2.3 POLITICAL, GOVERNMENTAL AND LEGAL VARIABLES:
Federal, state, local and foreign governments are major regulators, deregulators, subsidize, employers and customers of organizations. Political, governmental, and legal factors can represent key opportunities or threats for us. Political forecasts can be most important part of an external audit in variables where our industry depends heavily on government contracts or subsidies.
2.3.1 Government regulations or deregulations
The government public regulations refer to the study of the formation of institutions and the government policies that regulate industries. Usually these rules and laws are applied by the state.
In Colombia, the “Ley 142 / 1994 Ley de Servicios Públicos” addresses in Article 2, the intervention in public services from the sate. The state will intervene in public services, for the following purposes (these are the ones that most concern us): to ensure the quality of good object of public services and final disposal to ensure improved quality life for users. Efficiency of delivering he service. Free competition and not abusing of the domain position. Obtaining economies of scale verifiable. Mechanisms that ensure the users access to the service and participation in the management and oversight of its provision.
2.3.2 Changes in tax laws
The tax reforms in Colombia affect all industries. The main national taxes in Colombia that are taken into consideration are the following:
IMPUESTO SOBRE LA RENTA Y COMPLEMENTARIOS
(Article 5 from the tributary bylaw)
The income and complementary tax apply nationally and is considered as a single tax with three main components: income, capital gains and remittances. It is a direct tax. Those that are deductible from the tax income are the costs and expenses that are causally related with the income producing activities.
IMPUESTO AL VALOR AGREGADO (IVA)
(Article 420 from the tributary bylaw)
It’s the national tax that levies on the provision of services, sales and import of goods. The VAT is structured as value added tax, so that the tax assessment is allowed to deduct the IVA paid on goods and services for taxable transactions.
The tax is generated in the financial transactions to dispose funds deposited in current accounts, deposit or savings, as well as the rotation of cashier's checks. (Tariff equivalent to four per thousand of the value of the transaction )
IMPUESTO DE TIMBRE
(Article 514 Tributary bylaw)
Documented tax that is caused by the giving or receiving of documents in Colombia, or that will be executed or have any effects in Colombia, and hence that exceed the following amount ($ 63,191,000) designated annually by the National Government in Colombia, equivalent to US $ 26.900 taking $ 2,350 as the reference rate for 2006).
2.3.3 Special tariffs
Tariffs are consider to give a price advantage to national or locally-produced goods in comparison with similar goods which that might be imported, raising revenues for governments. Special tariffs are another kind of payments that companies must attend.
2.3.5 Voter participation rates
In the elections of 2014 at the polls only 14.3 million citizens attended. This shows that the right for democracy is not being exercise by half of the population.
32,795,962 Colombians are eligible to vote in elections. Of all the citizens who make up the electoral roll, 17,043,963 are women and 15,751,999 are men.
2.3.6 Changes in patent laws:
Ordinance No 1873 of 2014 by which the compensation during the term of the patent by regulating restoration. In which the ministry of industry and commerce agreed to extend the deadline as compensation to the patent holder for unreasonable delays in the issuance of the same patent.(Organización Mundial de la Propiedad Intelectual, 2014)
In addition there more updates or changes in patent laws, these are can be looked at (Organización Mundial de la Propiedad Intelectual, 2014). This variable is not very relevant to the industry because there is no need to patent any invention, any resources used are already created and the company Refreshing Breeze is not going to devote to create, just to provide a service where resources are already established.
2.3.7 Number of patents:
The patent is one privilege that is given to a person (inventor) as a form of recognition for their investment and efforts to create it. The privilege gives you the right to exploit his invention and be the only one authorized to take advantage of the invention for 20 years, after that time any organization or individual may exploit.
Patents in Colombia are relatively few compared to other countries, in 2014 nearly 2,000 petitions were filed to patent, these patents filed 1110 and 134 were of foreign national. This indicates that in Colombia does not work hard to generate patents for invention, given to South America, Colombia is one of the most patents for invention generates even though no other South American country is among the first 20 countries the global list of countries that generate more patents for invention.
Although this variable is not relevant to the industry because not affected by the patent for invention, also in industry such patents is not necessary because the company you work with specific equipment and established for the necessary procedure the service to be provided.
2.2.8 Import-export regulations:
This variable is the regulations that exist for any import or export that people want to perform.
