Oil and mining caused the flow of foreign currency from abroad to reach record levels in April. According to the Bank of the Republic, that month 1,951 million dollars entered Colombia.
Of this total, more than 88 percent, that is, 1,721 million dollars entered thanks to the mining-energy sector.
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Investments in the sector have remained relatively stable
But while currency flows increased 79 percent in the oil and mining sector in April, they fell 70 percent in the rest of the sectors’ activities, compared to the fourth month of 2022. They went from 778 million dollars last year to 230 million this year.
For May, the flows slowed down again, with a fall of 2 percent in the total, during the first 12 days of the month. In that period, in oil and mining there is an advance of 6.8 percent, and in the other sectors, a fall of 33 percent.
The Colombian Petroleum Association (ACP) assured that it is reviewing the information presented by the Bank of the Republic to be certain of what this increase in investment corresponds to, “because it seems to respond to something specific because so far this year sector investments have remained relatively stable”.
This flow of currency is one of the parts that make up Foreign Direct Investment (FDI), whose data for the first quarter of 2023 has not yet been published by the Bank of the Republic.
The part of foreign investment reported in the exchange balance only records foreign currency flows from abroad. Total foreign investment, which is recorded in the balance of payments, includes, in addition to foreign currency flows, the reinvestment of profits and capital contributions other than foreign currency (such as machinery).
The latest available data on total FDI is from December of last year, which shows that during 2022 there was a record of 17,048 million dollars, especially due to the historical behavior of the first and second quarters of that year.
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Are there conditions to continue investing in Colombia?
According to the ACP, in order for the investments and operations of the oil sector to remain viable in the country and continue contributing to energy self-sufficiency and with the fiscal resources required to leverage the productive transformation and energy transition, it is essential to guarantee the legal stability. In addition to rigorous speed in environmental licenses and permits; law enforcement and security in the regions; and be vigilant to legal and regulatory initiatives that limit its development and a robust institutional articulation.
Although currently the signs of respect for contracts stand out, the prospectivity of the country to find resources and the country has an already developed industry, The union states that it is important to keep in mind that there are some weaknesses that are impacting the operation and investment interest in the country.
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For example, tax changes and high taxes on the industry, the complexity of operations in the territory and uncertainty in public policy and regulation that governs the sector.
In the 2022 tax reform, an income surcharge will be advanced for the production of oil and coal and it was prohibited to deduct the income tax on royalties for the production of hydrocarbons and minerals.
