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V. TRADE POLICIES AND PRACTICES BYSECTOR
(1) Overview
1. Until 1990, Colombia hadamong thehighest tariffs intheregion andwasconsidered asone
oftheleastopeneconomies oftheAndean countries; restrictive import licensing wasinplace.1The
Apertura (opening) programme, anambitious andstraightforward reform, reduced thescope of
quantitative restrictions rapidly andbrought tariffs down. Tooffset negative effects oncertain
import-competing activities, adjustment measures havebeenadopted incertain areas.
2. Inrecent years theshare ofagriculture toGDPhasdeclined, theproduction ofimport competing
crops hasfallen andimports havemorethandoubled. Coffee production hasalsodeclined, while coffee
exports havegrown moderately. Thisperformance maypartly beexplained bythereduction inborder
protection butalsobyadverse climatic andworld market factors. Therevitalization ofagriculture
hasthusbeenapriorpolicy concern, including forsocial reasons, andtheresort tomeasures affecting
production andtrade hasintensified; onthetrade side,these include tariffs, variable import levies,
reference prices, import administration andsafeguards against certain imports. Acautious approach
wasadopted withrespect toregional preferences forcertain agricultural items. Awide range of
"short-term"devices,includingsubsidizedlandsales,subsidizedloans,domesticabsorptionarrangements,
andproducer price support, areavailable tofarmers.
3. While some partsofthemining sector aredynamic (e.g., emeralds), overall, theshare ofthe
important mining andenergy sectors inGDPhasfallen sincethelastTrade Policy Review ofColombia
in1990. Energy prices areamong thelowest inLatin America andtheCaribbean, despite Colombia 's
electricity andtransport fuelsshortage butthesearebeing increased toopportunity costorworld prices
where thishasnotalready happened (e.g., fueloilandpropane).
4. Inmanufacturingthereductionofborderprotectionhasexposedanumberofindustriestoforeign
competition. However, onlythecarassembly andtextile industries appear tobenefit from specific
measures other thantariffs. Carassembly bears thehighest tariff protection, differential value-added
taxratesandlocal(recentlysub-regional)contentrequirements.Nevertheless,thepresentrégimeappears
tobemore liberal thanitspre-Apertura version. Thedegree ofState involvement inmanufacturing
isbeing reduced.
5. Estimated simple average tariffs forbroad sectors oftheeconomy are:agriculture, hunting,
forestry andfishing -11.4percent; mining andquarrying -5.3percent; andmanufacturing -
11.6percent(Table V.1). Themore heavily protected sub-sectors are:fishing -17percent; food,
beverages andtobacco -17.3percent; andtextiles, wearing apparel andleather -17.9percent
(Table AV.1). However, there isconsiderable variation among individual industries (Chart V.1).
1IDB(1996), p.49.Colombia WT/TPR/S/18
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WT/TPR/S/18 Trade Policy Review
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Table V.1
Main features oftheColombian tariff schedule, 1996
Simple average tariff Tariff dispersion
(advalorem percent) Tariff range
(advalorem percent)Standard
deviationaCoefficient
ofvariationa
Alltariff lines 11.5 0-35 6.4 55.7
Bysectorb:
Agriculture andfisheries 11.4 0-20 5.1 44.7
Mining 5.3 0-15 1.5 28.7
Industry 11.6 0-35 6.5 55.7
Bydegree ofprocessing:
Primary products 10.1 0-20 5.6 55.2
Semi-processed products 9.9 0-20 6.1 61.3
Finished goods 12.7 0-35 6.5 50.9
a Thestandard deviation measures theabsolute dispersion ofadistribution; thecoefficient ofvariation isameasure ofrelative
dispersion, defined asthestandard deviation divided bytheaverage.
b Based onISICclassification.
Source: WTO Secretariat.
6. Tariff escalation isnotpronounced forfinished goods (Table V.1), butthere areanumber
ofindividual industries where escalation exists forsemi-processed aswellasprocessed goods. Examples
include foodproducts, textiles, wood products, paper products, petroleum andcoalproducts, ironand
steel, andnon-ferrous andferrous metal products (Table AV.2). Asstated earlier (Chapter IV(2)),
theauthorities consider thatgreater tariff escalation isdesirable forcertain semi-manufactures, but
there arenoplans formodifying theAndean CET.
7. Export subsidization through theCERT andSIEX/ Vallejo Plan(formachinery) alsoapplies
inanon-uniform manner todifferent sectors. Chart V.2illustrates thistendency, which isexpressed
inboththeaverage CERT rateandthesubsidy element foreachactivity in1993. Agriculture, textiles
andclothing absorb thelargest partofthese subsidies.Colombia WT/TPR/S/18
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8. Inrecent years Colombia 'sexport growth hasbeenbased ontheexpansion ofnon-traditional
exports, which increased by37percentinU.S. dollar value between 1991 and1995 (Chart V.3)2
Exports ofthemining sector grew four-fold (mainly ofemeralds), manufactures by61percentand
agricultural items by51percent(mainly bananas andcutflowers). Ontheother hand, thevalue of
traditional items (coffee, oilandproducts thereof representing 83percent,andcoal,iron/nickel) fell
by23percentbetween 1990 and1993; while theyrecovered in1994, theydidnotattain their1990
level. Thisdecline wasmainly duetoreduction ofearnings from coffee andoilexports.
9. Recent liberalization andprivatization efforts haveledtotheexpansion oftheservices sector,
which accounts formorethanhalfofGDP. Stateinvolvement hasbeenreduced significantly infinancial
services,tourismandradiobroadcasting,andthereareplansforareducedrôleintelevisiontransmission.
Market access, ownership andlocalrepresentation restrictions affect afewservices (Annex V.1).
2This statement isbased ondatacalculated bytheColombian National Administrative Department of
Statistics (Departamento Administrativo Nacional deEstadística ,DANE).Colombia WT/TPR/S/18
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(2) Agriculture
10. Between 1990 and1994, theshare ofagriculture inGDP at1975 constant prices fellby
about 10percenttoabout 20percent; for1995 nochange wasexpected.3From 1992 to1994, no
major changes occurred intheproduction pattern (Chart V.4). Theshares ofpoultry andpigoutput
haverisen, while thatofcoffee dropped asaresult ofthedecline inworld prices andpestinfestation.
Since 1990 thevolume ofproduction ofallimport competing andnon-tropical crops havedeclined
significantly (Table V.2); by1995, theextent ofthedecline ranged from 11percentformaize to
59percentforbarley andsoybeans.
11. Agricultural andlivestock imports more thandoubled between 1990 and1994 (Table V.3).
Inthesame period, agricultural exports grew bysome 8percentayear(Table V.4).
12. Theliberalization oftrade inagriculture, initiated in1990 andintensified in1991 and1992,
ledtothereduction oftariffs aswellastheelimination ofnon-tariff restrictions including priorlicensing
onproducts nottraded byIDEMA, andtheimport monopoly ofthisentity ongrains andoilseeds.
Thehoped foreffect ofthereforms onproduction ofexportables were notrealized mainly because
offactors suchastheappreciation ofthenational currency, thehighcostofcredit, deteriorating world
commodity prices andnon-tariff restrictions inindustrial countries.4
13. Anewframework lawforagricultural policy wasintroduced inDecember 1993, allowing State
intervention through anumber ofmeasures, including tariffs, pricestabilization funds, financing devices
andassistance forinsurance payments.5Thefiscal impact fromtheimplementation ofthese measures
hasbeenestimated at0.2percentoftheGDP.
14. Newmeasures aiming attherevitalization ofagriculture, introduced under theGovernment 's
current four-year development programme, include landpurchases forconversion toagricultural use;
larger andlonger-term credit availability; assistance forimproving marketing andtrading techniques;
andsubsidies tosmall producers.6Inaddition, anumber of"short-term" measures areavailable in
theform ofdomestic absorption agreements, intervention prices andincreases inCERT rates
(Chapter IV(4)). Some ofthese areusedselectively toassist activities adversely affected byworld
price developments.
3Calculations ofDANE andNational Planning Department cited inDepartamento Nacional de
Planeación (1995a).
4Forexample, theproduction ofgrain andoilseeds isnotwellsuited toColombia 'sclimatic conditions.
Intropical climates grains andoilseeds, onwhich emphasis hasbeen putinColombia, arecrops thatrequire
more agrochemicals andyield lessthanintemperate countries. While productivity isverylowfornon-tropical
crops compared tothat ofother countries, intropical products itregisters high levels. Document
CONPES 2786-DNP: UDA- Minagricultura ,7June 1995, cited inMinisterio deAgricultura yDesarrollo
Rural (1995), pp.218-221.
5Law101,23December 1993. Thisframework law(General LawfortheDevelopment ofAgriculture and
Fisheries, LeyGeneral deDesarrollo Agropecuario yPesquero )wasintroduced under aconstitutional provision
providing forspecial protection tothefarmsector andmeasures tofoster thetransfer oftechnology, andimprove
thequality oflifeandincrease productivity.
6EIU(1995c), p.15.WT/TPR/S/18 Trade Policy Review
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Colombia WT/TPR/S/18
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Table V.2
Developments innon-coffee crop output, 1990-1995
Item 1990 1991 1992 1993 1994 1995
Production (tonnes)
Export crops
Sugar cane 1,588,800 1,702,413 1,953,881 2,436,864 2,943,145 3,220,176
Potatoes 2,464,400 2,371,948 2,281,400 2,860,328 2,938,631 3,054,495
Plantains forexport 90,900 104,634 146,385 153,836 119,375 114,850
Bananas forexport 1,243,614 1,521,332 1,629,400 1,808,007 1,845,012 1,677,481
Brown sugar cane 1,092,629 1,092,551 1,175,648 1,236,794 1,239,403 1,287,726
African palm 251,961 290,856 290,470 314,680 376,860 387,943
Rice 2,116,600 1,738,600 1,734,950 1,590,062 1,657,212 1,750,471
Fruits 1,172,500 1,498,960 1,891,824 1,950,471 2,051,649 2,135,767
Vegetables 1,284,800 1,272,100 1,142,412 1,220,885 1,249,094 1,277,555
Yucca 1,939,019 1,645,213 1,650,961 1,900,190 1,794,611 1,923,880
Cotton 314,170 414,539 306,589 180,412 145,558 151,608
Tobacco (Black) 21,344 21,803 18,083 23,587 21,207 21,272
Sesame seeds (Ajonjolí) 8,230 5,602 3,785 9,772 8,768 7.492
Import competing crops
Maize 1,213,300 1,273,600 1,055,670 1,129,752 1,161,090 1,083,939
Sorghum 777,400 738,300 751,785 633,303 649,320 559,334
Soybeans 232,140 193,597 96,002 113,212 109,390 93,944
Wheat 104,800 93,900 75,219 96,303 105,183 90,338
Barley 100,400 102,400 56,039 72,552 57,702 47,383
Tobacco (Virginia type) 11,645 12,535 9,825 10,734 5,698 4,729
Change (percent)
Export crops
Sugar cane 7.2 14.8 24.7 20.8 9.4
Potatoes -3.8 -3.8 25.4 2.7 3.9
Plantains forexport 15.1 39.9 5.1 -22.4 -3.8
Bananas forexport 22.3 7.1 11.0 2.0 -9.1
Brown sugar cane 0.0 7.6 5.2 0.2 3.9
African palm 15.4 -0.1 8.3 19.8 2.9
Rice -17.9 -0.2 -8.4 4.2 5.6
Fruits 27.8 26.2 3.1 5.2 4.1
Vegetables -1.0 -10.2 6.9 2.3 2.3
Yucca -15.2 0.3 15.1 -5.6 7.2
Cotton 31.9 -26.0 -41.2 -19.3 4.2
Tobacco (Black) 2.2 -17.1 30.4 -10.1 0.3
Sesame seeds (Ajonjolí) -31.9 -32.4 158.2 -10.3 -14,5
Import competing crops
Maize 5.0 -17.1 7.0 2.8 -6.6
Sorghum -5.0 1.8 -15.8 2.5 -13.9
Soybeans -16.6 -50.4 17.9 -3.4 -14.1
Wheat -10.4 -19.9 28.0 9.2 -14.1
Barley 2.0 -45.3 29.5 -20.5 -17.9
Tobacco (Virginia type) 7.6 -21.6 9.3 -46.9 -17.0
Source: Government ofColombia.WT/TPR/S/18 Trade Policy Review
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Table V.3
Imports bysector, 1990 and1994
ByISIC three-digit codes
(US$ million andpercent)
Annual
ISIC Value ofimports average growth
Code Description 1990 1994 1990-94
Total 4,962.1 10,216.7 19.8
1 Agriculture 264.7 611.0 23.3
11 Agriculture andhunting 237.4 565.2 24.2
111 Agriculture andlivestock production 235.6 560.3 24.2
113 Hunting, trapping andgame propagation 1.9 4.9 26.6
12 Forestry andlogging 24.1 25.7 1.6
121 Forestry 24.1 25.7 1.6
122 Logging ... ... ...
130 Fishing 3.2 20.1 58.7
2 Mining andquarrying 24.9 41.4 13.5
210 Coalmining 0.2 0.0 -72.1
220 Crude petroleum andnatural gasproduction 2.3 5.3 23.5
230 Metal oremining 0.0 0.7 182.6
290 Other mining 22.5 35.4 12.0
3 Manufacturing 4,672.5 9,564.2 19.6
31 Manufacture offood, beverages andtobacco 133.7 420.4 33.2
311/312 Food manufacturing 100.3 396.4 41.0
313 Beverages industries 33.4 23.9 -8.0
314 Tobacco manufactures 0.0 0.2 54.8
32 Textiles, wearing apparel andleather production 129.7 407.5 33.1
321 Manufacture oftextiles 102.0 297.8 30.7
322 Manufactures ofwearing apparel, except footwear 18.6 67.0 37.7
323 Manufacture ofleather andproducts ofleather 7.2 21.7 31.6
324 Manufacture offootwear 1.8 20.9 83.4
33 Manufacture ofwood andfurniture 6.5 42.8 60.4
331 Manufacture ofwood, except furniture 3.2 21.4 60.4
34 Manufacture ofpaper, printing andpublishing 265.0 347.4 7.0
341 Manufacture ofpaper andpaper products 132.5 277.4 20.3
342 Printing andpublishing 26.1 70.0 27.9
35 Manufacture ofchemicals andchemical 1,680.5 2,473.4 10.1
351 Manufacture ofindustrial chemicals 1,167.6 1,653.9 9.1
352 Manufacture ofother chemical products 128.6 324.1 26.0
353 Petroleum refineries 334.8 314.5 -1.5
354 Manufacture ofmiscellaneous products ofpetroleum andcoal 0.6 0.5 -7.1
355 Manufacture ofrubber products 34.9 112.5 33.9
356 Manufacture ofplastic products 14.0 67.9 48.4
Table V.3(cont'd)Colombia WT/TPR/S/18
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Annual
ISIC Value ofimports average growth
Code Description 1990 1994 1990-94
36 Manufacture ofnon-metallic mineral products 25.1 128.1 50.3
361 Manufacture ofpottery, china andearthenware 0.5 31.4 180.6
362 Manufacture ofglass 10.2 60.8 56.4
369 Manufacture ofother non-metallic mineral 14.4 35.9 25.6
37 Basic metal industries 279.4 383.4 8.2
371 Ironandsteelbasic industries 152.2 187.3 5.3
372 Non-ferrous metal basic industries 127.2 196.2 11.4
38 Manufacture offabricated metal products 2,139.8 5,288.7 25.4
381 Fabricated metal products except machinery andequipment 83.8 251.2 31.6
382 Manufacture ofmachinery except electrical 1,037.0 2,007.4 18.0
383 Manufacture ofelectrical machinery 493.3 1,123.7 22.9
384 Manufacture oftransport equipment 409.1 1,639.8 41.5
385 Manufacture ofprofessional andscientific equipment 116.6 266.7 23.0
390 Other manufacturing industries 12.7 72.5 54.5
410 Electricity andgas ... 0.1 ...
... Notavailable.
