Doing business with Bogotá 

Colombia’s entrepreneurs emerge despite mounting challenges.

According to the Heritage Foundation, a US economic think tank, Colombia takes 2nd spot after Chile for economic freedom in Latin America, ranking particularly highly in measures including trade, investment and business freedom. Nonetheless, Colombia’s economy and business environment is likely to slow down as inflation rates continue to rise. Colombia’s judicial system remains inefficient and corruption remains a serious problem, mainly affecting businesses at the lower and middle levels of bureaucracy.  

A fintech entrepreneur based in Colombia explained, “One of the things that facilitates the creation of ventures in Colombia is that there are many problems in the market and although there is a lack of state policy to promote ventures, there are so many other challenges that there is no room for the emergence of new ventures.” 

“…although there is a lack of state policy to promote ventures, there are so many other challenges that there is no room for the emergence of new ventures.”

A fintech entrepreneur, Colombia

The entrepreneur clarified that this phenomenon has not occurred thanks to difficulties with the country’s legal and tax system, and that this is such a great obstacle that in the end many enterprises transfer their headquarters and corporate governance to the United States, the Cayman Islands etc. and only leave a subsidiary or headquarters in Colombia. 

The same source mentioned that the main challenges faced by entrepreneurs in Colombia are: 

  • Access to pre-seed stage capital (early stage), starting from scratch is difficult, in the United States it is easier, in Latin America the risk is higher.
  • Government incentives are not so good, could be better.
  • The local market is not big enough so to grow rapidly you need to immediately enter larger markets like Mexico, and in Latin America the regulations are very different in each country and that becomes a challenge for scalability.
  • There are few reliefs and regulation is complex, especially in matters relating to labour.

A startup founder and investor in Colombia explained, “Regarding what the government is doing to promote entrepreneurship, I can mention the Orange Economy. Before, INNpulsa [which promotes the emergence of new companies] gave entrepreneurs a cheque to get started and that was fine at the time, now it translates into some tax relief: the orange law exempts you from paying income tax for 7 years if you meet certain criteria. They do not give cash; the idea is to reinvest in the company instead of giving it to the government.”  

Our sources also mentioned the efforts of other government institutions, “The Ministry of Information Technologies and Communications continues to invest in digital technologies (bootcamps, motivational events, etc.); [the National Training Service] SENA has a strong entrepreneurship programme. What has also helped in Colombia is that the issue of entrepreneurship has been a constant and a transversal topic in politics.” 

“What has also helped in Colombia is that the issue of entrepreneurship has been a constant and a transversal topic in politics.”

A startup founder, Colombia

In March, Colombia’s National Statistics Department published data that showed industry and retail trade had accelerated since January due to increasing domestic demand although business confidence had declined.  

The startup founder concluded on a more positive note, “Colombia is the ideal country to become a hub for startups, just think of Brazil but cheaper with a higher quality of life!” 

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