How to do business in Colombia - a guide

  HOW TO DO BUSINESS IN COLOMBIA  1

Table of  Contents  

Table of  Contents  1

1.  Introduction  3

2.  Important Factors and Cultural Dimensions  3

2.1.  Important Factors and Values  3

2.1.1.  Religion  3

2.1.2.  Business Network in Colombia  4

2.1.3.  Face and Hierarchy  4

2.1.4.  Long-Term Orientation Future orientation  4

2.2.  Hofstede s Cultural Dimensions  4

2.2.1.  Power Distance  4

2.2.2.  Uncertainty Avoidance  5

2.2.3.  Collectivism  5

2.2.4.  Masculinity Femininity  5

2.3.  PEST Analysis  5

2.3.1.  Political factors  5

2.3.2  Economical factors  6

2.3.2.  Social Factors  6

2.3.3.  Technological Factors  6

3.  Communicating Cross Culturally  6

3.1.  Language  7

3.2.  Communication  7

3.3.  Verbal communication  7

3.4.  Non-verbal communication  7

3.4.1.  Speaking Colombian  8

3.4.2.  Hand gestures  8

3.4.3.  Personal interspace  8

3.4.4.  Eye contact  8

3.5.  Written communication  8

3.6.  Problems tips and hints when communicating  8

3.6.1.  Translation  9

3.6.2.  Speed  9

3.6.3.  Slang and proverbs  9

4.  Teams to Work in Colombia  9

4.1.  Leaders and Managers  9

4.2.  Motivational Approaches in Colombia  10

4.2.1.  Provide Status  10

4.2.2.  Feedback Positive Reinforcement  10

5.  Negotiating Cross Culturally  10

  HOW TO DO BUSINESS IN COLOMBIA  2

5.1.  Protocol in Colombia  10

5.1.1.  Scheduling a meeting  10

5.1.2.  Relationship before business  11

5.1.3.  Greetings  11

5.1.4.  The use of titles names and business cards  11

5.1.5.  Business Dress  12

5.1.6.  Conversation  12

5.1.7.  Gift Giving  12

5.2.  Negotiation  13

5.3.  Negotiating Tips  14

6.  Managing Expatriates In Colombia  14

6.1.  Determining the need of an expatriate in Colombia  14

6.2.  Selection of expatriates in Colombia  15

6.3.  Repatriation  16

7.  Managing Social and Ethical issues in Colombia  16

7.1.  Civil War  16

7.2.  Drugs  16

7.3.  Corruption  16

8.  Conclusion and Recommendations  17

  Bibliography References  I

Appendix I  Map of Colombia  II

Appendix II  Hofstede s Dimension of Culture Scales  III

Appendix III  Useful Internet Links  IV

Appendix IV  Endnotes  VI

1. Introduction

Colombia is the hinge between North and South America situated on the northwestern end of South America and stretching over an area roughly equal to that of Portugal, Spain, and France put together 1 . Colombia is not only country of origin of world known artists (e.g. Gabriel Garcia Marquez), sportsmen (e.g. Juan Pablo Montoya) and scientists (e.g. Manuel Elkin Patarroyo, who discovered a vaccine against malaria and donated it to WHO). The country with the second biggest population in South America (42 millions) is also economi- cally an important player. It's the world’s largest producer of emeralds and orchids, the second largest exporter of flowers in general, the third largest producer of coffee, women’s lingerie, reptiles and bananas and it's the fourth largest producer in coal and nickel. Colombia pos- sesses the largest coal reserves, the second largest hydroelectric potential and the fourth larg- est oil and gas reserves in Latin America.

Although Colombia had and still has some problems with political and social stability 2 , violence 3 and drug trafficking, it offers interesting business opportunities to international companies, especially regarding its minerals and energy resources. Colombia underwent a major economic reform in the past decade, which enabled its economy to participate in inter- national trade and investment.

This guide, who doesn't claim to be comprehensive, will provide a collection of pri- mary 4 and secondary 5 information about Colombian culture and customs, which are helpful to do bus iness in Colombia and to avoid capital blunders.

2. Important Factors and Cultural Dimensions

The cultural background including basic values and beliefs is essential to understand business related behaviours and decision- making processes of potential business partners. The following paragraphs set out the particularities of the Colombian culture and the values that might have an impact if you as a foreigner do business in Colo mbia.

2.1. Important Factors and Values 2.1.1. Religion

Colombia is an overwhelmingly Roman Catholic country. More than 95 % of the popu- lation had been baptised in the Catholic Church and the Colombian variant is widely re- nowned as one of the most conservative and traditional in Latin America. Other religions continue to play a small role. There are only around 200,000 Protestants and even far less Jewish people. However, the Colombian constitution guarantees freedom of religion, which is

essential to maintain political stability. 6 Regarding to business this means you should regard catholic holidays and customs, while working in Colombia or with Colombians. 2.1.2. Business Network in Colombia

Studies show that 68% of all enterprises in Colombia are family businesses 7 . The impor- tance of family businesses in Colombia shows that qualities such as trust, reciprocity and harmony are very important for doing successful business in Colo mbia. 2.1.3. Face and Hierarchy 8

Colombians are mo tivated by maintaining standards and strengthened by a sense of pride. In spite of socio-cultural tensions and the tendency towards change, the Colombian society is characterized by high family and group values, high elitism but also by a relatively high tendency towards gender equality.