Note: Concordance from SITC Rev.1 toISICbyWTO Secretariat. Errors could arise from thearbitrary allocation oftrade datato
ISICindustries because ofimperfections intheconcordance.
Source: WTO estimates based onUNSTAT, Comtrade database.
Table V.4
Exports bysector, 1990 and1994
ByISIC three-digit codes
(US$ million andpercent)
Annual
ISIC Value ofexports average growth
Code Description 1990 1994 1990-94
Total 6,251.1 7,702.5 5.4
1 Agriculture 2,293.1 3,231.8 9.0
11 Agriculture andhunting 2,175.5 3,023.7 8.6
111 Agriculture andlivestock production 2,173.0 3,013.5 8.5
113 Hunting, trapping andgame
propagation2.5 10.2 42.9
12 Forestry andlogging 0.1 0.1 -3.5
121 Forestry 0.1 0.1 -3.5
122 Logging ...
130 Fishing 117.5 208.0 15.4
2 Mining andquarrying 2,077.4 1,483.2 -8.1
210 Coalmining 537.0 545.6 0.4
220 Crude petroleum andnatural gas
production1,539.7 936.9 -11.7
Table V.4(cont'd)WT/TPR/S/18 Trade Policy Review
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Annual
ISIC Value ofexports average growth
Code Description 1990 1994 1990-94
230 Metal oremining ... ... ...
290 Other mining 0.7 0.7 0.2
3 Manufacturing 1,880.6 2,987.5 12.3
31 Manufacture offood, beverages and
tobacco130.6 198.6 11.1
311/312 Food manufacturing 103.1 167.0 12.8
313 Beverages industries 4.1 6.3 11.2
314 Tobacco manufactures 23.3 25.3 2.0
32 Textiles, wearing apparel andleather
production749.0 930.7 5.6
321 Manufacture oftextiles 130.6 216.8 13.5
322 Manufactures ofwearing apparel,
except footwear446.6 511.0 3.4
323 Manufacture ofleather andproducts
ofleather98.4 121.8 5.5
324 Manufacture offootwear 73.4 81.2 2.5
33 Manufacture ofwood andfurniture 3.7 8.1 21.9
331 Manufacture ofwood, except
furniture3.7 8.1 21.9
34 Manufacture ofpaper, printing and
publishing116.7 211.9 16.1
341 Manufacture ofpaper andpaper
products27.2 71.1 27.2
342 Printing andpublishing 89.5 140.8 12.0
35 Manufacture ofchemicals and
chemical654.2 883.6 7.8
351 Manufacture ofindustrial chemicals 196.6 416.1 20.6
352 Manufacture ofother chemical
products18.7 99.7 52.0
353 Petroleum refineries 410.7 298.7 -7.7
354 Manufacture ofmiscellaneous
products ofpetroleum andcoal0.8 0.4 -18.3
355 Manufacture ofrubber products 18.1 20.1 2.7
356 Manufacture ofplastic products 9.4 48.7 50.7
36 Manufacture ofnon-metallic mineral
products66.9 104.5 11.8
361 Manufacture ofpottery, china and
earthenware9.7 23.1 24.1
362 Manufacture ofglass 12.8 20.9 13.0
369 Manufacture ofother non-metallic
mineral44.3 60.5 8.1
37 Basic metal industries 11.7 28.8 25.4
371 Ironandsteelbasic industries 10.3 20.5 18.8
372 Non-ferrous metal basic industries 1.4 8.3 57.6
38 Manufacture offabricated metal
products131.6 589.6 45.5
Table V.4(cont'd)Colombia WT/TPR/S/18
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Annual
ISIC Value ofexports average growth
Code Description 1990 1994 1990-94
381 Fabricated metal products except
machinery andequipment56.6 123.6 21.6
382 Manufacture ofmachinery except
electrical27.3 159.2 55.4
383 Manufacture ofelectrical machinery 34.6 93.1 28.1
384 Manufacture oftransport equipment 7.9 187.8 120.6
385 Manufacture ofprofessional and
scientific equipment5.2 25.8 49.0
390 Other manufacturing industries 16.3 31.8 18.1
... Notavailable.
Note: Concordance fromSITC Rev.1 toISICbyWTO Secretariat. Errors could arisefromthearbitrary allocation oftradedatatoISIC
industries because ofimperfections intheconcordance.
Source: WTO estimates based onUNSTAT, Comtrade database.
15. Developments inestimated producer assistance, represented bythetotalassistance indicator
totheagricultural sector (Índice deApoyo alSector Agropecuario, IASA), fordifferent items are
illustrated inChart V.4. TheIASA protection indicator quantifies costs orbenefits fromtransfers to
producers through policy measures which disconnect thedomestic market fromunrestricted competition
oraffect thecostofcredit andfertilizers.7In1994, thetotalIASA attained US$915 million, itshighest
levelsince 1986; mostofthetransfers wereabsorbed bymilk(50percent)andsugar (32percent).
IASA 'srise(1993-94) andsubsequent fall(1995) ismainly explained byworld price developments
rather thandeliberate domestic policy action. Theprice bandsystem which hasabsorbed therisein
international prices, ledtoahigher IASA; theirdecline eliminated theprotection element oftheband.
Border protection
16. In1988, average tariffprotection fortheagricultural sector wasatabout 37percent,whereas
today tariffprotection averages 10.7percent(simple average tariffforISICindustry 111,Table AV.1).
However, anumber ofgoods aresubject toprior non-automatic import licensing, asdiscussed earlier
(Chapter IV(2)).8
17. Inthecontext ofregional agreements, safeguard measures were adopted against imports of
sugar andriceoriginating inVenezuela (Chapter IV(2)); these products hadbeenprocessed with
imported inputs subject toduties lower thanthose applied byColombia.9Toavoid thistypeofproblem
relating toinputs from Canada ortheUnited States andthose subsidized byMexico (fordomestic
production), Colombia hasexcluded allsensitive agricultural items fromitsliberalization commitments
intheGroup ofThree.
7Thisindicator isused fordiscussions atAndean Group level (CEGA-JUNAC, 1996).
8Decree 2439 of1994.
9These measures were adopted inconformity withtheprovisions ofAndean Group Decisions 370and371.WT/TPR/S/18 Trade Policy Review
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18. Asdiscussed earlier (Chapter IV(2)), asystem ofimport levies isoperated atsub-regional level
under theAndean Price Band System. Table V.5attempts toindicate theleveloftheimport levyfor
"marker products" andtheirrelation totariff binding commitments.
Table V.5
Estimated border protection for"marker" products through import levies andtariffs
(Percent)
"Marker "
ProductsImport levy
1April 1995-
31March 1996Import
dutyTotal
1April 1995-
31March 1996Final
tariff
binding
rateImport levy
1April 1996-
June 1996Total
1April 1996-
June 1996
minimum maximum minimum maximum minimum maximum minimum maximum
Crude palm oil 0 0 20 20 20 199 12.5 20 32.5 40
Crude soybean oil 0 14 20 20 34 75 19 20 39 40
White rice 18 45 20 38 65 189 8.5 16.5 28.5 36.5
Raw andwhite
sugar 18 33 20 38 53 117 14 22.5 34 42.5
Barley 0 16 15 15 31 144 0 0 15 15
Fullcream milk 16 40 20 36 60 151 7.5 9.5 27.5 29.5
Yellow andwhite
maize 0 29 15 15 44 194 0 0 15 15
Soybeans 5 25 15 20 40 125 0 6 15 21
Wheat 0 15 15 15 30 124 0 0 15 15
Poultry meat 39 90 20 59 110 209 60.5 71 80.5 91
Pork meat 20 65 20 40 85 108 10 30.5 30 50.5
Note: -theimport levyissetonthebasis ofareference price which varies (chapter IV(2)(ix)(a);
-allitems arecovered bytheSpecial Safeguards provisions oftheAgreement onAgriculture;
-poultry andpork meat aresubject tominimum access commitments with anin-quota tariff of80percent.
Source: Ministry ofAgriculture.
19. IntheUruguay Round, tariffbinding commitments wereextended toallitems andlevels reflect
"tariffication" obligations (Chapter IV(2)). Colombia alsoundertook toreduce budgetary outlays for
export subsidies andthequantities benefiting fromsuchassistance progressively overaten-year period,
andcutfinancial assistance, including subsidized loans andthepricesupport mechanism, toagricultural
producers.Governmentsupportforagrarianadjustmentinvestmentorpaymentsrelatingtoenvironmental
programmes areexcluded fromreduction commitments. However, certain aspects ofimplementation
needtobeclarified. These include: theelimination ofremaining import restrictions conditioned by
self-sufficiency principles anddomestic absorption requirements; theintroduction ofarégime fortariff
quota administration; andtheoperation ofimport levies through theAndean Price Band System
(Chapter IV(2)).
Agrarian reform
20. Landsalestofarmershavebeenheavilysubsidized,withloansincludingatwo-yeargraceperiod,
andconcessional interest rates. Theeffective subsidy onthelandsalehasbeenestimated at80percentColombia WT/TPR/S/18
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ofthepurchase.10TheNational Institute forAgrarian Reform (Instituto Colombiano delaReforma
Agraria ,INCORA), established in1961andrecently restructured, administers landreform andgrants
loans. Ithasbeentheprincipal agent intheColombian landmarket.
21. TheAgrarian Reform Law(Law 160), promulgated inAugust 1994, established anewsystem
ofsubsidized landpurchases covering upto70percentofthecostoflandrequired byafamily farm
unit(Unidad Agraria Familiar ,UAF) tocover itsoperational andre-investment expenses. Conditions
forloans forthepurchase oflandandproduction loans forthebeneficiaries oftheReform werelast
regulated in1995 andconsist of:are-discount ofupto100percentfor12-year periods including
twoyears ofgrace; amaximum loanof30percentofthevalue oftheland/project agreed witha
UAF; andinterest similar tothatgranted byFINAGRO (seebelow) tosmall producers
(i.e., 4percentage points higher thantheDTFdeposit ratefor1996). Total expenditure onloansrelated
totheAgrarian Reform mustnotexceed Col$18.5billion (orUS$18.5 million). Extensive landgrants
topeasants arealsoplanned.
Subsidized loans, indebtness andinsurance
22. Tofinance loans, banks andfinancial corporations areobliged toinvest anamount equivalent
to10percentoftheir total loans, inAgricultural Development Bonds (Títulos deDesarrollo
Agropecuario )issued bytheFund ofAgricultural Guarantees (Fondo Agropecuario deGarantías ,
FINAGRO).11FINAGROpaysinterestat4and2percentagepointsbelowtheaverage90-dayfixed-term
deposit rateDTF. Inaccordance withaCentral Bank decision of1990, these ratesweretoberaised
by1995, butaone-year delay, untilJanuary 1996, wasimposed.12InApril 1996, itwasdecided to
maintain ratesat1995levels. Thisisexpected tocause about US$30 million oflosses toFINAGRO.
Itisestimated thatifthesubsidy element istobeeliminated, interest rates willbeincreased by
4to8percentage points above theDTF rate,bringing theirlevelto45percent.13
23. In1994, 19percentofagricultural loans covered byFINAGRO were channelled tosmall
producers. These loans havebeenusedeither forworking capital orinvestment purposes atsimilar
proportions. About 64percentofthetotalamount wasdestined forthepurchase ofseeds andlive
animals.
24. Financial services toproducers, including insurance, arealsosupplied bytheCaja Agraria
(fullname CajadeCrédito Agrario, Industrial yMinero ),amixed-ownership ruraldevelopment bank
establishedin1931.Withrespecttoinsurance,theNationalFundforAgriculturalRisks(FondoNacional
10World Bank (1994), pp.127-128.
11Asfrom1990,theFundofAgriculturalGuarantees(FondoAgropecuariodeGarantías),amixed-ownership
entity, mainly provides loanguarantees andloans forsmall producers aswellasrediscount funds (recursos de
redescuento )foragricultural loans. FINAGRO wascreated byLaw16of1990 anditsactivities areregulated
byDecree 663, 2April 1993.
12InFebruary1996,theBankers'Association(AsociaciónBancariadeColombia,ASOBANCARIA)expressed
itsopposition totheGovernment policy ofmaintaining subsidized credit foragriculture totheexpense ofthe
banking sector (ElTiempo ,1February 1996)
13ElTiempo ,18March 1996.WT/TPR/S/18 Trade Policy Review
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deRiesgos Agropecuarios )wasestablished inAugust 1993.14Anational agricultural credit
commission (Comisión Nacional deCrédito Agropecuario ),created in1991, authorizes thegranting
offinancial incentives tofarmers.
25. In1994, aUS$170 million debtrecovery planforsmall producers (Programa deAlivio de
laDeuda alosPequeños Productores) wassetupbytheCajaAgraria tocover more than
120,000 indebted farmers.15Itcomprises debtrescheduling, writing offofinterest arrears, and
availability ofnewcredits.
Domestic absorption régime
26. InlinewiththeConstitution (Articles 64,65and66),adomestic absorption policy isused
topromote thedevelopment ofagriculture, livestock andfisheries activities, improve therevenue and
living standards ofdomestic producers, andincrease sectoral competitiveness. Under thispolicy,
where theprice offered bytheprocessor tothefarmer washigher thanthatprevailing inthemarket,
theauthorities granted acompensatory tariff concession cutfortheformer 'simports, suchtariff
concessions wereduetobeeliminated asfromthesecond quarter of1996. Theauthorities consider
thatdomestic absorption policy, which forms partoftheprogramme ofColombia 'sgradual andselective
liberalization, isinconformity withthecountry 'sinternational commitments.
