export and import strategies in colombia

8/2/2019 Export and Import Strategies in Colombia

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EXPORT AND IMPORT STRATEGIES IN COLOMBIA

Colombia has a free market economy with major commercial and investment ties to

theUnited States. Transition from a highly regulated economy has been underway for more

than a decade In 1990, the administration of President Csar Gaviria Trujillo (199094)

initiatedeconomic liberalism policies or "apertura economica" and this has continued since

then, with tariff reductions, financial deregulation, privatization of state-owned enterprises, and

adoption of a more liberal foreign exchange rate. Almost all sectors became open to foreign

investment although agricultural products remained protected.

The original idea of his then Minister of Finance, Rudolf Hommes, was that the country

should import agricultural products in which it was not competitive,

like maize, wheat,cotton and soybeans and export the ones in which it had an advantage,

like fruits andflowers. In ten years, the sector lost 7,000 km to imports, represented mostly in

heavilysubsidized agricultural products from the United States, as a result of this policy, with a

critical impact on employment in rural areas.[5] Still, this policy makes food cheaper for the

average Colombian than it would be if agricultural trade were more restricted.

Until 1997, Colombia had enjoyed a fairly stable economy. The first five years of

liberalization were characterized by high economic growth rates of between 4% and 5%.

The Ernesto Samperadministration (199498) emphasized social welfare policies whichtargeted Colombia's lower income population. However, these reforms led to higher

government spending which increased the fiscal deficit and public sector debt, the financing of

which required higher interest rates. An over-valued peso inherited from the previous

administration was maintained.

The economy slowed, and by 1998 GDP growth was only 0.6%. In 1999, the country

fell into its first recession since the Great Depression. The economy shrank by 4.5% with

unemployment at over 20%. While unemployment remained at 20% in 2000, GDP growth

recovered to 3.1%.The administration of President Andrs Pastrana Arango, when it took office on August

7, 1998, faced an economy in crisis, with the difficult internal security situation and global

economic turbulence additionally inhibiting confidence. As evidence of a serious recession

became clear in 1999, the government took a number of steps. It engaged in a series of

controlled devaluations of the peso, followed by a decision to let it float. Colombia also entered

into an agreement with the International Monetary Fund which provided a $2.7 billion

guarantee (extended funds facility), while committing the government to budget discipline and

structural reforms.
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By early 2000 there had been the beginning of an economic recovery, with the export sector

leading the way, as it enjoyed the benefit of the more competitive exchange rate, as well as

strong prices forpetroleum, Colombia's leading export product. Prices ofcoffee, the other

principal export product, have been more variable.

Economic growth reached 3.1 % during 2000 and inflation was 9.0% although

unemployment has yet to significantly improve. Colombia's international reserves have

remained stable at around $8.35 billion, and Colombia has successfully remained in

international capital markets. Colombia's total foreign debt at the end of 1999 was $34.5 billion

with $14.7 billion in private sector and $19.8 billion in public sector debt. Major

international credit rating organizations have dropped Colombian sovereign debt below

investment grade, primarily as a result of large fiscal deficits, which current policies are

seeking to close.

Several international financial institutions have praised the economic reforms

introduced by former president lvaro Uribe (elected August 7, 2002), which include measures

designed to reduce the public-sector deficit below 2.5% of GDP in 2004. The government's

economic policy and democratic security strategy have engendered a growing sense of

confidence in the economy, particularly within the business sector, and GDP growth in 2003

was among the highest in Latin America, at over 4%. By 2007, GDP grew over 8%.

Exports $40.24 billion (2010 est.)

Export

goods

petroleum,coffee, coal,nickel,emeralds,apparel,bananas, cutflowers

Main

export

partners

U.S. 32.45%, Venezuela 17.16%,Netherlands 4.22% (2009)

Imports $36.26 billion (2010 est.)

Import

goodsindustrial equipment, transportation equipment,consumergoods,chemicals,paperproducts, fuels,electricity

Main

import

partners

U.S. 28%, China11%, Mexico 7%,Brazil 6.5%,France 4.5%, Germany4%(2009)

FDI stock $84.62 billion (31 December 2010 est.)

