Name: Maria Camila Puerta Velásquez

Identification Code: 2239358

Santo Tomas University
Topic: Economy

Mr. Frankie Smith, with American citizenship has in his birth country a chain of
prestigious hotels known as Smith Hotels throughout of the country. When he was
traveling in Colombia year 2018 and there understood a lot of tourism flow in some
parts, so, Mr. Smith decides come back to Colombia current year in order to request
the conformation, and the systematization “legal intelligence" legal firm associated
to Colombian political-economic system to have knowledge if is whether or not
Colombia investment rate to generate accumulation and growth himself its capital.
Could be Colombia according to underdeveloped level guarantee reliability at the
moment making investment?
In Colombia, the economic system is based on mixed capitalism, where the state
controls a large part economy in order not to fall into economic instability. This system
is divided into two sectors, the public and the private sector, where both have the
possibility give decisions.
The Mixed capitalism defines economic system free market is under influence of the
State, the market is a fundamental element for the private sector, since it allows use
of productive resources expecting to comply with requirements of the people. So, with
market support expecting us to act in their own benefit, so the mean is to sell in
exchange for a revenue will allow them to satisfy their needs. Likewise, it must be
taken account the market must to have a lower production percentage to the company
needs so that it can to increase its production and generate higher revenues.
As highlight topic and priority, the means of production in Colombia are private sector
and its administration is managed through the market. Another mechanism present in
a mixed economy is planning to cover the weaknesses market so private activity has
focus on the social policy, noting planning to identify public needs is dedicated to
attend those of public interest, planning mechanism appear public sector with the
purpose of synchronize public and private interests. Therefore, is necessary any
country there is a coherence and equality when fulfilling particular and general target
of the society.
The public sector goes a head of the State, which own companies, and its purpose is
the production of property and services satisfy basic needs of those who make up this
system such as; housing, health, clothing and food, therefore, its main interest is to
provide a stable compliance of these to the community. The private sector is
associated economy line that is not managed by the State, however is made up of
profit-oriented companies through the supply of property and services provider to the
community in this activity, and purpose is to expand industrial production, increase
external investment rates and bring new technologies to our country. The private
sector may be composed of an association, corporation or owner ship, so, individual
or social people, it may be headed by a guy a legal entity, collective or moral and
these have the capacity to manage their own productive methods.
First, reference will be made to the structure, financing and expenditures of the public
sector, and secondly to the conformation and types of costs of the private sector.
The structure public sector meets all fundamental needs to form administrative
organization we can to have correct functions distribution way generates economic
growth compliance of its services. The public authorities are responsible planning
work government; give security through justice, providing health services, education
home, agencies and support companies to the central authority make a supply
property and services government provides to society. The administrative
organization structure is distributed as national; presidency, congress, office of the
comptroller, ministries, administrative departments, and superintendence’s, in
departmental level; governors, assemblies and secretaries and after municipal level;
mayoralties, Municipal Councils and secretaries. In this way, it is deduced as a
decentralization of these entities legal personality is transferred from the national
central level to other entities of the territory to merchandise and services.
Like the structure of the public sector, it is important to emphasize where it gets
financing to fulfill its functions. The Government has to acquire various properties and
services to be able to carry out its activities, therefore, it needs high amount of
financing. From the public sector you can generate resources for some of your
companies at the time of selling properties or services and other government
agencies, these are the so-called current revenue, another type of revenue is provided
by non-profit state organizations. Also, resources are acquired from the private sector
through tariffs, royalties, fines, taxes, contributions, etc., which are understood as non-
tax revenues. But, if these ordinary resources are not enough to cover the expenses,
the state will use the capital in the way be monetary investments with the private
sector and loans to national or foreign entities, sale of fixed assets, transfer of capital
of the same sector, definitely transfers in general.
But if its carefully considered, the main source of resources is generated by the
collection taxes collection, which are those contributions made by some members of
society for the collection fees and sale of its production, which are separated in two
parts. National level; are those apply to all natural or legal person’s resident in the
country, and taxes regional. they are determined by each department or municipality
according to the parameters set by the Law. Therefore, taxes are a permanent fund
to finance the activity public sector. Likewise, two types of taxes are managed, direct
taxes; It has focus renting work labor on equity represented in physical or financial
assets of the private sector, and indirect taxes; they are used according to the expense
or consumption of the merchandise or services.
Therefore, the Government has revenue and expenses generated in time line. The
fiscal deficit generates a balance or resister equivalent amount current and amount
owe or pay, comparing the assets with the liabilities Nation representing result flow of
resources. Likewise, this method is applied registration public sector operations to do
an accounting balance checking government operations.
Emphasizing, we should to have highlights expenses public sector are classified as
current; are those that to cover the costs of their operation should be made a payment
indispensable proper and normal development public services and administration in
general, and capital expenses are those expenditures of the government increasing
public patrimony.
After to make brief description public sector, there will be done emphasis on the private
sector, there the society is businesswoman and the most productive organizations are
