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II. trade and investment regime
(1) Overview
1. Colombia is a founding Member of the WTO. Multilateral agreements rank on a par with ordinary laws. Colombia took part in the negotiations on telecommunications and financial services after the Uruguay Round. It is an observer in the Committee that administers the Plurilateral Agreement on Government Procurement; it is not a party to the Information Technology Agreement. During the period under review, it has fulfilled its WTO notification commitments and submitted various proposals under the Doha Work Programme. The Colombian authorities recognize and appreciate the importance of the multilateral trading system to the predictability and security of its trade policy, but believe that Colombia has limited influence on the content and pace of multilateral negotiations.
2. Trade policy is decided largely at national level, bearing in mind Colombia's membership of the Andean Community. Colombia assigns high priority to the conclusion of preferential trade agreements. Since the last review, it has completed negotiation of two new agreements; the agreement with the United States is of particular importance since the United States is the main destination for Colombian exports.
3. Colombia has an open foreign investment regime. The Constitution was amended in 1999 to abolish the power of Congress to expropriate without compensation "for reasons of equity". In mid-2005, Colombia introduced legal stability contracts as an option for investors. The Government has retained, though never used, the authority to identify sectors where foreign capital participation will be limited.
(2) General Legal Framework
4. Colombia is a unitary republic.[1] The Constitution of 1991 confers the following rights on the country's regional authorities: self-government; exercise of their respective powers; administration of resources and establishment of the taxes needed to perform their functions; and participation in national revenue.[2] The Constitution provides that a basic law shall determine the distribution of powers between central government and the regional authorities, but the law has not as yet been promulgated.[3] The Colombian authorities indicate that the regional authorities have established no measures that affect international trade.
5. Power is divided into three branches: the legislature, the executive and the judiciary.[4] The legislature is a bicameral Congress comprising the Senate of the Republic and the Chamber of Representatives. The 102 senators and 166 representatives are elected simultaneously by universal suffrage for a renewable term of four years. The most recent parliamentary elections were held in March 2006.
6. The President of the Republic is head of State, head of Government, and the supreme administrative authority.[5] The Government consists of the President, ministers and directors of administrative departments. The President is elected by universal suffrage for a four-year term. Presidents were not eligible for re-election until 2004, when the Constitution was amended to allow a second term.[6] The President has sole authority to appoint and dismiss ministers and directors of administrative departments. The most recent presidential elections took place in May 2006.
7. The judicial organs are the Supreme Court of Justice, the Council of State, the Constitutional Court, the Higher Council of the Judiciary, the Office of the Prosecutor General and the courts.[7] The Constitution also assigns judicial duties to the authorities of indigenous peoples.[8] The Office of the Attorney-General oversees the conduct of public servants. Private individuals may rely on WTOAgreements and Andean Community rules in Colombian courts. Where Andean Community rules are cited or in dispute in a final appeal, the court must apply to the Andean Community Court of Justice for an interpretation of the Community provisions. Colombian courts are bound by the Andean Court's interpretation.[9]
8. Upon adopting a draft law, Congress refers it to the Government for approval and an order of promulgation. The Government may remand the draft to Congress on the grounds that it is "unconstitutional or unsuitable".[10] A draft remanded as unsuitable will become law if Congress approves it a second time. A draft law deemed unconstitutional by the Government and passed a second time by Congress is referred to the Constitutional Court. If the Constitutional Court finds no breach of the Constitution, the President must approve the draft law and order its promulgation. Otherwise, the President of Congress has the authority to approve it.[11]
9. Management of Colombia's international relations and the conclusion of agreements with other States are the responsibility of the President of the Republic. International agreements have to be approved by Congress and receive a favourable opinion from the Constitutional Court before the President of the Republic may ratify them. Congress has no authority to amend the text of an international agreement.[12] "Economic and trade agreements concluded within international bodies" may be applied provisionally pending approval by Congress.[13] The Constitution allows Colombia to transfer "certain duties" to international bodies that seek to promote economic integration with other States.[14]
10. The Constitution takes precedence over any other law.[15] According to a Constitutional Court ruling, in the event of incompatibility between an economic integration agreement and the Constitution, "the political authorities have a duty to change the international commitment [of Colombia] in order to align it with the Constitution, or amend the latter to accommodate [Colombia's] international obligations".[16] The Constitutional Court also ruled that economic integration agreements rank lower than certain international human rights agreements, and than basic laws and statutes.[17]
11. Colombia has suffered from decades of violence. Nevertheless, the Colombian authorities say that the rule of law has been maintained and that efforts are being made to ward off the potential repercussions of violence on the stability of the State.[18]
(3) Trade Policy Formulation and Objectives
12. The Cartagena Agreement establishing the Andean Community includes among its objectives the formulation of a trade policy common to all the member countries (see section (5)(ii)(a) below). However, since the Andean integration project is not yet complete, Colombia's trade policy is largely decided at national level.
