Colombia - Economy

Economy

Main article: Economy of Colombia See also: Agriculture in Colombia

In spite of the difficulties presented by serious internal armed conflict, Colombia's market economy grew steadily in the latter part of the twentieth century, with gross domestic product (GDP) increasing at an average rate of over 4% per year between 1970 and 1998. The country suffered a recession in 1999 (the first full year of negative growth since the Great Depression), and the recovery from that recession was long and painful. However, in recent years growth has been impressive, reaching 8.2% in 2007, one of the highest rates of growth in Latin America. Meanwhile the Colombian stock exchange climbed from 1,000 points at its creation in July 2001 to over 7,300 points by November 2008.

According to International Monetary Fund estimates, in 2011 Colombia's GDP (PPP) was US$471.964 billion (28th in the world and third in South America). Adjusted for purchasing power parity, GDP per capita stands at $10,249, placing Colombia 81st in the world. However, in practice this is relatively unevenly distributed among the population, and, in common with much of Latin America, Colombia scores poorly according to the Gini coefficient, with UN figures placing it among the lowest ranking countries. According to the World Bank, in 2010 the richest 20% of the population had a 60.2% share of income/consumption and the poorest 20% just 3.0%, and 15.8% of Colombians lived on less than $2 a day.

Government spending represents 37.9% of GDP. Almost a quarter of this goes towards servicing the country's government debt, estimated at 52.8% of GDP in 2007. Other problems facing the economy include weak domestic and foreign demand, the funding of the country's pension system, and unemployment (10.8% in November 2008). Inflation has remained relatively low in recent years, standing at 5.5% in 2007.

Historically an agrarian economy, Colombia urbanised rapidly in the twentieth century, by the end of which just 22.7% of the workforce were employed in agriculture, generating just 11.5% of GDP. 18.7% of the workforce are employed in industry and 58.5% in services, responsible for 36% and 52.5% of GDP respectively. Colombia is rich in natural resources, and its main exports include petroleum, coal, coffee and other agricultural produce, and gold. Colombia is also known as the world's leading source of emeralds, while over 70% of cut flowers imported by the United States are Colombian. Principal trading partners are the United States (a controversial free trade agreement with the United States was approved on 11 October 2011 by the United States Congress and became effective from 15 May 2012), the European Union, Venezuela and China. All imports, exports, and the overall balance of trade are at record levels, and the inflow of export dollars has resulted in a substantial re-valuation of the Colombian peso.

Economic performance has been aided by liberal reforms introduced in the early 1990s and continued during the presidency of Álvaro Uribe, whose policies included measures designed to bring the public sector deficit below 2.5% of GDP. In 2008, The Heritage Foundation assessed the Colombian economy to be 61.9% free, an increase of 2.3% since 2007, placing it 67th in the world and 15th out of 29 countries within the region. It has Free trade Zone (FTZ), such as Zona Franca del Pacifico, located in the Valle del Cauca, one of the most striking areas for foreign investment.

Meanwhile the improvements in security resulting from President Uribe's controversial "democratic security" strategy have engendered an increased sense of confidence in the economy. On 28 May 2007 the American magazine BusinessWeek published an article naming Colombia "the most extreme emerging market on Earth". Colombia's economy has improved in recent years. Investment soared, from 15% of GDP in 2002 to 26% in 2008. private business has retooled. However, unemployment at 12% and the poverty rate at 46% in 2009 are above the regional average.

According to a recent World Bank report, doing business is easiest in Cali, Manizales, Ibagué and Pereira, and more difficult in Medellin and Cartagena. Reforms in custom administration have helped reduce the amount of time it takes to prepare documentation by over 60% for exports and 40% for imports compared to the previous report. Colombia has taken measures to address the backlog in civil municipal courts. The most important result was the dismissal of 12.2% of inactive claims in civil courts thanks to the application of Law 1194 of 2008 (Ley de Desistimiento Tácito).

The following are the most important Colombian companies:

• Ecopetrol: The fourth largest oil company in Latin America.
• Suramericana de Inversiones: The largest retirement plan management company in Latin America.
• Avianca: The third largest airline in Latin America.
• Coomeva: The third largest cooperative in Latin America.
• Grupo Aval: One of Colombia's largest holding company. It is owned by Luis Carlos Sarmiento Angulo.