In Colombia the regulation of international trade is in charge of the Ministry of Commerce, Industry and Tourism, is this who oversees determine the scope of international trade and FTA (Free Trade Agreement) promote trade relations of the country abroad, establish procedures, requirements and routine records on imports and exports of goods, services and technology, among others. To protect the industry and domestic production, imports are determined for some tariffs or taxes to be paid to the state when it will nationalize a product, so that these taxes maintain a balance of the balance between foreign products and those are produced domestically.
For cosmetics products where inputs using in the industry are classified under tariff heading that defines the DIAN in beauty creams have the nomenclature code 3304.99.00.00 is 15% if it comes from a country that does not have agreements or treaties with the country, but to proceed US products are under the coverage of the FTA agreement 096, which exempts the tariff payment.
2.2.9 Government fiscal and monetary policy changes:
Fiscal policy is "the policy followed by the public sector on its decisions on spending, taxes and borrowing" This policy aims to facilitate and encourage the good performance of the national economy to achieve acceptable or outstanding levels of growth, inflation and unemployment, among other variables. It also seeks to avoid fluctuations in the economy. Fiscal policies in Colombia are stable and generate reassurance to investors, which added to the good image that crosses the country, making Colombia an attractive place for investors to bring their money. Additionally, economic incentives in taxation for new investors or existing investors of items such as software, hotel, cinema, generate a plus to ensure that foreign investment continues to pour into the country. In fact according to GP Morgan Colombia is the fifth country in the world to protect foreign investment.
For the industry prosecutor being a new company that is creating jobs gain, the benefits are defined by Act 1429 of 2010. In the short term it opens the benefits to be gained are: Zero percent (0%) rate of income tax in the first two taxable years; Twenty-five percent (25%) rate of income tax in the third taxable year; escalation to pay parafiscal, commercial registration and tax industry and commerce.
2.3.10 Special local, state, and federal laws:
In Colombia the laws have a national character and are defined by the Congress of the Republic on a regulated by the national constitution of 1991. However there are some decrees or regulations that have been enacted by the Presidency of the Republic framework, where benefits are granted prosecutors industries, investors or entrepreneurs who meet the defined rules. Some of these are Plan Vallejo, free zones, special zones, ecotourism benefits and hospitality services, benefits for late harvest crops.
For the industry, the economic benefits that can be achieved, resulting in the creation and maintenance of permanent jobs, generating tax benefits in payment of annual taxes to the government.
2.3.11 Political conditions in foreign countries:
The near Colombia political issues are currently taking place in the country of Venezuela, since they are going through a major economic and political crisis framed by lower international oil prices which represents 90% of tax revenue for the country, shortages of the main products of basic goods, inflation of 69%. The political crisis influenced by the persecution that is subjected opposition, where two of its top leaders are currently imprisoned without clear legal guarantees for their processes.
2.3.12. Lobbying activities:
According to the dictionary of the Spanish language, when it comes to lobbying, we refer to the activity - paid or unpaid - which aims to promote, defend or represent any legitimate interest of the individual, by sectors or institutional, in connection with any decision to be taken public authorities. The activity of the lobby is regulated by law in countries like Peru, Canada and the United States; however it is an activity that occurs around the world and mostly is not framed within a legal framework, without meaning this question of a crime. This activity has professionals in the field, experts in managing your customer's benefits or tasks assigned to it; it is noteworthy that such intervention had professional Lobbyists in the United States, working for the Colombian government in approving the TLC. In the Colombian environment Lobby activities relate mostly by the public with corrupt practices, where the benefit is sought for third at the expense of embezzlement of public funds.
In the Lobby industry task will by the general manager or business manager, focusing on achieving agreements with hotels, aesthetic clinics, employee funds and tourist agencies. Aside from discounts on the price of services is going to generate revenue to entities that hire the benefits they can get those managing or determine the negotiations will be some attention or courtesies to access the services of the industry.
2.3.13. Antitrust legislation
The new antitrust and control status will forbid all unfair practices that occur in the production and marketing of goods and services. This statute prohibit agreements that limit the production or distribution of any product. Restrict the chains that form with some products from manufactured until they reach the consumer.
