What are political, governmental, and legal forces?
Political, governmental, and legal forces are external environmental variables that represent key opportunities for organizations and industries.
1. Government regulations and deregulations
2. Changes in tax laws
Following last year’s economic trends, it is expected for the Colombian economy, the year 2016 to be a year more complex.
Economic regulations or deregulations:
By 2015, Finance Minister Mauricio Cardenas, insists that the fiscal adjustment led by falling oil prices is already done, but acknowledges that the country is in a transition period including a slowdown in the production sector.
The trend for the years 2014-2015 in economic regulations approved by the Colombian Congress was as it follows:
1. Tax Reform: an initiative made by the Government in which tools were granted to finance the General Budget of the Nation. Also, mechanisms to combat tax evasion were created. (See: Decreto Único Reglamentario en materia tributaria (2015))
2. Financing Alternatives: the Commission's legislative work in recent months pushed through the initiative of the Ministry of Justice, which was established financing options for the sector which will provide money to relieve the judicial system and improve infrastructure for cabinets.
3. Microcredits: in the banking sector, the Third Committee, assigned to Senator Juan Manuel Corzo, to lead the project management ordering facilities to facilitate access to microcredit services to low-income populations that have not yet acceded to the thereof.
4. Access to Financial Services: the initiative by which measures to promote access to financial and transactional services are held.
5. Rules for Resolving Societies: Senator Patricia Arleth Casado, will be in charge of the initiative for which rules to solve societies are established, a brief settlement process is created and other provisions are made in the management of the Chambers of Commerce.
Social regulations or deregulations:
The trend for the years 2014-2015 in social regulations approved by the Colombian Congress was as it follows:
1. General Budget for the Royalties System: the move to presidential approval of the project with which the Budget of the General System of Royalties for the next two years was ordered and which all regions will benefit from resources to be allocated for the development social works.
2. Accounts Paid: related to the definition and regulation of paid accounts to allocate resources for education with which money will favor the education system will be assigned.
3. Scholarships: this legislature is related to the creation of scholarship-credit and support the maintenance of the student in higher education institutions.
4. Stamps for the elderly: Senators Bernabé Celis and Fernando Tamayo will be responsible for establishing new standards for the care and distribution of postage to the welfare of the elderly. (See: Decreto Sistema General de Pensiones)
5. Pension Bonus: a special fund for minimum income would be created and assigned a pension bond for children from vulnerable families. (See: Decreto Sistema General de Pensiones)
Administrative regulations or deregulations:
The latest change in administrative regulations was made in 2012 through the law 1506 of January 10 2012, in which it is stated that: “Establishing Provisions on public services of electricity, fuel gas network, water supply, sewerage and sanitation to address any disaster or calamity affecting the national population and their way of life.” (See law 1506 of January 10 2012)
In Colombia there have been, by the year 2010, ten tax reforms that are:
Through the years of 2012 to 2014 there have been major changes in Colombian tax laws (also called Reforma Tributaria).
Law 1607 of December 26, 2012: the main objective of the reform made in this law is to generate employment and reduce inequality. To do this, it seeks to improve the distribution of the tax burden favoring low-income Colombians.
The tax reform which came into force on 1 January 2013 impacts the following:
1. VAT (value added tax):
a. Leases of commercial premises, hotel service and mobile phone service are now taxed at a rate of 16%.
b. Reduced rates of VAT from 10 to 5% in certain foods like chocolate, this means that the business establishments that have existence of products with this reduction shall adjust the final price with the new rate.
c. Prepaid medicine lowers from 10% to 5%.
d. Cleaning service and surveillance, which previously had a rate of 1.6% and the services provided by temporary employment firms will be taxed at a rate of 16% in the share of ALU (Administration, Contingencies and Utility ), which may not be less than ten percent (10%) of the contract value.
e. The parking service provided by condos will have a rate of 16%.
f. Smart mobile devices such as tablets, whose value does not exceed 43 UVT ($ 1,154,163 for 2013), are excluded from VAT.
2. Consumption tax:
a. The mobile phone service is taxed at a rate of 4%, for the national consumption tax.
b. Restaurants and bars no longer charge VAT of 16% and from 1 January 2013 charged 8%, corresponding to the consumption tax. However, the restaurants that operate under franchise mode or perform the operation of any other intangible continue taxed at a general tax rate of 16%.
c. The restaurants that have income in the previous year less than 4,000 UVT, are not subject to this tax.
d. Luxury goods are taxed at a rate of excise duty of 8% or 16%.
