Digital Economy Overview

Colombia has made progress in developing its digital economy, with 63% of the population using the Internet as of 2023, up from 38% in 2014. The country has emerged as a leading player in the digital landscape of Latin America and the Caribbean, hosting 12.8% of the region’s digital firms, trailing only Brazil and Mexico (World Bank, 2024).

Despite these advances, significant challenges remain, particularly in achieving universal internet access and enhancing digital skills. The urban-rural divide is a critical issue, with over 40% of households across the country still lacking internet access. This limited connectivity and low digital literacy hamper the private sector’s ability to fully leverage digital technologies for value creation.

National Focus

National Digital Strategy 2023-2026

In February 2024, Colombia’s Ministry of Information and Communication Technologies (MinTIC) and the National Planning Department (DNP) unveiled the National Digital Strategy (NDS) for 2023-2026. The strategy aims to leverage digital technologies to address economic, social, and environmental challenges. The plan is structured around the following key pillars:

• Enhancing Connectivity: The government seeks to close the digital divide by expanding broadband infrastructure, particularly in rural and underserved regions. This includes initiatives to provide affordable internet access and improve the quality of digital services nationwide.
• Establishing Secure Data Infrastructure: Efforts are underway to build a robust data infrastructure that guarantees the security and privacy of users’ data. This includes the deployment of advanced encryption technologies and the development of secure data centers.
• Building Digital Trust and Security: The government is committed to creating a secure digital environment by implementing stringent cybersecurity measures and promoting digital literacy. This includes public awareness campaigns on safe internet practices and the formation of cybersecurity response teams.
• Developing Digital Skills and Talent: To support the burgeoning digital economy, the government invests in education and training programs to cultivate a skilled workforce. This involves partnerships with educational institutions and private sector entities to offer digital skills training and certification programs.
• Promoting AI: The government is actively encouraging the adoption of artificial intelligence (AI) across various sectors. This includes establishing AI research centers, funding AI startups, and implementing AI-driven solutions in public services.
• Encouraging E-Government: The government aims to enhance public service delivery and increase citizen engagement by leveraging digital technologies. This includes the digitization of government services, the development of e-government platforms, and the use of digital tools for public consultations.
• Supporting Digital Economy Initiatives: The government extensively supports digital startups and entrepreneurs through funding programs, incubators, and accelerators. These efforts are designed to foster innovation and collaboration within the digital ecosystem.
• Fostering a Digital Society: The strategy emphasizes the creation of an inclusive digital society where all citizens can participate in the digital economy. This involves promoting digital inclusion, addressing gaps in digital literacy, and ensuring that digital technologies are accessible to all citizens. 

Projected Digital Economy Growth in Colombia

Colombia’s digital economy is set for expansion in the coming years, key factors include:

• Increasing Internet Adoption: Continued expansion of connectivity infrastructure, particularly in rural areas, is expected to bring more Colombians online. This increased Internet penetration will significantly drive growth in the digital economy.
• Adoption of Emerging Technologies: Colombian businesses are investing in cutting-edge technologies such as cloud computing, artificial intelligence (AI), and cybersecurity. These technologies are revolutionizing industries, enhancing efficiency, and unlocking new growth opportunities.
• Digitalization of the Public Sector: The Colombian government is focused on improving public services through e-government initiatives, the development of robust data infrastructure, and extensive digital skills training. These efforts are expected to streamline public service delivery and foster greater citizen engagement.

Local and international players are driving the growth of Colombia’s digital economy:

• Local Firms: Colombian software companies specializing in financial applications, digital animation, and mobile/web applications are at the forefront of innovation, contributing significantly to the digital economy.
• International Tech Giants: Companies like Microsoft, Google, and Amazon have made substantial investments in the Colombian market, bringing global expertise and resources that further accelerate the digital transformation. 

Market Challenges  

Despite Colombia´s positive outlook, challenges persist, particularly in ensuring equitable access to digital technologies and fostering digital skills, especially in rural regions. Addressing the urban-rural divide and improving educational outcomes will be critical to achieving inclusive digital development.

Regulatory Environment

The regulatory environment in Colombia presents challenges for the digital economy. While the government actively promotes digital transformation, businesses operating in the market must navigate several regulatory aspects. 