Gross

external

debt

$57.74 billion (31 December 2010 est.)
http://en.wikipedia.org/wiki/Petroleumhttp://en.wikipedia.org/wiki/Coffeehttp://en.wikipedia.org/wiki/Credit_ratinghttp://en.wikipedia.org/wiki/Sovereign_debthttp://en.wikipedia.org/wiki/%C3%81lvaro_Uribehttp://en.wikipedia.org/wiki/Democratic_securityhttp://en.wikipedia.org/wiki/Latin_Americahttp://en.wikipedia.org/wiki/Petroleumhttp://en.wikipedia.org/wiki/Coffeehttp://en.wikipedia.org/wiki/Coffeehttp://en.wikipedia.org/wiki/Coalhttp://en.wikipedia.org/wiki/Coalhttp://en.wikipedia.org/wiki/Nickelhttp://en.wikipedia.org/wiki/Emeraldhttp://en.wikipedia.org/wiki/Emeraldhttp://en.wikipedia.org/wiki/Apparelhttp://en.wikipedia.org/wiki/Bananashttp://en.wikipedia.org/wiki/Flowershttp://en.wikipedia.org/wiki/United_Stateshttp://en.wikipedia.org/wiki/Venezuelahttp://en.wikipedia.org/wiki/Netherlandshttp://en.wikipedia.org/wiki/Consumer_goodshttp://en.wikipedia.org/wiki/Consumer_goodshttp://en.wikipedia.org/wiki/Consumer_goodshttp://en.wikipedia.org/wiki/Chemicalshttp://en.wikipedia.org/wiki/Paperhttp://en.wikipedia.org/wiki/Fuelhttp://en.wikipedia.org/wiki/Electricityhttp://en.wikipedia.org/wiki/United_Stateshttp://en.wikipedia.org/wiki/People's_Republic_of_Chinahttp://en.wikipedia.org/wiki/People's_Republic_of_Chinahttp://en.wikipedia.org/wiki/Mexicohttp://en.wikipedia.org/wiki/Brazilhttp://en.wikipedia.org/wiki/Francehttp://en.wikipedia.org/wiki/Francehttp://en.wikipedia.org/wiki/Germanyhttp://en.wikipedia.org/wiki/Foreign_direct_investmenthttp://en.wikipedia.org/wiki/Petroleumhttp://en.wikipedia.org/wiki/Coffeehttp://en.wikipedia.org/wiki/Credit_ratinghttp://en.wikipedia.org/wiki/Sovereign_debthttp://en.wikipedia.org/wiki/%C3%81lvaro_Uribehttp://en.wikipedia.org/wiki/Democratic_securityhttp://en.wikipedia.org/wiki/Latin_Americahttp://en.wikipedia.org/wiki/Petroleumhttp://en.wikipedia.org/wiki/Coffeehttp://en.wikipedia.org/wiki/Coalhttp://en.wikipedia.org/wiki/Nickelhttp://en.wikipedia.org/wiki/Emeraldhttp://en.wikipedia.org/wiki/Apparelhttp://en.wikipedia.org/wiki/Bananashttp://en.wikipedia.org/wiki/Flowershttp://en.wikipedia.org/wiki/United_Stateshttp://en.wikipedia.org/wiki/Venezuelahttp://en.wikipedia.org/wiki/Netherlandshttp://en.wikipedia.org/wiki/Consumer_goodshttp://en.wikipedia.org/wiki/Consumer_goodshttp://en.wikipedia.org/wiki/Chemicalshttp://en.wikipedia.org/wiki/Paperhttp://en.wikipedia.org/wiki/Fuelhttp://en.wikipedia.org/wiki/Electricityhttp://en.wikipedia.org/wiki/United_Stateshttp://en.wikipedia.org/wiki/People's_Republic_of_Chinahttp://en.wikipedia.org/wiki/Mexicohttp://en.wikipedia.org/wiki/Brazilhttp://en.wikipedia.org/wiki/Francehttp://en.wikipedia.org/wiki/Germanyhttp://en.wikipedia.org/wiki/Foreign_direct_investment


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Import Regulations by Colombia customs

Free import

200 Cigarettes 50 cigars Up to 50g of tobacco A reasonable quantity of perfumeProhibited

Vegetables, plants and plant materials are banned from entry. Meat and animal based foodstuffs are also banned from entry.Restricted

Guns, explosives and ammunition are prohibited from being imported to this country withoutstated permission from Colombian authorities. Any dogs or other animals being imported into the country will require a veterinarian issuedHealth Certificate and a rabies vaccination before being admitted.

Export Regulations by Colombia customs

Free export

200 Cigarettes 50 cigars Up to 50g of tobacco A reasonable quantity of perfume

Local currency equal to USD 10,000Prohibited

Weapons, guns and ammunition Illegal drugs Counterfeit goods Weapons, Explosives and ammunition Knives and deadly weapons Pornographic materialRestricted

No information available

% of product sold domestically and its reasons

Columbia Pictures Industries, Inc. (CPII) is an American

film production and distribution company. Columbia Pictures now forms part of the Columbia

TriStar Motion Picture Group, owned by Sony Pictures Entertainment, a subsidiary of the

Japanese conglomerateSony. It is one of the leading film companies in the world, a member of

the so-called Big Six. It was one of the so-called Little Three among the eight major film

studios of Hollywood's Golden Age.[1]
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The studio, founded in 1919 as Cohn-Brandt-Cohn Film Sales by brothers Jack

and Harry Cohnand Joe Brandt, released its first feature film in August 1922. It adopted the

Columbia Pictures name in 1924 and went public two years later. The name is derived from

"Columbia", a national personification of the United States, which is used as the company's

logo.

In its early years a minor player in Hollywood, Columbia began to grow in the late

1920s, spurred by a successful association with directorFrank Capra.

With Capra and others, Columbia became one of the primary homes of the screwball comedy.

In the 1930s, Columbia's major contract stars were Jean Arthurand Cary Grant (who was

shared with RKO Pictures). In the 1940s, Rita Hayworth became the studio's premier star and

propelled their fortunes into the late 1950s. Rosalind Russell, Glenn Ford, and William

Holden also became major stars at the studio.

In 1982, the studio was purchased by Coca-Cola; that same year it launched TriStar

Pictures as a joint venture with HBO and CBS. Five years later, Coca-Cola spun off Columbia,

which merged with Tri-Star to create Columbia Pictures Entertainment. After a brief period of

independence with Coca-Cola maintaining a financial interest, the combined studio was

acquired by Sony in 1989

Columbia Pictures Industries, Inc.