27. Absorption contracts/agreements (convenios deabsorción ),sponsored bytheMinistries of
Agriculture, Economic Development andForeign Trade, aresigned between individual agricultural
producers andfoodprocessing firms. These agreements focus onimproving prices fordomestic
agricultural producers, ensuring outlets fortheir output andcontrolling surpluses. Bymid-1994
absorption agreements covering wheat, barley, sorghum andpalm oilwere signed withprocessing
firms including mills andbreweries. InMarch 1996, newdomestic absorption agreements were
concluded formaize, sorghum andyucca.16Inthelightofrecent increases inworld prices ofagricultural
products andsupply shortages forcertain items (wheat, sorghum, rice,maize, soybeans), theimpact
ofsuchagreements isreported tohavedeclined, withdomestic prices currently much lower thanworld
levels.17
28. Evenwiththeelimination ofcompensatory tariffs, domestic absorption contracts canpotentially
haverestrictive effects onimports. Thisisbecause, asstated earlier (Chapter IV(2)), despite the
commitmentto"tariffy"oreliminatenon-tariffbarriers,compliancewithdomesticabsorptionconditions
istaken intoconsideration forthegranting ofimport licences. However, theauthorities indicated to
theSecretariat thatthedomestic absorption policy wasnotrelated to"tariffication" commitments and
hadnothadimport restrictive effects.
29. TherégimeofdomesticabsorptioncontractshasbeennotifiedtotheWTOCommitteeonTRIMS
andthuscanremain inforce untiltheyear2000. Nevertheless, itseems thatthetrend istopassfrom
thisrégime totheSectoral Competitiveness Agreements (Chapter IVandbelow).
14Law 69,24August 1993.
15EIU(1995d), p.16.
16ElTiempo ,29March 1996.
17ElTiempo ,4March 1996.Colombia WT/TPR/S/18
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Producer prices
30. Asstated inChapter IV(4), minimum guaranteed andintervention prices apply tocertain
agricultural products through purchasing operations carried outbytheAgricultural Marketing
Institute (Instituto deMercadeo Agropecuario ,IDEMA). Since 1991, theformer haveconsistently
covered sesame seeds (ajonjolí ),paddy rice,barley (until 1993), dried beans, maize, sorghum and
soybeans. Thelatter, which whenever applied simultaneously withtheminimum guaranteed prices,
aresetatthesame orahigher level (upto22percent), havebeenapplied forregional assistance
purposes since 1993, andhavecovered paddy rice,barley, maize, soybeans andwheat. Minimum
guaranteed andintervention prices havebeenhigher thanofrepresentative international market places;
inrecent years (1994-95) differences haveranged between 5percent(wheat) and52percent(yellow
maize).
31. Since 1989theStatehascontributed towards theestablishment ofpricestabilization funds for
agricultural, livestock andfisheries products. Priority intheallocation ofthesefunds isgiven toexport
items andproducts affected bycyclical effects ofworld prices. Sofar,twofunds are
operational covering cotton andcocoa andthreemore (including African palm) aretobecreated. Apart
from theinitial capital contribution bytheGovernment, itseems thatthefunds arenowfinanced by
theretention of5percentoftheCERT amount from exports.
Trading/marketing arrangements
32. Asmentioned earlier (Chapter IV(2)(xiii) andTable IV.5), IDEMA andother firms ensure
themarketing/trading ofagricultural, livestock andfisheries goods. IDEMA istheentity implementing
theofficial marketing policy; since1992itsoperations havebeengoverned byanewlegalframework,
updated inlinewiththeGovernment 'sobjectives intheareaofeconomic andsocial development.18
IDEMA, which lostitsimport monopoly status in1991, hasgradually reduced itstrading activities
tothose intended toresolve marketing problems inmarginal zones (i.e., where market imperfections
exist) orinemergency situations andtoensure adequate basicfoodsupplies tolow-income consumers.
33. Since 1993, IDEMA hasoperated asalastrecourse buyer (particularly inmarginal zones)
ofagricultural products atprices (minimum guarantee and/or intervention prices setbytheMinistry
ofAgriculture. Italsoencourages, andparticipates in,theestablishment oftrading companies.19In
linewithitstrading mandate, intheperiod from1990 to1995 IDEMA purchased rice(7.5to15per
centofdomestic production), wheat (9.5to23.5percent), dried beans (0.1to9.7percent), maize
(2.3to5.4percent), sorghum (1.8to18.5percent), soya(0.2to42.1percent) andsesame seeds
(2.3to16.1percent). Despite theobjectives stated above, between 1990and1995IDEMA 'spurchases,
consisting mainly ofpaddy rice(59percent, 1995), soybeans (13percent), sorghum (13percent)
andmaize (9percent), rosebyabout 49percenttoUS$97 million. However, budgetary outlays for
IDEMA 'sCrop Purchase Fund (Fondo deCompras deCosechas )havereportedly beendrastically cut;
in1996 these stood atmore thanonethirdoftheirlevelin1994. IDEMA isalsodirectly involved
inthemarketing (sales) ofcrops; in1995itsoldrice,maize, soybeans, dried beans andsesame seeds
foratotalamount ofabout US$10 million.
18Decree 2136 of1992 andLaw101, 23December 1993.
19Until 1991, IDEMA hadmonopoly rights onimports ofmajor agricultural products (rice, sorghum, maize,
wheat, barley, soybeans, sesame, powdered milk) (World Bank, 1992), p.36.WT/TPR/S/18 Trade Policy Review
Page 110
34. Since 1993, efforts havebeenmade toreplace IDEMA 'strading intervention byasystem of
incentivesandsubsidies.Underthissystem,"compensatorypayments"(compensaciónorbonificaciones
especiales ),corresponding tothedifference between minimum guarantee and/or intervention prices
andtheprevailing domestic market prices, aregranted toagro-industry forsalesofcertain products
ofspecific regions.20Between August 1994andJune1995, suchcompensatory payments affected rice,
soybeans (US$48 pertonne) andcotton fibres (US$73 pertonne).21In1995, totalexpenditure for
soybeans andcotton reached about Col$ 2million andCol$ 1.2million, respectively.
35. Actionisalsobeingtakentoinvolvefarmersinprocessingandtradingactivities.InMarch1994,
IDEMA 'sManagement Board (Junta Directiva )created theFund forInvestment through RiskCapital
inEnterprises involved inMarketing andPrimary Processing ofAgricultural, Livestock andFisheries
Products (Fondo deInversiones para Capital deRiesgo enEmpresas Comercializadoras yde
Transformación Primaria deProductos Agropecuarios yPesqueros ),called theEMPRENDER Fund;
itsfinancial resources stood atabout US$4.6 million inearly1996. Itsobjective istobuildpartnerships
between associated producers andtheState(e.g., IDEMA) byfinancing partofthecostofestablishing
trading andbasic processing firms. EMPRENDER canfundupto50percentofthepre-investment
expenditure (preparation ofproposals), 50percentofthefirmcreation expenditure andprovide up
to49percentofthetotalcapital. ByJune1995, sixoutof35projects hadbeenapproved.22For
projects related totrading andprocessing activities (rice, dried beans, maize, slaughtering, powdered
milk), EMPRENDER wastotakeanaverage share of43.8percent.23
36. ANationalCommodityExchange(BolsaNacionalAgropecuaria)easescommoditytransactions
andcontributes inriskmanagement andprice stability. Special price bands areagreed foroperations
relating tocommodities requiring protection against price fluctuations (e.g., cotton). Between 1990
and1995, thevalue oftransactions grew byanoverall rateof1,364 percenttoUS$1 billion.
Modernization incentives
37. Asmentioned inChapter IV(4), aCapitalization Incentive inRural Areas (Incentivo de
Capitalización Rural )wasintroduced in1993andlastmodified in199524Thisconsists ofagovernment
subsidy, operated byFINAGRO, andinvestments andcapitalization intended tomodernize production
anddistribution, marketing andtrading procedures; ittakes theform ofa30percent(medium and
large producers) or40percent(small producers) discount onthetotalvalue ofloans contracted for
theseprojects. Atpresent, incentives cover projects inmarketing andtrading, technological innovation,
land conversion andpurchase ofmachinery andequipment. Bymid-1996, 67percentof
1,313 applications, representing expenditure equivalent toUS$15.3 million, hadbeenauthorized and
US$9.5 million hadbeendelivered tothebeneficiaries.
Sectoral competitiveness agreements
20Articles 48and49ofLaw101, 23December 1993.
21Ministerio deAgricultura yDesarrollo Rural (1995), p.61.
22Ministerio deAgricultura yDesarrollo Rural (1995), p.21.
23Ministerio deAgricultura yDesarrollo Rural (1995), p.61.
24Law 10123December 1993.Colombia WT/TPR/S/18
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38. Tocreate favourable conditions forimproving theefficiency andcompetitiveness ofthe
agricultural andagro-industrial sectors, asfrom 1995 Sectoral Competitiveness Agreements (Pactos
Sectoriales deCompetitividad )maybeconcluded between vertically linked public- andprivate industries
inindividual regions, upon initiative ofthelatter. These agreements, which aretobeco-ordinated
bytheMinistry ofAgriculture andtechnically supported bytheNational Planning Department, involve
awiderange ofactivities, suchasresearch, trouble-shooting, training, investment incentives, loans,
etc.InMarch 1996, astatement ofintentions (acuerdo devoluntades )wassigned between producers
andprocessors ofsorghum, maize andyucca. Work wasinitiated inother agro-industrial sectors such
asthose ofoleaginous seeds, wheat, bananas, aquaculture, riceanddairies.
Other
39. Since 1993, aprogramme ofmodernization anddiversification (Programa deModernización
yDiversificación delSector Agropecuario )hasapplied todealwithcrops affected bystructural
problems.25Priority isgiven toproducts suchasbarley, wheat, tobacco (black), pitafibre(fique)and
yucca.
40. Abroad network ofpublic, private andmixed-ownership institutions aredevoted totechnology
research anddevelopment (Sistema Nacional deInvestigación yDesarrollo Tecnológico )andtechnology
transfer (Sistema Nacional deTransferencia deTecnología Agropecuaria ).TheInter-American Institute
forAgricultural Co-operation (Instituto Interamericano deCooperación paralaAgricultura, IICA)
alsoprovides technical assistance. InJune1995, aUS$51 million loantofinance thetechnology transfer
programme wasagreed withtheWorld Bank.
41. Since June1994, aforestries development scheme, thecertificate offorestries
incentive (certificado deincentivo forestal ),hasbeenoperated bytheMinistry ofAgriculture through
FINAGRO. Treeplanting andpreservation costs (forafive-year period) aresubsidized byportions
ofupto75percentand50percent.26
(i) Coffee
42. Colombia accounted forabout 15percentofworld coffee production in1994. Between 1992
and1994 production declined byanoverall 26percent(Chart V.5) because ofadverse climatic
conditions andtheeffects ofcoffee berry borer worm. Coffee, however, wasstillColombia 'slargest
export itemin1994; average annual export growth recorded arateof9percentinvalue between
1990 and1994.
43. Colombia hasatradition ofregulating thedomestic coffee sector andadjusting producer prices
inresponse tofluctuations ininternational prices. TheNational Federation ofCoffee Growers
(Federación Nacional deCafeteros ,FEDECAFE) administers coffee policy, directed bytheNational
Coffee Committee andtheNational Coffee Fund (Fondo Nacional deCafé,FNC), which wassetup
in1940. TheFund'sparafiscal resources areadministered onbehalf ofthecoffee growers ofColombia,
25This programme wasdesigned with theassistance oftheInter-American Institute forAgricultural
Co-operation (Instituto Interamericano deCooperación para laAgricultura ,IICA) hasprovided technical
co-operation (IICA, 1993), p.80).
26Law 139, 21June 1994.WT/TPR/S/18 Trade Policy Review
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andareusedasabuffer todampen theeffects offluctuations inworld coffee prices.27TheFNC is
responsible forexport marketing andtheadministration ofinvestments (inareas asdiverse asbanking
andshipping companies) which result from theaccumulation ofcoffee revenues; italsomaintains
exclusive domestic salesrights fordenaturated orsemi-roasted coffee. Amajority ofprivate exporters
aregrouped intheAssociation ofCoffee Exporters (Asociación deExportadores delCafé,
ASOEXPORT).
44. Emergency measures, introduced on19May1995toassist inthefightagainst thecoffee berry
borer worm (labroca ),allow foradisbursement ofCol$500,000 (US$547) perhectare forreplanting
80,000 ha.ofoldorinfected coffee plantations.28Thisdisbursement represents aquarter ofthetotal
costperhectare; FINAGRO loans wereexpected tocover theremainder ofthecost. Asmentioned
earlier (Chapter IV(4)(iii)), indebted coffee producers whose 1995 crop suffered from this
infestation/disease andthedrought ofthesame yearareeligible forthisfinancial support.
45. Thedomestic producer price forexport-type coffee issetbytheFNC, which alsoactsasa
lastinstance buyer. After adjustments forinflation, theproducer price hasgenerally moved inthe
same direction astherealinternational price ofcoffee buthasvaried lessinabsolute terms duetothe
stabilizing impact oftheFNC. InJuly1994, inthecontext oftheNational Coffee Committee, the
Government andFEDECAFE agreed onaspecific mechanism linking domestic prices toworld price
developments, toavoid theneedforfrequent negotiations (between Government andcoffee growers).
Under thismechanism, thedomestic producer pricevaried along withexternal prices, calculated every
15daysonthebasis ofa60-day moving average oftheNewYork spotprices forColombian coffee.
Minimum andmaximum prices were setatUS$1.30 andUS$2.60 apound. Themechanism was
abolished inAugust 1995when external prices slumped to17months oflows. Since themechanism 's
elimination, thedomestic producer price hasbeenkeptatCol$ 201,000 (US$206) per125kg.load
ofunthreshed (pergamino )coffee.
46. Because oftherecent slump inworld coffee prices, sustaining highdomestic prices means that
theFNC mayincur losses. In1995, theFNC hadaliquidity problem, duetoaverylarge cropwith
aseasonal increase ofstocks, which ledtoadeficit ofCol$ 179billion, orabout US$184 million.
Given theworld price situation anditsmandate-conditioned trading practice ofbuying atthehigh
domestic support priceandselling limited quantities atlowprice, theFNCrisksbeing leftwithlarger
coffee stocks. Between 1991 and1994 stocks were cutby48percentto4.8million bags29;
nevertheless, bySeptember 1995arising trend wasagain apparent (Chart V.5), andtheFNC'sshare
incroppurchases dropped from57to33percent. However, between September andDecember 1995
thetrend wasreversed withtheshare reaching 88percent.
