Colombia: Economic Review
Colombia: Economic Review
Written by: Ryan Berger Foreign Trade Administration Ministry of Industry, Trade & Labor Updated: February 2010
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GENERAL BACKGROUND Location • Northwestern South America • Bodies of water: Panama Canal to the northwest, Caribbean Sea to the north, and North Pacific Ocean to the west • Neighboring countries: Panama to the northwest (across the Panama Canal), Venezuela to the east, Ecuador and Peru to the south, and Brazil to the southeast Capital • Bogotá, Distrito Capital Language • Spanish (national) • Local Spanish dialects (regional) Currency • Colombian Peso (COP) • Conversion: 1 NIS = ~515.35 COP (02/2010) • Conversion: 1 USD = ~1937.98 COP (02/2010) Ethnic Groups • 58% mestizo (mixed European + American Indian) • 20% white • 14% mulatto (mixed white + black) • 4% black • 3% zambo (mixed African + American Indian) • 1% American Indian Geographic Information • 1,141,748 km2 • 440,839 mi2 • 8.8% water Climate • Tropical along coast and eastern plains • Cooler in highlands -2-
Terrain • Flat coastal lowlands • Central highlands • High Andes mountains • Eastern lowland plains Natural Resources • Petroleum, natural gas, coal, iron ore, nickel, copper, emeralds, hydropower Demographic Information • 0-14 years of age: 28.9% • 15-64 years of age: 65.4% • 65+ years of age: 5.6% • Median age: 27.1 years (2009 estimate) • Urban population: 74% of total (2008 estimate) • Life expectancy at birth: 72.81 years of age • Religion: o 90% Roman Catholic o 10% other Population • 44,928,970 (4/2009 estimate) • 42,888,592 (2005 census) • 3rd-largest population in Latin America (2005) Human Development Index • 0.807 (2007) – "high" Government • Presidential republic • President: Álvaro Uribe Veléz since 7 August 2002. The president of Colombia is the head of state and head of government • The President is followed by the Vice President and Council of Ministers • Elections: The president is elected to a four-year term with a maximum of two terms in office • Administrative divisions: Colombia is divided into 32 departments + 1 capital district, which are subdivided into municipalities -3-
ECONOMIC INFORMATION Colombia's economy is capitalist and market-oriented, and has been experiencing steady growth throughout this decade. Having entered a recession in 1999 that was blamed on excessive government regulation (la apertura económica), President Álvaro Uribe has begun to free Colombia of such liberalist policies by instituting promarket economic reforms, advancements in domestic security, and rising commodity prices. Colombia's constant economic growth – expansion in 2007 alone exceeded 8% - has helped reduce poverty by 20% and cut unemployment by 25% since 2002, although Colombia still exhibits double-digit unemployment and a relatively low GDP per capita (estimated at $9200 in 2008). The global financial crisis resulted in a slowdown in Colombia's economic escalation in 2008. However, Colombia enjoys a friendly climate for foreign direct investment and heightened trade cooperation with various international partners. The GDP, official exchange rate, for 2008 was $240.8 billion, making Colombia one of the 30 highest-grossing economies in the world.
Economic data for 2004-2006 can be found below:
Indicators
2004
2005
2006
98.059
122.9
135.883
GDP (constants prices, annual % change)(1)
4.9
4.7
6.8
Inflation (consumer prices, annual % change)(1)
5.9
5
4.3
2628.613
2320.834
2361.139
GDP (USD billion)(1)
Official exchange rate per USD (period average)(3)
Sources: (1) IMF - World Economic Outlook Database, (2) ILO - Key Indicators of the Labour Market, (3) World Bank - World Development Indicators
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Item
Total Foreign Investment Direct Portfolio Demand and Unemployement GDP Production Rate (EMM (*)) Retail Sales Investment National Unemployement Rate 13 Main Cities Unemployement Rate Prices and Interest Rates Consumer Price Index Producer Price Index Pasive Interest Rate (90 days) Lending Interest Rate Exchange Rate Nominal Exchange Rate Nominal Devaluation Real Exchange Rate (ITCR) Real Devaluation Peso/Yen monetary Units Peso/Euro Monetary Units Trade Exports (FOB) Traditional Exports Non-Traditional Exports Imports (CIF) Others M1 M3 Net International Reserves Colombia General Stock Exchange Index Fiscal Deficit (Central Government) Fiscla Deficit (Non-Finacial Public Sector)
Units
Period
Data
Data one year before
US$ million US$ million
Jan. 05 - Dic 05 Jan. 05 - Dic 05
10,192.00 -167,00
3,117.00 743,00
% annual variation % annual variation to date % annual variation to date % annual variation (%) (%)
Jan. 05 - Dic. 05 Jan. 06 Dec. 05 Dec. 05 Jan. 06 Jan. 06
5,13 5.9 9.11 28.96 13.2 16.1
3,96 2.8 8.67 13.3 14,00 14.2
% annual variation % annual variation Monthly average (%) Monthly average (%)
Feb. 06 Feb. 06 Feb. 06 Feb. 06
4.85 2.06 6.2 11.85
5.5 0.04 7.64 13.18
Peso/dólar US$ average % annual variation 1994=100 % annual variation Peso/Yen Peso/Euro
