Risks

Country risk in Colombia is low to moderate, the OECD country risk rating is 4. Colombia officially became the 37th member of the OECD on 28 April 2020 after in-depth reviews by 23 Committees and major reforms conducted by the country to align its legislation, policies and practices to OECD standards. Is the third Member country from the Latin America and Caribbean region to join after Chile and Mexico. Among those changes, Colombia has applied transparency rules in terms of SOE’s good governance and public accountability, and it implemented changes in the tax and pension regulations.

According to the report published by Fitch Ratings, the sharp fall in oil and the efforts of the National Government to overcome the COVID-19 pandemic are the main causes of the weakening of the fiscal and economic capacity of the country that has resulted in the rating downgrade from BBB to BBB-, the lowest rating within investment grade. This decision had also been made in previous weeks by Standard and Poor’s rating agency, according to which Colombia’s external profile has been weakened by lower export earnings and a broader current account deficit, raising concerns about economic growth.

The country has recently experienced political unrest due to protests against police brutality. These events recall the 2019 nationwide strike demanding further protection for social leaders being persecuted in different regions, and opposition to social welfare and tax reforms. It is also worth noting that 2021, is a pre-electoral year in Colombia and pre-campaign for the 2022 elections has already began.

Although Colombia is categorised as a steadily growing middle-income country, the benefits of its sustained economic growth have been distributed unequally. Large advanced urban centres (urban population is 76.4%) co-exist alongside extensive rural areas with high poverty rates (GINI index is 50.4).

Colombia finished 2019 with a 9.5% unemployment rate, which remains within the official target under 10%, but grew up during 2020 due to COVID-19. Furthermore, the main problem in the labour market is informality. The last official report shows that 46.5% of working people have no social security. Also, 63.8% of the population earns a minimum wage or less.

Snapshot Risks COL_edited.jpg

The OECD also provides a list of country risk classifications. Under the Participants’ system, country risk encompasses transfer and convertibility risk (i.e. the risk a government imposes capital or exchange controls that prevent an entity from converting local currency into foreign currency and/or transferring funds to creditors located outside the country) and cases of force majeure (e.g. war, expropriation, revolution, civil disturbance, floods, earthquakes). The scale is 1 to 7 where 7 is the highest risk.

OECD Col_edited.jpg

Consult the entire list here

Reliability

Know you are doing business with stablished and registered businesses will bring you some peace of mind. 

Colombia, as most of the entire LATAM region is not a culture where you can fully rely on! The business culture tends to be quite formal in the major cities such as Bogotá and Medellín, with a more relaxed attitude in the hot coastal regions. It is always important to engage in small talk before focusing on business concerns, and Colombians also prefer doing business in person. Business ethics and the level of reliability varies upon the size of the business as well as the type of the person you are dealing with.