This is for anyone who has ever considered owning a business in Colombia. It’s for the adventurous who have come to try their hand at Doing Business in Colombia. Let me ask you a question: Have you ever considered opening a business in Chile? Or even Lithuania? There ARE other start-up scenes in the world. The scene here is very cool, and very happening, but very tricky too. Not everyone who has a good idea can make that idea work or find a way to make it happen.
The Colombia opportunity is complicated – and you will need a special level of passion and organization to really make it work. And always, always always…have an escape hatch. Because Doing Business in Colombia is not for the faint of heart. It’s for the courageous lion type, who takes risks and has a backup plan.
Doing Business in Colombia
Four years ago, when I arrived in Colombia it was probably the last of the “good days” for foreign owned businesses. Anyone who had a SAS or limited liability small biz could get an American employee under the guise of “volunteering” or at the very least get them a decent work visa. And, it seems like – it was a lot easier Doing Business in Colombia previously.
When I did my first internet searches on life abroad, Colombia always came back as #1 for how easy it was to get a work visa. At that time they were still head and shoulders above most of South America – except maybe Chile which has had some really good foreign owner start-up programs.
I was attracted to Colombia for teaching, either for an institute or privately. It rated higher for the amount of pay compared to the cost of living. Bloggers everywhere still do rave about “how cheap and easy” the nice good life in Colombia is. But, that IS changing over time. Even in Pereira, costs are starting to rise, and we now have the added pressure of the Venezuelan migration too.
Then, and now…
Suffice it to say, it was much easier to do business back then, only a couple years ago for both foreign workers and potential foreign business owners. Try to create something that you are willing to take with you if leaving becomes necessary. Otherwise, plan to have a business plan you can take with you and set up in a new place later. And Colombia is really shooting themselves in the foot by cock-blocking Uber, trying to suck taxes off of AirBnB hosts and the basic tax requirements of owning a business.
After the tax package in December of 2016, the opportunity has diminished. Luxury taxes were added to internet bills, the taxes on alcohol correspond with potency (can we throw the tea into the harbor yet?), and the Value Added Tax was raised to 19%. Foreign business owners can be taxed up to 35% annually on their incomes. Don’t forget the FATCA requirements either, if you are a US citizen. Americans are only exempted up to $90,000 USD per year. Add onto that the cost and difficulty of getting a legit BUSINESS visa in Colombia, and you might find yourself in a bit of a pickle. My advice is to marry a Colombian, then open a business – or I don’t know – Teach English? Needless to say you will need to examine the requirements ahead of time.
Let’s talk about the social issues of doing Business in Colombia.
No one ever stops to question whether el Gringo, has an outside income, a massive savings or a trust fund. They simply assume it. And, traditionally, many foreign residents have often had something of the sort. To be fair, prior to 21st century globalization, life abroad was for the rich and well-insulated.
The reality is – that many foreigners today are coming to Colombia more as Immigrants, in order to change their situation, not simply for the leisure of having an extra home abroad.
We spoke to a local business owner, Jorn of Denmark. He is here as a foreign resident, his wife is Colombian, and they run a business which caters to a more upper class clientele. He shared with us some perspectives gained as a result of Doing Business in Colombia. He also explained to us, why he felt that Colombians are “not good customers.”
Here are some of Jorns thoughts based on his experience Doing Business in Colombia:
When customer behavior does not allow you to deliver good service:
“How to deserve good service or not, seen from a service delivery perspective. A good customer orders, enjoys, pays and leaves. No, that is WRONG! A good customer knows what they want to eat or if they want to be surprised. A good customer engages in the design of the plates. A good customer actually know what they are ordering. A good customer is never rude or arrogant or aggressive or patronizing to the waiter or host. A good customer does not ask for things not on the menu, and then expect to get it quicker than the things actually on the menu. A good customer immediately says if something is not to their liking on the plate – they do not wait till they leave, and then tell the whole world how terrible everything was and write complaints in social media about the terrible plate that was inedible (especially after they, by the way, have eaten everything on their plate with no complaints during the stay). A good client gives a tip for services provided, or justifies why the service does not deserve a tip.”
Now the generalized secret truth of South America. SUCH CLIENTS DO NOT REALLY EXIST, says Jorn
Editors Note: This is coming from a business perspective and hands-on experience. He went on to explain why good clients often don’t exist in Colombia:
“There is in many cases, a perception from clients who can afford to go out and eat – especially at high level cuisine or expensive places – that they have the right to behave as they please. No matter what, I as the client, am always right. If I want to scream at your staff, I am entitled to it. If I want something else I am entitled to ask for it. Years of abuse and arrogance of people with money but absolutely no understanding of/education in food or wine, has set the agenda. Poorly educated waiters and hosts, are equally disadvantaged, as they have little or no experience outside their barrio/city/country. Whenever people or places try to change and offer a differentiation in menus and settings, the customers start complaining about not having the option of “tipicos” – typical preparations of platano, rice, grilled meat etc.”
