Colombia: Economy

Colombia is a free market economy with major commercial and investment ties to the United States. In 1990, the administration of President Cesar Gaviria (1990-94) initiated economic liberalization or "apertura," with tariff reductions, financial deregulation, privatization of state-owned enterprises, and adoption of a more liberal foreign exchange rate. These policies eased import restrictions and opened most sectors to foreign investment, although agricultural products remained protected.

The Uribe administration sought to maintain prudent fiscal policies and pursued tough economic reforms including tax, pension, and budget reforms. The Santos administration has been promoting economic growth by pursuing free trade agreements with other South American and Asian countries, as well as the U.S. and Canada. The average unemployment rate in 2011 is around 10%, down from 12% in 2009. Despite recent improvements in Colombia’s economy, the country continues to have a high rate of poverty (45.5%) and one of the highest levels of income disparity in the world.

Colombia's economic growth in the last decade can be attributed to an increase in security, resulting in greater foreign investment; economic reforms in the oil and gas sectors; prudent monetary policy; and export growth fueled in part by the Andean Trade Promotion and Drug Eradication Act (ATPDEA) of 2002. Investments as a percentage of GDP were around 28% in mid-2011, which is higher than both Brazil and Chile.

First-quarter GDP growth for 2011 was 5.1%, and economists project growth levels between 4% and 6% in 2011. Per capita GDP has doubled since 2002, while unemployment fell from 15.7% in 2002 to 11.8% in 2010. Colombia has concluded or is pursuing free trade agreements (FTAs) with the U.S., EU, Canada, Switzerland, Turkey, Panama, South Korea, and Japan in addition to its existing trade agreements with Mexico, Chile, Central America, the Andean Community of Nations, and Mercosur.

Industry and Agriculture
As the most industrially diverse member of the Andean Community, Colombia has five major industrial centers--Bogota, Medellin, Cali, Barranquilla, and Bucaramanga--each located in a distinct geographical region. Colombia's industries include mining (coal, gold, and emeralds), oil, textiles and clothing, agribusiness (cut flowers, bananas, sugarcane, and coffee), beverages, chemicals and petrochemicals, cement, construction, iron and steel products, and metalworking. There is also a burgeoning service economy comprised of tourism and information technology exports (call centers, software development, animation).

Colombia's diverse climate and topography permit the cultivation of a wide variety of crops. In addition, all regions yield forest products, ranging from tropical hardwoods in the lowlands, to pine and eucalyptus in the colder areas. Cacao, sugarcane, coconuts, bananas, plantains, rice, cotton, tobacco, cassava, and most of the nation's beef cattle are produced in the hot regions from sea level to 1,000 meters elevation. The temperate regions--between 1,000 and 2,000 meters--are better suited for coffee, flowers, corn and other vegetables, pears, pineapples, and tomatoes. The cooler elevations--between 2,000 and 3,000 meters--produce wheat, barley, potatoes, cold-climate vegetables, flowers, dairy cattle, and poultry.

Labor
While Colombia faces challenges in terms of labor rights, it has committed to sweeping reforms under the Labor Action Plan announced by Presidents Obama and Santos on April 7, 2011. The Colombian Government recently began hiring 100 additional labor inspectors as part of a commitment to double the labor inspectorate by hiring 480 inspectors over the next 4 years. A significant number of these inspectors will be dedicated to addressing worker rights abuses in the palm oil, sugar, mines, ports, and flowers sectors, and preventive inspections in these sectors and for temporary service agencies have already begun. New legislation also establishes criminal penalties, including imprisonment, for employers that undermine the right to organize and bargain collectively or threaten workers who exercise their labor rights. Furthermore, the Government of Colombia has also secured legislation establishing a separate Labor Ministry to provide better institutional capacity to protect labor rights.

To address issues of impunity in crimes against labor unionists, the Colombian Government has exceeded its Action Plan commitments in appointing 100 full-time judicial police inspectors for labor violence cases, and has developed improved training for judicial police investigators and prosecutors on such cases. Priority labor violence cases do remain, but Colombia is showing a commitment to reduce the number of unresolved cases. The Colombian Government has also expanded its protection program for threatened union activists and reduced the backlog of risk assessments by 75% for those unionists applying for protection.

Trade
Colombia is the United States' third-largest export market in Latin America behind Mexico and Brazil. U.S. exports to Colombia in 2010 were $12.1 billion, up 26% from the previous year. U.S. imports from Colombia in 2010 were $15.6 billion, up 38% from 2009 due to high crude oil prices and a low dollar. Colombia's major exports are petroleum, coffee, coal, nickel, cut flowers, and bananas. The United States is Colombia's largest trading partner, representing about 41% of Colombia's exports and 27% of its imports.

Mining and Energy
Colombia has considerable mineral and energy resources, especially coal and natural gas reserves. Mining and energy-related investments have grown because of higher oil prices, increased demand, improved output, and pro-business reforms. These reforms have significantly liberalized Colombia’s petroleum sector, leading to an increase in exploration and production contracts from both large and small hydrocarbon industries.

Natural Gas. In 2010, natural gas reserves totaled 5.4 trillion cubic feet. Natural gas production totaled 1.090 million cubic feet per day on average during 2010.
Crude Oil. The country’s production of crude oil has nearly doubled since 2007, reaching 927,000 barrels per day (bbl/d) in May 2011. Colombia had 1.9 billion barrels of proven crude oil reserves in 2010, the fifth-largest in South America.
Refining Capacity. The country's current oil-refining capacity is 325,000 bbl/d, and is expected to grow to 415,000 in 2016 according to the Ministry of Mines and Energy.
Coal. As of 2010, Colombia was the tenth-largest coal producing country and the fifth-largest coal exporting country in the world. It is the largest coal producer in Latin America (74.3 million tons in 2010). Colombia also is the largest exporter of coal to the U.S.
Gems. Colombia historically has been the world's leading producer of emeralds and after a short lull in production it has returned to being a leader in this field. Emerald production rose to 5.23 million carats in 2010, up from 2.12 million carats in 2008.
Precious Metals. Colombia is also a significant producer of gold (53.6 tons in 2010), silver (15.3 tons in 2010), and platinum (1 ton in 2010).

Foreign Investment
In 2010, total foreign direct investment (FDI) in Colombia was $6.8 billion, a slight decrease from the $7.2 billion in 2009. The Central Bank estimates that FDI in the first quarter of 2011 will be higher than the first quarter of 2010. On average, the United States has been the largest source of new FDI in Colombia, particularly in mining and hydrocarbon projects. The bulk of total new investment in Colombia is in the manufacturing, mining, and energy sectors. The only activities closed to foreign direct investment are defense, national security, and disposal of hazardous wastes.

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