• Data Privacy - Colombia has a comprehensive data protection regime, primarily governed by Law 1581 of 2012, also known as the General Data Protection Law. This law aligns with international standards, offering protection for personal data and establishing clear guidelines for data processing activities. However, compliance can be complex, particularly for foreign companies that must adapt to local requirements while adhering to global standards.
• AI Regulation - Colombia does not have specific legislation governing artificial intelligence (AI). The government recognizes the growing importance of AI and is in the process of developing guidelines to address the ethical and practical implications of these technologies. However, the absence of established regulations creates uncertainty for businesses looking to implement AI solutions, as they must navigate a regulatory landscape that is still evolving.
• Cross-Border Data Flows - Cross-border data transfers in Colombia are tightly regulated under Law 1581. Transfers are only allowed if the receiving country offers adequate protection for personal data. This requirement complicates operations for companies relying on global data flows, as they must comply with Colombian law and other jurisdictions’ laws. Navigating these complex regulations can be challenging and resource-intensive.
• Cybersecurity - Colombia’s cybersecurity framework is outlined in Decree 338 of 2022, which mandates that public and private entities implement measures to protect critical infrastructure. The government has also introduced a National Cybersecurity Policy to strengthen the country’s cybersecurity resilience. While these regulations enhance digital security, compliance can be demanding, particularly for smaller businesses needing more resources and expertise. Challenges remain, especially in the public sector, where infrastructure and capacity to respond to cyber threats are often limited.
• Standards Development - The need for harmonized standards presents challenges for businesses. Regulatory changes can occur with little notice, creating difficulties for companies striving to comply with evolving standards. Additionally, there are concerns about the potential adoption of European standards that may exclude U.S. standards, particularly in sectors requiring specific testing and compliance.
• Subnational Market Regulation - Local regulations vary significantly across Colombia’s regions, particularly regarding digital infrastructure development. This creates a complex landscape for businesses, as they must navigate different regulatory environments depending on where they operate. These regional variations can lead to increased compliance costs and operational challenges, particularly for companies seeking to expand their digital services nationwide.
• Market Entry - While the Colombian market is generally open, challenges persist, especially about bureaucratic processes. High costs and complex regulatory requirements can serve as barriers to new entrants. Companies often face lengthy and unpredictable licensing procedures, particularly in regulated sectors like mining and oil. Additionally, the need for more transparency in public procurement processes can hinder market entry for foreign firms, making it challenging to participate in competitive bidding.
• Public Sector Procurement - Colombia’s public sector procurement process, particularly for digital services and technologies, remains complex despite ongoing efforts to streamline procedures. Issues such as transparency and the time required to secure contracts continue to pose challenges. The public procurement process has been criticized for its lack of competitive bidding conditions, which can disadvantage foreign bidders and create barriers to market entry. 

Digital Trade Barriers  

Colombia faces several digital trade barriers that impact U.S. business’s ability to enter and compete in the market effectively.

• Data Localization - Colombia does not currently have data localization requirements. However, there is ongoing debate about such policies’ potential benefits and drawbacks, particularly in the context of national security and data sovereignty. Should data localization laws be introduced, they could impose significant constraints on businesses, particularly those relying on cross-border data flows.
• Technology Barriers - Import tariffs and regulatory requirements for technology products can create substantial challenges for companies attempting to enter the Colombian market. These barriers often result in increased costs and delays in the deployment of new technologies. The high cost of technology and limited access to advanced technological infrastructure are significant hurdles, necessitating considerable investment from companies to ensure they can keep pace with global innovations.
• Barriers to Internet Services - Despite growing internet penetration in Colombia, significant disparities in access remain, particularly in rural areas. Limited internet connectivity and the high cost of services and devices pose substantial challenges, restricting the reach of digital services and stifling the growth of the digital economy. These barriers are particularly problematic for companies looking to expand digital offerings to regions.
• Third Country Bias/Influence - Colombia’s regulatory environment is influenced by regional trade agreements and regulations, particularly those within the Andean Community and other Latin American trade blocs. The 2024 Investment Climate Statement for Colombia highlights concerns about potential third-country bias, particularly in light of a recent tax reform that introduced a 3% digital services tax starting in January 2024.  

