Transfers

How to: International Money Transfers to Colombia

Update

6/20/2014 – We just talked to the Bancolombia FX desk about a Scottish client of ours wanting to send GBP direct to Bancolombia.  Bancolombia can accept this but MUST by regulation of the Colombian Central Bank convert into $USD first and then into $COP.  The round trip FX costs for 150,000 GBP was about 1.2% with most of that coming in the commissions associated with the GBP to USD conversion.  If your foreign non-US bank can buy $USD for you at less than 1% off market spot rates then you’re better off doing that first and sending $USD to Colombia.

 

At some point if you are investing in or even just living in Colombia you are faced with with how to move possibly large sums of foreign currency into the country quickly, efficiently and legally.  Especially during the course of a large investment like the purchase of real estate in Colombia you want to make sure you’re getting good rates from all the banks involved because even just 1-2% of a large number starts adding up to real money.  Here’s a few tips for the most common types of international money movements in Colombia.

Transfers
Paying with card online

Personal Accounts

If you have a personal account with Bancolombia and are moving in money from outside the country, Bancolombia gives you two options.  Under $7000 USD and you don’t get their best rate.  I’m my experience it is about 40-60 basis points off spot rate so taking 50 for an average at a 2000 COP/US = 50/2000 = 2.5%.  That could still be better than using your credit/debit card plus associated fees but if you can move money in at the $7000 USD clip level you get the opportunity to call the Bancolombia “Mesa de Dinero” (Money Desk) and get a better rate.

At a level of $7000 USD Bancolombia will automatically hold the money until you call.  La Mesa de Dinero:  You call 6045299 from your home landline or the local branch.  Once they authenticate your account they will give you their “Tarifa Plena” aka the Bancolombia exchange rate which varies by the second.  This is going to differ from the TRM (Tasa Representativa del Mercado – from the Banco de la Republica) or the “spot” rate you get from Yahoo, Bloomberg etc., because Bancolombia is taking a commission on the trade and no one buys at spot anyways.  Between $7,000-$20,000 USD you’re going to get a rate that’s about 10 basis points off the market spot rates in my experience.  10/2000 = 0.5%, much  more efficient (5x) than small transfers.  Bottom line is send >$7000 USD if you want to send money at low cost but don’t expect to negotiate much unless you’re moving a larger sum.  However the benefit of sending less than $7000 is speed – the money is going to show up and be available in hours instead of possibly 1-2 days.

Transfer-Credit Card

Transferring Large Sums

First of all, beware of people that tell you they can help you negotiate with Bancolombia due to their “relationship”, “volume”, etc., they are most likely trying to sell you on some other service they provide.  Bancolombia has a pretty standard set of rates (between their Tarifa Plena and TRM) for larger transactions.  My experience has been that as your approach $250,000 USD you will see that spread close to about 4-5 basis points.  Therefore a $250,000 USD transaction at 5 bps @ 2000 COP/USD (0.25%) will cost you about $650 in Bancolombia commissions.  Not bad – I’ve seen a lot worse transferring large sums of CAD to USD from my Canadian banks at home for example.  Unless you are an institutional investing moving millions of foreign currency into Colombia you are going to have a hard time beating 4-5 bps.

Corporate Accounts

Very similar to personal accounts but the clip level for the Mesa de Dinero can be lower.  You can set that as low as $1000 USD if you like.  However, every time you move money into a corporate/commercial account in Bancolombia from abroad you need to go to a branch personally and fill out a stack of paperwork to declare the sources and purposes of the money, etc.  It may or may not be worth it for you to use your corporate account depending on the needs of the money.  Registering funds with a Formulario 4 may be very beneficial if you think you may want to take that money back out of the country one day for example.

Non-USD Currency Transactions

Bancolombia can technically accept foreign currencies other than USD for personal transactions.  Last time I asked, all the majors, GBP, EUR, SFR, even Yen, Won, various Nordic krone/as are accepted but beware of the following:

1) If your non-USD bank has the ability to deal direct with Bancolombia in home currency that’s a good start.  However if an intermediary (US bank usually) needs to be invovled, there is another hand in your pocket.

2) The USD is the world’s reserve currency for a reason.  It is more liquid and highly traded which means it may be more cost efficient to move your money into USD first (your home bank buys USD on your behalf – watch out for their commissions) and then move that USD to Bancolombia who can change it into COP fairly low cost.

3) If you insist on sending your non-USD from abroad to Bancolombia you are asking Bancolombia to do an “exotic” (non-USD) currency transaction.  I would be interested in hearing if anyone has tried to do this and at what cost, but Bancolombia has told me that there are less favorable guidelines to their exchange rates in these cases.  Bottom line, USD transactions at Bancolombia are likely the fastest and lowest costs.

 

Update

6/20/2014 – We just talked to the Bancolombia FX desk about a Scottish client of ours wanting to send GBP direct to Bancolombia.  Bancolombia can accept this but MUST by regulation of the Colombian Central Bank convert into $USD first and then into $COP.  The round trip FX costs for 150,000 GBP was about 1.2% with most of that coming in the commissions associated with the GBP to USD conversion.  If your foreign non-US bank can buy $USD for you at less than 1% off market spot rates then you’re better off doing that first and sending $USD to Colombia.

 

Good luck in whatever your need for Colombian Pesos may be.

Brad Hinkelman.

brad@casacol.co

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