Colombia

Corporate Treasury & FX in Colombia, Chile & Peru

Report date: 
4 Mar 2025

Commentary

Amongst treasurers, Latin America does not have a great reputation. Even if we have come a long way from the past of military dictatorships and very difficult regulations, it remains more complicated than many other regions. Peru, Colombia and Chile all have seen significant turmoil in the recent past.

So – where do we stand today? It says a lot that, on this call, the peers’ main concern was about whether to use local or foreign banks, and whether the FX rates for foreign remittances were better onshore or offshore. 

Of course, there are causes for concern, especially about the direction of the economy in each country. Peers gave different views on this, especially in Colombia. But, generally, the problems companies face are manageable:

  • The biggest complaint was about the financial transaction tax in Colombia: as its name suggests, the “cuatro por mil” is a 0.4% tax on every money transfer above a monthly threshold. This can represent a significant cost when cash is being moved between banks, even within the same entity. There is a workaround which involves the use of a fiduciary: this does not work for transfers with third parties, and it blocks the cash for 24 hours. Another alternative for cross border international payments between subsidiaries is to settle them offshore.
  • All peers are working to improve working capital. Factoring and supplier finance solutions are available, but factoring is felt to be expensive. 
  • Other avenues for improving working capital include trying to use more modern payment methods. There was a feeling that these countries are maybe less...

 

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Topics covered in this report: 
Tax, Bank Relationships, Working Capital, Factoring, Payments - domestic, Payments - cross border, Payments-digital, payroll, Cash Repatriation, Hedging FX
Service providers discussed in this report: 
Banco Davivienda, Banco de Chile, Banco de Bogotá, Banco de Credito del Peru, Bank of America, JP Morgan, BBVA, Santander, Citi, Yappy

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Treasury, FX & Banking in Colombia & Peru

Report date: 
24 Jul 2023

Commentary

In our last call on Colombia and Peru in October 2021[https://www.complexcountries.com/treasury-fx-in-colombia-peru], there were concerns about political uncertainty. Since then, the president of Peru has been impeached and a left wing former guerrilla elected president of Colombia has been beset by scandals. So how has this impacted the companies operating in the countries?

In short, not a great deal. Currency volatility continues to be a challenge and reduced foreign investment has hampered growth. But in terms of politics the markets are relatively sanguine as the respective governments stumble along without enough power to make radical changes and the long run potential remains.

From a Latin American perspective both countries are relatively easy to operate in for treasury, with local teams coping well with the challenges.  

Colombia:

  • Most companies repatriate cash via dividends and intercompany loans. The process involves a lot of admin, but it works.
  • Funding is relatively easy but also entails a lot of bureaucracy and it is essential to get communications with DIAN (the tax & customs agency) accurate.
  • Some companies avoid the transaction tax (‘cuatro por mil’) by parking cash in fiduciary accounts for 24 hours. It saves money but, again a lot of form filing.
  • The currency volatility also caused one participant to have their local credit dramatically reduced
  • Citi is the
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Topics covered in this report: 
Cash Repatriation, Bank Relationships, FX, Hedging FX, Funding, T&E Management
Service providers discussed in this report: 
Citi, JP Morgan, BBVA, Santander, Bank of America, Banco Davivienda, BNP Paribas, Scotia, Bancolombia, Banco de Bogotá, Banco de Credito del Peru

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Treasury & FX in Colombia & Peru

Report date: 
25 Nov 2021

Commentary

It is a rare pleasure to have a call on Latin America where the conclusion is that things work well, but that is the case with these two countries. This is even better news, given the turbulent pasts both countries have.

Of course, our Latin American treasurers always enjoy a lively discussion, and this session was no exception. It is still Latin America, so things will never be 100% plain sailing. 

Generally, funding is no problem. Extensive use is made of intercompany loans, and currency hedging is only complicated by the bouts of volatility. One participant has also encountered issues with the value dating of hedges.

The relationships with local banks are strong, and there is often resistance to centralising banking relationships. This usually results in a mix of local and international banks – the local banks are viewed as being necessary, anyway.

As this is Latin America, taxes and the bureaucracy can be onerous. In Colombia, people tend to use trustees to get round a financial transaction tax – the same tax exists in ...please sign in to continue reading

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Topics covered in this report: 
Bank Relationships, Cash Repatriation, Corporate Treasury, FX, Political Risk
Service providers discussed in this report: 
360T, Banco Davivienda, BBVA, BNP Paribas, JP Morgan, Citi

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