Digital Trade Opportunities

Cross-Sector Enabling Technologies in Colombia

Colombia is embracing various cross-sector enabling technologies (CETs) that are crucial in enhancing productivity, efficiency, and functionality across industries. These technologies are pivotal in driving the country’s digital transformation and supporting the growth of the digital economy.

• Communications and Networking Technologies - Colombia is investing in advanced communications networks, including 5G technology, which is expected to significantly enhance connectivity and support various applications across sectors such as healthcare, agriculture, and manufacturing. The rollout of sub-sea cables also aims to improve internet access and data transfer speeds, facilitating better communication and business operations.
• Cloud Computing - Cloud computing is gaining traction in Colombia, allowing businesses to scale their operations more efficiently. This technology is particularly transformative for sectors like finance and retail, where real-time data processing and storage solutions are critical. The shift towards cloud-based systems is expected to enhance operational efficiency, reduce costs, and support the digitalization of business processes.
• Artificial Intelligence - Artificial Intelligence (AI) is a central focus of Colombia’s digital economy strategy, with applications spanning various sectors, including finance, and agriculture. The government’s commitment to AI as a driver of innovation creates substantial opportunities for companies specializing in AI development and implementation. AI technologies are expected to play a crucial role in optimizing business operations, enhancing decision-making processes, and driving economic growth. 

Specific Industry Sub-sectors in Colombia

Colombia’s digital economy is evolving, with several specific industry sub-sectors leveraging advanced technologies to drive growth and innovation.  

• Financial Technologies (Fintech) - Colombia’s financial technology (fintech) sector is experiencing rapid growth, spurred by increased smartphone penetration and a concerted effort to promote financial inclusion. Colombian fintech companies are at the forefront of developing digital banking solutions, payment platforms, and lending services, specifically targeting the unbanked and underbanked populations. The government’s proactive regulatory framework supports this growth by promoting digital financial services to enhance access to banking and financial products nationwide. This sector is critical in driving economic inclusion and expanding financial services to previously underserved areas.
• Internet of Things (IoT) and Smart Cities - The Internet of Things (IoT) is gaining significant traction in Colombia, mainly through implementing smart city initiatives in urban areas. IoT applications are utilized in various sectors, including traffic management, waste management, and energy efficiency. These technologies improve urban living conditions, optimize public services, and align with Colombia’s broader goal of fostering sustainable development.  
• Software and Digital Services - Colombia’s software and digital services sector is driven by the adoption of digital solutions across various industries. This includes custom software development, cloud services, and digital platforms designed to enhance operational efficiency and customer experiences. As businesses digitize their operations, the demand for innovative software solutions grows, contributing to the country’s economic development and global competitiveness in the tech industry.

Digital Economy-Related Trade Events in Colombia

Colombia hosts several prominent trade events centered around the digital economy, offering key opportunities for networking, collaboration, and showcasing the latest innovations

• ANDICOM (The International ICT Congress), one of the most significant events in Latin America, held annually in Cartagena. It serves as a major platform for industry leaders, government officials, and technology providers to converge and discuss the latest trends, challenges, and opportunities within the digital economy. The event covers a wide range of topics, including digital transformation, connectivity, and innovation.  
• Colombia 4.0 is an annual event organized by the Ministry of Information and Communications Technology (MinTIC), focusing on digital creativity, technology, and innovation. The event features a variety of conferences, workshops, and exhibitions covering topics such as video game development, animation, digital marketing, and software development. Colombia 4.0 has become a key event for digital entrepreneurs, tech enthusiasts, and creative industries, providing a vibrant platform for knowledge exchange and showcasing cutting-edge digital projects.
• Expodigital is an annual event highlighting the latest digital technology trends and innovations. It provides businesses, startups, and technology enthusiasts a valuable platform to network, share insights, and explore new business opportunities. The event typically features exhibitions, panel discussions, and product showcases, focusing on areas such as digital transformation, AI, IoT, and cloud computing.  
• Cybersecurity Summit, a key event focusing on the growing challenges and solutions in the field of cybersecurity. This summit brings together experts, policymakers, and industry leaders to discuss emerging cyber threats, best practices for digital security, and the latest regulatory developments. The event is crucial for organizations aiming to strengthen their cybersecurity posture and for professionals seeking to stay updated on the latest trends in cyber defense.