47. FEDECAFE runsitsownexport levysystem, theCoffee Contribution (Contribución Cafetera) ,
which isusedtosustain thelevelofthedomestic producer price. Thelevy'slevelvaries onthebasis
ofworld pricedevelopments. When theexternal pricefallsbelow acertain (equilibrium) leveloccurs,
thetaxbecomes negative andatransfer ismade fromtheFNC totheexporters toensure thepayment
ofthe(pre-set) domestic producer pricetothegrowers. Theadvalorem taxoncoffee exports, levied
bytheGovernment since 1967, waseliminated in1991.
27Membership ofFEDECAFE iscompulsory forallcoffee growers.
28EIU(1995b), Country Report 3rdquarter, p.13.
29Astandard bagofcoffee weighs 60kg.Colombia WT/TPR/S/18
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WT/TPR/S/18 Trade Policy Review
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48. Within theAssociation ofCoffee Producing Countries (Asociación dePaíses Productores de
Café,APPC) Colombia hassupported theattempt tolimitsupplies inorder toincrease prices. As
explained earlier (Chapter IV(3)), Colombia, incompliance withitsAPPC commitments, withheld
20percentofitscoffee exports fortheperiod October 1993toApril 1994. Theresulting improvement
ofprices inearly 1994 prompted APPC members, on10May1994, torelease halfoftheirwithheld
stocks; thirteen dayslatertheydecided torelease remaining stocks inan"orderly manner" between
JulyandSeptember 1994. Table V.6provides anoverview oftheAPPC 'sformer coffee retention
plan.
Table V.6
Coffee: Operational stages oftheAPPC Retention Scheme, 1994 and1995
Indicative Price (UScents perlb.) Retained quantity
(percent)1994 1995
Retention phase Upto75
75.01 to80Upto165
165.1 to18020
10
Neutral phase 80.01 to85 180.1 to190 0
Liquidation ofwithheld stocks 85.01 andabove 190.1 andabove 0
Reintroduction ofretention phase 85to80.01
Lessthan80.01...
...10
20
... Notavailable.
Note: Theindicative price refers totheflexible 20-day average Indicative Price setbytheInternational Coffee Organization.
Source: Government ofCosta Ricacited inWTO (1995a), Trade Policy Review -Costa Rica, Geneva.
49. InMarch 1995, anewvoluntary supply restriction planwasagreed within theAPPC; price
levels wereupdated andquantitative criteria were introduced toregulate theannual coffee supply to
theworld market. Forthe1995/96 scheme, Colombia wastolimititsexports to9.9million bags,
representing more thanonethirdofthetotalquantity agreed tobereleased byAPPC members onthe
world market. Colombia 'squota wastobespread overfourphases: July-September 1995(2million
bags); October-December 1995(3.3million); January-March 1996(2.25 million); April-June 1996
(2.36 million).30
50. Private firms areincreasingly responsible forthelarger partofcoffee exports: from 1990 to
1994, theirshare roseby25percenttoabout 64percent(Chart V.5). TheAPPC agreements require
restrictions byprivate exporters aswellastheFNC; inconsequence exports byprivate firms have
toberegistered bytheFNC.
(ii) Bananas
51. Between 1990and1994, exports ofbananas grew atanannual rateofmore than11percent,
mainly duetoanexpansion by47percentofthecultivated area; however, imports offresh banana
andplantains from Ecuador expanded inthesame period tomeetdemand intheSouthern partofthe
30Latin American Economy &Business, August 1995.Colombia WT/TPR/S/18
Page 115
country. Theexport success ledtothereplanting ofcertain coastal areas (Santa Marta).31Adrop
of15percentofbanana exports wasexpected in1995 because ofaglutintheworld market and
disruption ofproduction duetocivilunrest intheUrabá area.32
52. Almost 50percentofColombia 'sbanana exports gototheEUunder thetariffquota established
inaccordance with the1994 Framework Agreement onBananas (due tobemaintained until
31December 2002). Colombia started implementing thisrégime inthefirstquarter of1995; theglobal
quota wasincreased byaround 5percent, to2.2million tonnes. Colombia wasoriginally granted
ashare of21percentintheEU'sannual global tariff quota, allowing forsome 500,000 tonnes of
in-quota exports in1995. However, thisshare roseto25.3percent,or645,150 tonnes, when itwas
granted partoftheVenezuelan andalltheNicaraguan allocations. InApril 1996, Colombia 'stariff
quota stood at24.6percent, including 30percentofVenezuela 'squota.33Thein-quota tariff rate
isECU 75pertonne.34
(iii) Other
53. Production ofrice,maize, cotton andsorghum hasdecreased (aswellastheplanting area)
since1990because ofthereduction intariffprotection andconsequent increase inimports (Table V.2).35
From exporting rice,Colombia hasturned intoanetimporter since 1993 when 61,708 tonnes were
admitted.Thisincreasedto233,976tonnesin1994,buthassincefallen,andin1996only60,000tonnes
ofriceimports wereauthorized (Chapter IV(2)). Asstated earlier (Chapter IV(2)), selective safeguard
measures were taken recently against riceandsugar imports from Venezuela.
54. Between 1990 and1994 thevalue ofsugar exports grew eight-fold, sustained bydomestic
sugar caneproduction (Table V.1). Sugar exports totheUnited States aresubject toannual quotas
(Chapter IV(3)). Colombia 'sshare oftheU.S.market dropped progressively toabout onethirdor
23,570 tonnes intheperiod 1990-94; since thenithasrisen to47,855 tonnes fortheperiod from
October 1995 toSeptember 1996.36
55. Exports ofriceandsugar mayrequire special authorization toguarantee adequate domestic
supplies; atpresent, thismeasure isnotinforce.
56. Cut-flowers exports were worth US$430 million in1994. Over 80percentofexports are
destined fortheUnited States market where some aresubject toanti-dumping duties (Chapter IV(3)).
Since 1992, thecompetitiveness ofColombian cut-flowers intheworld market hasapparently declined
31Europa Publications Limited (1995), p.202.
32Latin American Weekly Report, 2November 1995.
33Latin American Weekly Report, 3August 1995, p.345; Europe, 1March 1996.
34More information ontheEUbanana régime canalsobefound inrecent WTO (1995a), WTO (1995b) and
WTO (1996).
35Europa Publications Limited (1995), p.202.
36WTO document G/AG/N/USA/2/Add.2, 2November 1995.WT/TPR/S/18 Trade Policy Review
Page 116
because oftheappreciation inrealterms ofthepeso, rising production costsandincreasing competition
from more innovative newcompetitors.37
57. Colombia'sNationalPlanforAlternativeDevelopment(PlanNacionaldeDesarrolloAlternativo)
seeks options forproducers ofillicit crops, interaliathrough attempting tomake alternative crops more
viable. Fortheperiod 1994 to1998, 50percentoftheexpenditure forthisprogramme, estimated
atUS$300 million, istobefinanced from abroad (e.g., theInter-American Development Bank).
58. InApril 1994, itwasestimated thatremittances fromtheillicit drugs tradestood atUS$5 billion
peryear, anamount equivalent tothatoflegalexports in1995or10percentofGDP.38Thereceipts,
together withother inflows, havecaused upward pressures ontherealexchange ratewhich make it
more difficult toexport other products (e.g., coffee) (Chapter I).
59. According toaMinistry ofJustice study, Colombia 'scampaign against drugtrafficking costs
3percentofGDP; expenditure stood atUS$653 million andUS$911 million for1994 and1995.39
Alarge-scale operation tospray cocafields withherbicide waslaunched inlate1994. In1996,
eradication plans aretoaffect 35,000 ha.ofillicit crops. Inaddition, 8,000 ofthe32,000 growers
havesigned ontoalternative development projects.40
(3) Mining andEnergy
60. Between 1990and1994, theshare ofmining (including hydrocarbons) andquarrying inGDP
(atconstant 1975prices) fellbyabout 22percentto3.7percent; thiswasexpected toincrease only
slightly in1995.41
61. Under theConstitution, theState canbedirectly involved inthemining andenergy sectors
bymeans ofdecentralized agencies oritmayassign exploration andexploitation rights totheprivate
sector.42Asmentioned earlier (Chapter IV(2)(xiii), Table IV.5), theStateisinvolved inproduction
andtrade ofmining andenergy products. ECOPETROL istheentity responsible forthenegotiation
ofagreements/contracts inthehydrocarbons sector, while ECOCARBON andMINERALCO have
similar responsibilities inthecoalandother mining activities, aswellasprospection andidentification
ofresources within theirresponsibility.
62. Royalty rates, calculated asapercentage ofthevalue ofoutput ofnon-renewable resources,
varybyproduct. Hydrocarbons aresubject toarateof20percentwhile those forother items range
37Europa Publications Limited (1995), p.202.
38Europa Publications Limited (1995), p.202.
39Latin American Weekly Report, 19October 1995.
40Latin American Weekly Report, 18January 1996.
41Calculations ofDANE andNational Planning Department cited inDepartamento Nacional de
Planeación (1995a).
42Investment conditions forthese sectors arediscussed inChapter III.Colombia WT/TPR/S/18
Page 117
from 1to12percent.43ANational Royalties Fund (Fondo Nacional deRegalías ),created in1994,
finances thepromotion ofmining (20percent), environmental protection (20percent) andregional
investment projects (59percent). Revenue isdistributed among central, departmental andmunicipal
authorities andtoregional development corporations ortheports.
(i) Mining, other thanenergy
63. Inrecent years mining production involume terms hasdeclined overall, except foremeralds,
ironore,nickel,sulphurandcertainnon-metallicminerals(e.g.,salt).44Between1990and1994,imports
grewatover10percentperyearandexports werealmost static(Tables V.3andV.4).45Annual growth
ofimports ofsaltandironoreaswellasexports ofprecious stones (seebelow) hasbeenparticularly
high.
64. AsnotedinTableIV.5,MINERALCOandECONIQUELarethepublicsectorentitiesinvolved
inmining, other thanenergy (seenextsection).
65. Between 1993 and1994 emerald extraction grew byabout 40percent. InAugust 1995, the
licences ofemerald producers were suspended following theveryhighgrowth ofexports inrecent
years.46Since then, emerald concessions havebeengranted onlytocompanies thatcandemonstrate
theirtechnical andfinancial capacity inproduction andexport ofthestone.
(ii) Energy
66. Prices forelectricity, natural gasandfuelsaremonitored bytheGovernment 'sNational Energy
andGasCommission andtheMinistry ofMines andEnergy (petrol formotor vehicles). High levels
ofsubsidization toconsumption haveformed partofColombia 'ssocial welfare programmes.47At
present,electricityandnaturalgastariffsdifferbetweenthepoorestandwealthiestsectionsofthesociety;
reportedly, those affecting thelatter exceed theproduction costandthisadditional revenue isused
topartly finance prices fortheformer.48Prices forfuelsarebeing adjusted withaviewtoattaining
thelevelofopportunity costs orworld prices; according totheauthorities domestic prices forfuel
oilandpropane arealready equivalent totheirinternational prices while those ofpetrol, diesel oroil
43Article 16ofLaw141, 20June 1994. Thislawregulates theState'sright oflevying royalties.
44Ministerio deMinas yEnergía (1995), p.166.
45Based onUNSTAD Comtrade database. According totheauthorities imports grew by25percentand
exports by4percentinthesame period. However, these estimates mayinclude energy products.
46Exports grew from anaverage US$40 million toUS$185 million (1992), US$424 million (1993) and
US$473 million (1994). TheState company MINERALCO hadissued 32emerald mining licences although
only11mines existed. Reportedly, export earnings stated asbeing from emeralds were from sales ofcocaine
orcoca paste (Latin American Economy &Business, October 1995).
47World Bank (1994), pp.84-86.
48Therestiscovered bysubsidies channelled through theColombian Energy Institute (Instituto Colombiano
deEnergía ;ICEL). For1995 these were estimated atUS$4.2million (Ministerio deMinas yEnergía ,1995,
p.47).WT/TPR/S/18 Trade Policy Review
Page 118
forengines(aceitecombustibleparamotores,ACPM)(excludingtaxes)rangebetween60and70percent
below world prices. Fuelprices were lastfixed inFebruary 1996.49
67. Table V.7indicates Colombia 'saverage energy pricing andranking inLatin America andthe
Caribbean asat1994. Theaverage electricity tariffforhouseholds, thelargest consumers, corresponded
to54percentand40percentofthepricecharged toindustrial andnon-industrial consumers. In1994,
households, theindustrial andnon-industrial absorbed 47percent, 33percentand10percentof
electricity sales.
Table V.7
Energy pricing inColombia andtheregion, 1994
(US$ perunit,percentorotherwise indicated)
Product/unit Average price Ranking inLatin America
andtheCaribbeana
(rank, cheapest after)Differencea
from highest
price inthe
region
(percentless)Difference froma
lowest price in
theregion
(percentabove)1994 1995
Natural gasfordomestic
use(1,000 cubic meters)113.8 104.8 4(Bolivia) 84(Barbados) 499(Venezuela)
Natural gasforindustrial
use(1,000 cubic meters)83.7 77.1 6(Bolivia) 88(Barbados) 781(Venezuela)
Liquid Petrol Gas(LPG)
(barrel)22.1 23.8 6(Bolivia) 77(Barbados) 135(Venezuela)
Regular petrol (Gasoline)
(barrel)34.2 35.1 2(Venezuela) 70(Uruguay) 511(Venezuela)
Premium petrol (Gasoline)
(barrel)42.5 43.5 2(Venezuela) 67(Uruguay) 575(Venezuela)
Diesel oil(barrel) 34.2 35.1 5(Trinidad &Tobago) 67(Barbados) 612(Venezuela)
Jetfuel(barrel) 29.7 20.5 5(Cuba) 60(Haiti) 209(Venezuela)
Kerosene (barrel) 34.2 35.1 7(Bolivia) 42(Uruguay) 877(Venezuela)
Fueloil(barrel) 10.3 12.3 2(Venezuela) 79(Bolivia) 164(Venezuela)
Coalforironandsteel
industry (tonne)13.1 12.2 2(Venezuela) 86(Chile) 84(Venezuela)
Coalforthermal power
stations (tonne)13.1 12.2 2(Costa Rica) 93(Paraguay) 6(Costa Rica)
Electricity fordomestic
use(KWh)4.0 4.5 4(Ecuador) 80(Grenada) 344(Venezuela)
Electricity forindustrial use
(KWh)7.4 8.1 11(Chile) 60(Argentina) 311(Venezuela)
Electricity for
commercial (non-industrial
non-residential) use(KWh)10.1 10.8 10(Haiti) 53(Grenada) 288(Venezuela)
a Situation asof1994.
