Colombia - 6-Financial SectorColombia - 6-Financial Sector
Capital Markets and Portfolio InvestmentThe Colombian Stock Exchange (BVC) is the main forum for trading and security transactions in Colombia. The BVC is a private company listed on the stock market. The BVC, as a multi-product and multi-market exchange, offers trading platforms for the stock market, along with fixed income and standard derivatives. The BVC also provides listing services for issuers. The BVC is part of the Latin American Integrated Market (MILA) along with the Mexican Stock Exchange, the Lima Stock Exchange and the Santiago Stock Exchange. BVC market capitalization has risen from USD 14 billion in 2003 to USD 100.2 billion in 2016. Colombia maintained a BBB ‘Investment Grade’ credit rating by Fitch and Standard and Poor’s thanks to sound macroeconomic fiscal management including the 2016 tax reform. Foreign investors can participate in capital markets by negotiating and acquiring shares, bonds, and other securities listed by the Foreign Investment Statute. These activities must be conducted by a local administrator, such as trust companies or Financial Superintendency authorized stock brokerage firms. Foreign investment capital funds are forbidden from acquiring more than ten percent of the total amount of a Colombian company's outstanding shares. Foreigners can establish a bank account in Colombia as long as they have a valid visa and Colombian government identification.
The market has sufficient liquidity for investors to enter and exit sizeable positions. The Central Bank respects IMF Article VIII and does not restrict payments and transfers for current international transactions. The financial sector in Colombia offers credit to nationals and foreigners that comply with the requisite legal requirements.
Money and Banking SystemIn 2005, Colombia consolidated supervision of all aspects of the banking, financial, securities, and insurance sectors under the Financial Superintendency. Colombia has an effective regulatory system that encourages portfolio investment. According to the Financial Superintendency, as of December 2016, the combined estimated assets of Colombia’s major banks totaled USD 183 billion.
Colombia’s financial system is strong by regional standards. The financial sector as a whole is investing in new risk assessment and portfolio management procedures. As of December 2016, two private financial groups, the Sarmiento Group (Grupo Aval) and the Business Group of Antioquia (BanColombia), together own over half of all Colombian banking assets. The Sarmiento Group (Grupo Aval) controls about 27 percent of the sector and the Business Group of Antioquia (Bancolombia) about 26 percent. Total foreign-owned bank assets account for approximately 28 percent of the sector.
Commercial banks are the principal source of long-term corporate and project finance in Colombia. Loans rarely have a maturity in excess of five years. Unofficial private lenders play a major role in meeting the working capital needs of small and medium-sized companies. Only the largest of Colombia’s companies participate in the local stock or bond markets, with the majority meeting their financing needs either through the banking system, by reinvesting their profits, or through credit from suppliers.
Foreign Exchange and RemittancesForeign Exchange
There are no restrictions on transferring funds associated with FDI. Foreign investment into Colombia must be registered with the Central Bank in order to secure the right to repatriate capital and profits. Direct and portfolio investments are considered registered when the exchange declaration for operations channeled through the official exchange market is presented, with few exceptions. The official exchange rate is determined by the Central Bank. The rate is based on the free market flow of the previous day. Colombia does not manipulate its currency to gain competitive advantages.
If investments are officially registered, repatriations of profits are permitted without restrictions. The government permits full remittance of all net profits regardless of the type or amount of investment. Foreign investments must be channeled through the foreign exchange market and registered with the Central Bank’s foreign exchange office within one year to be able to repatriate or reinvest the proceeds. There are no restrictions on the repatriation of revenues generated from the sale or closure of a business, reduction of investment, or transfer of a portfolio. Colombian law authorizes the government to restrict remittances in the event that international reserves fall below three months’ worth of imports. International reserves have remained well above this threshold for decades.
Sovereign Wealth FundsIn 2012, Colombia began operating a sovereign wealth fund called a savings and stabilization fund, administered by the Central Bank, with the objective of promoting savings and economic stability in the country. The fund can administer up to 30 percent of annual royalties from the extractive industry. The fund was valued at USD 3.4 billion in 2016, from an initial value of USD 500 million in 2012. The government transfers royalties not dedicated to the fund to other internal funds to boost national economic productivity through strategic projects, technological investments, and innovation. Prepared by our U.S. Embassies abroad. With its network of 108 offices across the United States and in more than 75 countries, the U.S. Commercial Service of the U.S. Department of Commerce utilizes its global presence and international marketing expertise to help U.S. companies sell their products and services worldwide. Locate the U.S. Commercial Service trade specialist in the U.S. nearest you by visiting http://export.gov/usoffices.
Colombia Economic Development and Investment Law