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Foreign Investors Have Signed 16 of 46 Legal Stability Contracts

October 2, 2009

Legal Stability Contracts provide investors a way to contract with the government to prevent adverse legal and regulatory developments that hurt an investment. They have been touted as a way of attracting foreign investment on the ProExport site.  In fact, ProExport’s website lists the legal stability contracts that have been signed and with which companies. Avianca is one signatory, and it is, in fact, foreign-owned (by a Brazilian firm).  

My research into the list of companies on the Minsitry’s website that appear to be foreign investors, and other information I have obtained, identifies several of the contracting parties as foreign investors, including (but not limited to) Siemens Manufacturing S.A., Laboratorios Baxter, Sodimac, Arcelor Stainless, Sociedad Inversiones Inmobiliarias De Colombia, Novamar Development, Hoteleria Internacional, Schlumberger Surenco, Bavaria, Cervecería Del Valle, and Almacenes Exito. (I refer readers to the Ministry’s list, however, as the authoritative current information on who has signed the contracts.)

The published list consists of only 28 published contracts, a figure that has remained unchanged for several months.  In June 2009, however, the Trade Ministry reported that 42 stability contracts have been signed as of June 25, 2009 (see slide 15).

This led to two questions which I put to Luis Guillermo Plata, the Minister of Trade, Industry and Tourism, to get a better understanding of how this innovative mechanism works in practice:

  1. Are stability contracts intended primarily to attract foreign investment?
  2. How many stability contracts are there, and if more than there are published, why are some not published?

Minister Plata answered almost immediately, through a member of his staff, Julio José Rodriguez, that:

1. Legal stability contracts are designed to bring new investments into the country, be they domestic or foreign, under the principle of equality. Although they are intended to result in new investment from outside, they are not an exclusive mechanism for FDI (Foreign Direct Investment). [Emphasis added.]

Today we have 60 legal stability contracts approved, of which 46 have already been signed. Of these we have 16 contracts signed with foreign investors not including domestic firms that may have foreign capital injections. [Emphasis added.]

2. Of the 46 contracts, there are 28 published on our website. The others have not been published while awaiting all the requirements of improving our contract required by state procurement law, the published record only contains contracts that have taken effect, and not all have done so. As you can see, it is a legal matter that until they have taken effect they may not be published.

This is very helpful information. First, stability contracts are meant to help attract investors, not just foreign investors.  Second, they have attracgted foreign investors.  Sixteen contracts of the 46 signed contracts, or about one third, were signed by foreign investors.  The policy is one of equality for all investors, not one that provides special treatment to foreign or domestic players.

Third, there are many more contracts than the published list reveals. In June 2009, there were 42 reported – now there are 60 approved and 46 signed agreements.  The explanation is that they have not all taken effect.

The projects involved in the twenty-eight published contracts are:

Company Date Project Description
Alpina February 3, 2003July 8, 2005 Industrial expansion plan for Alpina SA
Proficol Andina B.V. Sucursal Colombia January 2007 Relocation and expansion of the plant capacity for insecticides and fungicides
DIVCO July 8, 2003 Enhancements of a plant for production gelatin or starch gums in the Free Trade Zone of La Candelaria
Almacenes Exito S.A. January 16, 2007 Expansion and consolidation of Exito stores through property acquisition, construction, and staffing of fifteen (15) retail establishments and warehouses of the distinct kind operated by the company as hypermarkets or supermarkets
Sociedad de Fabricación de Automotor January 16, 2007 Injection process of large plastic parts for vehicles 
Comertex S.A. January 15,2007 Construction of a warehouse for commercial distribution of products 
Cervecería del Valle S.A.  January 15, 2007 Construction and commencement of a new brewery in Yumbo 
Bavaria S.A        January 15, 16 2007 Five Year Investment Plan by brewery 
Avesco S.A. January 15, 16 2007 Master plan for parent company of Kokoriko fast-food chicken restaurants: expansion and modernization of production plant, enlargement of freezing capacity, opening and remodeling of restaurants
Empresas Públicas de Medellín E.S.P.  July 31, 2006 Hydroelectric project PORCE III whose installed capacity will be 660 Megawatts
   Teledatos Zona Franca S.A.  January 15, 16, 2007 installation in the Bogota free trade zone of call center with 1114 positions to provide telephone contact service to domestic and foreign firms . 
Hotelería Internacional S.A.   Same as next
Nova Mar S.A.  January 15, 16, 2007 construction and operation of a high spec hotel, located on 73rd Street on 9th avenue in the city of Bogotá
Sociedad Schlumberger Surenco, S.A. July 26, 31, 2006 application of technological developments and practices optimizing water injections required to boost oil production in mature wells Cassava Project. 
Interconexión Eléctrica S.A. E.S.P. ISA E.S.P. July 26, 31, 2006 construction of power transmission lines  Primavera-Bacatá and associated works, 2 of 2003 UPME transmission line to 500 kV. cuicuito sencilio, Bolivar-Copey-Ocana-Primavera and associated works and expansion of the Cano Limon substationEnlargement of Cano Limon
Cine Colombia S.A. May 31, 2007
June 1, 2007
Comprehensive expansion and modernization of a total of 54  new and remodeled cinemas
Zona Franca Argos S.A January 15-16, 2007 new production line for Portland cement in the city of Cartagena, which will increase the capacity of
it in approximately 1.8 million tons per year. 
COMAI January 15, 16, 2007 Purchase a lot in the  Candelaria Free Trade Zone in Cartagena, for the assembly of a splitter tower 
Propileno del Caribe S.A – Propilco S.A January 15, 16, 2007 Expansion of polypropylene production capacity to meet rising domestic demand 
Inversiones Inmobiliarias de Colombia S.A. January 15, 16, 2007 construction and operation of a complex of high specification office and retail, in Bogotá
Renting Colombia S.A., January 15, 16, 2007 Ongoing expansion and renovation of light cargo vehicle fleet for operational leasing 
Arcelormittal Stainless Service Andino S.A. January 15, 16, 2007 Steel Service Center in the free zone of Barranquilla to process raw materials and semi-finished products. 
Leonisa S.A January 15, 16, 2007 technological conversion of the company through acquisition of fixed assets for next generation production processes of weaving, finishing, rubber bands, thermal cutting, integration and clothing. 
Productora de Confección PROCO January 15, 16, 2007 expansion and modernization of production processes of the company, through acquisition of 53 latest technology machines to optimize the textile process and four (4) warehouse located in the Zona Franca de Rionegro  
Gas Natural Comprimidos S.A., GNC S.A. o GAZEL. July 26, 31, 2006 Construction of 90 new service stations for natural gas fueled vehicles
Avianca S.A. y SAM S.A August 11, 2003 acquisition of Airbus A-319, A-320 and A-330 aircraft and ground support equipment such as: pay-movers, dollies, Dorti, conveyors, and trailer levers, tools, components, and spare parts required for maintenance of aircraft. 
GYPLAC S.A. January 15, 16 2007 plant assembly in the Free Zone Mamonal – Cartagena for plasterboard production for use in the construction sector 
Novavento S.A.  January 15, 16, 2007 acquisition
of snack and coffee machines, and investment in infrastructure for direct sales 
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