How to do business in Colombia - a guide

Table of Contents

1. Introduction

2. Important Factors and Cultural Dimensions
2.1. Important Factors and Values
2.1.1. Religion
2.1.2. Business Network in Colombia
2.1.3. Face and Hierarchy
2.1.4. Long-Term Orientation / Future orientation
2.2. Hofstede’s Cultural Dimensions
2.2.1. Power Distance
2.2.2. Uncertainty Avoidance
2.2.3. Collectivism
2.2.4. Masculinity – Femininity
2.3. PEST Analysis
2.3.1. Political factors
2.3.2 Economical factors
2.3.2. Social Factors
2.3.3. Technological Factors

3. Communicating Cross Culturally
3.1. Language
3.2. Communication
3.3. Verbal communication
3.4. Non-verbal communication
3.4.1. Speaking Colombian
3.4.2. Hand gestures
3.4.3. Personal interspace
3.4.4. Eye contact
3.5. Written communication
3.6. Problems, tips and hints when communicating
3.6.1. Translation
3.6.2. Speed
3.6.3. Slang and proverbs

4. Teams to Work in Colombia
4.1. Leaders and Managers
4.2. Motivational Approaches in Colombia
4.2.1. Provide Status
4.2.2. Feedback /Positive Reinforcement

5. Negotiating Cross Culturally
5.1. Protocol in Colombia
5.1.1. Scheduling a meeting
5.1.2. Relationship before business
5.1.3. Greetings
5.1.4. The use of titles, names and business cards
5.1.5. Business Dress
5.1.6. Conversation
5.1.7. Gift Giving
5.2. Negotiation
5.3. Negotiating Tips

6. Managing Expatriates In Colombia
6.1. Determining the need of an expatriate in Colombia
6.2. Selection of expatriates in Colombia
6.3. Repatriation

7. Managing Social and Ethical issues in Colombia
7.1. Civil War
7.2. Drugs
7.3. Corruption

8. Conclusion and Recommendations

Bibliography / References

Appendix I Map of Colombia

Appendix II Hofstede's Dimension of Culture Scales

Appendix III Useful Internet Links

Appendix IV Endnotes

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^[i]. 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 economically 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 possesses the largest coal reserves, the second largest hydroelectric potential and the fourth largest oil and gas reserves in Latin America.

Although Colombia had and still has some problems with political and social stability^[ii], violence^[iii] 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 international trade and investment.

This guide, who doesn't claim to be comprehensive, will provide a collection of primary^[iv] and secondary^[v] information about Colombian culture and customs, which are helpful to do business 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 Colombia.

2.1. Important Factors and Values

2.1.1. Religion

Colombia is an overwhelmingly Roman Catholic country. More than 95 % of the population had been baptised in the Catholic Church and the Colombian variant is widely renowned 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.^[vi] 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^[vii]. The importance of family businesses in Colombia shows that qualities such as trust, reciprocity and harmony are very important for doing successful business in Colombia.

2.1.3. Face and Hierarchy

Colombians are motivated 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.^[viii]

2.1.4. Long-Term Orientation / Future orientation

Colombian society is oriented more towards the present than towards the future. Colombian 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. regarding 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 events on the day of the event, because fans only begin to make their purchases a few days before the event. However, the Colombian government and larger corporations tend towards a stronger future orientation.

2.2. Hofstede’s Cultural Dimensions

The Dutch researcher, Geert Hofstede carried out a formative study about Colombia. ^[ix]

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, powerful, 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 prefixes “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^[x]. 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 instability: 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 institutions 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 remarkable in Colombia.^[xi].

Colombia has been part of the international movement towards achieving gender equality. 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 important 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^[xii]. 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 America^[xiii]. The food processing industry has traditionally been a mainstay of the Colombian Economy. 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 exploration, drilling and distribution of petroleum in new regions; the export of fresh-cut flowers 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 cocaine 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, family background and education.

Colombian society is organized in four classes^[xiv]: 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 successful 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.

3.1. Language

Language is defined as “a system of signs, symbols, gestures, or rules used in communicating^[xv]. We use language to communicate thoughts and feelings through a system of arbitrary signals, such as voice sounds, gestures or written symbols.

3.2. Communication

Communication consists of verbal and non-verbal communication. Professor Albert Mehrabian is one of the pioneers in communication research. He established the following classic statistics of spoken communication^[xvi]:

- 7% of meaning is in the words that are spoken.
- 38% of meaning is paralinguistic (the way that the words are said).
- 55% of meaning is in facial expression.

Most Colombian businessmen have a high profile and are very formal. It is usual for successful Colombian businessmen to have international experience, so they are generally aware of the classic communication blunders that occur.^[xvii] The formality is reflected in the language used in business communication, both written and spoken. Although “Latinos” are known to be formal, indirect and polite, they are not perceived to be as indirect as some Asian cultures tend to be.