Source: Organización Latinoamericana deEnergía/Sistema deInformación Energética (OLADE/SIEE) inMinisterio deMinas y
Energía (1995), Memorias alCongreso Nacional 1994-1995, p.141.
Hydrocarbons
68. According torecent estimates byECOPETROL Colombia 'soilresources consist of
4billion barrels ofproven reserves and3.2billion barrels ofprobable reserves. Intheearly-1990s,
petroleum discoveries (e.g., Casanara andCusiana oilfields) significantly increased proven reserves.
Between 1993andSeptember 1995, oilproduction fromallfields rosefrom453,000 to643,000 barrels
49Resolution oftheMinistry ofMines andEnergy 80271, 29February 1996.Colombia WT/TPR/S/18
Page 119
perday, arecord level.50In1994, themain refinery products were petrol (18percent), fuel
oil(14percent), engine oil(Aceite Combustible para Motores, ACPM) (14percent) anddiesel
oil(12percent).51
69. Between 1990 and1994 exports ofcrude petroleum andrefinery products recorded negative
annual growth rateswiththeexception ofcertain items (lubricating oils,distillates). In1994, themain
markets forColombian hydrocarbon exports were theUnited States (79percent) and
Puerto Rico(11percent).52
70. Although anexporter offueloilandother heavy products, Colombia doesnotrefine sufficient
transport fuels(e.g., gasoline, aviation fuel)tomeetdomestic needs.53Fortheperiod 1990-94, imports
ofrefined items grew atdouble-digit annual rates, except forgasoline which contracted. However,
theopening ofanewcatalytic cracking plantattheBarrancabermeja refinery inMay1995wasexpected
tohelpreduce petrol imports by15,500 barrels perday(ofwhich 3,500 ofliquid petrol gas,LPG).
Overall, Colombia uses130,000 barrels perdayofwhich 115,000 arenowdomestically produced.54
71. Noproduction restraints apply inColombia55.Asindicated inTable IV.5, theStatemonopoly
inproduction,refiningandtransportationofpetrolisoperatedbyECOPETROL.In1974ECOPETROL
initiated aphase-out ofoilconcessions atthetimeofrenewal, andonlythree concessions arenowleft
(ELF, Hocol, andPetronorte); theircontribution tooverall production isreflected inChart V.6.Most
oil(72percentin1994) isnowproduced under association (joint-venture) agreements withforeign
partners except forafewcases where ECOPETROL isthesole operator.56Atpresent
exploration/production contracts aregenerally granted forupto28years including maximum periods
of8and22years forexploration andexploitation, respectively. ByNovember 1995, 80association
agreements hadbeensigned withECOPETROL, which usually hasa50percentstake.
72. Asmentioned inChapter III,a"wartax"wasintroduced in1991tofinance military assistance
todefend pipelines; thistaxisbelieved toreduce theinternal rateofreturn oftheaverage oilproject
by4percentage points. Atpresent thetax(contribución especial porlaexplotación )islevied atrates
of7.0percent(light crude) and3.5percent(gas,other crude) ontheproduction value; on1January
1998these aretodropto5.5and3.0percent. Their gradual phase-out istocontinue until2001when
thetaxistobefullysuppressed.57
50Latin American Regional Reports-Andean Group, 16November 1995.
51Ministerio deMinas yEnergía (1995), p.156.
52Ministerio deMinas yEnergía (1995), p.163.
53Europa Publications Limited (1995), p.203.
54Latin American Economy &Business, August 1995.
55Colombia isnotanOPEC member.
56EIU(1995d), p.17.
57Articles 55and56,Law223, 20December 1995.WT/TPR/S/18 Trade Policy Review
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73. WhileECOPETROLensureswholesalesupplies,thedistributionoffuelsforretailsaleiscarried
outbyprivate firms authorized bytheMinistry ofMines andEnergy. ECOPETROL assumes the
costs relating tothesaleofgasoline andother fuelsbelow world prices; however, revenue fromthe
saleofoilderivatives covers domestic production costs.
74. AFundforOilSavings andStabilization (Fondo deAhorro yEstabilización Petrolera ),created
inAugust 1995, istoaccumulate US$2 billion between 1997and1999. Export revenue (30percent)
from theCusiana oilfield should bechannelled totheFund.58
Gas
75. Inrecent years attention hasturned tothegaspotential ofthecountry. Under theProgramme
ofExpansion forGasConsumption (Programa deMasificación delConsumo deGas),established in
December 1991, aneffort isbeing made tosubstitute gasforhigh-cost energy resources. Existing
andnewly discovered fields aretobefullyexploited. AscitedinTable IV.5, ECOPETROL isthe
public entity involved ingasdevelopment; ECOGAS, another Statecompany, istotakecareofgas
transportation.
58Latin American Economy &Business, October 1995.Colombia WT/TPR/S/18
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76. Theprincipal responsibility oftheCommittee forEnergy andGasRegulation (Comisión
Reguladora deEnergía yGas,CREG) theregulating authority, istopromote competition inthesector,
ensuring thattheagent acquires adominant position andpermitting theentry ofnewcomers. Italso
control prices, butindustrial consumers areabletonegotiate preferential rates. In1994, ECOPETROL
planned theconstruction ofagas-transmission pipeline toexploit bothdomestic andexport potential.
Coal
77. Colombia hasthelargest proven coalreserves inLatin America. Itmanaged toincrease the
contribution ofthisindustry toGDP through jointprojects between theStatecompany CARBOCOL
andUnited States companies (e.g., Intercor ofExxon, Drummond Coal). CARBOCOL isthemain
Statecompany responsible fortheexploitation ofcoalresources; others include CARBORIENTE and
ECOCARBON. Between 1990 and1994 imports steadily shrank, while exports remained stable.
Electricity
78. In1995, 78percentofelectricity wasproduced byhydro-electric generators; therestwas
fromthermal power stations. Despite massive expansion andrestructuring projects, drawn upinthe
1970s, electricity generation anddistribution haveimproved little. Thesituation hasbecome critical
since1992whenweatherconditionsadverselyaffectedwaterlevelsandreducedsuppliestohydro-electric
generators; electricity wasrationed untilApril 1993. Certain residential andindustrial consumers
haveresorted toindividual power generating devices. Supply remains insufficient tomeetdomestic
demand andthedeficit ismade upthrough imports from Venezuela (0.4percentoftotalsupply
in1994).59
79. Anumber ofpublicly owned companies (e.g., CORELCA, ICEL, ISA,ISAGEN) generate
and/or distribute electricity. Toreduce reliance onhydro-electric power andincrease output from
930MW to11,012MW by1998, arapid expansion programme hasbeenlaunched. Itincludes the
privatization andgreater useofthermal power stations (including thethree stations owned by
ECOPETROL). Concessions tobuild threenewpower stations werelettoforeign investors in1994.
80. InFebruary 1996, action wastaken toaccelerate theprivatization process byobliging allfirms
generating electricity totransfer 40percentoftheirmarket share toanother entity withwhich nolinks
aremaintained.60
(4) Manufacturing
81. Dataformanufacturing areunfortunately notfullyavailable forrecent years. Between 1990
and1994 theshare ofmanufacturing (including coffee processing andbeverages) inGDP fellby
7percenttoabout 20percent(measured inconstant prices); in1995afurther decline to19percent
wasexpected.61Intheperiod 1989to1993, theindustries ofthesector havenotrecorded major changes
interms ofperformance orrelative importance (Table V.8). Agro-industrial production (i.e.processing
ofagricultural products including tobacco) remains thelargest manufacturing activity in
59Ministerio deMinas yEnergía (1995), p.140.
60CREG Resolution 0020, 27February 1996.
61Calculations ofDANE andNational Planning Department cited inDepartamento Nacional de
Planeación (1995a).WT/TPR/S/18 Trade Policy Review
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output (43percentin1992) andvalue added (39percentin1992). Tobacco manufacturing, non-metal
basedindustries,woodprocessingandbeveragesproductionaretheactivitieswiththehighestvalue-added
content.
Table V.8
Manufacturing inColombia, 1989-92
(Percentandvalue)
Activity Output Share Value added Value-added/output Establishments Employees
1989 1992 1989 1992 1989 1992 1992 1992
Percent
Processed coffee 8.8 11.5 11.4 14.4 48.0 45.6}
Meat 11.4 9.0 3.5 2.7 11.4 10.9}
Processed cereals 7.8 7.6 4.8 4.8 22.9 22.9} 17.8 18.3
Dairies 2.3 2.2 1.8 1.7 28.7 28.0}
Sugar 2.5 2.6 3.0 3.1 43.6 42.3}
Other manuf. agric. products 3.9 4.0 2.8 2.8 26.7 26.0}
Beverages 6.2 5.9 8.9 8.4 52.8 51.6 1.9 4.3
Manufactured tobacco 0.9 0.7 1.7 1.5 73.9 73.0 0.2 0.3
Textiles, clothing &leather 11.4 11.7 13.3 13.4 42.8 41.8 24.2 25.3
Wood &furniture thereof 1.5 1.4 2.2 2.1 54.0 53.1 5.9 3.1
Paper &printed matter 6.4 6.5 7.2 7.2 41.8 40.1 7.3 7.1
Chemicals &rubber 15.3 15.7 13.3 13.2 32.0 30.7 12.8 14.2
Prod. ofpetroleum refineries 4.4 4.1 5.6 5.1 46.4 45.0 0.4 1.0
Non-metallic manuf. 3.8 3.8 5.9 5.9 57.3 55.9 5.3 6.4
Basemetal industries 5.4 5.4 5.7 5.6 39.3 37.5 1.6 2.2
Machinery &equipment 4.0 3.8 4.3 4.1 40.3 38.7 15.7 11.9
Transport equipment 3.0 3.0 3.0 2.9 36.7 35.2 3.4 3.6
Miscellaneous manufactures 1.1 1.0 1.5 1.3 49.7 48.8 3.4 2.4
Manufacturing inCol$ milliona409,688 455,156 150,913 165,690
Manufacturing inUS$milliona1,071 599 394 218
a Constant 1975 prices.
Source: DANE.
82. Intheperiod 1990 to1994, overall imports ofmanufactures grew more slowly thanthose of
agricultural products, recording anaverage annual rateofgrowth ofabout 20percent(Table V.3).
Nevertheless, incertain sub-sectors, including foodmanufacturing, textiles, clothing, footwear, wood
manufactures, transport equipment, there hasbeenmuch higher growth ofimports. Export growth
developed atalower rate. Leading industry groups include themanufacturing ofbasemetal andmetal
products aswellaswood furniture.
83. Inmanufacturing, there hasbeenasubstantial reduction ofimport tariffs andelimination of
import quotas under theApertura programme. In1988, average tariffs onsemi-processed andfinished
agro-industrial items were about 34and48percent; forindustrial items therates were 22andColombia WT/TPR/S/18
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29percent.62Since then(although there isnotadirect comparison) these rates have fallen to
17.5percentforfoodmanufacturing (ISIC Industry 311)while manufacturing asawhole hasasimple
average tariff of11.4percent(Table AV.1). Under theUruguay Round, tariff bindings for
manufactured items haveconsiderably improved interms ofbothcoverage andlevel; ingeneral, these
aresetat35percentasfrom 1995 (Chapter IV(2)).
84. However, despite thephasing outofmany non-tariff restrictions toimports, anumber ofdevices
including thedomestic absorption agreements, energy pricing policies andexport subsidization are
inplace toprovide assistance tomanufacturing activities. Suchassistance willbereduced asColombia
implements itsUruguay Round commitments tophase-out prohibited export subsidies (SIEX/ Vallejo
Plan)formanufactured items (Chapter IV(3)).
85. Asstatedearlier(ChapterIV(4))themanufacturingsectorbenefitsfromIFI'sfinancialassistance
throughloansforadjustment,modernization,productivityrise,researchanddevelopment.ItsPROPYME
andFINURBANO programmes were assigned Col$ 600billion eachfortheperiod 1994-98. IFI
maintains astake inseveral manufacturing areas.63
86. Inrecent years Sectoral Competitiveness Agreements (Acuerdos Sectoriales deCompetitividad )
have been available toindustries toassist their modernization andintegration intotheworld
market (Chapter IV(4) andSection (2)above). These intra-industry agreements aresponsored bythe
Ministry ofEconomic Development withthesupport oftheNational Planning Department. Sofar
twovertical-type agreements havebeenconcluded, linking thetextiles andclothing industries; and
theironandsteel, basemetal, capital goods andautomotive industries. Other agreements areunder
way(e.g., petrochemicals, plastics andrubber; wood pulp, paper andgraphic arts).
(i) Textiles andclothing
87. Until1992,thetextilesandclothingsectorswereamongtheleadersinmanufacturing,accounting
forabout 12percentoftotalmanufacturing output (Table V.8). However, between 1992 and1994,
theircontribution tovalue added inmanufacturing dropped by15percentto11percent.64From
1990to1994imports grewatannual ratesofabout 31percentfortextiles and38percentforclothing;
particularly fastgrowth affected knitted clothing accessories, waste textile fabrics andknitted textile
fabric. Despite thefactthattheclothing industry islargely anassembly (maquila )industry using
imported textile fabrics, exports progressed ataslower pacethanimports.
88. Thewithdrawal oftrade barriers (particularly tariff reductions onrawmaterials) under the
Apertura programme andaflood ofcheap, under-invoiced orillegal imports (Chapter IV(2)) have
brought about extensive changes intheindustry.65Certain firms became exporters (leather-goods
manufacturers), while thousand ofjobswere lostinthetextile business. According toresearch
undertaken bytheauthorities, Colombia hasdefinitively moved outofthegroup oflow-cost producers,
62GATT (1990), p.126.
63EIU(1995a), p.20.
64According toDANE (1995), p.159.
65Thevolume ofillegal (smuggled) andunder-invoiced imports isestimated at30percentofthenational
output (1993).WT/TPR/S/18 Trade Policy Review
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interalia,becauseofsignificantlyhigherlabourandcapitalcosts.66Itscomparativeadvantageisexpected
tocontinue shifting fromthelow-cost endofthesector, andtheindustry willneedtomove toother
segments oftheworld market byadapting output tointernational fashion, quality andfinishing
requirements.Inmid-1995textilesindustryrepresentatives(AsociacióndeConfeccionistasdeColombia)
asked foraUS$18.5 million conversion plan(PlandeReconversión Industrial )tohelptherestructuring
of750small andmedium-sized firms.67
89. In1988 average tariff protection was47percentandrates ranged from 5percentto
70percent.68Thishasnowdropped toasimple average of17.7percentandarange of0to20percent
(Table AV.1). Tariff escalation isquite pronounced, withratesrising from 9.5to18.8percentin
thetextiles sector and19.9percentinclothing (Table AV.2).
90. Tomitigatetheeffectsofadjustmenttothetariffreductions,certainnon-tariffprotectivemeasures
wereintroducedin1993.Minimumimportpricesaffectcertaintextileitems(ChapterIV(2)).Moreover,
selective safeguard measures weretaken recently against textiles, clothing andfootwear fromChinese
Taipei (Chapter IV(2)).
91. Ontheexport side,thetextile andclothing andleather industries areamong themajor recipients
oftheCERT andSIEX subsidy elements (Chapter IV(3)). In1993, these industries received atotal
amount ofexport subsidy under these measures equivalent toUS$18.5 million (Chart V.2).
92. Until31December1995Colombiamaintainedrestrictivebilateralagreementsregulatingexports
ofcertain textile items (poplin andprintcloth fabric ofcotton, infant cotton wear) totheUnited States
(ChapterIV(3)).Twoarrangements(memorandaofunderstanding),signedon2Juneand9August1995
withthiscountry, areinforceuntil31December 1997; theycover underwear andwoolsuitsforwomen
andgirls. These arrangements provide foroneaccess quota without anyrulesoforigin requirements
andasecond (larger) preferential treatment quota forthesame items when made from U.S.inputs;
thelatteraresubject totariffs onthevalue added inColombia. Quotas areallocated through INCOMEX;
90percentofthequota isallocated totraditional exporters while therestischannelled toaReserve
Fund (Fondo deReserva )toensure access tonewcomers. Annual individual quotas arebased onexport
performance overtheprevious 24months; iftheallocated amount cannot beutilized (fully orpartially),
itmust bereturned bytheendoftheeighth month ofthequota year. Exporters whohaveutilized
lessthan90percentoftheirquota aresubject toaprogressive three-year reduction oftheirquota down
to70percent.69Visa/Certification requirements affecting theseexports aregoverned bytheconditions
setunder abilateral arrangement signed inOctober 1995.70
93. Uruguay Round binding commitments intheareaoftextiles aretobeimplemented overalonger
(ten-year) period compared toother manufactured items. Colombia reserved itsright under the
WTO Agreement onTextiles andClothing touseitstransitional safeguards mechanism withrespect
tocertain items.
66Departamento Nacional dePlaneación (1994b), p.18.
67Mexico &NAFTA Report, 24August 1995.
68GATT (1990), p.123.
69INCOMEX External Circular SOE No.005.
70VisaArrangement between theGovernments oftheRepublic ofColombia andtheUnited States ofAmerica
concerning Textiles andTextile Products, 31October 1995. Procedural details were provided totheWTO
Secretariat.Colombia WT/TPR/S/18
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(ii) Carassembly industry
94. Transport equipment represented 3percentofoutput andvalue added inthemanufacturing
sector in1992 (Table V.8). Itscontribution tothevalue added generated bythesector roseby
43percenttomore than 4percent.71In1995, domestic assembly (installed) capacity was
90,000 vehicles peryear. Three outofeight foreign-owned car-assembly companies, accounting for
about 89percentofthiscapacity, dominate themarket: Sofasa (Renault, Toyota), Fábrica Colombiana
deMotoresorCOLMOTORES(GeneralMotors)andCompañíaColombianaAutomotrízorCCA (Mazda
70percent,Sumitomo 30percent).72Assembled vehicles consist mainly ofpassenger (70percent)
andcommercial vehicles.
95. Since thetrade reforms began, there hasbeenconsiderable growth intrade inautomotive
products, albeit within theAndean Group. Between 1986and1990, restrictive policies limited imports
toanaverage of10,000 vehicles eachyear. Despite export requirements under thepre-1990 régime,
noexports wererealized. Bycontrast, between 1990and1994, imports oftransport equipment recorded
annual growth ratesofmore than41percent, while exports ofpassenger motor vehicles increased
byanannual average rateof486percent,buses atabout 55percentandmotor vehicle partsatmore
than29percent.73By1994 imports ofCBU (completely builtup)vehicles andCKD (completely
knocked down) kitshadmultiplied respectively byabout four andthree times their 1992
level(Chart V.7). From 1991to1994, carassembly output almost doubled to80,968 units. In1995,
about 66percentofthedomestic demand wasmetbyhome-assembled vehicles.
96. Reportedly, Colombian assembly isseenbythethree major firms asabasis forexpanding
exports inLatin America andtheCaribbean. Asindicated earlier, Colombia 'sfirstcarexports took
place in1992 andgrew sixfold thefollowing year. More specifically, forthese years 208and
1,300 vehicles, representing 0.4percentandabout 2percentofdomestic assembly output, were
exported toVenezuela, another signatory oftheautomotive agreement. In1995, exports wereexpanded
tomore than4,211 home-assembled vehicles, andEcuador wasadded tothedestinations.74
97. Thetrade developments aretheoutcome ofsignificant sectoral trade policy changes and
streamlining which tookplace intheearly1990s bothinColombia andintheAndean Group ingeneral.
Since 1990 theassembly industry hasbeenderegulated andgreater flexibility hasbeenadded tothe
legalframework. Thelegislation allows for:market access tonewcar-assembly firms; theelimination
ofexport requirements; thesetting oflocal-content requirements atreasonable levels; thesuppression
oflimitations onthenumber ofmodels andlife-cycle inthemarket; therationalization oftariffs affecting
imports; and,theelimination ofimport permits forCKD kits.75
71According toDANE (1995), p.159.
72Other car-assemblers include TEA andMONO BLOCK withtheparticipation ofIsuzu, Mercedes-Benz
andMitsubishi.
73WTO Secretariat estimates based onUNSTAT, Comtrade database.
74ElTiempo, 1April 1996.
75Departamento Nacional dePlaneación (1995b), p.14.WT/TPR/S/18 Trade Policy Review
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98. Trade policy measures arecurrently applied inlinewiththe1993 Agreement ontheautomotive
sector (seealsoChapter IV(2)). These include atariff peakof35percentforCBU motor vehicles;
aconcessional rateof3percentforCKD kitsavailable toassemblers participating inthelocal-content
scheme (seebelow); differential IVAratesonforeign carsupto1,400 cc;minimum import prices;
andimport prohibitions onusedmotor vehicles, usedspare parts, andnewunused vehicles builtprior
to1994.76Toparticipate inthelocal-content scheme, anapplication (accompanied, interalia,bya
feasibility study covering financial andtechnical aspects) mustbesubmitted totheMinistry ofEconomic
Development, which issues theassembly certificate (certificado deensamble ).77
99. Before thereforms, tariffs intheautomotive sector were very highwithpeaks ofover
200percent.Today,thesimpleaveragetariffonmotorvehiclesis14.2percent,althoughCBUvehicles
aresubject tothehighest rateinColombia 'stariff schedule, 35percent(Table AV.1). However,
theverylowtariffof3percentonCKD kitsandthe35percentrateonCBU vehicles provides much
higher effective protection forassembly thanisevident fromthenominal rates.78Asnoted inTable IV.2,
charges added tothef.o.b. value ofa1,300 ccpassenger carcanattain 96percent.
100. In1995, thelocal-content scheme 'sminimum requirement waschanged toaminimum Andean
Groupsub-regionalcontent(porcentajedecomprassubregionales)requirement.79Fortheperiod1995-96
thiswassetat30percentforpassenger motor vehicles withacapacity ofupto16persons and
merchandise transport vehicle ofatotalweight of4.5tonnes (category 1),andat15percentforother
types ofvehicles (category 2).These requirements aretorisegradually to33and18percentby
January 1998.
101. Aformula, taking intoaccount sub-regional purchases ofvehicle parts, thevalue added of
exported parts orvehicles, andthevalue ofimported materials, isusedforcalculating compliance
withsub-regional content requirements.80Asanctions mechanism incaseofnon-compliance withthe
provisions oftheComplementarity Agreement wasagreed inJune1995.81
102. Theshare ofdomestic value added fortheentire sector oftransport equipment wasmore than
35percentin1992. Carassembly firms seemtohavedifficulties inmeeting thescheme 'ssub-regional
value added requirements. Thisispartly duetothefactthatdomestic firms (around 170)produce
76Article 5oftheComplementarity Agreement.
77Procedures arelaiddown inDecree 1343, 27June 1994.
78Forexample, onthebasis ofa70percentmaterials/output ratiounder freetrade theeffective tariff rate
would exceed 100percent.
79Decree 440,8March 1995, implementing Andean Group (JUNAC) Resolution 355,9December 1994.
80Decree 440,8March 1995. Under thisDecree, minimum sub-regional content (porcentaje decompras
subregionales ,PCS) iscalculated withtheformula: (IS+Vex)/(IS+CKD)*100, where ISrepresents thec.i.f.
value ofpurchases (from other signatories totheagreement) ofparts required forthevehicle assembly, Vex
isthevalue added inexports ofparts orvehicles, andCKD isthec.i.f. value ofimported materials from third
countries. Thevalue ofVexintheformula must notexceed 25percentoftheminimum sub-regional content
established foreach vehicle category, sothatatleast 75percentoflocal parts remain available forassembly
operations.
81AndeanGroupResolution375(PublicacióndelAcuerdosobreMecanismodeSanciones,relativoalConvenio
deComplementación enelSector Automotor ),21August 1995.WT/TPR/S/18 Trade Policy Review
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carpartsthatdonotrequire highly complex technology (e.g., batteries, filters, radiators, wheels, disc
pads, cables) andarethusoflimited value. Despite recent export growth, theparts firms'output is
mainly absorbed bythedomestic market forcarassembly (58percent) andrepair (36percent).
(5) Services
103. Between 1990 and1994 theshare oftheservices sector (excluding government services) in
GDP grew by22percenttoabout 53percent.82Thisincrease waspartly duetothedecline in
manufacturing aswellasfastgrowth infinancial services, transport, telecommunications, tourism and
retail trade. Asindicated inChart V.8,retail trade, hotelandrestaurant services (i.e., tourism) were
theleading activities in1994.
104. Anumber ofchanges tookplace inthestructure ofColombia 'stradeinservices between 1987
and1992. Theshares oftransport andtelecommunication services intotalimports ofservices rose
by12percentand7percent,while those offinancial andbusiness services andretail tradecontracted.
Inthesame period, theexport share oftelecommunication services expanded by32percent, while
thatoftransportation shrank by14percent.
105. Theauthorities havesupplied details ofconditions governing trade inservices inColombia
inanumber ofsectors; thesearesetoutinAnnex V.1.According tothisinformation barriers toforeign
investors orprofessionals existinaudiovisual, basic telecommunications, maritime transport, tourism
andprofessionalservices.Minimumequityparticipationisrequiredinadvertisingservices.Restrictions
affectthemovementofprofessionalsandworkers(e.g.,architecture,engineering,construction,unskilled
labourers).
106. Table AII.1 provides details onpolicy formulation intheservices sector. TheStateisinvolved
inproductionandtradeinservicessuchastelecommunicationsandbroadcasting,railandwatertransport,
infrastructure works, tourism, finance andinsurance. Nevertheless, inrecent years thedegree ofits
involvement seems tohavebeenreduced, shifting increasingly toaregulatory andsupervisory function.
107. Regional tradeagreements signed byColombia contain either general intention orsector-specific
provisions onservices (mainly transport ortransport-related). Bilateral agreements cover, interalia,
professional services, education, cultural services, andtourism.
108. Inview ofthedynamism ofthesector, theauthorities have recognized theneed fornew
legislation incorporating provisions forthepromotion oftrade inservices.83Thereduction ofthe
10percenttaxlevied onforeign currency earned from exports ofservices wasunder consideration
inlate1994. Thepossibility forintroducing anexport assistance scheme, aPlanVallejo Servicios
(particularly fortourism services), similar tothescheme forgoods (Chapter IV(2)(ii)(e)) isunder
consideration. Export support includes finance from BANCOLDEX.
82Calculations byDANE andNational Planning Department cited inDepartamento Nacional de
Planeación (1995a).
83Departamento Nacional dePlaneación (1994a), p.24Colombia WT/TPR/S/18
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109. Colombia'sScheduleundertheGeneralAgreementonTradeinServices(GATS),complemented
byfinancial sector undertakings inJuly1995, provides for"horizontal" commitments ontwomodes
ofsupply: commercial presence andthepresence ofnatural persons. Inrespect oftheformer, existing
legal market access restrictions relate toinvestment projects inareas suchas:national defence, the
processing anddisposal oftoxic, hazardous orradioactive waste; andborder orcoastal zones. In
respect ofthelatter, Colombia hasbound theentry andtemporary stayoflegal representatives,
managerial andtechnical staffaswellasspecific employment shares foritsnationals.84Specific sectoral
commitments refermainly tounrestricted market access andnational treatment oncross-border supply,
consumption abroad andcommercial presence. Commitments cover, interalia,alarge number of
professional services (legal services other thanthose relating tonational law,accounting, taxadvice,
managementconsulting,computer-relatedservices,businessservices,etc.),constructionandengineering
aswellasfinancial services.
110. Inviewofitscommitmentsvis-à-visLatinAmericanandotherpartners,Colombiahasexempted
thefollowing sectors fromm.f.n. treatment asenvisaged under Article IIoftheGATS: landtransport
andvalue-adding telecommunications (topreserve Andean Group preferences); audiovisual services
(toobserve commitments under bilateral orregional agreements); banking, financial andinsurance
services (granted onareciprocal basis).85
111. Theauthorities consider that,inthelightoftherecent liberalization oftheforeign investment
andexchangerégimes(ChaptersIandIII),thecommitmentsunderGATSdonotrequirepolicychanges.
112. Colombia isparticipating inthenegotiations onmaritime transport andbasictelecommunication
services. Inmaritime transport, replies totherelevant questionnaire andaninitial offer havebeen
submitted.86Colombia offered toeliminate itsArticle II(m.n.f.) exemption ininternational maritime
transport (currently granted onareciprocal basis) inexchange forother participants 'commitments
toprovide unrestricted access inthethreepillars ofthenegotiations. Since 28February 1996, Colombia
hashadfullparticipant status inthenegotiations onbasic telecommunications andhasmade adraft
offer.87Colombia submitted asubstantial offeronbasic telecommunications totheWTO Negotiating
Group inApril 1996, covering telephone, packet-switched andcircuit-switched datatransmission, telex,
telegraph andprivate leased circuit services. Inthisoffer, Colombia committed itselftoopennational
andinternational long-distance services togreater competition onastaged basisasfromMarch 1997,
andtoopencellular telephone services further afterJune1999.
84GATS/SC/20, 15April 1994, andGATS/SC/20/Suppl.1, 28July1995.
85GATS/EL/20, 15April 1994, andGATS/EL/20/Suppl.1, 28July1995.
86WTO documents: S/NGMTS/W/2/Add. 30,17July1995, andS/NGMTS/W/14, 20March 1996.