13. The President of the Republic is empowered to regulate foreign trade, including customs and tariffs, although the regulation of tariff policy has been transferred in part to the Andean Community.[19] In exercising his trade-related powers, the President must apply the following principles, set by Congress:[20]
- Further the internationalization of Colombia's economy in order to step up and sustain the pace of development;
- promote and develop foreign trade in goods, technology, services and, in particular, exports;
- encourage integration processes and bilateral and multilateral trade agreements that expand and facilitate Colombia's external transactions;
- further the modernization and efficiency of local production to make it more competitive on international markets and ensure that it meets consumer needs;
- secure lawful and fair competition in local production and provide it with adequate protection, particularly against unfair international trade practices;
- support and facilitate private initiative and transactions by the various economic agents in foreign trade operations;
- coordinate foreign trade policy and regulations with tariff, monetary, exchange and fiscal policies; and
- adopt as a temporary measure mechanisms allowing the economy to overcome any internal or external circumstances that are adverse to Colombia's trade interests.
14. The government entity empowered to "direct, coordinate, formulate and evaluate" foreign trade policy is the Ministry of Trade, Industry and Tourism.[21] In carrying out its trade-related functions, the Ministry of Trade, Industry and Tourism may convene the Higher Council for Foreign Trade, which advises the Government on matters relating to foreign trade policy.[22] The Council is composed of the President of the Republic, the Minister of Trade, Industry and Tourism, the Minister of Foreign Affairs, the Minister of Finance and Public Credit, the Minister of Agriculture and Rural Development, the Minister of Mining and Energy, the Minister of Transport, the Minister of the Environment, Housing and Land Development, the Director of the National Planning Department, and the General Manager of the Bank of the Republic.[23] The Higher Council for Foreign Trade may invite other officials to speak, but not vote, at its meetings.
15. The Committee on Customs, Tariffs and Foreign Trade makes recommendations on the customs and tariff regimes. Where they involve a change in trade policy, the Committee refers its recommendations to the Higher Council for Foreign Trade. Other recommendations are sent directly to the Government. The Committee is composed of the Deputy Ministers of Foreign Trade, Finance and Public Credit; Business Development; Agriculture and Rural Development; and Mining and Energy, and the Deputy Director of the National Planning Department, the Director-General of Foreign Trade, the Director of Taxes and National Customs and the advisors of the Higher Council for Foreign Trade.[24]
16. The private sector participates in trade policy formulation through the Joint Committee on Foreign Trade, which may make recommendations on foreign trade to the Government. Its members are the main trade associations and the Higher Council for Foreign Trade.[25]
17. The Constitution of 1991 calls on the State to promote economic, social and political integration with other nations, particularly those of Latin America and the Caribbean, through the conclusion of the agreements involving the establishment of supranational bodies.[26] Colombia has assigned high priority to the conclusion of preferential trade agreements in recent years. The Colombian authorities state that they recognize and appreciate the importance of the multilateral trading system in securing predictability and security for Colombia's trade policy, although they see Colombia's influence on the content and pace of the WTO negotiations as limited.[27] The trade policy objectives set forth in the Strategic Export Plan 1999-2009 are to increase and diversify the export supply; consolidate and boost foreign investment as a means of promoting exports; make export activities competitive; step up export participation by the country's various regions; and develop an export culture.[28]
(4) Foreign Investment Regime
(i) Introduction
18. The Ministry of Trade, Industry and Tourism (MCIT) formulates foreign investment policy. It does so in coordination with the Ministry of Finance and Public Credit, taking into account the guidelines of the Consejo Nacional de Política Económica y Social – CONPES (National Economic and Social Policy Council).[29] CONPES is a Government advisory body for economic and social matters and is headed by the President of the Republic. In January 2005, Proexport took over foreign investment promotion, formerly the responsibility of Coinvertir.[30]
