to no presence, giving leeway for criminal activity to flourish.
 
Through the Foreign Military Sales Trust Fund, the U.S. Department of Defense provides equipment and training to the Colombian military and police by means of military assistance programs. Other sources of funding include the U.S. State Department and programs that it administers, such as the INL program. INL has been the main source of funding for equipment acquisition in Colombia since 1990 through private military consulting firms. These firms operate through an open market competitive bidding system, mainly focused on supporting the police force for drug eradication/interdiction operations.

The Colombian congress approved Law 80 in 1993, under which preferential treatment is given to goods and services for security and national defense made in Colombia by local manufacturers over goods made by foreign manufacturers. However, under Chapter Nine of the National Treatment Caveat of the United States-Colombia Trade Promotion Agreement, U.S. companies must be treated as locals when they participate in public bids, eliminating the disadvantage they used to face prior to implementation of the agreement. Typically, some non-sensitive equipment may be procured through Colombia Compra Eficiente, but most sensitive hardware, which is the majority of purchases, is acquired through private invitations, a process that is not always transparent or easily understood by many foreign companies. American companies should inform the U.S. Embassy in Bogota of their intentions to bid on an RFP and if possible, have the Embassy advocate for a U.S. solution.
                                                                               
The United States continues to enjoy a privileged relationship with Colombia with regards to military equipment acquisitions. However, competitors from Israel, Russia, France, and Germany are also important players and are increasingly gaining market share. The Colombian military tends to use standardized equipment and values relationships, quality, warranties, interoperability, and familiarity with equipment. According to unofficial estimates, U.S. imports generally make up close to 50% of Colombia’s total imports of military equipment.  
                   
The Colombian military maintains high standards for its equipment, which has historically been a great opportunity for U.S. exporters. However, the United States could lose market share in the future due to more competitive bidding from foreign manufacturers and corruption in the procurement process. U.S. manufactured equipment is already losing market share in certain sectors such as rifles, which are increasingly being exported from Australia, Belgium, and Russia.
Colombia has persistent corruption issues across many different sectors which can make participating in the public procurement process difficult. It is essential for American companies to find a local representative to support in-country dealings. It is also important for American companies that are participating in public tenders with the Colombian Armed Forces to contact the U.S. Department of Commerce at the American Embassy in Bogota and make them aware of their participation.     
 
Leading Sub-Sectors
In 2018, Colombia will continue to be a major defense equipment importer via state-owned entities; INDUMIL (arms and ammo), CIAC (aviation), CODALTEC (digital), and COTECMAR (naval). These entities can be key partners for American companies that are willing to do technology transfers.


Colombia continues to upgrade equipment in all branches of the military, making it an attractive market for a variety of products and services:
  • Upgrades, parts and support for the Blackhawk and Huey helicopter fleets
  • Construction of Command and Control Centers in Bogota and other cities
  • Demining equipment, especially light hand-held devices to be used in rugged terrains
  • Transport trucks, including regular (troop and cargo carrier), armored and tactical
  • Upgrades to fixed wing aircrafts
  • Antitank missiles
  • Artillery: modernization of existing equipment and possible purchase of additional units
  • Riverine and maritime boats
  • Regular armament and survival equipment
  • All types of tactical equipment as well as bomb disarming gear
  • Equipment for manual eradication of illicit crops
 
American companies can also consider providing materials, equipment, and machinery to local manufacturing facilities:
  • INDUMIL (manufacturer of Galil rifles, Cordoba pistol, ammunition and explosives)
  • COTECMAR (currently manufacturing patrol vessels under Fassmer’s license and LPR 40s)
  • CIAC (Manufacturer of aircraft parts and the T-90 Calima)
  • CODALTEC (simulator manufacturer and software developer)
 
Opportunities
Military equipment trends have remained relatively constant in the post-Plan Colombia period since the government continues to fight interdiction and conduct manual coca eradication operations. Due to the improvement in security, the Colombian Air Force has been more involved with military and civilian rescue operations. In 2010, the Air Force created a new rescue unit that has increased purchases of rescue equipment and life support systems. The National Police is expanding its activity in civilian and urban surveillance, adapting its force and upgrading its equipment to this environment. Recent Navy purchases and investment in COTECTMAR indicate that the government’s interest is in increasing the protection of the Caribbean coast, especially around the islands of San Andres and Providencia. There has been ongoing interest from the Ministry of Defense to purchase 15 fighter jets, with possible candidates including the F-16. However, this project is on hold until further notice from the President-elect, who will most likely not entertain this project in the short term. Cavalry continues to show considerable interest in upgrading its armored, lightly armored, and tactical vehicles to better control national territory and sensitive border areas.
 
In 1990, the United States Government provided Colombia with 18 UH-1N helicopters and Colombia has since bought 36 more. In 2010, the Colombian military had 280 helicopters and 200 fixed-wing aircraft with no new major purchases projected through 2016, except for a possible purchase of helicopters with higher capacity to transport troops and equipment. Due to recent aircraft acquisitions, there are significant opportunities for training, parts, and maintenance of these aircraft, especially Blackhawk rotor blades, repair services, and erosion-resistant coating systems. Other opportunities include: parameter security protection systems (convoy security, security walls and fences, and video surveillance systems), safety and survival accessories, search and rescue equipment, protective clothing, emergency medical equipment, and trauma-life support systems.
 
Colombia’s Armed Forces personnel total 511,550, with 369,100 active personal and 142,450 reservists. In recent years, key needs have been ammunition (up to USD one million per year), night vision goggles (up to USD one million per year), anti-ballistic missiles (up to USD one million per year), survival equipment and kits (up to USD 400,000 per year), flight suits and footwear (up to USD 200,000 per year), personal arms (M4 rifles, M9 pistols), grenades, binoculars, and medical equipment. The Colombian Army continues to upgrade its equipment and uniforms with engineered textile solutions, smart textile materials, as well as integrated communication aircraft helmets.

Customs, Regulations and Standards.  

Import Tariff: The majority of defense and military equipment have no tariffs since the implementation of the U.S.-Colombian Trade Promotion Agreement in May 2012. Prior to the agreement, tariffs ranged between five and 20%. Companies are encouraged to check the Harmonized Code (Schedule B) to better understand the tariffs and taxes they would have to pay to export to Colombia. Corruption and lack of transparency in public procurement are the largest non-tariff trade barriers for American companies in Colombia. Please contact the Foreign Commercial Service at the American Embassy in Bogota before submitting paperwork for a procurement process with the Colombian Armed Forces.
 
Trade Events
 
Expodefensa
December (Dates TBD), 2019
Bogota, Colombia
 
F-Air
http://f-aircolombia.com.co 
International Aeronautics Fair
July 11-14, 2019
Medellin, Colombia
 
ColombiaMar
www.colombiamar.co/es
Conference and trade show for naval industry 
March 13-15, 2019.
Cartagena, Colombia
 
 
Web Resources
Ministry of Finance
Info Defense
Ministry of Defense

 

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Colombia Aerospace and Defense Trade Development and Promotion