87WTO documents: S/NGBT/13, 12March 1996; S/NGBT/W/3/Add. 38,7March 1996; and
S/NGBT/W/12/Add.34, 29April 1996.Colombia WT/TPR/S/18
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(i) Banking, finance andinsurance
113. Between 1990 and1994 theshare ofbanking (including services tobusiness) inGDP grew
by19percenttomore than9percent; afurther increase wasexpected in1995.88In1992, banking
wasresponsible formorethan13percentoftotalimports and21percentoftotalexports oftheservices
sector (Chart V.8).
114. Under thenewConstitution, allbanking, stockbroking, insurance andanyactivity related to
investment orsavings areconsidered tobeof"public interest".89Accordingly, prior authorization
isrequired forundertaking suchoperations. Asstated inChapter II,theManagement Board (Junta
Directiva )oftheBank oftheRepublic isthesupreme authority which formulates foreign exchange,
monetary andcredit policy. TheSuperintendency ofBanks (Superintendencia Bancaria ),attached
totheMinistry ofFinance (Ministerio deHacienda yCrédito Público ),istheregulatory authority of
thesector. Ithascontrol, inspection andintervention powers withrespect toalloperators (public or
private) ofthefinancial system, excluding theBank oftheRepublic.90
115. Colombia 'srecent sectoral policy objectives haveincluded unrestricted market access, unlimited
authorization offoreign investment, theelimination ofcertain barriers inanumber ofoperations and
theliberalization ofinterest ratesforloans and/or deposit savings.
116. In1991important changes wereintroduced intheforeign investment régime, andnorestrictions
toforeign presence orparticipation nowexist(Chapter III).Partly asaresult ofthese changes, the
stock offoreign investment infinance andinsurance increased from US$179 billion in1990 to
US$701.1 billion in1994.
117. Between 1991and1993thebanking sector wasstrengthened andexpanded because ofanumber
ofmergers, conversions andprivatizations. TheState hasbeen andremains involved insectoral
activities(TableIV.5).TableV.9indicatesthetypeandownershipofentitiesinvolvedintheColombian
banking andfinancial sector; theirscope ofaction (including limitations) isregulated byrecently enacted
legislation covering thefunctioning ofthefinancial (including insurance) system.91InJanuary 1996,
minimum capital requirements ranged between US$4.1 million (commercial financial corporations)
andmore thanUS$22 million (banking institutions) forthese institutions.
88Calculations ofDANE andNational Planning Department cited inDepartamento Nacional de
Planeación (1995a).
89Article 335ofthe1991 Constitution. Until theenactment ofthenewConstitution, theGovernment was
authorized tointervene inthefinancial sector onmatters related toprivate savings. Thus, allfinancial activities
were regulated through presidential decrees (IDB, 1996, p.15).
90Thescope andconditions forexerting these powers aresetinLaws 45and35of1990 and1993.
91Decree 663,2April 1993.WT/TPR/S/18 Trade Policy Review
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(ii) Telecommunications92
118. Between1990and1994theshareoftelecommunicationsgrewby9percenttoabout2percent
ofGDP andafurther increase of6percentwasexpected in1995.93However, despite anaverage
annual growth rateof8.5percentintelephone linesinthepastdecade, 20percentofthepopulation
remains deprived ofprivate telephone facilities. Telecommunication services accounted formore than
onefifthoftotalimports andtotalexports ofservices in1992 (Chart V.8).
Table V.9
Main financial sector operators, June 1995
(Units)
Establishments Total Private national State-owned Foreign-owned
(fully orpartly) (fully orpartly) (fully orpartly)
Commercial banks 32 27 4 14
Financial corporations (corporaciones financieras ) 24 24 13 10
Saving corporations (corporaciones deahorro ) 10 10 2 0
Commercial financing corporations (compañías de
financiamiento comercial CFC)74 73 9 15
Fiduciaries (fiduciarias ) 47 47 9 5
Deposit brokers (almacenes dedepósito ) 12 12 4 0
Capitalization firms (sociedades decapitalización ) 8 8 0 0
Insurance brokers (corredores deseguros ) ... ... ... ...
Insurance companies (compañías deseguros
generales )32 31 4 12
Lifeinsurance companies (compañías deseguros de
vida)23 23 2 4
Insurance co-operatives (sociedades coop. de
seguros )2 2 0 0
Re-insurance firms (compañías reaseguradoras ) 4 4 1 2
Pension funds (fondos depensiones ) 14 14 1 2
... Notavailable.
Source: Superintendencia Bancaria.
119. Traditionally, telecommunications, thesecond largest sector intrade inservices, hasbeena
Statemonopoly. However, current telecommunication policies areintended toachieve greater openness,
theelimination ofmonopolies andgreater private-sector participation, withtheobjective ofachieving
auniversal service, modernization oftheinfrastructure andthediversification ofservices.
120. Basic telecommunication services arereserved fornational firms. Asstated earlier
(Chapter IV(2), Table IV.5), since 1991 theState-owned telephone company (Empresa Nacional de
Telecomunicaciones ,TELECOM) hasprogressively reduced therange ofservices where itmaintains
92Asmentioned earlier (Section V(5)), more details ontheconditions governing theoperation ofthissector
arecontained inColombia 'sreplies totheQuestionnaire onBasic Telecommunications (S/NGBT/W/3/Add. 38,
7March 1996).
93Calculations ofDANE andNational Planning Department cited inDepartamento Nacional de
Planeación (1995a).Colombia WT/TPR/S/18
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monopoly rights. Atpresent these arerestricted tolong-distance calls(national orinternational).94
However, TELECOM 'smonopoly onlong-distance callsisabout todisappear because ofcompetition
from non-authorized suppliers ofcall-back services, which areprohibited; inaddition, concessions
forlong-distance services aretobemade available bytender tothree private-sector operators by
March 1997.95Local telephone services aresupplied byTELECOM (14percentoftotalcapacity)
andregional ormunicipal firms.96Other telecom services aresupplied byprivate-sector companies.97
In1994, six-year concessions foroperating mobile telephone networks were granted tosixprivate
andmixed-ownership (State participation) firms.
121. Tooperate basic telecommunication services andtherouting ofinternational traffic, prior
authorization informoflicences orconcession mustbeobtained fromtheMinistry ofCommunications
andaninitial tariff must bepaid; commercial presence isbased onaneconomic necessity test(test
denecesidad económica ).ThesameMinistry setsnetwork standards inconsultation withmanufacturers
andoperators.
122. Tariffs fortelecommunication services, other thanthose ofbasic telecoms, canbefreely set,
buttheymustberegistered withtheCommittee fortheRegulation ofTelecommunications (Comisión
deRegulación deTelecomunicaciones ).ThisCommittee mayintervene tofixtariffs whenever it
considers thattheseareagainst theinterest ofusers. Operators 'tariffs arecost-oriented, andnooperator
canoffer prices thatarebelow costordiscriminate among users. Toincrease itscompetitiveness
TELECOM hasbeenreducing itslong-distance tariffs; tariffs forinternational callsare15percent
above world average prices duetoadministrative inefficiencies.
(iii) Transport98
123. Thetransport sector accounts forabout twothirds oftrade inservices (Chart V.8). Between
1990 and1994, theshare oftransport andwarehousing remained unchanged atabout 7percentof
GDP.99Domestic cargo otherthanpetroleum andcoal,islargely operated bytrucks (about 95percent)
andtoalesser extent byrailandriver transport means.
124. PriortotheAperturaprogramme,thetransportsectorwascharacterizedbyexcessiveregulation,
Stateintervention andinefficiency. Policy responsibilities forthetransport sector werespread among
94Reportedly, TELECOM 'sprivatization hasbeen opposed bythefirm'sunion. Thus agradual fade-out
strategy isbeing followed (IDB, 1996, pp.36-37).
95TELECOM 'srevenue consists mainly oflong-distance international calls(44percent) andnational calls
(42percent).
96DocumentCONPES2760Mincomunicaciones-DNP:UINF-DITEL,p.2.TELECOMpayslocalcompanies
amounts ranging from to30to40percentofitsrevenues generated from long-distance calls generated from
their network.
97Ministry ofCommunications Resolution 28,14December 1995, regulates thegranting ofconcessions in
different telecommunication services.
98More details ontheframework ofrules governing thesector arecontained inColombia 'sreplies tothe
Questionnaire onMaritime Transport Services (S/NGMTS/W/2/Add.30, 17July1995).
99Calculations ofDANE andNational Planning Department cited inDepartamento Nacional de
Planeación (1995a).WT/TPR/S/18 Trade Policy Review
Page 134
different government agencies. Theportadministration aswellastheconstruction andmaintenance
ofinfrastructure relating tomerchandise trade weresubject toStatemonopoly. Thisframework had
anegative effect onitscompetitiveness andthequality ofservices rendered.
125. Since 1990, transport services havebenefited fromaseries ofpositive developments including:
anupdated general andmode-specific legal framework (1993); portprivatization (1991) and
modernization; theintroduction ofamore liberal regulatory framework atAndean Group levelin
air,maritime androad transport;100thelaunching oftheprivatization ofrailtransport; the
liberalization/deregulation intheairtransport sector (permits foroperators, tariffs, destinations); the
decentralization ofairport administration; andtheintroduction ofconcessions forrailtransport
operators (1995). TheMinistry ofTransport, established in1992, isresponsible forsectoral policies
which areformulated inco-ordination withtheMinistry ofForeign Trade (Table AII.1).
126. TheGovernment isconvinced thatbusiness competitiveness andexpansion maybehindered
bydeficiencies ininfrastructure andtransport services. Afive-year freight subsidy isgranted forcargo
destinations forwhich there isnodirect routing (Chapter IV(3)(viii)). Thisispartofaneffort to
diversify export markets aswellastopromote multi-modal transport.
127. Theoverall incidence oftransport costs (freight) toimports wasestimated at7percentofthe
f.o.b. value in1994. Thehighest rateswerefound formerchandise imports originating inChile and
Central America. Forexports, ratesranged from 1.8percent(coffee extracts shipped toGermany
ortheUnited States) to60percent(coal carried bytruck toVenezuela).
128. Inairtransport, an"open skies" (cielos abiertos )policy, adopted in1992 introduced anew
operationalpatternprovidingforincreasedcompetitiononareciprocalbasis.Maintainingonlyprofitable
cargo routes hasledtothesuppression offlights tocertain destinations andexcess insupply for
others (e.g.towards production centres). Between 1990 and1993, theleading domestic company,
AVIANCA, decreased itsinternational flights, domestic market share andpersonnel by37percent,
22percentand43percent. Ithadalsotoinvest infleetrenewal andservices upgrading.101Tariffs
forcargo transport arefreely setbutmust observe aceiling setbytheauthorities.
129. Themajor achievement inmaritime transport hasbeentheelimination ofthecargo reserve
requirement in1991. Thisboosted competition fromabroad (andfromroadtransport) thusbringing
bothasignificant dropintariffs (upto50percentsince1990) andasharp improvement inthequality
ofservices available onthemarket. Themarket share ofColombian lineswasconsiderably reduced.
Thisobliged domestic shipping companies tomodernize, cutcosts, register abroad (i.e,under flags
ofconvenience) orconclude agreements (e.g., slotsharing) withforeign operators.
130. Therestructuring ofportservices hasledtoa60percentriseinproductivity; thereduction
ofvessels mooring timefrom6to3days; andanaverage cutof52percentinportfeesandcharges.102
Tariffs forportservices must bekeptwithin aprice band setandmonitored bytheGeneral
Superintendency ofPorts (Superintendencia General dePuertos ).
100Andean Group Decisions 288,5February 1991 and314,18February 1992 liberalized maritime transport
(eliminating thecargo reserve requirement) andsetpolicy guidelines forthedevelopment ofacommercial fleet
atsub-regional level.
101IDB(1996), pp.55-56.
102Ministerio deComercio Exterior (1996), p.29.Colombia WT/TPR/S/18
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(iv) Tourism
131. Colombia 'stourism sector targets business travellers (42percent), vacationers (25percent),
conferences andtrade fairs(23percent) orweek-end shoppers (10percent).103Between 1990 and
1994 theshare oftourism (i.e., restaurants andhotels) increased five-fold tomore than11percent
ofGDP.104Since 1990 arrivals havegrown progressively ataratehigher thantheworld 'saverage.
Foreign visitors originate mainly intheAmericas (United States, Venezuela, Ecuador) andEurope.
132. Until theadoption ofthenew Constitution, aState entity, theNational Tourism
Corporation (Corporación Nacional deTurismo )linked totheMinistry ofEconomic Development,
hadregulated thedevelopment ofthissector. Since 1991, thesector hasbeenderegulated andthus
opentoprivate-sector investors. Regional andlocalgovernment regulations govern thesector.
133. Between 1968and1995acertificate oftourism development (certificado dedesarrollo turístico )
wasusedtohelpreduce major bottlenecks inhotel availability.105Itprovided forasingle (onefiscal
yearonly) revenue tax(impuesto derenta)break ofupto15percentofthetotalamount invested in
thefirm. Theratedepended onthelocation, quality, category androom occupancy ofthehotel. From
1971to1995, 124certificates, corresponding toaCol$4.1billion fiscal revenue loss,weredelivered.
134. Anewtourism lawisunder preparation. Itcontemplates amore liberal investment framework
aswellthereplacement oftheCNT byaVice-Ministry ofTourism attheMinistry ofEconomic
Development andthepreparation ofasectoral programme. This programme istoinclude the
establishment ofaTourism Promotion Fund (Fondo dePromoción Turística ),fiscal incentives, etc.
aswellastheopening ofpromotion offices abroad.
135. Since 1994 tourism-related freezones havebeencreated asanincentive toattract investment
tothesector (Chapter IV(3)(xiii)).
(v) Broadcasting
136. Traditionally, intelevision broadcasting, theinfrastructure fortransmission hasbeenowned
andcontrolled bytheNational Radio andTelevision Institute (Instituto Nacional deRadio yTelevisión ,
INRAVISI ÓN).INRAVISI ÓN,controls three national channels (twocommercial, oneeducational)
andfourregional channels. Broadcasting timeisdistributed through public tender toprogrammers.
Quotasfortelevisionbroadcastingtimedifferentiatesbetweenlocally-andforeign-producedprogrammes.
137. Since December 1995, television broadcasting hasbeenregulated byLaw182which provides
forspecific investment andbroadcasting (ofColombian-produced programmes) requirements; these
arecontained in(Annex V.1). Bytheendof1997when private channels aretobeauthorized tooperate,
more competition willbeintroduced inthesector.
103Ministerio deDesarrollo Económico (1995).
104Calculations ofDANE andNational Planning Department cited inDepartamento Nacional de
Planeación (1995a).