19. Consolidating and increasing foreign investment is one of the objectives set by the Strategic Export Plan.
20. The main legal provisions governing investment are Law No. 9 of 1991 and Decree No. 2080 of 2000, which has been amended several times.[31] In the Andean Community context, Colombia has adopted Decisions No. 291 and No. 292 (see (5)(ii)(a) below).
21. The foreign investment regime covers direct and portfolio investment by natural or legal persons non-resident in Colombia. The definition of investment includes foreign currency and tangible and intangible goods (including trademarks and patents), and the capitalization of resources in national currency with a right to outward remittance (including royalties payable under licensing contracts).[32] Loans and operations involving debt do not constitute investment.[33]
22. Colombia has an open foreign investment regime, although some foreign investors that took part in a survey by the United Nations Conference on Trade and Development found that one of the main difficulties they faced in Colombia was a severe lack of legal certainty caused by the frequent issuing of regulations and administrative decisions.[34] According to the Colombian authorities, foreign investment rules are not amended very frequently; and the amendments that have been introduced provide foreign investors with better guarantees.
(ii) Authorization and registration requirements
23. For the most part, foreign investment requires no prior authorization. Investment, whether domestic or foreign, in the finance, mining and hydrocarbons sectors does require prior authorization (Chapter IV(7)(3) and (4)).
24. All foreign investment must be registered with the Bank of the Republic. Registration may be carried out either by the investor or by his representative. The deadlines and conditions for registering a foreign investment vary according to the type of investment and the formalities involved. The Bank of the Republic automatically authorizes registration for investments meeting the provisions of Decree No. 2080 of 2000.[35]
(iii) Sectoral restrictions
25. CONPES is empowered to "identify sectors of economic activity for the Government to determine whether participation therein by investment of foreign capital shall be allowed".[36] According to the Colombian authorities, CONPES has never exercised this authority.
26. Decree No. 2080 of 2000 allows investment of foreign capital in all sectors of the economy, other than in activities pertaining to national defence and security and the processing, disposal and elimination of toxic, hazardous or radioactive waste not produced in Colombia.[37]
27. Foreign investment in companies providing open television services is subject to the principle of reciprocity and limited to 40 per cent of the company's share capital.[38] Foreigners are not granted licences for the management of radio news or information programmes.[39] Foreign geology consultancy firms may not offer their services in Colombia unless they are associated with a Colombian firm.[40]
28. Private investment, including foreign private investment, in the provision of public services in water supply and sewage, sanitation and the retail distribution of electricity and gas through mains is subject to restrictions insofar as the State establishes "exclusive service areas" in which only one company has permission to supply the service in question.[41]
29. There are restrictions on the purchase of property by foreigners in border areas and coastal areas and on islands.[42]
(iv) Protection
30. The Constitution safeguards private property. Article 58 allows expropriation by court decision and with prior compensation "in the public interest or on social grounds as defined by the lawmakers". Article 59 stipulates that in the event of war, the Government may order expropriation without prior compensation. Immovable property expropriated in a situation of war may be occupied only temporarily. Before 1999, the Constitution allowed Congress to expropriate without compensation "for reasons of equity". That authority was abolished by Legislative Act No. 1 of 1999. According to the authorities, there must always be compensation, pursuant to the constitutional provision that "the State shall always be liable for expropriations carried out by the Government on its own or through its agents".[43]