Mar. 06 Mar. 06 Feb. 06 Feb. 06 Feb. 05 Feb. 05
2,262.36 4.4 117.95 -4.4 19.41 2,710.02
2,353.71 14,00 121.95 -14,00 22.85 3,213.16
US$ million US$ million US$ million US$ million
Jan. 05 - Dec. 05 Jan. 05 - Dec. 05 Jan. 05 - Dec. 05 Jan. 05 - Dec. 05
21.187,00 10,366.00 10,825.00 21,204.00
16,788.00 7,679.00 9,109.00 16,745.00
% annual variation % annual variation US$ million July 2001=1000 % of GDP % of GDP
Jan. 06 Jan. 06 Feb. 06 Feb. 06 Dec. 05 Dec. 05
15.25 18.04 14,933.04 11,080.24 4.9 1.4
13.23 15.24 12,779.62 5,240.17 5.5 1.4
Sources: Banco de la República, DANE – Colombia National Statistics Department
Source: DANE – Colombian National Statistics Department
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Source: ECLAC (Economic Commission for Latin America and the Caribbean)
UNEMPLOYMENT & INFLATION The apertura económica liberalist policies preceding Colombia's recession in 1999 spawned widespread unemployment and poverty throughout the country. However, when Uribe assumed power in 2002, unemployment started to trend downward. For instance, the above ECLAC table shows the 2004 urban unemployment rate at 15.4%; the same figure was at 12.8% by the third quarter in 2006. Colombia's 2008 overall unemployment rate is 11.3%, the 132nd-lowest in the world. This represents a 0.1% increase from the 2007 figure – presumably a consequence of the global recession. All told, Colombia has not fully recovered from its past and present recessions; in 2005, the percentage of the population below the poverty line was reported as 49.2%. the estimated 2008 inflation rate of consumer prices was
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7.0%, 1.5% higher than the 2007 rate. A 2006 ECLAC report credits the stabilization of inflation rates pre-2008 recession to low adjustments of utility prices and greater international standing of Colombia's monetary policy. Relevant charts and graphs may be found below:
Source: Banco de la República
Source: ECLAC (Economic Commission for Latin America and the Caribbean)
PRODUCTION STRUCTURE BY REGION • 0-1000 meters elevation (hot regions): o Cacao, sugarcane, coconuts, bananas/plantains, rice, cotton, tobacco, cassava, beef cattle -7-
• 1000-2000 meters elevation (temperate regions): o Coffee, flowers, maize, citrus, pears, pineapples, tomatoes • 2000-3000 meters elevation (cool regions): o Wheat, barley, potatoes, dairy cattle, poultry AGRICULTURE PRODUCTS AND INDUSTRIES Colombia's key agricultural products include: coffee, cut flowers, bananas, rice, tobacco, corn, sugarcane, cocoa beans, oilseed, vegetables, and shrimp. In 2008, despite the global economic crisis and the increase in unemployment, Colombia registered an industrial production growth rate of 0.8%: Colombia's economic production is still growing, albeit at a slow pace. Colombia's industrial diversity is spread principally across four industrial centers in different areas of the country: Bogotá (center), Medellin (northwest), Calí (southwest), and Barranquilla (south). BREAKDOWN OF SECTORS Colombia's biggest industrial sectors are textiles, food processing, petrochemicals, aircraft, electronics, clothing and footwear (lingerie and leather products), beverages, chemicals, cement, forest products (tropical hardwoods, pine, eucalyptus) and minerals (gold, coal, emeralds). In addition, Colombia has a healthy supply of minerals and energy resources. For instance, it has the largest coal reserves in Latin America, and is second only to Brazil in hydroelectric power resources. Colombia also has sizeable amounts of silver, nickel, gold, platinum, and emeralds. Since 2004, Colombia has been a "net energy exporter" among such Latin American counterparts as Ecuador, Peru, Venezuela, and Panama.
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Oil – • Oil – •
production 588,000 barrels/day (2008 estimate) exports 294,000 barrels/day (2008 estimate)
In a 2006 ECLAC report, the fastest-growing sectors during that time were construction, industry, and commerce. In Q2 2006, construction posted the highest percentage of growth (28.2%). Similarly, the significant amount of industrial growth is credited to the rapid expansion of the construction- and transport equipmentrelated sectors. Conversely, the slowest-growing sectors in the same report were agriculture and mining. Agriculture dropped due to a dip in short-cycle crop production, and mining decreased due to slow growth rates of natural gas and nickel production. Relevant charts and graphs to the breakdown of sectors in Colombia's economy may be found below: 2002
2003
2004
2005
2006
2007
2008
GDP (real ann. %-change)
2.5
4.6
4.7
5.7
6.9
7.5
2.5
Consumption (real ann. %-chg)
3.3
3.5
3.9
5.1
6.2
6.9
2.3
Investment (real ann. %-chg)
1.2
14.0
13.7
20.3
19.2
13.7
7.7
Agriculture (real ann. %-chg)
5.3
3.2
1.8
2.4
3.9
3.9
2.7
Industry (real ann. %-chg)
0.6
6.5
5.0
5.6
6.9
8.1
0.7
Services (real ann. %-chg)
2.4
4.2
4.4
5.7
6.6
7.2
2.8
Manufacturing (real ann. %-chg)
0.3
2.9
6.7
4.0
11.2
10.7
-3.4