3. Employees:
a. The concept of employees and workers is modified for self-tax purposes.
b. National Alternative Minimum Tax (namt) and the alternative minimum tax single (amts) as systems for determining the income tax base created for individuals.
4. Saving for Building Construction (SBC):
a. The permanence minimum time of staying increased from 5 to 10 years. These savings are exempt from income tax, provided they do not exceed 30% of the labor income or taxable income of the year, as applicable, and up to a maximum of 3,800 UVT year.
5. Windfall Profits:
a. Income generated from the sale of house or apartment will be free in the first 7,500 UVT, provided that all money received will be deposited in savings accounts AFC and is used to purchase another house or apartment, or for payment, all or part of one or more mortgage loans directly linked to the house or apartment sold.
6. National tax on Gasoline and Diesel:
a. The national gas tax must be paid at the rate of $ 1,050 per gallon for regular gasoline, $ 1,555 extra per gallon for gasoline, while the national diesel fuel tax must be paid at the rate of $ 1,050 per gallon.
Law 1739 of 2014, the tax reform which came into force on 2014 impacts the following:
1. Creation of Wealth tax:
a. This tax will apply from 2015 to 2018 and will be in charge of legal, natural and corporate taxpayers, and other people. This tax has as a generator fact the possession of wealth as of 1 January 2015 equal to or greater than $ 1,000 million pesos. The price paid for this tax will not be deductible from income, or the CREE; nor it shall be offset against other taxes.
2. Creating the surcharge CREE: this tax will apply from 2015 to 2018.
3. Special Tariffs
Special tariffs in Colombia are commonly applied to Free Trade Agreements. Depends on the product or availability of it in the country, for example, if the product is scarce in the country (like corn nowadays), because of the Free Trade Agreement with the United States, corn would probably not have a tariff at all. The special tariffs are determined as it follows:
1. Determine what the subheading of the product is.
2. Consult the tariff reduction lists.
3. Look for the product.
4. Look for the product in the category of tariff reduction.
5. Look for the product in the category of special tariff.
6. See the tariff quotas.
7. Evolution of the tariff quotas.
4. Political action committees
A political action committees (PAC) are interest groups created with the only purpose of collecting money from their members and give it to each candidate and political party. The National Electoral Center (NEC) is the entity in charge of registering and keeping into account how many PACs Colombia has.
Colombia’s principal PACs are: Partido Liberal Colombiano, Partido Conservador Colombiano, Partido Opción Ciudadana, Partido Cambio Radical, Partido Alianza Verde, Movimiento Autoridades Indígenas de Colombia (AICO), Partido Alianza Social Independiente (ASI), Movimiento MIRA, Partido Social de Unidad Nacional (Partido de la U), Partido Polo Democrático Alternativo, Partido Unión Patriótica (UP), Centro Democrático and Movimiento Alternativo Indígena y Social (MAIS).
5. Voter participation rates
Colombia is the third country with less voter participation in Latin America, after Haiti and Chile. However, in Colombia, for the last year (2015), the abstention from voting decreased, and the blank vote rate didn’t change.
For the 2015 mayors and governors’ elections the rates were:
o In the municipal elections, abstention dropped from 42.7 percent in 2011 to 40.69 in 2015.
o In the department elections, abstention fell from 41.2 to 39.73 percent.
o Bogotá’s abstention rate also decreased, going from 52.59 percent in 2011 to 48.45. In other words, participation in the capital increased by 4.14 percentage points.
o Even greater was the reduction in Barranquilla, where abstention dropped from 52.56 to 45.65 percent.
o In Cali, abstention dropped from 57.16 to 54.69 percent.
o In Medellin, however, a small increase was recorded: from 49.31 to 50.51 percent.
o Participation in regional elections was higher than in the presidential elections. While only 47.89 percent of eligible voters vote in the second round last year -seven points higher than in the first round- in the 2015 elections voted on 59.31 percent of the eligible for election mayors and 60.28 percent enabled the election of governors.
o Over 20 million people voted for mayors, from the 33.8 million people enabled. Of the 28.3 million people eligible to elect governors voted 17.1 million.