The Columbia Pictures logo from 1993 to the present

Type Subsidiary ofSony Pictures

Entertainment

Industry Film

Founded Los Angeles, California, USA (May

1919 as C.B.C. Film Sales, renamed

Columbia Pictures on January 10,
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1924)

Headquarters Culver City, California, USA

Key people Doug Belgrad andMatt

Tolmach(Co-Presidents)

Products Motion pictures

Owner(s) Independent (privately held) (1919

1926)

Independent (publicly traded) (1926

1982)

Coca-Cola Co.(19821987)

Columbia Pictures Entertainment,

Inc. (publicly traded) (19871989)

Sony (1989present)

Parent Sony Pictures Entertainment

Website sonypictures.com

Its Reason

History

The early years

The original CBC Film Sales logo used from 1919 through 192 The predecessor of Columbia

Pictures, CBC Film Sales Corporation, was founded in 1919 byHarry Cohn, his brotherJack

Cohn, andJoe Brandt. Brandt was president of CBC Film Sales, handling sales, marketing anddistribution from New York along with Jack Cohn, while Harry Cohn ran production in
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Hollywood. The studio's early productions were low-budget short subjects: "Screen

Snapshots", the "Hall Room Boys" (the vaudeville duo of Edward Flanagan andNeely

Edwards), and the Chaplin imitatorBilly West.[3]The start-up CBC leased space in a Poverty

Rowstudio on Hollywood's famously low-rent Gower Street. Among Hollywood's elite, the

studio's small-time reputation led some to joke that "CBC" stood for "Corned Beef andCabbage."[2]

Reorganization and new name

Brandt eventually tired of dealing with the Cohn brothers, and sold his one-third stake to Harry

Cohn, who took over as president. In an effort to improve its image, the Cohn brothers renamed

the company Columbia Pictures Corporationon January 10, 1924.[4] Cohn remained head of

production as well, thus concentrating enormous power in his hands. He would run Columbia

for the next 34 years, the second-longest tenure of any studio chief, behind only Warner

Bros.' Jack Warner. In an industry rife with nepotism, Columbia's was particularly notorious.

HumoristRobert Benchley called it the Pine Tree Studio, "because it has so many Cohns.

Columbia's product line consisted mostly of moderately budgeted features and short subjects

including comedies, sports films, various serials, and cartoons. Columbia gradually moved into

the production of higher-budget fare, eventually joining the second tier of Hollywood studios

along with United Artists andUniversal. Like United Artists and Universal, Columbia was

a horizontally integrated company that only controlled production and distribution.

Helping Columbia's climb was the arrival of an ambitious director, Frank Capra. Between 1927and 1939, Capra constantly pushed Cohn for better material and bigger budgets. A string of hits

he directed in the early 1930s solidified Columbia's status as a major studio. In particular,It

Happened One Night, which nearly swept the 1934 Oscars, put Columbia on the map. Until

then, Columbia's very existence had depended on theater owners willing to take its films, since

it didn't own any theaters itself. Other Capra-directed hits followed, including the original

version ofLost Horizon (1937), with Ronald Colman, andMr. Smith Goes to

Washington(1939), which madeJames Stewart a major star.

Columbia couldn't afford to keep a huge roster of contract stars, so they usually borrowed themfrom other studios. At MGM, Columbia was nicknamed "Siberia", as Louis B. Mayer would

use the transfer to Columbia as a way to punish his less obedient signings. In the 1930s they

signed Jean Arthurto a long-term contract, and afterThe Whole Town's Talking(1935), Arthur

became a major comedy star. Cary Grantsigned a contract in 1937 and soon after it was altered

to a non-exclusive contract shared withRKO.
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Short subjects

Stock certificatein 1965

At Harry Cohn's insistence the studio signed The Three Stooges in 1934. Rejected

by MGM (which kept straight-man Ted Healy but let the Stooges go),[6] the Stooges made 190

shorts for Columbia between 1934 and 1957. Columbia's short-subject department employed

many famous comedians, includingBuster Keaton, Charley Chase, Harry Langdon,Andy

Clyde, and Hugh Herbert. Almost 400 of Columbia's 529 two-reel comedies were released to

television in the late 1950s; to date, only the Stooges and Keaton subjects have been released to

home video. In the early 1930s Columbia distributed Walt Disney's famousMickeyMouse cartoons. In 1934 the studio established its own animation house, under theScreen

Gems brand; Columbia's leading cartoon series wereKrazy Kat, Scrappy,The Fox and the

Crow, and (very briefly)Li'l Abner. In the late 1940s Columbia agreed to release animated

shorts from United Productions of America; these new shorts were more sophisticated than

Columbia's older cartoons, and many won critical praise and industry awards.

According to Bob Thomas's bookKing Cohn, studio chief Harry Cohn always placed a high

priority on serials. Beginning in 1937 Columbia entered the lucrative serial market, and kept

making these episodic adventures until 1956, after other studios had discontinued them. Themost famous Columbia serials are based on comic-strip or radio characters:Mandrake the

Magician, The Shadow,Terry and the Pirates,Captain Midnight,The Phantom,Batman,

and Superman, among many others. Columbia also had separate units shootingWesternB

pictures.

Columbia also produced musical shorts, sports reels (usually narrated by sportscasterBill

Stern), and travelogues. Its "Screen Snapshots" series, showing behind-the-scenes footage of

Hollywood stars, was a Columbia perennial; producer-directorRalph Staubkept this series

going through 1958.
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% of product exported - WHYNickel and copper are fastest-growing Colombian exports to the U.S. while militarymaterials and equipment lead American imports into Colombia.