2.7 1.4 6.1 Source: LatinFocus
9.5
14.7
10.2
0.5
Retail Sales (real ann. %-chg)
Source: World Resources Institute
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Source: World Resources Institute
EXPORTS & IMPORTS In 2008, Colombia exported approximately $38.53 billion in goods, the 59th-highest in the world for that year and a $7.95 billion increase over the 2007 statistic. The most demanded Colombian commodities by the international community were: petroleum, coffee, coal, nickel, emeralds, apparel, bananas, and cut flowers. Similarly, Colombia's largest export partners in 2008 were: the U.S. (38%), Venezuela (16.2%), and Ecuador (4%). In 2008, Colombia imported $37.56 billion in goods, the 58th-highest amount in the world for that year and a $6.39 billion increase over the 2007 figure. The goods Colombia most desired to import were industrial equipment, transportation equipment, consumer goods, chemicals, paper products, fuels, and electricity. Colombia's biggest import partners in 2008 were: the U.S. (29.2%), China (11.5%), Mexico (7.9%), and Brazil (5.9%). A 2006 ECLAC report attributes a 20% growth in imports from 2005 to 2006 to higher purchases by Colombian citizens of vehicles and vehicle parts, machinery, fuel, and mineral oils. Consumer goods grew in Colombia during that time because they were benefited from a greater amount of household consumption. Exports also grew from 2005 to 2006 due to a higher global price of oil and petroleum. Proexport Colombia, an organization funded by
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the Colombian government dedicated to expanding foreign trade with the global community, estimates the growth of exports and imports during 2005 to be 26.7% and 26.6%, respectively. Proexport also depicts the commercial openness rate [(exports + imports) / GDP] of 2005 to be just under 44%. Below are relevant charts:
Main customers
(% of exports, 2006)
USA
40,80%
Venezuela
11,10%
Ecuador
5,10%
Peru
3,00%
Mexico
2,80%
Main suppliers USA
(% of imports, 2006) 26,60%
Mexico
8,80%
China
8,50%
Brazil
7,20%
Venezuela
5,70% Source: Comtrade
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Colombian Economy commercial openness rate (1985-2005) (X+M)/GDP (%) 45,0 40,0 35,0
25,0 20,0 Mar-85
Mar-89
Mar-93
Mar-97
Mar-01
Mar-05
Sources: Banco de la República, DANE – Colombian National Statistics Department
TRADE In 2008, Colombia reported a $0.97 billion trade surplus, fueled by its rich commodities. Aside from the United States, Colombia's main trading partners are the European Union, Japan, Venezuela, and the Andean Community countries. The current member nations in the Andean Community are Bolivia, Colombia, Ecuador, and Peru; the associate nations are Argentina, Brazil, Paraguay, Uruguay, and Chile; and the observer nations are Mexico and Panama. Currently, Colombia has enforced free trade agreements with Chile, Panama, El Salvador, Guatemala, and Honduras. Moreover, Colombia is a member of numerous trade organizations, including: the Andean Community, Group of Three (G-3; Colombia and Mexico are the current members, as Venezuela has since left), Caribbean Community (CARICOM; Colombia is one of seven observer nations), and the World Trade Organization. The United States-Colombia Trade Promotion Agreement is still awaiting ratification by the U.S. Congress. With respect to the United States, - 12 -
Colombia was its 5th-largest export market in Latin America in 2000. The Trade Promotion Agreement extends favorable trade and tariff benefits to some 99% of Colombia's commodities. According to the U.S. Commercial Service, Colombia's other trade integration agreements allocate 97% of the items in the Colombian Harmonized Tariff Schedule to the free import list. With the Andean Community, Colombia imposes a 5-to-20% common external tariff on the CIF (charges, insurance, and freight) value of shipments. Colombia also levies a national value added tax on normal shipments, valued at 16% on CIF. The Encyclopedia of the Nations explains four tariff levels for the Colombian economy and the greater Andean Community: 5% for raw materials and intermediate and capital goods not produced in Colombia; 10% and 15% for goods in the first category but have domestic production in Colombia; 20% for finished consumer goods; and 35% for automobiles and other luxuries. On the note of automobiles, although the national VAT is 16%, the automobile sales tax ranges from 16-to-60%. However, there are non-tariff barriers to trade on poultry parts, powdered milk, wheat, and other agricultural products; in 1999, tariff rates for these commodities amounted as high as 119%. In addition, a 2006 Proexport Colombia report cites preferential tariff agreements with the United States through the ATPDEA (Andean Trade Promotion and Drug Eradication Act), and with the European Union through the Andean SGP (Generalized Preference System). Additional advantages for foreign trade regimes include: 10 duty free zones, 5 special economic export zones, and incentives for large exporters.
