The subject of foreign indebtedness is closely related to the apertura economica that was initiated in Columbia shortly before the new constitution of 1991 was passed by the Constitutional Assembly. Before the apertura, there were rules providing for light exchange controls in the country, which were later relaxed substantially. Further, the Central Bank (in Colombia Banco de la Republica), was given the responsibility of relating, among other monetary matters, those related to private and public foreign indebtedness. In pursuance of their new faculties, the Board of Directors of he Central Bank issued several regulations dealing with different issues in the context of indebtedness of the state of government controlled entities and of private entities. While state loans are also subject to registration with Banco de la Republica and to the same limitations regarding the term of the agreement mentioned below for private loans, the approval procedures vary substantially. Therefore, this note only refers to private indebtedness, regulated by resolutions issued by the Board of Directors of Banco de la Republica.

For purposes of exchange controls legal provisions, the concept of residence in Colombia is defined by law. In relation to companies or other legal entities, it is considered that Colombian state owned entities, legal entities domiciled in the country, and the branches of foreign corporations domiciled in Colombia are residents, irrespective of their nationality or permanent domicile. All residents in Colombia are subject to exchange controls regulations.

Resolution No. 21 of 1993 of the Board of Directors of Banco de la Republica, indicates that:
  • (i) Colombian residents may obtain credits in foreign currency from foreign financial entities;
  • (ii) Colombian residents may grant loans in foreign currency to residents outside of Colombia, and
  • (iii) Colombian residents and non-residents may obtain credits in foreign currency from the exchange market intermediaries.
In all three cases, the terns of the financing and the purpose of the foreign currency financing may be freely agreed between the parties without limitation (article 28, Resolution 21 of 1.993 of the Board of Directors of Banca de la Republica).

In those cases, exchange controls law understands that the resident has made an exchange operation (foreign credit) and that exchange law requirements must be fulfilled, such as:
  • (i) Making a deposit in cash at the Central Bank, if it is necessary, depending on credit conditions, and
  • (ii) registering the credit at the Central Bank.
These matters are explained in the following paragraphs.

At the same time our exchange controls provide for an important exception, applicable to the exchange market intermediaries such as banks and finance corporations, that obtain foreign credits from finance institutions with the purpose of granting loans to residents in Colombia. Those exchange market intermediaries do not have to fulfil exchange law requirements as to foreign indebtedness, that is, they do not have to register the credits with the Central Bank. Those obligations are assigned to the resident that obtains the credit.

The exchange law requirements are:

(i) Requirement to make a deposit with the Central Bank
In the event of a credit with a term of sixty (60) months or less, the resident must make a deposit in the Central Bank in Colombian currency, calculated as a percentage that varies according to the credit's term (140.0% to 42.8% of the total credit in foreign currency), at the rate of exchange on the day the deposit is made. This deposit is made through an exchange market intermediary.

There are special events in which this deposit does not have to be made. These events are the following:
  • (ii) for exports with a term shorter than or equivalent to one year; (iii) for exports of green coffee with a term of less than 60 days, by the National Coffee producers Federation;
  • (iv) when the credit's tern is of more 60 months;
  • (v) when they are used as financing for the acquisition of Colombian companies, or for the payment of licensing or concession agreements.
In some of the above cases, the exemption from making a deposit is subject to additional requirements and restrictions.


Transactions involving foreign currency have to made through the exchange market by exchange market intermediaries. These transactions must be registered with Banco de la Republica. Any amendment of the agreements that gave rise to the foreign currency transactions must also be registered. When a deposit has to be made according to the above mentioned rules, evidence thereof has to be attached to the registration request. In some special cases, other requirements must be fulfilled.

The exception is the registration requirements that we have mentioned above, is for the exchange market intermediaries that obtain credits in foreign currency from foreign finance institutions, to be used in authorized exchange market intermediary operations. One of this authorized operations is granting loans in foreign currency to residents in Colombia.

As a consequence, if a large foreign bank grants credit to a Colombian exchange market intermediary in foreign currency, and this intermediary uses the funds to grant loans to residents in Colombia in such currency, the Colombian exchange market intermediary does not have to register the transaction with the Central Bank.

Interest payment limitation in foreign indebtedness

Resolution no. 53 of 1.992 of the Board of Directors of the Central Bank limits to 20% the maximum annual interest rate that can be agreed for credits in US dollars. For delinquent interests, the same Resolution limits them to a maximum annual rate of 25%.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.