ECONOMY
Colombia is a free market economy with major commercial and investment ties to the United States. Transition from a highly regulated economy has been underway for more than 15 years. In 1990, the administration of President Cesar Gaviria (1990-94) initiated economic liberalization or "apertura," 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. These policies eased import restrictions and opened most sectors to foreign investment, although agricultural products remained protected.
The Uribe administration seeks to maintain prudent fiscal policies and has pursued tough economic reforms including tax, pension and budget reforms. A U.S. Agency for International Development (USAID) study shows that Colombian tax rates (both personal and corporate) are among the highest in Latin America. The unemployment rate in November 2007 was 9.4%, down from 15.1% in December 2002.
The sustained growth of the Colombian economy can be attributed to an increase in domestic security, the policies of keeping inflation low and maintaining a stable currency (the Colombian peso), petroleum price increases and an increase in exports to neighboring countries and the United States as a result of trade liberalization. The Andean Trade Preference Act, which was extended through December 2008, also plays a pivotal role in Colombia's economic growth. The signing of a trade promotion agreement with the U.S. in November 2006 provides further opportunity for growth once it is approved by the U.S. Congress and implemented.
Trade
In 2006, Colombia was the United States' fifth-largest export market in the Western Hemisphere behind Canada, Mexico, Brazil, and Venezuela and the largest agricultural export market in the hemisphere after the North American Free Trade Agreement (NAFTA) countries. U.S. exports to Colombia in 2006 were U.S. $6.9 billion, up 13.2% from the previous year. U.S. imports from Colombia were U.S. $9.6 billion, up 4%. Colombia's major exports are petroleum, coffee, coal, nickel, and nontraditional exports (e.g., cut flowers, gold, bananas, semiprecious stones, sugar, and tropical fruits). The United States is Colombia's largest trading partner, representing about 40% of Colombia's exports and 26.6% of its imports.
Colombia has improved protection of intellectual property rights overall, but the United States remains concerned over deficiencies in licensing and copyright protection.
Mining
and Energy
Colombia has considerable mineral and energy resources, especially coal and natural gas reserves. New security measures and increased drilling activity have slowed the drop in petroleum production, allowing Colombia to continue to export through 2011, given current production estimates. In 2006, gas reserves totaled 7,349 billion cubic feet. Gas production totaled 680 million cubic feet per day. The country's current refining capacity is 299,200 barrels per day. Mining and energy related investments have grown because of higher oil prices, increased demand and improved output. Colombia has significantly liberalized its petroleum sector, leading to an increase in exploration and production contracts from both large and small hydrocarbon industries.
Colombia is presently the 16th-greatest coal producing country, accounting for about 1% of the world's total annual coal production, and the largest producer in Latin America (65.8 million tons in 2006). Colombia has proven recoverable coal reserves of about 7.4 billion short tons, the majority of which are located in the north of the country. Colombia historically has been the world's leading producer of emeralds, although production has fallen in recent years. Emerald production fell from 116.3 million carats in 2005 to 112.7 million carats in 2006. Colombia is also a significant producer of gold, silver, and platinum.
Foreign
Investment
The United States is the largest source of new foreign direct investment (FDI) in Colombia, particularly in the areas of coal and petroleum. In 2007, new FDI totaled U.S. $7.5 billion, more than triple the amount in 2002. The bulk of the new investment is in the manufacturing, mining, and energy sectors. The only activities closed to foreign direct investment are defense and national security, and disposal of hazardous wastes. Capital controls have been implemented to reduce currency speculation and to keep foreign investment in-country for at least a year. In order to encourage investment in Colombia, Congress approved a law in 2005 to protect FDI.
Industry
and Agriculture
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, leather products, processed foods and beverages, paper and paper products, chemicals and petrochemicals, cement, construction, iron and steel products and metalworking.
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.
GDP (2006): $125 billion; base year 1994: $105.9 billion.
Annual growth rate (2006): 6.8%.
Per capita GDP (2006): $2,976.
Government expenditures (2006): 22.2% of GDP.
Natural resources: Coal, petroleum, natural gas, iron ore, nickel, gold, silver, copper, platinum, emeralds.
Manufacturing (14.4% of GDP): Types--textiles and garments, chemicals, metal products, cement, cardboard containers, plastic resins and manufactures, beverages, wood products, pharmaceuticals, machinery, electrical equipment.
Agriculture (13.1% of GDP): Products--coffee, bananas, cut flowers, cotton, sugarcane, livestock, rice, corn, tobacco, potatoes, soybeans, sorghum. Cultivated land--8.2% of total area.
Other sectors (by percentage of GDP): Government, personal and other services--18.6%; financial services--17.1%; commerce--11.2%; transportation and communications services--7.9%; construction and public works--5.4; mining and quarrying--4.5%; electricity, gas, and water--2.9%.
Trade: Exports (2006)--$24.3 billion: petroleum, coal, coffee, flowers, textiles and garments, ferronickel, bananas, chemicals, pharmaceuticals, gold, sugar, cardboard containers, printed material, cement, plastic resins and manufactures, emeralds. Major markets--U.S., Venezuela, Germany, Netherlands, Japan. Imports (2006)--$24.5 billion: machinery/equipment, grains, chemicals, transportation equipment, mineral products, consumer products, metals/metal products, plastic/rubber, paper products, aircraft, oil and gas industry equipment, supplies. Major suppliers--U.S., Germany, Japan, Panama, Venezuela.