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FOREIGN DIRECT INVESTMENT In the early 1990s, Colombia began passing laws to encourage foreign direct investment (FDI) in nearly every sector of the economy – minus defense, national security, hazardous wastes, and real estate. CoInvertir was established to facilitate this goal, and later evolved into Proexport Colombia. By the end of 1997, CoInvertir helped bring in $11.2 billion in FDI. The United States constituted approximately 38% of that figure, with the largest interest expressed in the petroleum, natural gas, coal, chemical, and manufacturing industries. A 2006 ECLAC report cited FDI as a main engine for economic growth, which has been strengthened by low interest rates, public infrastructure projects, and credit expansion. In 2006 alone, public sector investment increased by 18% and private sector investment by 30%. These statistics have pushed the total FDI as a percentage of GDP rate to 25% in 2006. A Proexport Colombia cites the most popular FDI inflows for 2005 as manufacturing (53%), mines and quarries (19.4%), petroleum (12.1%), and transportation/storage/communications (10.9%). In terms of origin, the countries procuring the most FDI were the United States, the United Kingdom, Mexico, Spain, and the Netherlands, with 37%, 14%, 10%, 6%, and 3%, respectively. Relevant FDI graphs and charts may be found on the following page:
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FDI Flows in Colombia by Sectors (2005) US$ million
Electricity, Gas, and Water Community Services Agriculture, Hunting and Forestry Construction Commerce, Restaurants and Hotels Financial Establishments Transport, Storage and Communications Petroleum Sector Mines and Quarries (including coal) Manufactures
-1.000
0
1.000 2.000 3.000 4.000 5.000 6.000
Sources: Colombia Proexport Institute, Banco de la República
FDI Flows in Colombia by Country of Origin (2005) (*) % share
United States 37,0%
United Kingdom 14,0%
Mexico 10,0% Other countries 30.0%
Spain 6,0% Netherlands 3.0%
* Total U.S. $ = 10,192 million dollars Sources: Colombia Proexport Institute, Banco de la República
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CHALLENGES Despite Colombia's many successes of the 2000s, the Latin American nation faces many current challenges that could affect its business climate. For instance, Colombia is the world's leading producer of the illicit drug coca, with 167,000 hectares cultivated in 2007 – a 6% increase over the previous year. Besides coca, Colombia also illicitly produces opium poppy and cannabis. Colombia supplies coca to the vast majority of international markets. Financial analysts are also concerned with Colombia's growing government deficit, with debt as a percentage of GDP at approximately 5%. In response, the Colombian government is attempting to implement an active fiscal policy, with such initiatives like proposed tax reform and strict compliance within the medium-term fiscal framework. Colombia's bond rating history is shown in the following: 2002
2003
2004
2005
2006
2007
2008
Ba2
Ba2
Ba2
Ba2
Ba2
Ba2
Ba1
Sov. Rating S & P
BB
BB
BB
BB
BB
BB+
BB+
Sov. Rating Fitch IBCA, Duff & Phelp
BB
BB
BB
BB
BB
BB+
BB+
Sov. Rating Moody's
Source: LatinFocus
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RELATIONSHIP WITH ISRAEL The diplomatic relations between Colombia and Israel, established shortly after Israel's creation in 1948, were dramatically augmented upon the signing of the Trade and Economic Cooperation Agreement between the two nations in 1986. This agreement granted preferred status and favorable customs tariffs to goods originating from either nation upon arrival in the other nation, and established commercial missions between the contracting parties. In December 2007, Israel signed a free trade agreement with Mercosur, of which Colombia is an associate member. Israel is the only nation outside of South America to sign such an accord with Mercosur. The Agreement was ratified by Israel in November 2009. Israel's commercial presence in Colombia is strongly integrated in the machinery and chemical products sectors. Comparably, Colombia's commercial presence in Israel is almost exclusively related to the mineral products industry sector. Latin America has become an increasingly attractive region for foreign market penetration, due to rapid economic growth in many parts of South America. Despite being located so far from Israel, Colombia's penchant for FDI can be seen as a positive litmus test for further Israeli commercial expansion. Currently, Israel has one economic mission in South America (São Paulo, Brazil) and employs local representatives as Trade Officers in the Israeli Embassy in Bogotá, and the Colombian market can be viewed as a way to further grow commercially within the South American continent.
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In 2008, the commercial trade between Israel and Colombia amounted to $567.11 million, which, when compared to $770.11 million from 2007, is a 35.8% decrease. Also in 2008, 95% of the Colombian exports to Israel were in the mineral products industry sector. Conversely, 47% of Israeli exports to Colombia were in the machinery sector.
Colombian Exports to Israel (2008, By Sector) Agriculture
Industry
Miscellaneous
Source: State of Israel, Ministry of Industry, Trade & Labor
2009 was a year that saw a 49.04% drop in Colombian exports to Israel, yet a 4.37% rise in Israeli exports to Colombia. Approximately $379.972 million of trade was engaged between Israel and Colombia, with $210.373 million amounting to Colombian exports – thus giving Colombia a $40.773 million trade surplus for this time period. Looking more broadly, between 2005 and 2008 the amount of Israel's exports to Colombia grew from $84.15 million to $154.26 million, while the inverse decreased from $467.54 million to $412.85 million during the four years.
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CONCLUSION Colombia enjoys relative political stability with President Uribe in power and his economic deregulation in place. With the next Colombian presidential election scheduled for 30 May 2010, it appears that either Uribe (who may run for a third term) or a successor will usher in further pro-market policies that will help pull the Colombian economy out of the same recession-like difficulties that most of the world is concurrently facing. Also, increased FDI and Colombia's strong partnership with the International Monetary Fund promise to stimulate the Colombian economy and aspire to trend down inflation. However, Colombia has a number of domestic issues that must be addressed, including illegal coca production, rebel leftist groups such as the FARC, and an unbalanced income distribution that in 2000 saw 60% of the nation's wealth allocated to the richest Colombian citizens. In addition to Colombia's trade organization memberships and signed free trade agreements, Colombia aspires to further integrate into the global economy with additional proposed FTAs with Canada, the European Free Trade Association (Switzerland, Norway, Iceland, Liechtenstein), and the European Union. Colombia's economic prospects for the future appear to be strong and promising. With the majority of the globe predicted to emerge from the current recession in 2010, Colombia will be poised to play a prominent role in the economic growth of Latin America as a whole.
