Economy of Colombia

The economy of Colombia is the fourth largest in Latin America as measured by gross domestic product. Colombia has experienced a historic economic boom over the last decade. Throughout most of the 20th century, Colombia was Latin America's 4th and 3rd largest economy when measured by nominal GDP, real GDP, GDP (PPP), and real GDP at chained PPPs. Between 2012 and 2014, it became the 3rd largest in Latin America by nominal GDP. As of 2018, the GDP (PPP) per capita has increased to over US$14,000, and real gross domestic product at chained PPPs increased from US$250 billion in 1990 to nearly US$800 billion. Poverty levels were as high as 65% in 1990, but decreased to under 30% by 2014, and 27% by 2018. They decreased by an average of 1.35% per year since 1990.

Petroleum is Colombia's main export, representing over 45% of Colombia's exports. Manufacturing represents nearly 12% of Colombia's exports, and grows at a rate of over 10% a year. Colombia has the fastest growing information technology industry in the world, and has the longest fibre optic network in Latin America. Colombia also has one of the largest shipbuilding industries in the world outside Asia.

Modern industries like shipbuilding, electronics, automobile, tourism, construction, and mining, grew dramatically during the 2000s and 2010s. However, most of Colombia's exports are still commodity-based. Colombia is Latin America's 2nd-largest producer of domestically made electronics and appliances, following Mexico. Colombia had the fastest-growing major economy in the Western world in 2014, behind only China worldwide.

Since the early 2010s, the Colombian government has shown interest in exporting modern Colombian pop culture to the world (which includes video games, music, films, television shows, fashion, cosmetics, and food) as a way of diversifying the economy and entirely changing the image of Colombia. This has inspired a national campaign, similar to the Korean Wave. Colombia is only behind Mexico in cultural exports, and is already a regional leader in cosmetic and beauty exports.

The number of tourists in Colombia grows by over 12% every year. Colombia is projected to have over 15 million tourists by 2023.

History

16th–19th centuries

European explorers reached what is now Colombian territory as early as 1510 in Santa María Antigua del Darién (in present-day Chocó department). For the next couple of decades Colombia, and South America in general, remained largely unexplored. From 1533 to 1600, Europeans began expeditions into the interior of current Colombia. The in of these expeditions was mainly to conquer new lands and exploit village resources. Legends of El Dorado that reached Spaniard explorers continued to fuel exploration and raiding of Indian villages.

In the 17th century, Spanish conquerors explored Colombia and made the first settlements, and this was the beginning of Colombia's modern economic history. Major conquistadors from this period were Pedro de Heredia, Gonzalo Jimenez de Quesada, Sebastián de Belalcazar, and Nikolaus Federmann.

During the 16th and 17th centuries, the colonial settlements in Colombia served purposes of extraction of precious metals and other natural resources, and later slavery trade. This economic arrangement left the Colony with little room for building solid institutionality for economic development. The main non-extractive institutions emerging in this centuries were the fortified port of Cartagena and the Viceroyalty of New Granada. Cartagena developed military defenses mainly out of necessity from frequently having to deal with pirate attacks. A primitive form of colonial administration was organized in Santa fé de Bogotá with the Viceroyalty of New Granada, especially under the tenure of José Solís Folch de Cardona (1753–1761), who conducted a census and built roads, bridges and aqueducts.

Following the Thousand Days' War (1899–1902), Colombia experienced a coffee boom that catapulted the country into the modern period, bringing the attendant benefits of transportation, particularly railroads, communications infrastructure, and the first major attempts at manufacturing.

20th century

Colombia's consistently sound economic policies and aggressive promotion of free trade agreements in recent years have bolstered its ability to weather external shocks. Real GDP has grown more than 4% per year for the past three years, continuing almost a decade of strong economic performance.

In 1990, the administration of President César Gaviria Trujillo (1990–94) initiated economic liberalism policies or "apertura economica" and this has continued since then, with tariff reductions, financial deregulation, privatization of state-owned enterprises, and adoption of a more liberal foreign exchange rate. Almost all sectors became open to foreign investment although agricultural products remained protected.

The original idea of his then Minister of Finance, Rudolf Homes, was that the country should import agricultural products in which it was not competitive, like maize, wheat, cotton and soybeans and export the ones in which it had an advantage, like fruits and flowers. In ten years, the sector lost 7,000 km² to imports, with a critical impact on employment in rural areas. Still, this policy makes food cheaper for the average Colombian than it would be if agricultural trade were more restricted.