The white vote:
As for the white vote, the proportion remained virtually intact. In the election of mayors it decreased from 3.87 percent in 2011 to 3.79 in 2015. And the governors of 7.96 to 7.92 percent. However, it draws attention to the level it reached in some places. Although the record of past elections did not break when Bello, Antioquia, had a voting stake of 56.67 percent white, this time it exceeded 30 percent in four municipalities, compared to just one in 2011. The white vote won elections in Tinjacá (Boyacá), with 53.01 percent.
Blank votes in the election of governors (some 1.2 million) exceeded those achieved by most political parties, except for the 'U' (1.6 million) and the Liberal (1.3 million).
And the blank votes in elections for mayors (over 720,000) exceeded those reached by the parties Opción Ciudadana, Polo Democrático Alternativo (in alliance with the Unión Patriótica and the Mais) and Alianza Verde.
7.Number, severity, and location of government protests
On the year 2015 Ombudsman found that in so far this year 283 protests occurred in 27 departments, highlighting those generated by the indigenous people of Cauca, students of San Martin and the protest Trucker. Besides the officers recognized that more active in the protests, including those who are the inhabitants of residential communities with 25%, the carriers with 17%, the education sector with 35% and ethnic groups, which have the indigenous, with 27%. Bogota is the area where most demonstrations were presented with 43 cases, then it is Bolivar 38, 26 Antioquia, Valle del Cauca and Cauca 24 18.
According to the study most of the protests are due to sit-ins and rallies, followed by marches and demonstrations, as well as the blockades of mobility and work stoppage. as over the years Bogota has characterized for being the place where it carries out these public stoppages as involved with the capital captures more attention and is more striking.
8. Number of patents
Over the years, Colombia has managed to stand out in terms of the number of patents since according to figures involving the last year, according to figures from the Superintendence of Industry and Commerce (SIC), the entity responsible for advancing these procedures, requests for patents increased from 1,800 in 2009 to 2,300 in 2012, representing an increase of 28%; the same behavior occurred in the Brand Features applications, as 22,000 applications received in 2009, last year recorded 31,000 (grew at a figure close to 41%)[2]. The figures indicate that in 2014 the Superintendence of Industry and Commerce (SIC) -the 2,087 requests were presented greater number of the last five years and 1,170 were granted. Therefore this year compared to 2012 reduced where Colombia reached 1,667.
9. Evironmental protection laws
The Constitution of Colombia of 1991 rises to constitutional rule consideration, management and conservation of natural resources and the environment, through the following fundamental principles: the right to a healthy environment, Article 79; The environment as a common heritage, CN incorporates this principle by imposing the state and individuals the obligation to protect cultural and natural resources (Art. 8); Sustainable development, defined as development that leads to economic growth, raising the quality of life and social welfare.
10. Level of defense expenditures
Military expenditure (% of GDP)
Data on military spending SIPRI are derived from the NATO definition, which includes all current and capital relating to military expenses, including the forces of peacekeeping; defense ministries and other government agencies engaged in defense projects; paramilitary forces, it is considering that are trained and equipped for military operations; and activities in the military area.
While elsewhere in the world military spending declined, Latin America experienced an increase of 2.2%. In the Colombian context "has grown in recent decades to drug trafficking groups operating outside the law," said Fabian Sanabria, director of the Colombian Institute of Anthropology and History.
Colombia represents:
Latin America and the Caribbean (developing only)
Income Level: Upper middle income
GDP (US $ at current prices): 2014 $ 377,700 million
Total population: 47.79 million 2014
16. Colombo-European Relationships
European Union: The relations between Colombia and the EU “are built on political dialogue, trade and development cooperation” (EEAS), Colombia is the fourth biggest EU economic partner with a trade volume of €11.884 billion, and the second trade partner, European union is helping Colombia with the bilateral humans right dialogue and political dialogues are based on the 1996 Rome declaration and the dialogues are based on the Political and Cooperation Agreement Between the EU and the Andean Community
17. Colombo-American Relationships
USA: Colombia and the US have a large history of political and economic cooperation, some of them is the now called “Plan Colombia” which was accepted by the USA in order to control and put an end to the narcotic issues, nowadays it a 15 year old cooperation and is still working, moreover economic investment for companies and markets, in 2007 USA invested more than $500 million on the most affected socioeconomic sector, it had a big impact in the future of Colombia because changed the face of Colombia abroad , increasing the foreign investment and new markets.