With a population of 45 million, Colombia exported US$9.3 billion worth of merchandise tothe United States in 2006, up 4.7% from 2005 and up 65.3% in 4 years.

Colombian imports from the U.S. rose 22.8% to $6.7 billion in 2006, up 87.3% since 2002.

In terms of the merchandise flow between the two countries, Americas trade deficit with theSouth American country was $2.6 billion in 2006, up 26.5% from 2002. The U.S. trade deficit

with Colombia decreased 24.5% in 2006 a significant improvement from the 23.1% deficitincrease in 2005 from the year earlier.

Top Colombian Exports & Imports

Colombian Exports to U.S.

Of the $9.3 billion in American imports from Colombia in 2006, the following product categories hadthe highest values.

1. Crude oil US$3.5 billion (37.3% of Colombia to U.S. exports, up 5.5% from 2005)2. Coal $1.2 billion (13%, up 24.8%)3. Green coffee $594.6 million (6.4%, down 0.6%)4. Nursery stock e.g. cut flowers, Xmas trees $455.4 million (4.9%, up 7.2%)5. Cotton apparel & household goods $321.4 million (3.5%, down 12%)6. Gold $306.6 million (3.3%, down 4.8%)

7. Fuel oil $257.6 million (2.8%, down 51.3%)8. Fruits & preparations including frozen juices $210.6 million (2.3%, up 0.2%)
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9. Other petroleum products $198.7 million (2.1%, down 1.9%)10. Other textile apparel & household goods $150.1 million (1.6%, up 7.8%)

Fastest-Growing Colombian Exports to U.S.

Below are American imports from Colombia in 2006 with the highest percentage salesincreases from 2005.

1. Nickel US$1.4 million (up from $0 in 2005)2. Copper $1.5 million (up 966% from 2005)3. Measuring, testing & control instruments $4.4 million (up 145%)4. Woodworking, glassworking, plastic & rubber $8.6 million (up 144%)5. Other precious metals $21.1 million (up 142%)

Colombian Imports from U.S.

Of the $6.7 billion in American exports to Colombia in 2006, the following product categorieshad the highest values.

1. Organic chemicals US$765 million (11.4% of Colombia from U.S. imports, up 13%from 2005)

2. Corn $384 million (5.7%, up 59.3%)3. Computer accessories $384 million (5.7%, up 31.8%)4. Plastic materials $325 million (4.8%, up 32.2%)5. Materials handling equipment $228.6 million (3.4%, up 33.7%)6. Drilling & oilfield equipment $205.7 million (3.1%, up 34.4%)7. Telecommunications equipment $196.6 million (2.9%, up 22.2%)8. Computers $178 million (2.7%, up 26.6%)9. Other chemicals $161.6 million (2.4%, up 29.1%)10. Excavating machinery $143.4 million (2.1%, up 47.7%)

Fastest-growing Colombian Imports from U.S.

Below are American exports to Colombia in 2006 with the highest percentage sales increasesfrom 2005.

1. Military trucks, armored vehicles US$2.1 million (up 808% from 2005)2. Military apparel & footwear $7.1 million (up 493%)3. Wine & related products $3.3 million (up 241%)4. Engines & turbines for military equipment $11.5 million (up 222%)5. Engines for civilian aircraft $36.9 million (up 199%)


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Benefits the company is receiving from the country

Source

Plan Colombia Benefits Oil Companies

Harken Energy is the latest oil company to benefit from the United States escalating

involvement in Colombia. On November 4, the Texas-based company announced the signing

of a new oil exploration and production contract in Colombia. The company is closely linked to

President George W. Bush who served on its board of directors from 1986 until 1990. In

addition to providing half a billion dollars a year in Plan Colombia aid during his first term,


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President Bush has given Colombia almost $100 million in counterterrorism aid and deployed

U.S. Army Special Forces troops to protect a major oil pipeline. The escalating U.S. military

intervention in Colombia, along with International Monetary Fund (IMF)-imposed economic

reforms, has created favorable conditions for foreign companies such as Harken seeking to

exploit Colombias oil reserves.

U.S. military aid is providing a secure environment in which U.S.

oil companies can operate in Colombia. In conjunction with

military aid, IMF structural adjustment programs are creating an

economic environment favorable to foreign companies. In return

for loans in December 1999 and January 2004 totaling almost $5

billion, the IMF demanded that Colombia restructure state-owned

entities. Accordingly, President Alvaro Uribe has restructured

Colombias state oil company Ecopetrol over the past two years,

providing favorable investment conditions for foreign oil

companies such as Harken.

Harkens November 4 press release stated that its subsidiary

Global Energy Development PLC will own 100% of the contract

subject only to an initial 8% royalty payable to the Colombian Ministry of Energy. Harken

goes on to note that the contract grants Global exclusive exploration and production rights to

85,000 acres which adjoin the established, producing Palo Blanco field, which has provedreserves of approximately 1.8 million net barrels.

A May 10 Colombia Journalarticle titled Plan Petroleum in Putumayo discussed how U.S.

military aid and IMF-imposed structural adjustment was already benefiting Los Angeles-based

Occidental Petroleum and Canadas Petrobank. The article also explained the Uribe

administrations 2003 restructuring of Ecopetrol into three separate entities: a truncated

Ecopetrol to function as an oil producer and refiner, the National Hydrocarbon Agency to

negotiate all oil contracts, and the Colombian Energy Promotion Association to promote

Colombias energy industry. Following the restructuring, however, all new contracts signed byforeign companies still required them to enter into partnership with Ecopetrol.