3.3. Verbal communication

The official language in Colombia is Spanish, but there are still some native Amerindians speaking their native language^[xviii]. Spanish is also the usual business language although most businessmen understand English^[xix].

Colombian Spanish differ some from “ordinary” Spanish in meaning and expression, but the main differences are in the dialect and the paralinguistics of the language. Although Colombia is part of the Latino culture group, Colombians have developed their own slang and meaning in their communication. An example is the Spanish word “roscon”, which are Spanish round bread and a common used word in Spain. In Colombia on the other hand this word has a strong sexual reference and should not be used in ordering food.

3.4. Non-verbal communication

The non-verbal communication consists of different aspects, such as kinetics; hand gestures, facial expressions, touching etc and paralinguistics; speech rate, pitch, volume and pauses and timing of speech^[xx].

3.4.1. Speaking Colombian

Since the vocabulary and the grammar of Colombian Spanish are so similar to “ordinary” Spanish, there are other factors that make out the main difference in the languages. The speech rate in Colombia is a bit slower than in their neighbouring countries and in Spain, but the intensity of hand gestures are the same. However, Colombians tend to use a higher difference in pitch when communicating. Furthermore Colombians use a very descriptive language and they are as most other Hispanic emotional about the topic at hand.

Interruptions are usual when communicating with Colombians; so do not get intimidated by it. As a foreigner you should on the other hand be careful with interrupting.

3.4.2. Hand gestures

There are many examples of people using gestures in the wrong way. Therefore you should be cautious using gestures. In Colombia for instance the typical American gesture for “A – O.k.” symbolises homosexuality when turned around.^[xxi]

3.4.3. Personal interspace

Furthermore, Colombians stand somewhat closer when communicating than do North Americans or Northern Europeans, Australians etc. Their personal space is closer. They do however have less body contact than some of the other South American cultures.

3.4.4. Eye contact

When communicating in Colombia you are expected to keep eye contact with the person you talk to, but do not stare.

3.5. Written communication

Written communication is frequently used in business and here as well styles differ between cultures. Colombians tend to have a very “verbal” written language, meaning that they write things, as they would say it. This implies that the written communication is descriptive and emotional. When Europeans may vary their style of writing from letter to e-mail to fax, the Colombians tend to keep the same writing style, although a fax is considered more informal.

3.6. Problems, tips and hints when communicating

There are several problems that can occur when communicating cross-culturally. This section is dedicated to mention some traps to be aware of when communicating cross-culturally. Be aware of the following traps:

3.6.1. Translation

Translation is a crucial part of communicating cross-culturally. The market is full of translators that offer their services to businesses. When translating it is a good advise to translate both ways, meaning first from your language to Spanish and then back again, preferable by different people. In a translation test of electronic translators, one of the group members translated the following: “The soul is weak” from English to Japanese. When translating back to English again it was translated to ” The meat is rotten”.^[xxii]

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^[i] For more geographic facts see below

^[ii] For a short history of Colombia

^[iii] See Cannon

^[iv] In order to get primary information we interviewed Colombian co-students of Bond University, Australia.

^[v] Secondary information was mainly retrieved from Internet sources, for current literature on Colombia is hard to find.

^[vi] See www.lcweb2.loc.gov/cgi-bin/query/ or www.kasbah.com

^[vii] http://www.genusresources.com/site/content/global_resources/columbia.asp.

^[viii] www.haskayne.ucalgary.ca/GLOBE/Public/Links/colombian.pdf

^[ix] www.cyborlink.com/besite/hofstede.htm

^[x] See appendix IV Hofstede’s cultural dimensions

^[xi] www.uniandes.edu.co/boletin/actual/secciones/publicaciones.html- Ogliastri, 1996

^[xii] Ogliastri and Dávila, 1987, Ogliastri, 1977

^[xiii] http://reference.allrefer.com/country-guide-study/colombia/colombia66.html.

^[xiv] http://reference.allrefer.com/country-guide-study/colombia/colombia53.html.

^[xv] http://www.yourdictionary.com/ahd/l/l0041400.html entered on the 5.12.03

^[xvi] http://www.businessballs.com/mehrabiancommunications.htm entered on the 04.12.03

^[xvii] Interviews with Colombian students with business experience at Bond University in 2003

^[xviii] http://www.cyborlink.com/besite/colombia.htm entered on the 01.12.03

^[xix] Interview with Colombian students at Bond University 2003

^[xx] lecture notes Cross Cultural Management sept 03 – Ben Shaw

^[xxi] Interview with Colombian students at Bond University 2003

^[xxii] reference to Anders Wedde, experiment from 98