Latin America: Colombia is a member in almost every treat some of them are CAN or Comunidad Andina de Naciones, it was created in 1969 in order to better the level of live of their inhabitants by the integration and socioeconomic cooperation; pacific alliance was created to better the trades within the countries by reducing taxes and becoming in a major competitive bloc; these two are the major important treaties that Colombia holds currently.
18. Import-export regulations
If a company in Colombia requires importing a certain product or service, they must follow some aspects that are the regulation for that action, for imports, have a registered NIT, must a RUT, should apply all the international prices sending by the seller where is showed all the expenses of the shipment, obtain an insurance, the product must arrive to a deposit, the product has to be nationalized; for exports, need a NIT, a RUT, need to show the costing of the shipment with all the expenses, acceptance of the payment and contributions.
19. Government fiscal and monetary policy changes
In Colombia, Banco de la República is the entity in charge of the monetary policies, with the goal of this year being lower the inflation rates to between a 2% and a 4%, which according to them, will be achieved in 2 years. According to a report made by Banco de la República, the reference rate raised from 5,50% to 5,75%: also, according to Banco de la República, the forecast of the Consumer Price Index (CPI) from Banco Central is based on that the adverse effects of El Niño will move forward, the transfer from high devaluation to the domestic prices and the activation of some indexation mechanisms that could keep it (reference rate) at high levels during the first half of 2016. However, the Emisor expects that in the second half of the year, these temporary shocks will be diluted.
Also, credits to individuals and businesses began to slow their growth, especially the one to households, which is what has prevented a further slowdown of the economy, while real rates of these loans were in constant decline.
According to Credicorp Capitals, projections for 2015-2016 are stable. But for the outlook to remain so in 2017, the company suggests that Colombia should have a structural tax reform in 2016. Although the overall national budget will increase 2.5% in 2016 ($ 215.9 billion including debt repayment), the economic outlook is not very flattering. According to accounts of the same government, in 2016 oil revenues will fall to $ 3.3 billion, when in 2014 were $ 19.7 billion.
The expectation of the Ministry of Finance's for the tax revenues, making greater efforts to control evasion, is that it will go up to $ 117 billion this year and $ 126 billion in 2016. Still remains a large broken public finances that have been thought to fill with new credit.
The most relevant is the political conditions in Venezuela, which is seen as a disaster, a country that most of its earning comes from the oil, and with a crisis like the one we are living today with a barrel of oil at almost $30, shows that the country has big problems in the internal economic, a country with a inflation of 141% in the 2015 and increasing adding issues such as political problems in the parliament, the confrontation between the two parties the MUD and PSUV, with a massive budget deficit that is financed by the central bank printing money, in conclusion we can infer that the most relevant political conditions in Latin America is Venezuela.
20. Political conditions in foreign countries
21.Special local, state, and federal laws
22. Lobbying activities
In Colombia national laws are formally written into the constitution of Colombia. these laws are expressed as rights for people who live in the country, whether Colombian or foreign citizens.
Also in Colombia there are three types of laws, framework laws, organic law and statutory law.
Framework law: ´is responsible for defining the objectives and principles on which activities such as public credit policy, foreign trade, international exchange, customs regime, financial activity and raising funds from the public (savers) develop and as remuneration and benefits of public servants.`
Organic Law: establishes congress regulations, rules on preparation, approval and execution of budget revenues, the appropriations bill and the general development plan. In addition, this law establishes the allocation of regulatory powers to local authorities.
Statutory law: Developed constitutional texts that recognize and guarantee fundamental rights found in the Constitution of Colombia. It also supports the development of means of punishment to ensure compliance.
Are those activities made by individuals or informal groups (as in the case of Colombia) to influence the legislative authorities against a topic of particular interest. In many cases, what these groups (with great economic influence) do is to fund political campaigns. In Colombia from 2011 it was created a law against these illegal activities when funding of more than 2.5 % is allowed in political campaigns is exceeded. This law is the 1474, 2011, or concocted as anticorruption statute.