The initiative will also incorporate many of the existing standards currently in Act 155, with the idea of actually implemented in the country a system of free competition and defense effective, coherent and practical consumer, and will be established that are prohibited or agreements which directly or indirectly aim to restrict the production or supply, distribution or consumption of raw materials, products or goods or services or foreign nationals, and in general, all kinds of practices, procedures or systems designed to limit free competition and to maintain or fix unfair prices.
(ardila, 2000)
2. 3.14 United States-Colombian relationships:
The relationship between Colombia and the United States is apparently easy to carry, close and harmonious. But really united states depends bit Colombia. in contrast to Colombia united states is their first export market since it covers more than half of the exports.
It is also the main source of investment and foreign credit and the importance of Colombia to the United States lies in being important source of illicit drugs, the risk of terrorism and its geographical position, which allows the above phenomena to neighboring countries extend.
(posada, 2003)
2.3.15. Russia-Colombia relationships:
Russia considers to Colombia as an important partner in Latin America and internationally. because the bilateral trade between Russia and Colombia remains at the level of 350-400 million dollars annually.
Russian export to Colombia basically consists of the regular supply of civil and military aircraft, helicopters Mi-17 and Mi-8 and An-32 and An-26 aircraft. Furthermore, Colombia trucks KAMAZ-6520 are exported.
Colombia today has become the third largest supplier of flowers in Russia and covers more than 10% of demand, it is also one of the largest suppliers of bananas and coffee in Russia. The Russian Federation is one of the five largest buyers of Colombian instant coffee.
(RBTH, 2014)
2.3.16 Europe-Colombia relationships:
Due to the strategic partnership in 1999 (which aims to sustain a proactive relationship) that was not successful. Today convergence spaces and opportunities between Europe and Colombia are searched in size as the deepening of a broad and constructive dialogue, generating new economic, business and competitive areas, the interest of finding viable and sustainable solutions for medium environment and energy, as well as the identification of issues relating to culture, education and science and technology.
(rosario)
2.3.17. Africa-Colombia relationships:
Africa relations are very solid and starting in the 2009 to come increased trade between these two countries.
As exports of goods in 2012 from Colombia to Africa are quantified in $ 494.7 million while imports totaled $ 149.1 million. As for the trade balance with Africa is positive with $ 345.6 million surplus.
Products exported to Africa
Products imported from Africa
2.3.18 - Environmental protection laws: The laws that are in charge to protect the ecosystem and natural environments needed to preserve the wildlife.
This variable is not relevant for the industry because the industry in which Refreshing Breeze operates does not pollute the environment and the products used to develop the service don’t make a noticeable impact on the ecosystem.
2.3.19 - Size of governmental budgets: The amount of money that the government has available to invest in the country.
According to urnadecristal.gov.co the general nation budget for the year 2015 is 203 billion from which only 46.7 billion are going to be designated to the public inversion for family programs, public schools for children, investment in housing, supporting students, and so on. The rest of the money as stated by Mauricio Cárdenas Santamaría, exchequer form Colombia, is going to invested on the national program of development , on the realization of the main president’s proposals such as reaching peace among the country and on the world economic sectors that the country is interested in developing.
This variable is relevant for the industry because it tells how much money the government is intended to invest in the industry in which Refreshing Breeze operates; showing that not enough money is going to be invested is a warning for organizations to plan how are they going to manage their profits and how are they going to adapt to the circumstances to make the profit rise.
2.3.20 - World oil, currency and labor markets: The price paid nowadays for oil, for the numerous currencies existing and the state of labor markets.
As stated by portafolio.com, the price of world oil is continuously going down affecting the entire world economy, especially Colombian economy that has seen a continuous depreciation on its currency because of the oil price.
This information is clearly relevant for the industry because it shows the Colombian economic trend which is bad and it allows organizations to think about possible plans and escapes to endure having a good performance during the economic crisis.
The government public regulations refer to the study of the formation of institutions and the government policies that regulate industries. Usually these rules and laws are applied by the state.
In Colombia, the “Ley 142 / 1994 Ley de Servicios Públicos” addresses in Article 2, the intervention in public services from the sate. The state will intervene in public services, for the following purposes (these are the ones that most concern us): to ensure the quality of good object of public services and final disposal to ensure improved quality life for users. Efficiency of delivering he service. Free competition and not abusing of the domain position. Obtaining economies of scale verifiable. Mechanisms that ensure the users access to the service and participation in the management and oversight of its provision.