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Colombia's projected economic indicators through 2014 are detailed below:
COLOMBIA PROJECTED ECONOMIC INDICATORS Real GDP Growth
4
Average Consumer Price Inflation
2
3
1
Percentage
5
0 2014
2013
2012
2011
2010
2009
Year Source: Economist Intelligence Unit
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For further information, please contact: Israeli Embassy in Bogotá, Colombia http://bogota.mfa.gov.il [email protected] Address: Calle 35 No. 7-25, Piso 14 Telephone: +57-1-3277500 Fax: +57-1-3277555
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Written by: Ryan Berger Foreign Trade Administration Ministry of Industry, Trade & Labor Updated: February 2010
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GENERAL BACKGROUND Location • Northwestern South America • Bodies of water: Panama Canal to the northwest, Caribbean Sea to the north, and North Pacific Ocean to the west • Neighboring countries: Panama to the northwest (across the Panama Canal), Venezuela to the east, Ecuador and Peru to the south, and Brazil to the southeast Capital • Bogotá, Distrito Capital Language • Spanish (national) • Local Spanish dialects (regional) Currency • Colombian Peso (COP) • Conversion: 1 NIS = ~515.35 COP (02/2010) • Conversion: 1 USD = ~1937.98 COP (02/2010) Ethnic Groups • 58% mestizo (mixed European + American Indian) • 20% white • 14% mulatto (mixed white + black) • 4% black • 3% zambo (mixed African + American Indian) • 1% American Indian Geographic Information • 1,141,748 km2 • 440,839 mi2 • 8.8% water Climate • Tropical along coast and eastern plains • Cooler in highlands -2-
Terrain • Flat coastal lowlands • Central highlands • High Andes mountains • Eastern lowland plains Natural Resources • Petroleum, natural gas, coal, iron ore, nickel, copper, emeralds, hydropower Demographic Information • 0-14 years of age: 28.9% • 15-64 years of age: 65.4% • 65+ years of age: 5.6% • Median age: 27.1 years (2009 estimate) • Urban population: 74% of total (2008 estimate) • Life expectancy at birth: 72.81 years of age • Religion: o 90% Roman Catholic o 10% other Population • 44,928,970 (4/2009 estimate) • 42,888,592 (2005 census) • 3rd-largest population in Latin America (2005) Human Development Index • 0.807 (2007) – "high" Government • Presidential republic • President: Álvaro Uribe Veléz since 7 August 2002. The president of Colombia is the head of state and head of government • The President is followed by the Vice President and Council of Ministers • Elections: The president is elected to a four-year term with a maximum of two terms in office • Administrative divisions: Colombia is divided into 32 departments + 1 capital district, which are subdivided into municipalities -3-
ECONOMIC INFORMATION Colombia's economy is capitalist and market-oriented, and has been experiencing steady growth throughout this decade. Having entered a recession in 1999 that was blamed on excessive government regulation (la apertura económica), President Álvaro Uribe has begun to free Colombia of such liberalist policies by instituting promarket economic reforms, advancements in domestic security, and rising commodity prices. Colombia's constant economic growth – expansion in 2007 alone exceeded 8% - has helped reduce poverty by 20% and cut unemployment by 25% since 2002, although Colombia still exhibits double-digit unemployment and a relatively low GDP per capita (estimated at $9200 in 2008). The global financial crisis resulted in a slowdown in Colombia's economic escalation in 2008. However, Colombia enjoys a friendly climate for foreign direct investment and heightened trade cooperation with various international partners. The GDP, official exchange rate, for 2008 was $240.8 billion, making Colombia one of the 30 highest-grossing economies in the world.
Economic data for 2004-2006 can be found below:
Indicators
2004
2005
2006
98.059
122.9
135.883
GDP (constants prices, annual % change)(1)
4.9
4.7
6.8
Inflation (consumer prices, annual % change)(1)
5.9
5
4.3
2628.613
2320.834
2361.139
GDP (USD billion)(1)
Official exchange rate per USD (period average)(3)
Sources: (1) IMF - World Economic Outlook Database, (2) ILO - Key Indicators of the Labour Market, (3) World Bank - World Development Indicators
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Item
Total Foreign Investment Direct Portfolio Demand and Unemployement GDP Production Rate (EMM (*)) Retail Sales Investment National Unemployement Rate 13 Main Cities Unemployement Rate Prices and Interest Rates Consumer Price Index Producer Price Index Pasive Interest Rate (90 days) Lending Interest Rate Exchange Rate Nominal Exchange Rate Nominal Devaluation Real Exchange Rate (ITCR) Real Devaluation Peso/Yen monetary Units Peso/Euro Monetary Units Trade Exports (FOB) Traditional Exports Non-Traditional Exports Imports (CIF) Others M1 M3 Net International Reserves Colombia General Stock Exchange Index Fiscal Deficit (Central Government) Fiscla Deficit (Non-Finacial Public Sector)
Units
Period
Data
Data one year before
US$ million US$ million
Jan. 05 - Dic 05 Jan. 05 - Dic 05
10,192.00 -167,00
3,117.00 743,00
% annual variation % annual variation to date % annual variation to date % annual variation (%) (%)
