An Emerging Tiger in South America
Colombia has become one of the most promising economies in the Western Hemisphere.
9:00 AM, Oct 31, 2011 • By JAIME DAREMBLUM
On October 21, President Obama signed into law the U.S.-Colombia free trade agreement (FTA), thereby giving American exporters greater access to one of South America’s fastest growing markets. The long, tiring debate over the FTA—which began five years ago, when the agreement was first completed—showed that popular perceptions of Colombia are stuck in a time warp. Not only has the country become a much safer and less violent place than it was in the 1980s, 1990s, and early 2000s, it has also become one of the most promising economies in the Western Hemisphere.
Last year, veteran Latin America correspondent Mac Margolis described Colombia as “a prospering dynamo,” noting that foreign direct investment (FDI) increased fivefold—and per capita GDP doubled—between 2002 and 2010. For that matter, the country received more than $7 billion worth of FDI during the first six months of 2011, an increase of 91.4 percent over the equivalent period in 2010. As the Wall Street Journal reported in mid-September, Colombia is one of six developing nations that “are being touted as the next generation of tiger economies.” Known by the acronym CIVETS, this group also includes Indonesia, Vietnam, Egypt, Turkey, and South Africa.
In March, Standard & Poor’s elevated Colombia’s credit rating to investment grade level. Moody’s did the same thing roughly two months later, citing “Colombia’s proven ability to deal with internal and external shocks.” Fitch Ratings followed suit on June 22, praising the country for its “track record of prudent economic policies” and also commending President Juan Manuel Santos for his advocacy of “an extensive reform agenda to bolster the credibility and predictability of public finances and enhance the country's growth trajectory.”
Colombia’s transformation has spurred a significant number of expatriates to return home. In the city of Pereira, “as many as one-fifth of the 4,000 new housing units sold last year were bought by Colombians living abroad, or by foreigners married to Colombians,” the Los Angeles Times reports. All told, “Colombian builders sold 152,000 new houses and condos last year,” which amounted to a 30 percent jump over new-unit sales in 2009. More recently, there was a 19 percent increase during the first seven months of 2011 compared with the same time frame in 2010.
The housing gains are just one symbol of Colombia’s progress in stemming violence and boosting economic opportunities. During the five year FTA battle, opponents of the trade deal often resisted acknowledging the extent of Colombia’s security improvements, particularly when it came to attacks on trade unionists, even as the objective evidence became impossible to deny. Contrary to the claims of anti-FTA labor leaders and NGOs, the South American country really has changed dramatically, and it really is a much safer place for union activists today than it was in the past.
Many other countries, both inside and outside of Latin America, now recognize that Colombia is an increasingly valuable economic partner. U.S. and Colombian officials signed their agreement on November 22, 2006. Five days later, Colombia inked a separate free trade accord with Chile. Since then, it has signed FTAs with Canada, Switzerland, the European Union, Peru, and several Central American nations. This past April, Colombia signed an economic-integration pact (the so-called Pacific Agreement) with Chile, Mexico, and Peru. It is currently negotiating FTAs with South Korea and Turkey, and it is also pushing to become a full member of the Asia-Pacific Economic Cooperation forum.
While Colombia does not boast the massive oil reserves of Venezuela or Brazil, it is blessed with an abundance of energy resources, including a relatively large amount of the black stuff. As the New York Times observes, Colombia’s daily oil output has approximately doubled over the past half-decade to reach nearly 1 million barrels, and officials are hopeful that it could hit 1.7 million barrels by 2020, provided the security environment continues to improve. Not for nothing has Colombia been called the “rising star” of the South American oil industry. It is also a major global coal exporter: According to the Energy Information Administration, the United States imports more coal from Colombia than from any other country.
To be sure, Colombian security forces are still waging war against leftist narco-guerillas, and many former right-wing paramilitary groups have become powerful drug gangs. Violence remains a serious threat to Colombian progress. (The energy sector, for example, has been the target of rebel bombings and kidnappings.) But this should not be allowed to overshadow Colombia’s momentous achievements in reducing overall levels of violence. Those of us who remember when the country seemed headed for total societal collapse can only marvel at its revival.
On October 20, one of Canada’s biggest financial institutions, Scotiabank, declared that it was purchasing 51 percent of Colombia’s Banco Colpatria. In a press release announcing the move, Scotiabank noted that the South American country has been enjoying “solid economic growth,” and that “consistently improved governance, security and foreign investment incentives has created a highly favourable environment for foreign investors.” The $1 billion deal was proof of Colombia’s newfound dynamism and positive outlook.
When U.S. policymakers survey the hemispheric landscape, they see plenty of worrisome trends, including the upsurge of drug violence in Mexico and Central America, the attacks on democracy from leftist autocrats such as Hugo Chávez, and the growing regional footprint of Iran. But Colombia is a bright spot, a country where democratic capitalism has triumphed against all odds. Indeed, if Chávez represents Latin America’s troubled past, Colombia represents its potentially bright future.
Jaime Daremblum, who served as Costa Rica’s ambassador to the United States from 1998 to 2004, is director of the Center for Latin American Studies at the Hudson Institute.
Recent Blog Posts