2.3.2 Changes in tax laws
The tax reforms in Colombia affect all industries. The main national taxes in Colombia that are taken into consideration are the following:
IMPUESTO SOBRE LA RENTA Y COMPLEMENTARIOS
(Article 5 from the tributary bylaw)
The income and complementary tax apply nationally and is considered as a single tax with three main components: income, capital gains and remittances. It is a direct tax. Those that are deductible from the tax income are the costs and expenses that are causally related with the income producing activities.
IMPUESTO AL VALOR AGREGADO (IVA)
(Article 420 from the tributary bylaw)
It’s the national tax that levies on the provision of services, sales and import of goods. The VAT is structured as value added tax, so that the tax assessment is allowed to deduct the IVA paid on goods and services for taxable transactions.
The tax is generated in the financial transactions to dispose funds deposited in current accounts, deposit or savings, as well as the rotation of cashier's checks. (Tariff equivalent to four per thousand of the value of the transaction )
IMPUESTO DE TIMBRE
(Article 514 Tributary bylaw)
Documented tax that is caused by the giving or receiving of documents in Colombia, or that will be executed or have any effects in Colombia, and hence that exceed the following amount ($ 63,191,000) designated annually by the National Government in Colombia, equivalent to US $ 26.900 taking $ 2,350 as the reference rate for 2006).
2.3.3 Special tariffs
Tariffs are consider to give a price advantage to national or locally-produced goods in comparison with similar goods which that might be imported, raising revenues for governments. Special tariffs are another kind of payments that companies must attend.
2.3.5 Voter participation rates
In the elections of 2014 at the polls only 14.3 million citizens attended. This shows that the right for democracy is not being exercise by half of the population.
32,795,962 Colombians are eligible to vote in elections. Of all the citizens who make up the electoral roll, 17,043,963 are women and 15,751,999 are men.
2.3.6 Changes in patent laws:
Ordinance No 1873 of 2014 by which the compensation during the term of the patent by regulating restoration. In which the ministry of industry and commerce agreed to extend the deadline as compensation to the patent holder for unreasonable delays in the issuance of the same patent.(Organización Mundial de la Propiedad Intelectual, 2014)
In addition there more updates or changes in patent laws, these are can be looked at (Organización Mundial de la Propiedad Intelectual, 2014). This variable is not very relevant to the industry because there is no need to patent any invention, any resources used are already created and the company Refreshing Breeze is not going to devote to create, just to provide a service where resources are already established.
2.3.7 Number of patents:
The patent is one privilege that is given to a person (inventor) as a form of recognition for their investment and efforts to create it. The privilege gives you the right to exploit his invention and be the only one authorized to take advantage of the invention for 20 years, after that time any organization or individual may exploit.
Patents in Colombia are relatively few compared to other countries, in 2014 nearly 2,000 petitions were filed to patent, these patents filed 1110 and 134 were of foreign national. This indicates that in Colombia does not work hard to generate patents for invention, given to South America, Colombia is one of the most patents for invention generates even though no other South American country is among the first 20 countries the global list of countries that generate more patents for invention.
Although this variable is not relevant to the industry because not affected by the patent for invention, also in industry such patents is not necessary because the company you work with specific equipment and established for the necessary procedure the service to be provided.
2.2.8 Import-export regulations:
This variable is the regulations that exist for any import or export that people want to perform.
In Colombia the regulation of international trade is in charge of the Ministry of Commerce, Industry and Tourism, is this who oversees determine the scope of international trade and FTA (Free Trade Agreement) promote trade relations of the country abroad, establish procedures, requirements and routine records on imports and exports of goods, services and technology, among others. To protect the industry and domestic production, imports are determined for some tariffs or taxes to be paid to the state when it will nationalize a product, so that these taxes maintain a balance of the balance between foreign products and those are produced domestically.
For cosmetics products where inputs using in the industry are classified under tariff heading that defines the DIAN in beauty creams have the nomenclature code 3304.99.00.00 is 15% if it comes from a country that does not have agreements or treaties with the country, but to proceed US products are under the coverage of the FTA agreement 096, which exempts the tariff payment.
