Colombia - Politics

Colombian stock exchange

Colombia's economy is one of the safest and fastest growing in the world, according to the World Bank and the IMF.

Are Colombia's politics - and the policies pursued over the last decade - propelling the nation onto the world stage?






Two pieces of economic news will have brought cheer to Colombian presidential palace, the Casa de Narino, this morning. The World Bank today labelled Colombia a safer economic bet than France; claiming it was less likely to default on its debts than the AAA rated, fifth largest economy in the world. At the same time, the IMF also revealed that Colombia looks likely to record one of the highest rates of growth in the world for 2011, 2012.

Since coming to power 13 months ago, President Juan Manuel Santos has been the happy recipient of an almost endless supply of good news stories on the economy. Growth figures have shot up, and unemployment figures have started to come down. The success is even more impressive against the backdrop of the pitiful performance of the world economy and the devastating effects of the worst winter flooding Colombia has ever seen.

According to World Bank Chief Economist for Latin America, Augusto de la Torre, Colombia is one of the countries with the best economic performance of the decade - during which time per capita GDP has doubled. This has been achieved in no small part because of political decisions, he concludes - through strengthening its macroeconomic and financial policies, setting an inflation target (Colombia enjoys a stable, and low rate of inflation), imposing strict banking regulations, and by adopting a strong position on fiscal and public debt. http://www.portafolio.co/internacional/prevision-crecimiento-del-pais-aumenta-el-fmi

The IMF have also concluded that Colombia has a 'sound and healthy' economy in which there are no 'inflationary or demand pressures'.

All this is a far cry from little more than a decade ago when the country was considered something of a failing state, from which investors ran a mile.

Colombia has seen foreign direct investment (FDI) in the country continue to rise since the turn of the century. This year, FDI is expected to be higher than 10 billion dollars. Colombia is also exporting its goods at a record level - some 43 billion dollars worth of Colombian products are expected to have made their way to foreign markets this year.

Pro-business reforms have also significantly increased the export of oil and coal - a significant driver of economic growth. Colombia is now the US' third largest supplier of oil, and the country is the world's fifth largest exporter of coal. So positive are the conditions that the world's richest man, Carlos Slim (a Mexican) has highlighted Colombia (and in particular these markets) as a key geographical focus for his investments.

Experts expect Colombia's economy to continue to grow - and possible exponentially so - once the free trade agreement (FTA) with the US is finally signed off by the US Congress. Colombia is also looking forward to preferential access to the European market, the EU FTA is making its way through Brussels' institutions.

The positive news also comes with a warning. The IMF indicated that Colombia now needs to undergo structural reform if it is to reduce substantively its unemployment rate. It must also invest in infrastructure improvements - whose poor state make transport of goods and human resources difficult in this vast and geographically diverse nation.

Few can doubt, however, that Colombia's economic star is in the ascendance.