Jan. 05 - Dic. 05 Jan. 06 Dec. 05 Dec. 05 Jan. 06 Jan. 06
5,13 5.9 9.11 28.96 13.2 16.1
3,96 2.8 8.67 13.3 14,00 14.2
% annual variation % annual variation Monthly average (%) Monthly average (%)
Feb. 06 Feb. 06 Feb. 06 Feb. 06
4.85 2.06 6.2 11.85
5.5 0.04 7.64 13.18
Peso/dólar US$ average % annual variation 1994=100 % annual variation Peso/Yen Peso/Euro
Mar. 06 Mar. 06 Feb. 06 Feb. 06 Feb. 05 Feb. 05
2,262.36 4.4 117.95 -4.4 19.41 2,710.02
2,353.71 14,00 121.95 -14,00 22.85 3,213.16
US$ million US$ million US$ million US$ million
Jan. 05 - Dec. 05 Jan. 05 - Dec. 05 Jan. 05 - Dec. 05 Jan. 05 - Dec. 05
21.187,00 10,366.00 10,825.00 21,204.00
16,788.00 7,679.00 9,109.00 16,745.00
% annual variation % annual variation US$ million July 2001=1000 % of GDP % of GDP
Jan. 06 Jan. 06 Feb. 06 Feb. 06 Dec. 05 Dec. 05
15.25 18.04 14,933.04 11,080.24 4.9 1.4
13.23 15.24 12,779.62 5,240.17 5.5 1.4
Sources: Banco de la República, DANE – Colombia National Statistics Department
Source: DANE – Colombian National Statistics Department
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Source: ECLAC (Economic Commission for Latin America and the Caribbean)
UNEMPLOYMENT & INFLATION The apertura económica liberalist policies preceding Colombia's recession in 1999 spawned widespread unemployment and poverty throughout the country. However, when Uribe assumed power in 2002, unemployment started to trend downward. For instance, the above ECLAC table shows the 2004 urban unemployment rate at 15.4%; the same figure was at 12.8% by the third quarter in 2006. Colombia's 2008 overall unemployment rate is 11.3%, the 132nd-lowest in the world. This represents a 0.1% increase from the 2007 figure – presumably a consequence of the global recession. All told, Colombia has not fully recovered from its past and present recessions; in 2005, the percentage of the population below the poverty line was reported as 49.2%. the estimated 2008 inflation rate of consumer prices was
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7.0%, 1.5% higher than the 2007 rate. A 2006 ECLAC report credits the stabilization of inflation rates pre-2008 recession to low adjustments of utility prices and greater international standing of Colombia's monetary policy. Relevant charts and graphs may be found below:
Source: Banco de la República
Source: ECLAC (Economic Commission for Latin America and the Caribbean)
PRODUCTION STRUCTURE BY REGION • 0-1000 meters elevation (hot regions): o Cacao, sugarcane, coconuts, bananas/plantains, rice, cotton, tobacco, cassava, beef cattle -7-
• 1000-2000 meters elevation (temperate regions): o Coffee, flowers, maize, citrus, pears, pineapples, tomatoes • 2000-3000 meters elevation (cool regions): o Wheat, barley, potatoes, dairy cattle, poultry AGRICULTURE PRODUCTS AND INDUSTRIES Colombia's key agricultural products include: coffee, cut flowers, bananas, rice, tobacco, corn, sugarcane, cocoa beans, oilseed, vegetables, and shrimp. In 2008, despite the global economic crisis and the increase in unemployment, Colombia registered an industrial production growth rate of 0.8%: Colombia's economic production is still growing, albeit at a slow pace. Colombia's industrial diversity is spread principally across four industrial centers in different areas of the country: Bogotá (center), Medellin (northwest), Calí (southwest), and Barranquilla (south). BREAKDOWN OF SECTORS Colombia's biggest industrial sectors are textiles, food processing, petrochemicals, aircraft, electronics, clothing and footwear (lingerie and leather products), beverages, chemicals, cement, forest products (tropical hardwoods, pine, eucalyptus) and minerals (gold, coal, emeralds). In addition, Colombia has a healthy supply of minerals and energy resources. For instance, it has the largest coal reserves in Latin America, and is second only to Brazil in hydroelectric power resources. Colombia also has sizeable amounts of silver, nickel, gold, platinum, and emeralds. Since 2004, Colombia has been a "net energy exporter" among such Latin American counterparts as Ecuador, Peru, Venezuela, and Panama.
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Oil – • Oil – •
production 588,000 barrels/day (2008 estimate) exports 294,000 barrels/day (2008 estimate)
In a 2006 ECLAC report, the fastest-growing sectors during that time were construction, industry, and commerce. In Q2 2006, construction posted the highest percentage of growth (28.2%). Similarly, the significant amount of industrial growth is credited to the rapid expansion of the construction- and transport equipmentrelated sectors. Conversely, the slowest-growing sectors in the same report were agriculture and mining. Agriculture dropped due to a dip in short-cycle crop production, and mining decreased due to slow growth rates of natural gas and nickel production. Relevant charts and graphs to the breakdown of sectors in Colombia's economy may be found below: 2002
2003
2004
2005
2006
2007
2008
GDP (real ann. %-change)
2.5
4.6
4.7
5.7
6.9
7.5
2.5
Consumption (real ann. %-chg)
3.3
3.5
3.9
5.1
6.2
6.9
2.3
Investment (real ann. %-chg)
1.2
14.0
13.7
20.3
19.2
13.7
7.7
Agriculture (real ann. %-chg)
5.3
3.2
1.8
2.4
3.9
3.9