2.1.4. Long-Term Orientation / Future orientation

Colombian society is oriented more towards the present than towards the future. Co- lombian culture is impulsive and spontaneous by nature; its members live for the moment without a serious concern for planning the future. Governmental long-term plans (e.g. regard- ing universities) are rarely met.

Spontaneity is the key word in Colombia: the act of living here and now. For instance it is possible to get tickets to important sports eve nts on the day of the event, because fans only begin to make their purchases a few days before the event. However, the Colombian go vern- ment and larger corporations tend towards a stronger future orientation. Hofstede’s Cultural Dimensions 9

2.2.

The Dutch researcher, Geert Hofstede carried out a formative study about Colombia. The following factors determine the main cultural dimensions in Colombia. 2.2.1. Power Distance

Society’s key characteristic is the concentration of power in the hands of a closed, pow- erful, elite. Social inequality is part of daily life. It is easy to notice the privileges enjoyed by the top members of any major business organization; these include lavish offices, special parking lots, fashionable clothing (instead of uniforms), and dining rooms that are reserved for the different ranks among the company's hierarchy. It is common to hear the formal pre- fixes “don” and “doña”, or “doctor” and “doctora” in recognition of social status.

2.2.2. Uncertainty Avoidance

Colombia earned a medium index rating for ambiguity and uncertainty avoidance 10 . Colombian people are quite comfortable with taking risks in business environments. Some factors in Colombian society that can explain the increasing uncertainty are; firstly, it is the result of the institutional changes, which transformed the country's economic development model from protecting domestic industry to exporting goods and services. Secondly, the following factors also contributed to instabil- ity: the inflow of illegal capital; the war on drugs; violent crime; powerful guerrilla armies. Therefore, Colombia tolerates ambiguity, which in turn, has positive implications including flexibility, open- mindedness, creativity, innovation, and the ability to handle emergencies.

2.2.3. Collectivism

Colombian society is highly collectivist in the sense of marked family and group loyalty values. The extended family in Colombian society has long been recognized for its distinctive collectivist features: unmarried or widowed adult children live with their families; elderly parents are not placed in instit utions but rather taken in by one of their children. The core social values in Colombia are undeniable collectivist or group oriented in nature.

2.2.4. Masculinity – Femininity

Geert Hofstede classified the Colombian society as having "masculine" values. Oddly enough, neither male nor female managers indicated that gender differentiation was remark- able in Colombia. 11 .

Colombia has been part of the international movement towards achieving gender equa l- ity. Occupations are still differentiated (nurses, schoolteachers, psychologists, translator use hod servants, housewives, etc. are “women's work ”). Only 20% of the Presidential Cabinet are females. In spite of the fact that gender inequality and discrimination still exist, it has been observed that business executive training programs in which women made up only 5% of the participants in the early 1970's, now have an enrolment (1990's) of 35% women. 2.3. PEST Analysis

Before conducting international business or communicating cross-culturally it is impor- tant to have some basic knowledge about the country at hand. We have chosen to do a PEST analysis to give insights on the determining factors of the Colombian business environment.

2.3.1. Political factors

The Colombian political system is an elective democracy in which the executive branch predominates within a centralized nation. Power is concentrated in the hands of unchanging, limited elite 12 . It has a profound impact on the benefits, costs and risks for doing business in Colombia.

2.3.2 Economical factors

From 1972 to 1996, the Colombian economy was the fastest growing in Latin Amer- ica 13 . The food processing industry has traditionally been a mainstay of the Colombian Econ- omy. For decades Colombia has been relatively self-sufficient in food production and national companies have predominated this sector alongside a few multinational corporations (such as Nestlé). In recent years competition increased, and free market policies allowed a greater number of imports and exports.

The dynamic economic growth has been dominated by new business activities: the ex- ploration, drilling and distribution of petroleum in new regions; the export of fresh-cut flow- ers and the production and international distribution of bananas and cocoa leafs from large farms. Furthermore, the illegal production and export of drugs such as of marijuana and co- caine has increased in the same time period.

2.3.2. Social Factors

Colombia has well-defined class membership, pronounced status differences. Classes were differentiated by occupation, life-style, income, fa mily background and education. Colombian society is organized in four classes 14 : The Upper class, 5%; middle class, 20%; lower class, 50%; and the masses 25%; The upper class comprised two interrelated groups, the traditional landed elite and the new rich, who earned their status primarily through suc- cessful entrepreneurships. The lower class and the masses together constituted the largest sector of rural and urban society (about 75%).

2.3.3. Technological Factors

After the privatisation of the governmental owned TELECOM in 1998 the competition improved the coverage with telecommunication services including modern telephone systems, cellular telephones, the Internet, satellite communications, new communications services, and data processing. Businesses in larger towns and cities have good Internet access and up-to- date telecommunication services.

3. Communicating Cross Culturally

The following paragraphs will analyse common aspects, which are often misunderstood and misinterpreted when communicating cross-culturally. The correct understanding of these issues will help to avoid capital blunders and facilitate the (especially in Colombia) very important building of personal relationships. We retrieved the information for this paragraphs from study guides as well as from interviews with Colombian students at Bond University.