A logistical look at Colombia

Colombia

As projects on Colombia’s ports and rivers expand in 2016, the need for comprehensive logistics and infrastructure becomes increasingly important. Ricardo Mahecha, the country manager for AC Logistics in Colombia, discusses the challenges facing companies as they navigate a complicated web of bureaucratic regulations as well as physical barriers to streamlined investment.

How is the state of the market improving the ease of doing business in Colombia?

Logistics companies are critical in a country like Colombia, where physical and regulatory infrastructure changes frequently. Companies entering the market are typically unaware of the norms that govern the energy and hydrocarbons industries and how they should comply. Customs processes are complicated and the requirements change based on the type of import or export. Transportation represents another complication. Colombia’s physical infrastructure changes constantly and is very difficult to predict. Navigating the infrastructure requires a high degree of flexibility and patience for land transport.

How can the public and private sectors work together to improve these challenges?

Unfortunately, the business culture of a small group of people in Colombia creates certain barriers to this kind of infrastructural development. Some organisations along the logistical chain are willing to cut corners to save money, using tactics such as tax evasion, falsifying documents or simply skipping the Customs process altogether. These kinds of shady dealings impede the advancement of the system as a whole. The police and regulating agencies see these practices as evidence of continued corruption, and it empowers them to create even more complicated rules. If all of the companies agreed to abide by a set of norms, it would make the logistics situation considerably more simple and relieve a lot of the burdens in the market.

What challenges does Colombia’s infrastructure still face?

Colombia’s infrastructure lags behind the rest of the region. The highway system is obsolete, with deteriorating roads that make it nearly impossible to make even simple trips. The topography of the country is complicated. This is exacerbated by the lack of efficiently navigable roadway. A trip by land from Cartagena to Bogota should take roughly 24 hours. In practice, the trip may end up taking days due to delays, detours and travel regulations. The government has voiced support for the development of road infrastructure, but they have not taken the proper actions to make those words a reality. Port development is also problematic. Ports are the pulse beneath Colombia’s development. A healthy import-export network is needed to sustain the local economy. Unfortunately, the recent developments in ports have only benefitted those profiting from the construction of the projects. Improvements to ports should facilitate business, but clients are not receiving any of those benefits. Customs regulations are a major problem. The Ministry of Commerce needs to re-examine their Customs practices and how regulations can create unnecessary barriers for end users.

What changes need to be made to improve Customs regulations?

The current Customs regulations are very redundant, forcing businesses to undergo repetitive application and review processes. Many companies do not realize the extent of the requirements for the import-export process, and as a result they are often sanctioned and fined for not knowing Customs rules. The regulating agencies justify this excess of bureaucracy as being integral to anti-narcotics and anti-smuggling enforcement. While the security situation at the ports is very important for the overall safety of the country, it should not come at such a high cost to legitimate businesses that are contributing to the economy. Technological infrastructure would be improved by automating application and review processes, which would streamline the overall Customs systems and reduce a lot of the hassle for companies and regulators alike.

What is the future of logistics and infrastructure in Colombia?

Companies will have hopefully seen the value of a proper and well-informed logistics plan by 2020. For many, this seems like a side note, but it really is an integral part of the ease of doing business. More flexibility is expected from regulators as the Customs and logistics processes become more intertwined with economic growth. The increasing incentives to invest physical and technological infrastructure will ensure that efficiency is prioritised from the very beginning. If this trajectory is followed with a strong commitment from public and private entities, the future of investment in Colombia is very bright.

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