Until 1997, Colombia had enjoyed a fairly stable economy. The first five years of liberalization were characterized by high economic growth rates of between 4% and 5%. The Ernesto Samper administration (1994–98) emphasized social welfare policies which targeted Colombia's lower income population. These reforms led to higher government spending which increased the fiscal deficit and public sector debt, the financing of which required higher interest rates. An over-valued peso inherited from the previous administration was maintained.

The economy slowed, and by 1998 GDP growth was only 0.6%. In 1999, the country fell into its first recession since the Great Depression. The economy shrank by 4.5% with unemployment at over 20%. While unemployment remained at 20% in 2000, GDP growth recovered to 3.1%. Unemployment in 2020 has improved compared to two decades ago to 12.20%.

The administration of President Andrés Pastrana Arango, when it took office on 7 August 1998, faced an economy in crisis, with the difficult internal security situation and global economic turbulence additionally inhibiting confidence. As evidence of a serious recession became clear in 1999, the government took a number of steps. It engaged in a series of controlled devaluations of the peso, followed by a decision to let it float. Colombia also entered into an agreement with the International Monetary Fund which provided a $2.7 billion guarantee (extended funds facility), while committing the government to budget discipline and structural reforms.

By early 2000 there had been the beginning of an economic recovery, with the export sector leading the way, as it enjoyed the benefit of the more competitive exchange rate, as well as strong prices for petroleum, Colombia's leading export product. Prices of coffee, the other principal export product, have been more variable.

Economic growth reached 3.1% during 2000 and inflation 9.0%. Inflation by 2021 has stabilized at 3.30%. Colombia's international reserves remained stable at around $8.35 billion in the year 2000 growing to $58.57 billion by 2021, and Colombia has successfully remained in international capital markets. Colombia's total foreign debt at the end of 1999 was $34.5 billion with $14.7 billion in private sector and $19.8 billion in public sector debt. Major international credit rating organizations had dropped Colombian sovereign debt below investment grade, primarily as a result of large fiscal deficits, which current policies are seeking to close. As of 2021 Colombia has recovered its investment grade rating.

Former president Álvaro Uribe (elected 7 August 2002) introduced several neoliberal economic reforms, including measures designed to reduce the public-sector deficit below 2.5% of GDP in 2004. The government's economic policy and controversial democratic security strategy have engendered a growing sense of confidence in the economy, particularly within the business sector, and GDP growth in 2003 was among the highest in Latin America, at over 4%. This growth rate was maintained over the next decade, averaging 4.8% from 2004 to 2014.

Colombia's President Iván Duque withdrew a controversial tax reform bill following four weeks of huge protests across the country starting 28 April 2021.

Overview

The longstanding internal armed conflict in Colombia has had economic impacts.

In the early 21st century, the Colombian economy grew in part because of austere government budgets, focused efforts to reduce public debt levels, an export-oriented growth strategy, an improved security situation in the country, and high commodity prices. Growth slowed to 1.4 percent in 2017, and then increased to 3.3 percent in 2019.

President Uribe, who was in office from 2002 to 2010, examined opportunities including reforming the pension system, reducing high unemployment, achieving congressional passage of a fiscal transfers reform, and exploring for new oil or producing ethanol. Colombia's Gini coefficient, a measure of inequality, was one of the highest in South America. International and domestic financial analysts warned of the growing central government deficit, which hovered at 5% of GDP. Nonetheless, confidence in the economy grew.

Household income or consumption by percentage share:
lowest 10%: 0.8%
highest 10%: 45.9% (2006)

Investment (gross fixed):
24.3% of GDP (2008 est.)

Budget:
revenues: $83.22 billion
expenditures: $82.92 billion; including capital expenditures of $NA (2008 est.)

Central bank discount rate:
11.5% (31 December 2008)

Commercial bank prime lending rate:
15.6% (31 December 2008)

Stock of money:
$21.58 billion (31 December 2008)

Stock of quasi money:
$26.57 billion (31 December 2008)

Stock of domestic credit:
$89.69 billion (31 December 2008)

Market value of publicly traded shares:
$87.03 billion (31 December 2008)

Agriculture – products:
coffee, cut flowers, bananas, rice, tobacco, corn, sugarcane, cocoa beans, oilseed, vegetables; forest products; shrimp

Industries:
textiles, food processing, oil, clothing and footwear, beverages, chemicals, cement; gold, coal, emeralds, shipbuilding, electronics, home appliance, and furniture.

