Interview: Martín Acero
How has the Pacific Alliance and more regional integration affected Colombia’s business climate?
MARTIN ACERO: The Pacific Alliance combines the strengths of four of Latin America’s fastest-growing economies – Colombia, Chile, Mexico and Peru – to make them more attractive to foreign direct investment (FDI), particularly from the Asia-Pacific region. The four countries aim to have full freedom of movement of goods, services, capital and people, allowing them to share ideas for promoting economic development.
These countries have individually entered into bilateral and regional agreements aimed at protecting investment, which has been commended by major economies, including China and Japan. The countries are also individually making strides to protect investments within their borders.
Colombia, for example, allows foreign investors to have full control over the capital of a company, without requiring prior government approval. Foreign investment receives the same treatment as investments made by Colombian nationals.
Member states have become more competitive than they would be individually, creating a more favourable business climate in each and in the region. Once a business has begun operating in one of the four countries, they are able to easily carry out cross-border transactions. Businesses also have access to the human resources, goods and capital of all four countries. A number of companies, including those in the legal sector, are capitalising on the strengths of the Pacific Alliance, by offering clients the opportunity to explore options across borders. This is having a positive impact on consumers.
What competitive advantages make Colombia a potential base for multinational companies?
ACERO: Colombia is 34th on the World Bank’s ease of doing business ranking for 2015, the highest in Latin America and the Caribbean, and up from 53rd in 2014. This vast improvement is a reflection on the improved legislative environment for businesses. While the government has long focused on promoting FDI through liberalised economic policies, in recent years it has also made strides in encouraging expanded business. Among the most notable reforms is Colombia’s effort to streamline the process for starting a business, allowing for one-stop shops in many major cities, which has reduced the amount of red tape businesses must deal with.
The government has also passed legislation that has reduced the number of steps for registering property, allowing all processes to take place at the same time electronically. Colombia has begun using electronic registration systems for many aspects of business, allowing cities and administrative bodies to better share information. The country has also made great strides in modernising infrastructure, using legislative policies that ease the process of obtaining construction permits. Moreover, the government has put great effort into streamlining the foreign exchange process and making the system more user-friendly. These advances, combined with Pacific Alliance membership, free-trade agreements with the US, the EU and South Korea, and a number of bilateral investment treaties, create a favourable environment for multinational companies.
What legal reforms are still needed, and how would they affect foreign businesses?
ACERO: Colombia has substantially improved the regulatory environment for investment. Laws are being designed to facilitate business and promote growth. For example, although tax reform in 2014 increased effective tax rates, the government has formed a high-level commission that is charged with overhauling the system, with a view to making it more competitive and equitable. The judicial system has made gains in efficiency, but there is still work to be done.
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