Trade in Colombia (Economic Policies and Opportunities)


The US recently signed a new trade agreement with the Colombian government. As  a result, this agreement should open up a lot more opportunities for businesses to invest in the Colombian economy. With the high rate of growth in the Colombian economy and the possibility of another global economic downturn, foreign businesses should consider Colombia as another place to park some of their money.  As of June 2011, the World Bank has ranked Colombia as the 42nd best place to do business in; this was a 5 place jump from #47 in 2010. This shows that the Colombian government has put in more effort over the years into making the business climate more favorable for investors.

Some of the business areas that are most attractive to foreign businesses are mining, manufacturing, and agriculture. Colombia is well-endowed with minerals and energy resources. It has the largest coal reserves in Latin America, and is second only to Brazil in hydroelectric potential potential. Estimates of petroleum reserves in 1995 were 3.1 billion barrels of high quality petroleum. It also possesses significant amounts of nickel, gold, silver, platinum, and emeralds. So Colombia would be a favorable place to invest for mining related businesses. Colombia has been a net exporter of oil, ever since it discovered huge deposits of its coast. As a result, companies involved in oil production and transport industries, could also look at Colombia as a way to diversify their portfolio.   The Colombian peso is also undervalued in comparison to the dollar, so businesses engaged in  basic manufacturing like textiles and garments, could consider Colombia as manufacturing center. The Colombian government is slowly closing the education gap between itself and more developed countries, as a result the Colombian population should become more productive and capable of advanced manufacturing in the future. However, for the time being only companies involved in basic manufacturing should consider investing in manufacturing in Colombia. The agricultural industry in Colombia is actually quite strong, due to the its diverse climate and topography. Thus, allowing for mass 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. So agricultural companies could also consider Colombia as place to invest in considering that the country has a whole is very conducive to farming, and the government has somewhat reduced regulation of the agricultural sector.

The domestic market also seems to show a high level of promise, as the economy grows and middle class consumers have more money in their pockets, their should be an increased spending on consumption. Domestic consumption accounts for nearly 80% of the economy. While most of the population is still relatively poor, the current economic growth should “lift all boats”, and with the Colombian population numbering around 46 million, there is clearly a huge potential market to sell into. So businesses involved in producing cheap consumer goods should consider Colombia as a bigger market to export to, as more and more middle class Colombians consume more and more products.

The current security situation also bodes well for investors, the current president has vowed to continue the previous president’s security crackdown on drug cartels and guerrilla groups. It seems that these policies are continuing to have a major effect on crime, driving it down in most parts of the country. As a result, in addition to the favorable business climate, investors can take comfort in the fact that the country is overall a lot more safer to invest in. It seems that the Colombian economy will likely maintain its favorable trajectory for the foreseeable future, as long as the government continues to improve conditions for trade and investment, as well as continuing to crackdown on crime in the country.  If you have any more questions about the Colombian economy or whatnot, feel free to contact me at zadey@globial.com.

– Jay Zadey
Trade Economics. Colombia. Household final consumption expenditure (annual % growth) in Colombia. http://www.tradingeconomics.com/colombia/household-final-consumption-expenditure-annual-percent-growth-wb-data.html Retrieved 2011-11-04.

“Doing Business in Colombia 2011”World Bank. Retrieved 2011-11-04.

Advertisements
Comments
One Response to “Trade in Colombia (Economic Policies and Opportunities)”
  1. Stanley says:

    Colombia’s a lot different from how I imagined it.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: