Republic of Colombia

Colombia Area: 1,141,748 sq. km
Population: 44,205,293 (July 2010 est.)
Capital city: Bogotá
President, Head of Government Alvaro URIBE Velez (elected May 2002; assumed office August 07, 2002; re-elected May 2006)

History

During the pre-Columbian period, the area now known as Colombia was inhabited by indigenous societies situated at different stages of socio-economic development, ranging from hunters and nomadic farmers to the highly structured Chibchas, who are considered to be one of the most developed indigenous groups in South America.  

The first permanent settlement in Colombia was at Santa Marta, founded by the Spanish in 1525. Santa Fe de Bogota was founded in 1538 and, in 1717, became the capital of the Viceroyalty of New Granada, which included what are now Venezuela, Ecuador, and Panama. Bogota was one of three principal administrative centers of the Spanish possessions in the New World. The area became Spain’s chief source of gold and was exploited for emeralds and tobacco.

Full independence was proclaimed in 1813, and in 1819 the Republic of Greater Colombia was formed. The new republic included all the territory of the former Viceroyalty (Colombia, Venezuela, Ecuador and Panama).

Colombia’s history has been characterized by widespread, violent conflict. Two civil wars resulted from bitter rivalry between the Conservative and Liberal parties: The War of a Thousand Days (1899-1903) claimed an estimated 100,000 lives, and La Violencia (the Violence) (1946-1957) claimed about 300,000 lives.

The “Plan Colombia” program was unveiled in 1999 to combat narco-terrorism; spur economic recovery; strengthen democratic institutions and respect for human rights; and provide humanitarian assistance to internally displaced persons.

Alvaro Uribe, an independent, was elected president in May 2002 (and re-elected in May 2006) on a platform to restore security to the country. Among his promises was to continue to pursue the broad goals of Plan Colombia within the framework of a long-term security strategy. In the fall of 2002, Uribe released a national security strategy that employed political, economic and military means to weaken all illegal narco-terrorist groups. The Uribe government offered to negotiate a peace agreement with these groups with the condition that they agree to a unilateral cease fire and to end drug trafficking and kidnapping.

Although much attention has been focused on the security aspects of Colombia’s situation, the Uribe government also is making significant efforts on issues such as expanding international trade, supporting alternate means of development, and reforming Colombia’s judicial system.

In January 2007, Colombian leaders presented a new strategy to consolidate and build on progress under Plan Colombia, called the “Strategy to Strengthen Democracy and Social Development.” The new strategy continues successful Plan Colombia programs while putting greater emphasis on consolidation of state presence, including access to social services, and on development through sustainable growth and trade.

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 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.

Foreign investors are welcomed as technology, management expertise, access to oversees markets, and finance, can be brought to the market

Colombia’s economy is heavily dependent upon its natural resources. Main exports include its well known coffee, petroleum and petroleum products, emeralds, fruits, flowers, iron and steel, textiles and apparel.

Colombia has not suffered any dramatic economic collapses. Prudent fiscal policies are maintained and economic reforms including tax, pension and budget reforms are pursued.

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.

Colombia experienced accelerating growth between 2002 and 2007, chiefly due to advancements in domestic security, to rising commodity prices, and to President URIBE’s promarket economic policies. Foreign direct investment reached a record $10 billion in 2008. A series of policies enhanced Colombia’s investment climate: President Uribe’s pro-market measures; pro-business reforms in the oil and gas sectors; and export-led growth fueled mainly by the Andean Trade Promotion and Drug Eradication Act.

Inequality, underemployment, and narcotrafficking remain significant challenges, and Colombia’s infrastructure requires major improvements to sustain economic expansion. Because of the global financial crisis and weakening demand for Colombia’s exports, Colombia’s economy grew only 2.6% in 2008, and contracted slightly in 2009. In response, the Uribe administration cut capital controls, arranged for emergency credit lines from multilateral institutions, and promoted investment incentives, such as Colombia’s modernized free trade zone mechanism, legal stability contracts, and new bilateral investment treaties and trade agreements. The government also encouraged exporters to diversify their customer base beyond the United States and Venezuela, traditionally Colombia’s largest trading partners.

The government is pursuing free trade agreements with European and Asian partners and awaits the approval of a Canadian trade accord by Canada’s parliament. In 2009, China replaced Venezuela as Colombia’s number two trading partner, largely because of Venezuela’s decision to limit the entry of Colombia products. The business sector remains concerned about the impact of the global recession on Colombia’s economy, Venezuela’s trade restrictions on Colombian exports, an appreciating domestic currency, and the pending US Congressional approval of the US-Colombia Trade Promotion Agreement.

Mining

Mining in Colombia began in the 1500s. Precious metal and stone mining was still carried out in the late 1980s. Gold was the most important metal in terms of short-term revenues. With the discovery and exploitation of large coal and natural gas reserves, the role of mining in the national economy expanded in the late 1980s. Mining and energy related investments have grown because of higher oil prices, increased demand and improved output. Other important metals in Colombia include platinum and silver, as well as been a major producer of emeralds.

Colombia’s impressive gold endowment and high exploration potential is widely recognized, with historic production believed to exceed 120 million ounces. Recent government-led improvements in security, infrastructure, and mining law reform are providing an ever improving environment for foreign investment in mineral exploration and development.

Infrastructure

Government efforts to expand mining in Colombia were needed to encourage private sector investment. The government set a policy of developing infrastructure (roads, electricity, and communications), providing technical assistance, and encouraging sound credit and legal policies to minimize problems with land titling.

The government of Colombia has outlined plans to invest COP55trn (US$24.4bn) in the country’s infrastructure over 2009 and 2010, a plan predicated upon the procurement of new projects under public private partnership (PPP) schemes. 

Forecasts for real industry value growth stands at 7.7% for 2009 and 5.6% for 2010. The plethora of tenders and private sector interest highlights that Colombia’s infrastructure sector is certainly a market to watch in the coming years. Over 2009, at least US$8.5bn worth of tenders were announced for transport infrastructure projects, which does not include projects such as the Bogota Metro, where feasibility studies are still under way to determine costs.The transport sector dominates developments in infrastructure. Official statistics indicate that over the first half of 2009, all transport sectors received a higher level of investments compared with the same time the previous year. In the energy and utilities sector, the Hidroeléctrica Ituango hydropower project, will have capacity of 2.4GW when it is complete. It is a major infrastructure project that has already attracted 22 companies interested in contracts. The contract is due to be awarded in June 2010 and construction is due to begin by 2011.