2.2.9 Government fiscal and monetary policy changes:
Fiscal policy is "the policy followed by the public sector on its decisions on spending, taxes and borrowing" This policy aims to facilitate and encourage the good performance of the national economy to achieve acceptable or outstanding levels of growth, inflation and unemployment, among other variables. It also seeks to avoid fluctuations in the economy. Fiscal policies in Colombia are stable and generate reassurance to investors, which added to the good image that crosses the country, making Colombia an attractive place for investors to bring their money. Additionally, economic incentives in taxation for new investors or existing investors of items such as software, hotel, cinema, generate a plus to ensure that foreign investment continues to pour into the country. In fact according to GP Morgan Colombia is the fifth country in the world to protect foreign investment.
For the industry prosecutor being a new company that is creating jobs gain, the benefits are defined by Act 1429 of 2010. In the short term it opens the benefits to be gained are: Zero percent (0%) rate of income tax in the first two taxable years; Twenty-five percent (25%) rate of income tax in the third taxable year; escalation to pay parafiscal, commercial registration and tax industry and commerce.
2.3.10 Special local, state, and federal laws:
In Colombia the laws have a national character and are defined by the Congress of the Republic on a regulated by the national constitution of 1991. However there are some decrees or regulations that have been enacted by the Presidency of the Republic framework, where benefits are granted prosecutors industries, investors or entrepreneurs who meet the defined rules. Some of these are Plan Vallejo, free zones, special zones, ecotourism benefits and hospitality services, benefits for late harvest crops.
For the industry, the economic benefits that can be achieved, resulting in the creation and maintenance of permanent jobs, generating tax benefits in payment of annual taxes to the government.
2.3.11 Political conditions in foreign countries:
The near Colombia political issues are currently taking place in the country of Venezuela, since they are going through a major economic and political crisis framed by lower international oil prices which represents 90% of tax revenue for the country, shortages of the main products of basic goods, inflation of 69%. The political crisis influenced by the persecution that is subjected opposition, where two of its top leaders are currently imprisoned without clear legal guarantees for their processes.
2.3.12. Lobbying activities:
According to the dictionary of the Spanish language, when it comes to lobbying, we refer to the activity - paid or unpaid - which aims to promote, defend or represent any legitimate interest of the individual, by sectors or institutional, in connection with any decision to be taken public authorities. The activity of the lobby is regulated by law in countries like Peru, Canada and the United States; however it is an activity that occurs around the world and mostly is not framed within a legal framework, without meaning this question of a crime. This activity has professionals in the field, experts in managing your customer's benefits or tasks assigned to it; it is noteworthy that such intervention had professional Lobbyists in the United States, working for the Colombian government in approving the TLC. In the Colombian environment Lobby activities relate mostly by the public with corrupt practices, where the benefit is sought for third at the expense of embezzlement of public funds.
In the Lobby industry task will by the general manager or business manager, focusing on achieving agreements with hotels, aesthetic clinics, employee funds and tourist agencies. Aside from discounts on the price of services is going to generate revenue to entities that hire the benefits they can get those managing or determine the negotiations will be some attention or courtesies to access the services of the industry.
2.3.13. Antitrust legislation
The new antitrust and control status will forbid all unfair practices that occur in the production and marketing of goods and services. This statute prohibit agreements that limit the production or distribution of any product. Restrict the chains that form with some products from manufactured until they reach the consumer.
The initiative will also incorporate many of the existing standards currently in Act 155, with the idea of actually implemented in the country a system of free competition and defense effective, coherent and practical consumer, and will be established that are prohibited or agreements which directly or indirectly aim to restrict the production or supply, distribution or consumption of raw materials, products or goods or services or foreign nationals, and in general, all kinds of practices, procedures or systems designed to limit free competition and to maintain or fix unfair prices.
(ardila, 2000)
2. 3.14 United States-Colombian relationships:
The relationship between Colombia and the United States is apparently easy to carry, close and harmonious. But really united states depends bit Colombia. in contrast to Colombia united states is their first export market since it covers more than half of the exports.
It is also the main source of investment and foreign credit and the importance of Colombia to the United States lies in being important source of illicit drugs, the risk of terrorism and its geographical position, which allows the above phenomena to neighboring countries extend.
(posada, 2003)
2.3.15. Russia-Colombia relationships:
Russia considers to Colombia as an important partner in Latin America and internationally. because the bilateral trade between Russia and Colombia remains at the level of 350-400 million dollars annually.