But then, there are of course some other facets to this diamond:
“Serving others at minimum salary and with angry and arrogant clients and bosses who only care about profit optimization, instead of customer satisfaction!! Would YOU do that – didn´t think so! Most waiters do this for the pay and sometimes, also to get some food they didn’t have to necessarily fix or pay for. They work 48-60 hours a week – many times under crappy conditions -without any respect from their employers. They usually do not get work uniforms. And if they do, it will be the cheapest acrylic product on the market (not fit for working people). Still they somehow manage to smile and be happy. Most of them are truly enthusiastic and really want to do good service, but recalling the customer behavior as mentioned above, they may soon lose their motivation.”
His advice to business owners is this:
“If a client is decent and has a balanced approach, then service should never be an issue. If service is bad – don´t go back, and make sure to tell the owner that something is missing. If a client is abusive and arrogant, and they expect you to read their minds before kissing their feet. Then as a service provider, give them the bill. Wish them a good day. And, hope they do not come back.
Ok, we have heard some of Jorn’s perspectives behind his experience as a business owner in Colombia. Let’s talk about some of the ethical issues which we have going on in Colombia.
Disclaimer: I am not a lawyer, but I do read – voraciously. Please, do not take my word for it – go do your own research. Hopefully, this will add some context to your understanding of Colombian business, and help you make a careful and balanced decision.
No Dar Papaya: is basically understood as “Don’t Give Advantage.” But, the Colombian businessman interprets that like Sun Tzu would: “Don’t give advantage, but take every advantage presented by your opponent.” It sounds crazy, but businessmen here really seem to embrace that slightly off center ethical mistake.
This skews the actual concept of business ethics quite a lot too. Friends of mine here who have businesses, tell me they must fight with everything they’ve got to establish themselves and compete with people who, will very easily get jealous of outsiders invading their territory. And jealousy can lend itself to mafioso style violence, when left unchecked. Any advantage like late payments, partial payments, late attendance, partial attendance, extra whatever – a Colombian will take advantage of to either not pay you or to only pay part. Obviously, not every single Colombian does business like this, I have had my share of good experiences. And some bad ones too.
Oh, and don’t even do that American thing – where you threaten to sue. That schtick doesn’t work here. Most judges are as corrupt as the average businessman who is trying to screw you over, you won’t necessarily see justice being done. If all else fails they might just decide to assassinate you and eliminate their competition that way. If you don’t believe me, read this: eltiempo.com/vida/viajar/asesinato-del-empresario-de-turismo-en-nuqui-choco If you are a Colombian who is reading this, then don’t even try to tell me that it hasn’t happened ever before in Colombia!
Finally we can ask ourselves: Are Colombians more corrupt than American businessman? Probably not! I think American business people simply hide it better. I’m not saying it’s impossible to have a business here. In fact, there are some tax incentives for certain types of businesses like tourism. Zero tax for tour operators, and zero IVA (Value Added Tax) for foreign visitors!
Difficult But Not Impossible
Start by buying local and living here first while you test your idea.
There is a small wiggle space for small businesses which aren’t quite legitimate but who want to sell products in the local area, in places like Pereira. In Bogota inspectors are everywhere, and they will steal your product if the Colombian version of the FDA hasn’t been paid off. All food products must be “certified” via INVIMA if you are trying to sell in bigger cities like the capital or Medellin. But, don’t hesitate to get involved with farmers markets or mercado agroecologias, to test drive your idea. The opportunities are out there.
It is important to help to build the reputation of your business by being supportive of those around you. When you help others that good karma will come back around and help you. Support your local farmers markets and buy products made by your friends or neighbors. Try growing or making your own products. Make sure you have a Facebook page or website to create the story of your product, and to help you find people who are looking for your idea. I see a lot of people in Colombia who aren’t reaching their customers due to no online infrastructure.
Over time you will gain an advantage. You will find out if your idea is worth the trouble of getting a business visa. The visa itself is almost impossible to get if you are opening a small business. The Colombian government wants a cash cow they can milk, like a large corporation or big scale manufacturing establishment. Which is exactly what Colombia DOESN’T need.
Enough with the exploitation and factory farming. We can no longer expect to create the huge environmentally stressful production outputs of the 90’s. It’s time to let the earth heal, and expand our outward consciousness to our neighbors. Small and sustainable wins the race.
Again, I am not a lawyer, but I have been involved in businesses, and some freelance writing and content marketing for businesses in Colombia. I have seen the good and the bad. People who are good, honest and pay on time. Others who lie, cheat and steal your time, ideas and energy.
Remember, good ideas and hard work always prevail. You aren’t trying to do the impossible – but it can be a bit difficult. Patience and grit are a must when to comes to Doing Business in Colombia! Good luck!
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