But in March 2004, as noted in our May 10 article: Colombias Energy Minister Luis Ernesto

Meja announced in Houston, Texas that foreign companies could negotiate contracts with the

National Hydrocarbon Agency without entering into partnership with Ecopetrol. This

declaration, along with the 2003 restructuring and reforms in 2001 that dramatically reduced

royalties companys had to pay to the Colombian government, allowed Harken energy to

negotiate a new contract in which it pays low royalties rates and does not have to enter into

partnership with Ecopetrol. As a result, Harken will own 100% of the contract, which
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translates into the company owning 100 percent of the oil. It also means that Harken is subject

only to an initial 8% royalty payable to the Colombian Ministry of Energy.

Harkens contract illustrates to what degree IMF-imposed reforms have forced Colombia to

make its oil available for foreign exploitation. As was noted in our May article: Clearly, theterms have shifted dramatically in favor of foreign companies considering contracts signed four

years ago called for equal partnership with Ecopetrol and 20 percent royalty payments.

While the Uribe administration justifies its policies to the Colombian people as necessary to

avoid Colombia becoming a net importer of oil, the reality is that little of the oil or the profits

remain in the country. Technically, Colombia will likely remain an oil exporter because of new

contracts like the one signed with Harken. However, because Harken will own 100% of the

contract, the company will reap all the profits from the oil it ships out of Colombia for sale

overseas (i.e. the United States). Colombia will only receive an eight percent royalty paymenton the value of the oil, but will be considered a net oil exporter because Harken drilled its oil

in Colombia.

Colombia had to acquiesce to the IMF neoliberal reform agenda in order to receive U.S.

military aid under Plan Colombia because the Clinton administration incorporated the IMF

reforms into the Plan. In other words, the economic component of Plan Colombia simply

consists of the structural adjustment programs imposed on Colombia by the IMF (see Plan

Colombia: A Closer Look). U.S. aid has constituted the military component of Plan

Colombia, which has so far amounted to some $3 billion in helicopters, weapons and training.

Clearly, U.S. military aid and IMF-imposed economic reforms have played a pivotal role in

creating favorable conditions for foreign oil companies operating in Colombia. U.S. military

aid is contributing to establishing security on the ground for oil companies seeking to take

advantage of the favorable economic conditions created by the IMF-imposed restructuring of

Ecopetrol. As Lt. Col. Francisco Javier Cruz, commander of a Colombian army battalion in the

oil-rich department of Putumayo in southern Colombia pointed out: Security is the most

important thing to me. Oil companies need to work without worrying and international

investors need to feel calm.

BOGOTA, Colombia A decade ago Marxist rebels bombed one Colombian oil pipeline sooften it was nicknamed the flute.

Back then, guerrilla attacks, extortion threats and kidnappings rendered many areas of thenation off-limits to oil companies. As production stagnated, fears grew that Colombia, long anoil exporter, would be forced to import.

But improved security, higher oil prices and more attractive regulatory conditions for investors

have led to a surge in oil exploration and production. The governments National Statistics
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Department estimated last month that daily oil production would double from the current764,000 barrels to 1.5 million barrels by 2018.

Colombia has changed a lot, said Ronald Pantin, CEO of Pacific Rubiales Energy, whichoperates the Rubiales field in southern Colombia and is the countrys No. 1 private producer.

Rebels bombed the field 11 years ago but since Pacific Rubiales Energy took it over in 2007we havent had one guerrilla attack or extortion threat," Pantin said in an interview. "We feelvery safe here.

Colombia is South Americasfourth-leading oil producerbehind Brazil (2.5 million barrels perday), Venezuela (2.4 million bpd) and Argentina (796,000 bpd), according to the U.S.governments Energy Information Agency. Oil sales represent about 40 percent of Colombia'sexport income, with much of the oil destined for the United States.

Colombias turnaround began in 2002 with the election of President Alvaro Uribe. At the time,rebels patrolled vast tracts of rural Colombia where they abducted petroleum workers andforced companies, like Occidental Petroleum of Los Angeles, to fork over extortion paymentsto continue operating.

After the construction in 1986 of the Cano Limon-Covenas pipeline, which carries Occidentaloil to Colombia's Caribbean coast, the rebels began blowing up the line to extract payoffs.

In his book"Dossier," a biography of the late Occidental Chairman Armand Hammer, EdwardJay Epstein writes that Hammer hired a former CIA agent and local mercenaries to negotiate aseries of payments to the guerrillas.

A 1998 Colombian government report estimated that oil companiespaid more than $40 millionannuallyto the guerrillas.

But with the help of billions in U.S. aid, Uribe upgraded the Colombian army and launchedmilitary offensives that pushed the guerrillas out of many oil-producing areas. The surgeincluded a battalion of U.S.-trained Colombian soldiers tasked with protecting the CanoLimon-Covenas pipeline the line that had been dubbed the flute.

Colombia also took advantage of shifting business conditions.

As the price of oil rose, many producing countries changed investment laws and royalty rates,squeezing private companies and giving their governments a greater share of oil profits. But insome cases those policies scared away foreign investors.

Uribe took the opposite approach.

Foreign companies were allowed to own 100 percent stakes in oil ventures. Governmentroyalties were reduced, exploring licenses were extended and state-run Ecopetrol was partially

privatized and forced to compete with foreign firms.