Russian export to Colombia basically consists of the regular supply of civil and military aircraft, helicopters Mi-17 and Mi-8 and An-32 and An-26 aircraft. Furthermore, Colombia trucks KAMAZ-6520 are exported.
Colombia today has become the third largest supplier of flowers in Russia and covers more than 10% of demand, it is also one of the largest suppliers of bananas and coffee in Russia. The Russian Federation is one of the five largest buyers of Colombian instant coffee.
(RBTH, 2014)
2.3.16 Europe-Colombia relationships:
Due to the strategic partnership in 1999 (which aims to sustain a proactive relationship) that was not successful. Today convergence spaces and opportunities between Europe and Colombia are searched in size as the deepening of a broad and constructive dialogue, generating new economic, business and competitive areas, the interest of finding viable and sustainable solutions for medium environment and energy, as well as the identification of issues relating to culture, education and science and technology.
(rosario)
2.3.17. Africa-Colombia relationships:
Africa relations are very solid and starting in the 2009 to come increased trade between these two countries.
As exports of goods in 2012 from Colombia to Africa are quantified in $ 494.7 million while imports totaled $ 149.1 million. As for the trade balance with Africa is positive with $ 345.6 million surplus.
Products exported to Africa
- Petroleum oils, oils bitumin. materials, crude $ 212,205.399 miles
- Petroleum oils and oils obtained from bituminous> 70% mineral oil 184,847.166 thousand $
- Confectionery $ 30,624.977 miles
- Pig iron and spiegeleisen, sponge iron, powder and granulate $ 11,503.283 miles
- Tools for use in the hand or machine $5372.454 thousand
- Coffee and coffee substitutes $4638.820 thousand
- Chocolate, cocoa-based food preparations, nes $3951.741 thousand
- Insecticides and similar products to the retail $3573.331 thousand
- Other tubes, pipes and hollow profiles, fittings, iron, steel $3357.805 thousand and civil engineering contractors' plant and equipment $3130.958 thousand
Products imported from Africa
- Petroleum oils and oils obtained from bituminous >70% mineral oil $25648.944 thousand
- Fresh fish (living or dead), chilled or frozen $ 25,325.696 miles
- Fertilizers (other than those of group 272) $ 16,015.313 miles
- Rolled products of alloy steel $ 15,894.195 miles
- Shoes, cloth $ 10,939.669 miles
- Telecommunication equipment, nes, and parts, nes $5042.335 thousand
- Men clothing fabrics, knitted $4830.009 thousand
- Articles of clothing textiles, nes $3812.129 thousand
- Tools for use in the hand or machine $2162.738 thousand
- Other organic chemicals $2136.177 thousand
2.3.18 - Environmental protection laws: The laws that are in charge to protect the ecosystem and natural environments needed to preserve the wildlife.
This variable is not relevant for the industry because the industry in which Refreshing Breeze operates does not pollute the environment and the products used to develop the service don’t make a noticeable impact on the ecosystem.
2.3.19 - Size of governmental budgets: The amount of money that the government has available to invest in the country.
According to urnadecristal.gov.co the general nation budget for the year 2015 is 203 billion from which only 46.7 billion are going to be designated to the public inversion for family programs, public schools for children, investment in housing, supporting students, and so on. The rest of the money as stated by Mauricio Cárdenas Santamaría, exchequer form Colombia, is going to invested on the national program of development , on the realization of the main president’s proposals such as reaching peace among the country and on the world economic sectors that the country is interested in developing.
This variable is relevant for the industry because it tells how much money the government is intended to invest in the industry in which Refreshing Breeze operates; showing that not enough money is going to be invested is a warning for organizations to plan how are they going to manage their profits and how are they going to adapt to the circumstances to make the profit rise.
2.3.20 - World oil, currency and labor markets: The price paid nowadays for oil, for the numerous currencies existing and the state of labor markets.
As stated by portafolio.com, the price of world oil is continuously going down affecting the entire world economy, especially Colombian economy that has seen a continuous depreciation on its currency because of the oil price.
This information is clearly relevant for the industry because it shows the Colombian economic trend which is bad and it allows organizations to think about possible plans and escapes to endure having a good performance during the economic crisis.