2.7
Industry (real ann. %-chg)
0.6
6.5
5.0
5.6
6.9
8.1
0.7
Services (real ann. %-chg)
2.4
4.2
4.4
5.7
6.6
7.2
2.8
Manufacturing (real ann. %-chg)
0.3
2.9
6.7
4.0
11.2
10.7
-3.4
2.7 1.4 6.1 Source: LatinFocus
9.5
14.7
10.2
0.5
Retail Sales (real ann. %-chg)
Source: World Resources Institute
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Source: World Resources Institute
EXPORTS & IMPORTS In 2008, Colombia exported approximately $38.53 billion in goods, the 59th-highest in the world for that year and a $7.95 billion increase over the 2007 statistic. The most demanded Colombian commodities by the international community were: petroleum, coffee, coal, nickel, emeralds, apparel, bananas, and cut flowers. Similarly, Colombia's largest export partners in 2008 were: the U.S. (38%), Venezuela (16.2%), and Ecuador (4%). In 2008, Colombia imported $37.56 billion in goods, the 58th-highest amount in the world for that year and a $6.39 billion increase over the 2007 figure. The goods Colombia most desired to import were industrial equipment, transportation equipment, consumer goods, chemicals, paper products, fuels, and electricity. Colombia's biggest import partners in 2008 were: the U.S. (29.2%), China (11.5%), Mexico (7.9%), and Brazil (5.9%). A 2006 ECLAC report attributes a 20% growth in imports from 2005 to 2006 to higher purchases by Colombian citizens of vehicles and vehicle parts, machinery, fuel, and mineral oils. Consumer goods grew in Colombia during that time because they were benefited from a greater amount of household consumption. Exports also grew from 2005 to 2006 due to a higher global price of oil and petroleum. Proexport Colombia, an organization funded by
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the Colombian government dedicated to expanding foreign trade with the global community, estimates the growth of exports and imports during 2005 to be 26.7% and 26.6%, respectively. Proexport also depicts the commercial openness rate [(exports + imports) / GDP] of 2005 to be just under 44%. Below are relevant charts:
Main customers
(% of exports, 2006)
USA
40,80%
Venezuela
11,10%
Ecuador
5,10%
Peru
3,00%
Mexico
2,80%
Main suppliers USA
(% of imports, 2006) 26,60%
Mexico
8,80%
China
8,50%
Brazil
7,20%
Venezuela
5,70% Source: Comtrade
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Colombian Economy commercial openness rate (1985-2005) (X+M)/GDP (%) 45,0 40,0 35,0
25,0 20,0 Mar-85
Mar-89
Mar-93
Mar-97
Mar-01
Mar-05
Sources: Banco de la República, DANE – Colombian National Statistics Department
TRADE In 2008, Colombia reported a $0.97 billion trade surplus, fueled by its rich commodities. Aside from the United States, Colombia's main trading partners are the European Union, Japan, Venezuela, and the Andean Community countries. The current member nations in the Andean Community are Bolivia, Colombia, Ecuador, and Peru; the associate nations are Argentina, Brazil, Paraguay, Uruguay, and Chile; and the observer nations are Mexico and Panama. Currently, Colombia has enforced free trade agreements with Chile, Panama, El Salvador, Guatemala, and Honduras. Moreover, Colombia is a member of numerous trade organizations, including: the Andean Community, Group of Three (G-3; Colombia and Mexico are the current members, as Venezuela has since left), Caribbean Community (CARICOM; Colombia is one of seven observer nations), and the World Trade Organization. The United States-Colombia Trade Promotion Agreement is still awaiting ratification by the U.S. Congress. With respect to the United States, - 12 -
Colombia was its 5th-largest export market in Latin America in 2000. The Trade Promotion Agreement extends favorable trade and tariff benefits to some 99% of Colombia's commodities. According to the U.S. Commercial Service, Colombia's other trade integration agreements allocate 97% of the items in the Colombian Harmonized Tariff Schedule to the free import list. With the Andean Community, Colombia imposes a 5-to-20% common external tariff on the CIF (charges, insurance, and freight) value of shipments. Colombia also levies a national value added tax on normal shipments, valued at 16% on CIF. The Encyclopedia of the Nations explains four tariff levels for the Colombian economy and the greater Andean Community: 5% for raw materials and intermediate and capital goods not produced in Colombia; 10% and 15% for goods in the first category but have domestic production in Colombia; 20% for finished consumer goods; and 35% for automobiles and other luxuries. On the note of automobiles, although the national VAT is 16%, the automobile sales tax ranges from 16-to-60%. However, there are non-tariff barriers to trade on poultry parts, powdered milk, wheat, and other agricultural products; in 1999, tariff rates for these commodities amounted as high as 119%. In addition, a 2006 Proexport Colombia report cites preferential tariff agreements with the United States through the ATPDEA (Andean Trade Promotion and Drug Eradication Act), and with the European Union through the Andean SGP (Generalized Preference System). Additional advantages for foreign trade regimes include: 10 duty free zones, 5 special economic export zones, and incentives for large exporters.