Policies and Norms of colombia for its petroleum industry

Transition from a highly regulated economic regime to an unrestricted access market has beenunderway in Colombia since 1990. At that time, the Colombian government introduced several

policies to spur economic development and promote private enterprise. In 1994, thegovernment enacted Laws 142 and 143 that provide the current framework for the electricity
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sector. Law 142 established that the provision of electricity, telecommunications, water,sewage, and bottled gas distribution are essential public services that may be provided by both

public and private entities. Law 143 encouraged greater private sector involvement in thepower sector, and separated the electricity industry into separate generation, transmission, anddistribution components.

The key governmental body involved in the energy sector in Colombia is the Ministry of Minesand Energy, which is responsible for the overall policy making and supervision of theelectricity sector in Colombia. It regulates generation, transmission, trading, interconnection,and distribution, and approves generation and transmission programs. The ministry delegatessupervisory authority over the electricity sector to a number of its agencies, specificallyComisin Reguladora de Energa y Gas (CREG) and Unidad de Planeacion Minero Energetica(the Union of Mineral and Energy Planning, or UPME). CREG regulates the transportation anddistribution of electric power and gas and adjusts policies and procedures by which theseservices can reach the consumers and allow market competition between providers.

In Colombia, the state owns all hydrocarbon reserves. Control is exercised in the oil and gassectors through state-run hydrocarbons companies Empresa Colombiana de Petrleos(Ecopetrol) and Empresa Colombiana de Gas (Ecogs). While Colombia is South America'slargest coal producer, almost 70% of the country's electric power comes from hydroelectricsources. The government is seeking to encourage greater use of natural gas for electricitygeneration and public transportation in itsPlan de Masificacion de Gas Natural(Natural GasMass Consumption Plan).

In July 2002 the government signed a law revising its hydrocarbons royalties scheme in a bid toattract more foreign investment in oil and gas exploration. The law cuts royalties on recentdiscoveries of oil fields producing less than 125,000 barrels per day (b/d) to between 8% and20% (depending on daily output) from the long-standing, flat rate of 20%. To put this intocontext, only the country's largest fields, the Cusiana-Cupiagua fields, exceeds 125,000 b/d.The purpose of the revision is to better compensate foreign oil companies for the country'sinstability and risk of violence. The sliding royalties formula is opposed by provinces withsubstantial oil reserves that depend heavily on revenue streams from oil fields. Provinces keep60% of the royalties with the rest going to Bogota.

CREG has released a series of incentives for promoting development of natural gas in theCusiana-Cupiagua fields. Among other things, the new plan eliminates the $0.10-per-millionBtu pipeline transport charge previously levied; instead, gas producers will now pay a separate

transportation fee for shipping natural gas through Colombia's gas pipelines. CREG also willnow allow partners to enter export agreements for projects where the reserves will last six yearsor more. Another improvement outlined in the CREG plan will allow gas producers to jointlysell their gas, whereas each company now has to sell its gas individually.


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Doing Business in Colombia

CAPITAL: Bogot D.C.

POPULATION: 45 Million

AREA: 1,138,910 sq km (439,735 sq mi.)

LARGEST CITIES: Medelln, Cali, Barranquilla, Cartagena

LANGUAGE: Spanish

RELIGION: Roman Catholic 95%

CURRENCY: Peso

Import Climate: Colombia has signed several multilateral and bilateral free trade agreements.

The most important of these are: a) the Andean Community (ANCOM) with Venezuela,Ecuador, and Bolivia (Peru withdrew in April 1997); b) the Latin American IntegrationAssociation (LAIA) with Argentina, Brazil, Mexico, Chile, Paraguay, Uruguay, El Salvador,Costa Rica, Guatemala, Nicaragua, Honduras and Cuba, which was later renegotiated country

by country on a bilateral basis; c) the G-3 (Colombia, Mexico, and Venezuela); and d) theColombia-Chile bilateral agreements. Full implementation will take several years, but onceachieved, would give Colombia access to a free market of over 200 million people. Colombiahas also requested admission to NAFTA.

Under the ANCOM agreement, the signatory countries must assign a common external tariff(CET) for imports coming from third countries and, at the same time, eliminate duties for

products manufactured and traded within the region. There are four tariff levels in the CET: 5,10, 15, and 20 percent. As these member countries grow and modernize, foreign firms may


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consider the expanded ANCOM market attractive enough to initiate local production for theregional market.

Due to a number of integration agreements with various countries, a complex system of tariffsare applied according to the different treaties. The prior import-licensing requirement has been

virtually eliminated. Approximately 97 percent of the 5,162 items in the ColombianHarmonized Tariff Schedule are now on the free import list (i.e., no license required). Importprices are now undergoing closer scrutiny (for duty collection purposes), as is the entry offoreign currency. U.S. dollars can be exchanged freely through banks and financialcorporations.

Import regime: Imports may be classified as ordinary, under franchise, temporary, re-importation, guaranteed import, temporary import for re-exportation, special import-exportsystems, for assembly or transformation, postal, express and courier, and travelers.

Free import list: The majority of HS tariff categories do not require prior import licenseapproval by the Ministry of Foreign Trade (MINCOMEX). However, customs duties and all

other taxes must be paid. An import request or registration form is still required.Prior import list: The prior import-licensing requirement has been virtually eliminated;import registrations are common for most imports. Import licenses are valid for six months;twelve months for capital goods. Requests for extensions are complicated and are permittedonly for official imports and capital goods with valid justifications, for successive periods ofthree months per extension.