105Thesuppression oftheincentive waspartoftheDecember 1995 taxreform (Chapters IandIV).WT/TPR/S/18 Trade Policy Review
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Annex V.1
Conditions governing trade inservices inColombia
A. Financial services
Finance
Theestablishment ofbranches offoreign enterprises inthefinancial sector isnotallowed;
onlytheestablishment ofaffiliates orsubsidiaries ispermitted (Code ofCommerce, Article 471)
Portfolio investment mustbemade bymeans ofaForeign Capital Investment Fund intended
fortransactions onthestock market (Article 39ofResolution 51of1991).
Anytransaction byinvestors fromabroad intended toacquire 10percentormore ofthepaid-up
shares ofanyfinancial bodyrequires theapproval oftheSuperintendency ofBanks (Superintendencia
Bancaria )(Article 28ofResolution 51of1991).
Theincorporation ororganization ofanyfinancial institution withforeign capital requires the
approval oftheSuperintendency ofBanks (Article 94(1) ofDecree 663of1993).
Inthecaseoftransfers abroad, foreign companies mustpayataxonremittance ofprofits as
follows:
-forthe1994 fiscal year, 10percent;
-forthe1995 fiscal year, 8percent;
-for1996 andsubsequent fiscal years, 7percent(Article 321-1 oftheTaxRegulations).
Insurance
Insuranceonvessels,aircraftandvehiclesregisteredinColombia,aswellaspersonsandproperty
inColombian territory mustbetaken outwithlawfully established insurance companies inColombia;
exceptionally,andonlyforreasonsofgeneralinterestmaythisbedonewithinsurancecompaniesabroad,
afterauthorization from theSuperintendency ofBanks (Article 188(1) ofDecree 663of1993).
Insurance with foreign insurance companies may betaken outonly forjourneys
abroad (Article 188(1) ofDecree 663of1993).
Itisnotpermitted onColombian territory toengage ininsurance operations withunauthorized
foreign companies forthepurposes ofinsurance activities inColombia ortodosowithagents working
forsuchbodies (Article 39ofDecree 663of1993).
Towork asinsurance agents, foreigners must haveresided inColombia formore thanone
year(Article 41(6)(d) ofDecree 663of1993).
Only persons authorized bytheSuperintendency ofBanks mayengage ininsurance business
inColombia (Article 108(3), Decree 663of1993).Colombia WT/TPR/S/18
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TheSuperintendency ofBanks authorizes theestablishment inColombia ofoffices representing
foreign reinsurers. Such offices mayonlyaccept orcedereinsurance; theycannot operate directly
orindirectly ininsurance (Articles 94(2) and(3)ofDecree 663of1993).
B. Audiovisual andbroadcasting services
Production
Under Colombian legislation, filmproduction isrequired tobecarried outbypersons or
enterprises ofColombian nationality. Thetechnical andartistic personnel must be85percent
Colombians. Thescreen timeshallbeatleast60minutes (Article 2ofDecree 284of1994).
Inthecaseofaco-production byColombian andforeign enterprises orpersons, theColombian
financial share shallnotbelessthan51percent. Thetechnical andartistic personnel mustbe30percent
Colombians andthescreen timeshallbeatleast30minutes (Article 3ofDecree 284).
Regional television organizations mayemploy forthepreparation oftheirprogrammes natural
orlegalpersons professionally engaged insuchactivities anddomiciled intheauthorized areacovered
bytherelevant regional television organization (Article 42ofLaw14).
Thesound tracks fornational andjointnational/foreign commercials must beproduced in
Colombia withColombian personnel. Forthese purposes, thefollowing definitions apply:
-national commercial: oneproduced byColombians, withColombian models, whether made
inColombia orabroad (Article 18ofResolution 2683 of1986);
-jointnational/foreign commercial: onemade byaColombian producer, withtheforeign
production confined topost-production services withcomputers, laboratories, special effects
orarchive footage, provided these donotaccount formore thanonethirdofthecommercial.
Themodels inthistype ofcommercial may beColombian orforeign (Article 19of
Resolution 2683 of1986);
-foreign commercial: onewhich doesnotmeettheabove-mentioned requirements (Article 20
ofResolution 2683 of1986).
Television broadcasting
Theprogrammingregulationsforregionaltelevisionchannelsprohibitthebroadcastingofforeign
commercials bythem (Articles 17,18,19andparagraph 2andArticle 20(1) oftheMinistry of
Communications Resolution 2683 of1986).
Thebeginning andtheendofColombian-produced programmes broadcast byregional channels,
aswellasthevarious sections ofsuchprogrammes, mayhavesponsors (Article 48ofResolution 2683
of1986).
"Courtesy" credits mayonlybeplaced attheendofnational orregional programmes (Article 57
ofResolution 2683 of1986).
When musical programmes arebroadcast onregional channels, when national andforeign
performers alternate, theColombian performers must opentheprogramme. Theadvertising oftheWT/TPR/S/18 Trade Policy Review
Page 138
programme featuring theforeign performer mustalsomention theColombian performer withwhom
hewillalternate. If,onaccount ofthenature oftheprogramme, itisnotpossible tofeature aColombian
performer, thetimethatwould beallowed foronemust bemade upinthefollowing broadcast(s)
(Article 75(4)ofResolution 2683 of1986).
Incultural anddrama broadcasts onregional channels, therelevant works must bewritten
specially fortelevision, adapted from literary works, preferably byauthors from Colombia andthe
region (Article 75(5) ofResolution 2683 of1986).
Foreign investment isauthorized incompanies withlicences fortelevision timeorprogrammes.
However, itislimited to15percentofthetotalcapital ofthelicensee company andtheinvestor 's
country oforigin must offer thesame opportunity forinvestment toColombian enterprises under
conditions ofreciprocity. Suchinvestment mustcome fromenterprises orcompanies inthetelevision
industry inthecountry oforigin oftheinvestment. Suchforeign investment mayonlybemade through
registered share companies (Article 34ofLaw182of1995 regulating television services).
Everytelevisionoperator,licenseeoftelevisiontimeorregionaltelevisioncontractor,regardless
ofgeographic coverage, must every month broadcast thefollowing minimum percentages of
Colombian-produced programmes:
- National andzonal channels:
-from 7.00pmto10.30 pm(Triple A),70percent;
-from midnight to10.00 am,100percentfreeprogramming;
-from 10.00 amto2.00pm,55percent;
-from 2.00pmto7.00pm,40percent;
-from 10.30 pmtomidnight, 55percent;
-onSaturdays, Sundays andholidays (Triple A),60percent.
- Regional channels andlocalstations:
-50percentoftheoverall programming.
Forregional channels andlocal stations, repeats ofColombian-produced programmes may
beincluded, wherever approved bytheGoverning Board oftheNational Television Commission.
Tomeetprogrammingrequirements,productionsofColombianoriginaredefinedasprogrammes
ofanykindmade atallstages byColombian artistic andtechnical personnel, withtheparticipation
offoreign actors inleading andsecondary roles. Theparticipation offoreign actors shallnotalter
theColombian nature oftheprogramme, provided itdoesnotexceed 10percentofthetotalofthe
leading roles. Theparticipation offoreign performers ispermitted whenever therulesintheircountry
oforigin permit them tobeemployed.
Aco-production istaken tomean oneinwhich theColombian share inartistic andtechnical
areas isnotlessthanthatofanyother country.
Every channel ofalicensee ofsubscription television thatbroadcasts commercials mustcomply
withtheColombian programming percentages.Colombia WT/TPR/S/18
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Radio broadcasting
Theradiobroadcasting frequencies belong totheState. Individuals usethemunder aconcession
system. Concessions toprovide aradio service mayonlybegranted toColombian natural persons
orColombian legalpersons inwhich themanagement orcontrol isinthehands ofColombians and
inwhich notlessthan80percentofthecapital isofColombian origin (Article 3ofDecree 0284 of
1992).
TheMinistry ofCommunications issues special licences forthebroadcasting ofradio news
programmes. Oneoftherequirements forsuchalicence isproof thattheheadoftheprogramme is
aColombian national andenjoys hisrights asacitizen (Article 7ofLaw74of1966).
Areader inradio broadcasts doesnotneedalicence orpermit ofanykindfromtheMinistry
ofCommunications ifheisaninhabitant ofColombian territory (Decree 0284/92, Art.122).
Thebroadcasting orrebroadcasting ofprogrammes other thaninSpanish ororiginating abroad
isregulated. Foreign performers taking partinradio broadcasts mayonlyactforalimited period
oftimeandshallbesubject tospecific obligations (Article 15ofLaw74of1966).
Movie theatres
Cinemas mustshow Colombian feature-length films for30daysintheyear. Uptoonethird
ofthisperiod maybecovered withLatin-American feature-length films from countries withwhich
there isacurrent co-production agreement, provided thecountries oforigin havemade reciprocity
arrangements (Article 5ofDecree 2570 of1985).
C. Transport
Land transport
TheColombian Government reserves therighttorestrict theprovision oflandmotor vehicle
cargoandpassengertransportservicesbetweendifferentpointsonnationalterritorytoColombiannatural
orlegalpersons.
Norestrictions apply toforeigners providing landmotor vehicle cargo andpassenger transport
services. Theonlyrequirement consists ofsetting upacompany inaccordance withColombian
legislation (Code ofCommerce).
Seaandriver transport
OnColombian-registered ships, thecaptain, theofficers andatleast80percentoftherest
ofthecrew must beColombians (Article 99ofDecree 2324 of1984).
Airtransport
AnyColombianorforeignairlinewithanagencyorbranchinColombiamustemployColombian
workers, inaproportion ofthestaffofnotlessthan90percent(Article 1803 oftheCode of
Commerce).WT/TPR/S/18 Trade Policy Review
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D. Tourism andtravel-related services
Foreign participation intourism free-zones must bemade through thebranch ofaforeign
company. Toengage inpermanent business, aforeign company must establish abranch domiciled
inColombia.
E. Professional services
Biologists
Concerningactivitiesinbiology,itiscompulsorytoemployColombianbiologistswhenecological
impact studies orwork aretobeinitiated (Law 22of1981 andDecree 2531 of1986).
Bodies operating inColombian biology-related activities arerequired toemploy atleastone
biologist ofColombian nationality. Towork inColombia, foreigners require theauthorization ofthe
Professional Biology Council andmust comply withtherules onwork byresidents abroad.
Economists
Persons wishing topractice aseconomists inColombia arerequired tobedomiciled in
Colombia (Law 37of1990 andDecree 2928 of1980).
Accountants
Persons wishing towork inColombia asaccountants arerequired toberegistered withthe
Board and,forthatpurpose, tobedomiciled inthecountry fornotlessthanthree years before the
application ismade (Law 45of1960 andLaw43of1990). Accountants ofenterprises engaged in
theexploitation ofnatural resources must beofColombian nationality orforeigners domiciliated in
Colombia forthethree years preceding theirrecruitment.
Engineering
Electrical andmechanical engineers andthelike,withforeign qualifications, require aspecial
licence towork inColombia when theyintend todosoforaperiod ofnotmore thansixmonths.
Thelicence isissued when theneedisshown fortheparticipation ofaforeign professional. Theforeign
professional isunder anobligation totrainColombian personnel andtheCouncil mayatanytimecancel
theregistration.
Inconstructions, studies, installations, etc.,theparticipation ofsuchprofessionals maynot
exceed 20percent, innumber orvalue, oftheprofessionals onthepayroll. Ifgreater participation
byforeign professionals isnecessary, theemployer shallbeallowed oneyearfrom thestartofthe
work totrainColombian professionals inorder tomeettheabove-mentioned minimum.
Foreign entities operating inColombia inactivities directly related tofishing ortheexploitation
ofhydro-biological resources, musthavetheprofessional services infisheries engineering, ofatleast
twoColombian engineers (Law 28of1989 andDecree 380of1993).
Aspecial licence isissued toaforeign professional petroleum engineer towork inColombia,
afterafavourable opinion astoneedanddesirability from theProfessional Petroleum Engineering
Council (Law 20of1984andDecree 1412of1986). Foreign professionals inpetroleum engineeringColombia WT/TPR/S/18
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arerequired totrainColombian personnel intheirfield. TheProfessional Council mayatanytime
cancel thespecial licence.
Bodies engaged inactivities relating tochemical engineering musthavetheservices ofatleast
oneColombian chemical engineer andhave astaffofatleast 90percentColombian chemical
engineers (Law 18of1976). Ifahigher percentage offoreign professionals isrequired, theemploying
bodyshallhaveoneyearfromthedateofemployment offoreign chemical engineers totrainColombian
personnel inorder toreplace theforeigners. TheProfessional Chemical Engineering Council shall
determine thepercentage offoreign personnel.
Anyforeign mission shallinclude theparticipation ofColombian geologists, whose conditions
ofremuneration shallnotbeinferior tothose oftheforeigners (Law 9of1974andDecree 2655(Mining
Code)).ForeignenterprisesengagedinactivitiesrelatingtogeologymustemployColombiangeologists,
whoshallaccount foratleast70percentofthestaff, andthesame proportion ofthefunds shallbe
assigned forsalaries, benefits andfees. Foreign firms engaged inconsultancy work mustbeassociated
withaColombian firm.
Special licences topractice asageologist areissued toforeigners when theirassistance isdeemed
necessary andadvisable intheopinion oftheNational Geology Council, particularly when their
specialities donotexist inColombia. Thelicences mayberenewed every twoyears andforeign
professionals areunder anobligation totrainColombian personnel intheirspecial field, forthepurposes
oftheirreplacement.
Holders oflicences andcontracts inthemining sector mustchoose natural persons ofColombian
nationality formining studies andworks.
TheColombian personnel shall, together, bepaidnotlessthan70percentofthetotalamount
ofthepayroll forthequalified personnel andnotlessthan80percentoftheamount ofthepayroll
forordinary workers.
Inthecaseofwork inmedium- andlarge-scale mining, aftertheinterested parties havebeen
heard theMinistry ofMines shallspecify theminimum percentages ofworkers ofColombian nationality
living intheareaofinfluence oftheproject. Such percentages shallbesubject toperiodic review.
Other106
Posts asheads ofinfirmaries inservice orteaching bodies inpublic, semi-public, private or
common utility institutions shall befilled only bynursing professionals ofColombian
nationality (Decree 2184 of1976).
106Anumber ofother professional services areregulated byspecific legislation. These include
lawyers (Decree 196,12February 1991), managers (Law 60,4November 1991), teachers/professors (Law 24,
13September 1976), doctors (Law 14,28April 1962 andDecree 605, 21March 1963), dentists (Law 10,
6April 1962, Law35,8March 1989), veterinaries (Law 73,8October 1985), opticians (Decree 825,
22March 1954), andjournalists (Law 51,18December 1975).WT/TPR/S/18 Trade Policy Review
Page 142
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