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FOREIGN DIRECT INVESTMENT In the early 1990s, Colombia began passing laws to encourage foreign direct investment (FDI) in nearly every sector of the economy – minus defense, national security, hazardous wastes, and real estate. CoInvertir was established to facilitate this goal, and later evolved into Proexport Colombia. By the end of 1997, CoInvertir helped bring in $11.2 billion in FDI. The United States constituted approximately 38% of that figure, with the largest interest expressed in the petroleum, natural gas, coal, chemical, and manufacturing industries. A 2006 ECLAC report cited FDI as a main engine for economic growth, which has been strengthened by low interest rates, public infrastructure projects, and credit expansion. In 2006 alone, public sector investment increased by 18% and private sector investment by 30%. These statistics have pushed the total FDI as a percentage of GDP rate to 25% in 2006. A Proexport Colombia cites the most popular FDI inflows for 2005 as manufacturing (53%), mines and quarries (19.4%), petroleum (12.1%), and transportation/storage/communications (10.9%). In terms of origin, the countries procuring the most FDI were the United States, the United Kingdom, Mexico, Spain, and the Netherlands, with 37%, 14%, 10%, 6%, and 3%, respectively. Relevant FDI graphs and charts may be found on the following page:
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FDI Flows in Colombia by Sectors (2005) US$ million
Electricity, Gas, and Water Community Services Agriculture, Hunting and Forestry Construction Commerce, Restaurants and Hotels Financial Establishments Transport, Storage and Communications Petroleum Sector Mines and Quarries (including coal) Manufactures
-1.000
0
1.000 2.000 3.000 4.000 5.000 6.000
Sources: Colombia Proexport Institute, Banco de la República
FDI Flows in Colombia by Country of Origin (2005) (*) % share
United States 37,0%
United Kingdom 14,0%
Mexico 10,0% Other countries 30.0%
Spain 6,0% Netherlands 3.0%
* Total U.S. $ = 10,192 million dollars Sources: Colombia Proexport Institute, Banco de la República
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CHALLENGES Despite Colombia's many successes of the 2000s, the Latin American nation faces many current challenges that could affect its business climate. For instance, Colombia is the world's leading producer of the illicit drug coca, with 167,000 hectares cultivated in 2007 – a 6% increase over the previous year. Besides coca, Colombia also illicitly produces opium poppy and cannabis. Colombia supplies coca to the vast majority of international markets. Financial analysts are also concerned with Colombia's growing government deficit, with debt as a percentage of GDP at approximately 5%. In response, the Colombian government is attempting to implement an active fiscal policy, with such initiatives like proposed tax reform and strict compliance within the medium-term fiscal framework. Colombia's bond rating history is shown in the following: 2002
2003
2004
2005
2006
2007
2008
Ba2
Ba2
Ba2
Ba2
Ba2
Ba2
Ba1
Sov. Rating S & P
BB
BB
BB
BB
BB
BB+
BB+
Sov. Rating Fitch IBCA, Duff & Phelp
BB
BB
BB
BB
BB
BB+
BB+
Sov. Rating Moody's
Source: LatinFocus
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RELATIONSHIP WITH ISRAEL The diplomatic relations between Colombia and Israel, established shortly after Israel's creation in 1948, were dramatically augmented upon the signing of the Trade and Economic Cooperation Agreement between the two nations in 1986. This agreement granted preferred status and favorable customs tariffs to goods originating from either nation upon arrival in the other nation, and established commercial missions between the contracting parties. In December 2007, Israel signed a free trade agreement with Mercosur, of which Colombia is an associate member. Israel is the only nation outside of South America to sign such an accord with Mercosur. The Agreement was ratified by Israel in November 2009. Israel's commercial presence in Colombia is strongly integrated in the machinery and chemical products sectors. Comparably, Colombia's commercial presence in Israel is almost exclusively related to the mineral products industry sector. Latin America has become an increasingly attractive region for foreign market penetration, due to rapid economic growth in many parts of South America. Despite being located so far from Israel, Colombia's penchant for FDI can be seen as a positive litmus test for further Israeli commercial expansion. Currently, Israel has one economic mission in South America (São Paulo, Brazil) and employs local representatives as Trade Officers in the Israeli Embassy in Bogotá, and the Colombian market can be viewed as a way to further grow commercially within the South American continent.
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In 2008, the commercial trade between Israel and Colombia amounted to $567.11 million, which, when compared to $770.11 million from 2007, is a 35.8% decrease. Also in 2008, 95% of the Colombian exports to Israel were in the mineral products industry sector. Conversely, 47% of Israeli exports to Colombia were in the machinery sector.
Colombian Exports to Israel (2008, By Sector) Agriculture
Industry
Miscellaneous
Source: State of Israel, Ministry of Industry, Trade & Labor
2009 was a year that saw a 49.04% drop in Colombian exports to Israel, yet a 4.37% rise in Israeli exports to Colombia. Approximately $379.972 million of trade was engaged between Israel and Colombia, with $210.373 million amounting to Colombian exports – thus giving Colombia a $40.773 million trade surplus for this time period. Looking more broadly, between 2005 and 2008 the amount of Israel's exports to Colombia grew from $84.15 million to $154.26 million, while the inverse decreased from $467.54 million to $412.85 million during the four years.
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CONCLUSION Colombia enjoys relative political stability with President Uribe in power and his economic deregulation in place. With the next Colombian presidential election scheduled for 30 May 2010, it appears that either Uribe (who may run for a third term) or a successor will usher in further pro-market policies that will help pull the Colombian economy out of the same recession-like difficulties that most of the world is concurrently facing. Also, increased FDI and Colombia's strong partnership with the International Monetary Fund promise to stimulate the Colombian economy and aspire to trend down inflation. However, Colombia has a number of domestic issues that must be addressed, including illegal coca production, rebel leftist groups such as the FARC, and an unbalanced income distribution that in 2000 saw 60% of the nation's wealth allocated to the richest Colombian citizens. In addition to Colombia's trade organization memberships and signed free trade agreements, Colombia aspires to further integrate into the global economy with additional proposed FTAs with Canada, the European Free Trade Association (Switzerland, Norway, Iceland, Liechtenstein), and the European Union. Colombia's economic prospects for the future appear to be strong and promising. With the majority of the globe predicted to emerge from the current recession in 2010, Colombia will be poised to play a prominent role in the economic growth of Latin America as a whole.
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Colombia's projected economic indicators through 2014 are detailed below:
COLOMBIA PROJECTED ECONOMIC INDICATORS Real GDP Growth
4
Average Consumer Price Inflation
2
3
1
Percentage
5
0 2014
2013
2012
2011
2010
2009
Year Source: Economist Intelligence Unit
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For further information, please contact: Israeli Embassy in Bogotá, Colombia http://bogota.mfa.gov.il [email protected] Address: Calle 35 No. 7-25, Piso 14 Telephone: +57-1-3277500 Fax: +57-1-3277555
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