Tariffs: Import duties are ad valorem and are assessed on the CIF value of shipments.Colombia's tariffs conform to the 5-20 percent Common External Tariff (CET) in effect for theAndean Community. Government entities are no longer exempt from import duties.

Special taxes, fees and/or surcharges: Most imports of consumer goods, consumerelectronics, and apparel (in addition to a 15 percent estimate for freight and insurance FOBcosts), are subject to a 1.2 percent surcharge on the FOB value of products for a so-called"Customs Services Fund" which was introduced recently under Article 56 of Law 633 ofDecember 29, 2000.

VAT: A 16 percent VAT (value-added tax) is levied on the CIF duty-paid value of imports,with only a few exceptions.

Courier or express shipments: Courier or express shipments not exceeding US$1,000 invalue and 20 kilograms in weight are freely imported into Colombia. These shipments areclassified under HS 98.08.00.00.00, and are subject to a 10 percent CIF tariff and 16 percentvalue-added tax assessed on the CIF-duty-paid value of most merchandise shipments, plus 1.2

percent FOB surcharge for Customs services. Rules apply to either air or surface couriershipments contemplated under the new Customs Code that entered into effect on July 1, 2000.

Subsidies/bounties: Export incentives include the "Plan Vallejo" (drawback) or "Maquila","Plan Vallejo, Jr.", and the CERT (Tax Reimbursement Certificate), soft credit lines, andexport credit insurance policy.

Under the "Plan Vallejo" or "Maquila", imports of raw materials, inputs, and semi-finisheditems, as well as machinery, equipment and parts for the production, transformation, orassembly of exportable goods are exempt from any prior import license requirement, customs

duties, taxes, surcharges, or fees (provided they are later re-exported in the form of finishedproducts). Imports under these plans should be authorized by the DIAN (Internal Revenue &


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Customs Service) and must enter into a special arrangement with MINCOMEX, thegovernment entity that establishes the minimum local content and export percentagerequirement on a case-by-case basis.

The "Vallejo, Jr." plan allows for duty-free importation of raw materials used in the production

of exportable goods, as well as the replenishment of foreign-origin raw materials.The CERT is a tax-reimbursement certificate which can be applied to taxes on income,customs duties, and certain other taxes. The amount of the CERT is calculated as a percentageof the value of the exported goods, and varies by product and country of destination. CERTvalues range from 2.25 percent to 2.50 percent. Exports from designated free-trade zones nowqualify for the CERT program, depending on percentages of national content.

Legislation in effect encourages the establishment, operation, and maintenance of freeindustrial and commercial trade zones (most of which are located by seaports) so as to increaseassembly operations (U.S. 807/807A), transformation or manufacturing of exportable goods,and bonded warehousing.

Bans/prohibitions: No tariff categories appear on the prohibited import list, except for usedbags and sacks of vegetable fibers. Items previously prohibited are now permitted underlicense. However, no import licenses are approved for used automotive vehicles of any kind,used parts and accessories for tractors and automotive vehicles, or used tires, which in practiceare all considered as prohibited items for import into Colombia. Furthermore, imports of old orused clothing, closeouts, irregulars, rags, and scrap cordage of textile material wastes aresubject to prior import license approval which, in practice, is not granted.

Certificate of Origin requirement: Only imports from countries with trade preferences arerequired to have certificates of origin.

Language requirements on documents: Import registrations, license forms, andaccompanying documents must be in Spanish.

Import procedures and documents: The following documentation is requiredbyMINCOMEX to register imports and/or for the approval of an import application:

(1) completed import registration or license form, with a complete description of the goodsincluding the commercial, technical, or scientific designations, marks, model, size, contents,end-use, etc., for proper identification and tariff classification (a tariff classification decisionand price lists certified by a chamber of commerce and notarized by the Colombian Consulatein the country of origin may be required for proper identification of goods and tariffclassification);

(2) proforma invoice;

(3) catalogs, sketches, and diagrams;

(4) foreign exchange declaration, proof of payment abroad and/or valid letter of credit;

(5) proof of a down payment or prior import deposit, which is required in the case of paymentsthat will be made abroad against loans of foreign origin or import financing.

Customs procedures: A new Customs Code, which entered into effect on July 1, 2000, hasintroduced a few changes, the penalties chapter being the most important one. The Code is still

subject to different interpretations and complaints from affected parties, which may lead to
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additional changes. For nationalization, or customs clearance, the following documents andprocedures are required for ordinary or common imports:

(1) import registration or license form approved by MINCOMEX, when required;

(2) import declaration accompanied by the bill of lading or air waybill and the commercial or

proforma invoice;

(3) proof of payment of import duties, value-added tax, surcharges and other fees collectedthrough commercial banks;

(4) phytosanitary, mercerization and other certificates, when required;

(5) packing list;

(6) customs valuation and inspection, if necessary;

(7) an Andean declaration for all imports (with few exceptions) with an FOB value ofUS$5,000 and over; and,

(8) certificate of origin, when required.

Customs procedures have been simplified significantly; fewer forms are required, asimport/export procedures and customs clearance have become practically virtual - import,export and custom transit declarations are to be presented to Customs through electronic ormagnetic media and passwords are assigned to users.