designed for group individuals wishing to specialize any production activity and with
base society they are creating a few background of production must be market inside
to satisfy all needs.
In 1970th ago when we are talking about business or companies, it was understood
associated to private sector, since the state did not conceive itself as an entrepreneur
and neither accessed the market to search profit through the provision of merchandise
and services. In 1968th based constitutional reform the State was allowed to convert
official companies in commercial and industrial entities so, Colombia began to apply
the mixed economy system. With the constitution 1991, the productivity, efficiency and
effectiveness terminus were exclusive to the private sector, and with this they were
employed by the State's wealth producing entities. In addition, in the Constitution of
1991 the concept of decentralization is used to the territorial entities like departments,
municipalities and districts, will have own sources of resources granted by the State,
in addition, these territorial entities will be able to create companies to produce
merchandise and services, only charging the cost product or services, or charging
prices. In summary, the entrepreneur generate business growth must properly
manage the costs and revenues of their company giving them a high management to
maintain a high business performance.
The types of costs the employer must manage are associated two types, the fixed
costs; are those company must pay produce or not and the variables costs are those
that change according variation production units.
After carrying out the explanation Colombian economic system, the matter requested
on foreign revenue in Colombian territory.
Foreign investment consists of foreign capital investment in Colombian territory made
by people who are not residents in Colombia. The investment opportunity Mr. Frankie
Smith American citizenship is the hotel investment associated to the tourism system.
According to decree 2080 of 2000, foreign capital investors must appoint an attorney
in Colombia on their investment. Likewise, article 2 of this decree stipulates the foreign
capital investment in Colombia will be treated for all purposes, also way as the
investment resident nationals, in accordance with article 100 of the constitution and
says foreigners will enjoy in Colombia the same civil rights that are granted to all
Colombians.
It should be noted the conditions foreigners are making an investment in Colombia:
1. The investor must fulfill the condition of not being resident.
2. The contributions must to correspond any authorized modalities
3. The resources must actually be used to make the investment.
In the Colombian legal system, in article 15 of Law 9 of 1991, there is the matter of
foreign investment, where it says.
"Article 15.- Investment Regime. The general regime investment of foreign capital in
the country Colombian investments abroad will be set by the national government.
So, in the development of this function modalities will be indicated destination,
approval form and the investments general conditions.
Once an investment of foreign capital has been made in the country according with
the process defined, the investor shall have the right to send the profits from the
investment abroad and to reimburse the invested capital gains, subject to the limits
and conditions indicated by the National government.
According with the general regulations norms may be established in accordance with
the destination investment, such as those corresponding to the financial, hydrocarbon
and mining sectors.
With the exception of those matters related transfer of resources abroad, foreign
investment in Colombia will be treated for all purposes in the same way as the
investment of Colombian nationals. (...) ".
This article defines measures must be adopted to carry out the investment to make
within established legal framework.
Finally, it is important to mention last year the national government ruled on
investment in the business hotel, mentions projects for the provision hotel services
built before 2026 will be given a preferential rate about tax for the hotel sector. 9% for
20 years.
FINDINGS
• Colombia has become a very important tourist so, the number tourists visit it is
increasing in the time, several foreigners arrive to the country even if their stay are
short.
• There are cultural events year in different parts of the territory, these events are
essential part of attracting tourists at any time of the year, these celebrations generate
more interest for foreigners.
• Ecotourism because it is one time most biodiverse countries included natural parks.
•Infrastructure is improving every time, such as roads, airports, ports, and others.
• Before making a hotel investment, it is important to find the right geographic location
so investment generates revenue and profits. For this reason, is important to highlight
cities most visited by tourists; Bogotá, Cartagena, Medellin, and Santa Marta being a
strategic point for the begin investment.
• Hotel investment has stability in the business cycle so its main source is tourism
revenue flow will be stable because it does not depend on the ups and downs local
economy, it is a business according to popularity and reputation can keep evolving.
• It is known in the world Colombia is an underdeveloped country and has several
issues such as application of the economy is due poor agricultural production of
efficiency with monopolistic tendencies low levels of transport, trade, technology,
education, and others. But this is due to the fact that a large part of the population It
takes a negative position does not take advantage of the planning mechanisms
imposed state to improve the economic organization of the country.
In summary, according to studies Colombia is one of the countries with greater
economic stability in the region. During the time 2010-2017, the Colombian economy
has grown, on average, 3.8%. During the last decades, Colombia has been
characterized by its political stability and firm respect for property and private initiative.
SUMMARY
Colombia is in the 32nd ranking of the world and 4th in Latin America of the largest
economies in the world, in addition, high foreign multinationals choose Colombia as
an investment destination.
Colombia is a destination with great tourism boom in different areas it should be
mentioned that since 2013-year tourism in Colombia had an increase of 6.5 million
tourists until 2017. The new tax reform allows the benefit of the 9 % of the rent
construction of hotels in cities with less than 200,000 inhabitants. Colombia abroad is
known as the "Continent Country" because it has a lot of diversity; from mountains
with snow-capped peaks, Andean cities, beaches with warm waters that go from the
Caribbean and the Pacific coast, to the Amazon jungle and the desert Peninsula of La
Guajira, where investors could take advantage nature of Colombia to develop a novel
infrastructure with greater tourist attention.