23. Size of government budgets
Because of the fall in the price of a barrel of oil the Colombian government has had to estimate a big cut on the national budget for last year it was estimated that the investment budget for 2016 would have to decrease to $ 46.2 billion to $ 40.6 billion pesos. However the price of oil continues to decline and still not know exactly what will be the fixed budget for the year, although if you have estimates that the cut will be $ 4.1 billion pesos.
24. Location and severity of terrorist activities
Terrorism is a method of producing anxiety based on repeated violent action by an individual or clandestine groups that the direct targets of violence are chosen randomly
Communication processes based on the threat are used to manipulate the audience, and get what they want
One of the best-known terrorist groups in Colombia are the Revolutionary Armed Forces of Colombia, known as FARC was born in 1964 in order to implement a socialist state in the country.
The M -19 is also considered as a terrorist group in Colombia as they have done many crimes, yet they claim it is an insurgent group in favor of the neediest.
25. Local, state, and national elections
Colombia is a democratic country that means the nation's gubernators as president; Governor, assembly, and mayor are elected by citizens. According to Article 265 ‘The National Electoral Council will regulate, inspect, monitor and control the entire electoral activity of political parties and movements, of significant groups of citizens, their legal representatives, managers and candidates, ensuring compliance with the principles and duties that correspond to them, and shall enjoy budgetary and administrative autonomy.'
National and presidential elections are held every four years as well as major from cities and municipalities. Next the general data of the last elections in the country will be shown.
*National elections: June 2014, Again Juan Manuel Santos was elected as Colombia`s president In Colombia,.
*Regional elections: October 30, 2015 . In total, 1,102 mayors were elected across the country.
*State elections: Governors election were October 30, 2011, there were 32 people, one for each department.
Sources:
[1] Elespectadorcom. (2015). ElEspectador. Retrieved 15 February, 2016, from http://www.elespectador.com/noticias/nacional/el-ano-se-han-presentado-283-protestas-articulo-549376
[2] Elespectadorcom. (2013). ElEspectador. Retrieved 15 February, 2016, from http://www.elespectador.com/noticias/nacional/colombia-el-pais-de-patentes-articulo-418418
[3] Casa editorial el tiempo. (2015). El Tiempo. Retrieved 15 February, 2016, from http://www.eltiempo.com/economia/sectores/patentes-en-colombia-hubo-reduccion-de-patentes-en-2014/15186223
[4] Upmegovco. (2016). Upmegovco. Retrieved 15 February, 2016, from http://www.upme.gov.co/guia_ambiental/carbon/gestion/politica/normativ/normativ.htm
[5] Elespectadorcom. (2015). ElEspectador. Retrieved 15 February, 2016, from http://www.elespectador.com/noticias/nacional/el-gasto-militar-colombia-un-escenario-de-posconflicto-articulo-487367
[6] Bancomundialorg. (2016). Bancomundialorg. Retrieved 15 February, 2016, from http://datos.bancomundial.org/pais/colombia
[7] http://eeas.europa.eu/colombia/index_en.htm
[8] http://bogota.usembassy.gov/bilateral-topics.html
[9]http://eeas.europa.eu/colombia/index_en.htm
[10] http://bogota.usembassy.gov/bilateral-topics.html
[11] http://www.icarito.cl/enciclopedia/articulo/segundo-ciclo-basico/historia-geografia-y-ciencias-sociales/organizacion-economica/2010/05/87-9129-9-pacto-andino-actual-comunidad-andina-de-naciones-can.shtml
[12] https://alianzapacifico.net/en/que-es-la-alianza/#what-is-the-pacific-alliance
[13]http://www.economist.com/blogs/graphicdetail/2016/01/graphics-political-and-economic-guide-venezuela?zid=305&ah=417bd5664dc76da5d98af4f7a640fd8a
[14] http://wsp.presidencia.gov.co/Normativa/Documents/Constitucion-Politica-Colombia.pdf
[15]http://www.congresovisible.org/democracia/congreso/funciones/leyesymayorias/
[16]http://www.elespectador.com/opinion/el-lobby-o-cabildeo-0
[20]http://www.cne.gov.co/CNE/OBJETIVOS_FUNCIONES.page
[21] http://www.registraduria.gov.co/-Eleccion-de-autoridades-locales,226-.html