The SIAs or Customs Intermediary Entities have been established to act onbehalf of importers, exporters and custom transit operators. However, anyone may alsoact without a SIA directly before Customs, in the cases outlined in the Customs Code,i.e, foreign trade operations under US$1,000, diplomatic possessions, internationalorganizations' shipments, travelers' possessions, etc. The SIAs must meet numerouslegal and capital requisites to become operative. The Permanent Customs Users, as well as the High-Volume Exporters, are thoseorganizations and/or private firms so identified for their large import and exportvolumes. They both enjoy some benefits that help expedite their shipments throughCustoms.

All incoming shipments shall be transferred to either bonded warehouses or free trade zones(or accredited private warehouses for product transformation, processing or industrialmanufacture), under Customs custody. This transfer must be done within two days fromairport arrival or five days from seaport arrival. The goods may remain for a maximum of two

months from the arrival date, while undergoing customs clearance. This initial period may beextended for two additional months, but after that extension expires, merchandise shall bedeclared as abandoned by Customs authorities if goods are not cleared for consumption.Merchandise rescue procedures are time-consuming and expensive considering warehousingand handling charges, in addition to a 15 percent penalty charge on the custom value of goods.

Importers are responsible for placing a correct value on imported merchandise and payingcorresponding duties and fees through commercial banks. The drastic reduction in paperworkhas simplified and accelerated the customs clearance process from weeks to a matter of hours.However, pilferage in customs warehouses continues to be a problem. Certificates ofconformity may be required for sensitive imports and other categories of products suspected of

being imported through smuggling and/or fraud.
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Warehousing charges: Imported goods stored in customs warehouses are subject to fines ifan import manifest is not presented within two working days from their arrival.

Samples: Samples usually require the same documents as commercial shipments; they may beimported without an import license, registration form, or payment of import duties if they are

consigned to a designated free trade zone, bonded warehouse, or imported on a temporarybasis in-bond.

Prior authorization requirements: Phytosanitary clearance, as well as permits or proof ofcompliance, are required by government entities when importing raw cotton, cotton yarns, andother vegetable fibers.

Labelling: Textile care, percentages of fibber content, and country of origin or manufacturemust be listed on the labels of apparel and other textiles imported into Colombia. Name of

product and contents, warnings, date of manufacture, expiration dates, and country of originare to be shown on all other imported articles.

Sizing/metrification: The metric system is used in Colombia. Sizes may be identified assmall, medium, large, extra-large, etc., and/or by European size numbers.

Financing/payment: Most products are imported through letters of credit and/or time drafts.Soft and long-term financing is an important sales tool, especially for government imports or

public tenders. Imports may be financed by foreign suppliers, financial intermediaries inColombia, and/or foreign financial institutions.

Colombian importers may freely negotiate payment terms with their suppliers, but importersmust list the agreed-upon payment terms on the import documents and may not subsequentlychange them. These are generally between one and six months for imported products forimmediate consumption, including raw materials, intermediate goods, and consumer goods,

with almost no term limitations for capital goods, which are payable within the timetables seton the import documentation, plus a grace period of three additional months. Foreign

payments may be authorized in instalments, but in no case can the original terms listed on theimport documents be changed. Often changes on monetary measures may limit amounts,advance deposits, and payback timetables for direct external loans.

U.S. exporters should be alert to financial market competition and be prepared to offer soft andlong-term financing after verifying the customer's credit status and the guarantees offered.Local importers usually obtain trade financing from commercial banks or credit agencies.Colombian exporters have access to credit offered by the Colombian Foreign Trade Bank(Banco de Comercio Exterior -BANCOLDEX), which replaced the former Export Promotion

Fund - PROEXPO. This credit is granted at competitive commercial rates and may berequested at any stage of a foreign trade transaction (including raw material purchase,technical assistance, marketing and promotion, shipment, etc.). This credit is now beingextended to Colombian importers--namely for industrial imports.

Prior import and foreign financing deposits: Loans of foreign origin and/or foreign financingof imports are permitted, but are subject to a prior import deposit (with a few exceptions, i.e.capital goods) of ten percent for six months from the date of the bill of lading or air waybilland registration with the Central Bank (Banco de la Republica). The Central Bank may alsoestablish other limitations and/or conditions, i.e., interest rates, end-uses, quantity limits, termsand other pertinent conditions to avoid undue pressures on and/or inconveniences to the

Colombian exchange market.
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Direct Import Costs: Consumer articles including, electronics, audio/video equipment, dataprocessing, communications items, storage devices, electric/electronic household appliances,etc., from around the world now appear in Colombian stores. Although an increasing

percentage of these products is legally imported, a significant amount comes in throughcontraband, which is a major problem, especially for consumer goods. Over US$5.0 billion in

all kinds of products (mainly consumer goods) is estimated to enter the country illegally.One of the causes for so much contraband is the fact that most imports of consumer goods,consumer electronics, and apparel (in addition to a 15 percent estimate for freight andinsurance FOB costs), are subject to an FOB 1.2 percent surcharge, plus a 20 percent CIFimport duty and a 16 percent value-added tax (VAT) assessed on the CIF-duty-paid value ofimported products. This approximate 62 percent margin over the basic FOB price of legallyimported goods encourages contraband.

U.S. exporters should note that consumers in Colombia usually end up paying an additional 80to 120 percent over the FOB price of imports. Final retail prices usually depend on profitmargins agreed on between U.S. suppliers and their Colombian representatives.

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