Industrial production growth rate:
2% (2013 est.)

Electricity – production:
53.6 billion kWh (2007)

Electricity – consumption:
52.8 billion kWh (2007)

Electricity – exports:
876.7 million kWh (2007)

Electricity – imports:
38.4 million kWh (2007)

Oil – production:
(2008 est.)

Oil – consumption:
(2007 est.)

Oil – exports:
(2008 est.)

Oil – imports:
(2005)

Oil – proved reserves:
(1 January 2008 est.)

Natural gas – production:
7.22 billion cu m (2006 est.)

Natural gas – consumption:
7.22 billion cu m (2006 est.)

Natural gas – exports:
0 cu m (2007 est.)

Natural gas – imports:
0 cu m (2007 est.)

Natural gas – proved reserves:
122.9 billion cu m (1 January 2008 est.)

Current account balance:
$−6.761 billion (2008 est.)

Exchange rates:
Colombian pesos (COP) per US dollar – 2,243.6 (2008), 2,013.8 (2007), 2,358.6 (2006), 2,320.75 (2005), 2,628.61 (2004)

Source:

Colombia has a track record of prudent macroeconomic management.

Development of main indicators

The following table shows the main economic indicators in 1980–2019 (with IMF staff stimtates in 2020–2025). Inflation below 5% is in green.

Graphics

Labor rights

On 8 June 2020, the newly formed Employment Mission ''(Misión de Empleo)'' met for the first time to discuss labor reforms that it intended to propose to Congress. Some of these reforms had been desired for years, and others had come into starker view during the coronavirus pandemic.

Agriculture

Colombia is one of the 5 largest producers in the world of coffee, avocado and palm oil, and one of the 10 largest producers in the world of sugarcane, banana, pineapple and cocoa.

Colombia produced, in 2018, 36.2 million tons of sugarcane (7th largest producer in the world), 5.8 million tons of palm oil (5th largest producer in the world), 3.7 million tons of banana (11th largest producer in the world) and 720 thousand tons of coffee (4th largest producer in the world, behind Brazil, Vietnam and Indonesia). Although its neighbor Brazil is the largest producer of coffee in the world (3.5 million tons produced in the same year), the advertising carried out by the country for decades suggests that Colombian coffee is of higher quality, which generates greater added value to the country's product. In the same year, Colombia produced 3.3 million tons of rice, 3.1 million tons of potato, 2.2 million tons of cassava, 1.3 million tons of maize, 900 thousand tons of pineapple, 670 thousand tons of onion, 527 thousand tons of tomato, 419 thousand tons of yam, 338 thousand tons of mango, 326 thousand tons of avocado, in addition to smaller productions of other agricultural products such as orange, tangerine, lemon, papaya, beans, carrot, coconut, watermelon etc.

The share of agriculture in GDP has fallen consistently since 1945, as industry and services have expanded. However, Colombia's agricultural share of GDP decreased during the 1990s by less than in many of the world's countries at a similar level of development, even though the share of coffee in GDP diminished in a dramatic way. Agriculture has nevertheless remained an important source of employment, providing a fifth of Colombia's jobs in 2006.Roberto Steiner and Hernán Vallejo. "The Economy". In ''Colombia: A Country Study'' (Rex A. Hudson, ed.). Library of Congress Federal Research Division (2010).

The most industrially diverse member of the five-nation Andean Community, Colombia has four major industrial centers—Bogota, Medellin, Cali, and Barranquilla, each located in a distinct geographical region. Colombia's industries include textiles and clothing, particularly lingerie, leather products, processed foods and beverages, paper and paper products, chemicals and petrochemicals, cement, construction, iron and steel products, and metalworking. Its 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 hot country to pine and eucalyptus in the colder areas.

Cacao beans, 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; cut flowers; maize and other vegetables; and fruits such as citrus, 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.

Livestock

In the production of beef and chicken meat, Colombia is among the 20 largest producers in the world.

In Colombia, the exploitation and breeding of cattle is carried out on small farms and large farms. Black-eared white, casanareño, coastal with horns, romosinuano, chino santandereano and hartón del Valle, are the Colombian breeds with the highest production.

In 2013, livestock occupied 80% of productive land in Colombia. The livestock sector is one of the most outstanding in areas such as Caribbean Region

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