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COUNTRY ANALYSIS REPORT

Colombia
In-depth PESTLE Insights

Publication Date: August 2010

OVERVIEW

Catalyst
This profile analyzes the political, economic, social, technological, legal and environmental structures in Colombia. Each of
the PESTLE factors is explored on four parameters: current strengths, current challenges, future prospects and future risks.

Summary
Key findings

President Juan Manuel Santos has imparted political stability, but fragile internal security remains a problem

President Juan Manuel Santos has managed to impart political stability to the country after winning the presidential
elections in June 2010. Santos won the elections with over 69% of the vote compared to his opponent Antanas Mockus,
who won only 27.5% of the vote. Santos is the founder of the Social National Unity Party (U Party). Furthermore, the Social
National Unity Party has continued with the agenda of uniting parliamentary supporters of President Santos into one single
party. In the 2010 elections, this party won 47 deputies and 28 senators. With the strong majority, the president enjoys a
majority in the parliament which allows him to undertake major reforms.

However, guerilla groups like the Revolutionary Armed Forces of Colombia (FARC; Fuerzas Armadas Revolucionarias de
Colombia – Ejército del Pueblo) have continued to exist in Colombia despite the government’s efforts to curb their
influence. The country is not completely free from paramilitary groups and narcotics-trafficking syndicates. Many groups
have subverted the lenient amnesty schemes to win immunity from prosecution and have continued illegal operations in the
country by forming new paramilitary groups or forging ties with militarized drug traffickers. Groups like FARC and the
National Liberation Army (ELN; Ejército de Liberación Nacional) remain well funded and equipped, and are capable of
carrying out effective guerrilla attacks against the military and security forces. In December 2009, FARC rebels killed the
governor of the southern state of Caqueta, Luis Francisco Cuellar. The country continues to face serious threats from
armed guerilla groups and narcotics syndicates.

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Overview

A preferred FDI destination, but increasing current account deficit and external debt are a cause for concern

Foreign direct investment (FDI) in Colombia has grown rapidly following the economic liberalization and privatization
programs of the 1990s. To overcome the economic crisis and as part of the IMF bailout package, the Colombian
government passed laws to remove restrictions on foreign inflows. It initiated a privatization program and opened up
investment in the oil industry. In 2005, FDI saw a huge spike and touched around $10 billion compared to $4 billion in the
previous year. In spite of the global economic slowdown, the country registered a marginal increase in FDI from around $9
billion in 2007 to reach around $10 billion in 2008. Moreover, the country has seen an increase in FDI in diverse sectors.
Although manufacturing, energy, and mining sectors are the main recipients of FDI, the financial, transportation, and
communications sectors are not far behind in this regard. Furthermore, despite global recession, the country attracted FDI
of $7.2 billion in 2009.

Colombia’s widening current account deficit and huge external debt are the major challenges the government has to deal
with. In 2008, the current account deficit reached $6.7 billion from $5.8 billion in 2007. The current account deficit as a
percentage of GDP increased from 3% in 2007 to reach 3.5% in 2008. The country had a current account deficit of $5.1
billion in 2009 (2.2% of GDP), compared to $6.9 billion in 2008. The external debt increased from $41.3 billion in 2007 to
reach $46.4 billion in 2008. The external debt rose to $47.3 billion as of December 31, 2009 and it is expected to go up
further.

Country is ranked low on human development index (HDI), however, new initiatives are being taken to improve the
social landscape

Colombia performs poorly on the human development index (HDI) as defined by the UNDP (United Nations Development
Programme). According to the UNDP, the HDI of Colombia is 0.807, which puts the country in the 77th position in a list of
182 countries in 2009. Besides poor educational standards, disparities in healthcare have continued to persist in the
country, with the poor continuing to suffer relatively high mortality rates. The healthcare sector also faces significant
challenges such as large scale corruption and the misallocation of funds.

In August 2010, the Inter-American Development Bank approved a $220 million loan to support Colombia’s Familias en
Accion conditional cash transfer program aimed at improving the health, nutrition and education of poor families. The
objective of the program is poverty reduction through direct cash transfers to families, and stimulating household
investment in child health and education. The reforms are expected to include the update of the obligatory national health
plan, the unification of the subsidized and contributive systems, the creation of a technical evaluation committee, promotion
of preventive healthcare services, and the formalization and creation of further employment.

The burgeoning telecoms sector presents new opportunities in terms of technological advancement

Colombia’s progress in terms of technological development has been limited. The country also lags behind in terms of
technical manpower and science and technology (S&T) infrastructure. The country spends very little on R&D (around 0.3%)
and has failed to take advantage of FDI inflows to develop its technological capabilities. The level of expenditure
undertaken by Colombia is far below the desirable level of 1% of GDP (as given by the OECD). The per capita expenditure
on R&D has also declined over the years. The public sector plays a dominant role in R&D expenditure, with the business
sector’s contribution to R&D remaining at 18%. Limited involvement of the business sector has also impaired innovative
activities in the country.

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Overview

However, with the liberalization of the economy, the telecommunications sector has been witnessing significant growth. The
Colombian telecommunication sector has been rapidly growing, especially in mobile telephony, as mobile phones
subscriptions grew at an annual average rate of around 38.4% during 2002–09. Mobile telephony growth peaked in 2005,
growing at a rate of 109%. However, during the same year, the fixed line segment registered a negative growth.

Cumbersome legal processes taint an otherwise favorable investment landscape

The legal climate is generally considered as conducive for foreign investment in Colombia. Ever since the liberalization in
the 1990s, the country has provided national treatment for foreign investors. A number of controls on remittance of profits
and capital were also lifted, and foreign investment was allowed in most sectors, except in defense and sectors with
national importance. Generally, foreign investment does not require prior authorization, except when made in restricted
areas. Although investments involving sensitive sectors are subject to prior approval, foreign investors are not treated
differently from domestic players.

Although the FDI policies are favorable, legal processes are lengthy and the judiciary has been accused of being less than
fair on a number of occasions. The independence and freedom of judges to make fair judgments are curtailed due to
pressure imposed by vested interests. Moreover, a heavy workload has strained the system's limited resources. On a
number of occasions, the lower courts have failed to act independently and unless adequate measures are taken these
courts will remain susceptible to corruption. Moreover, the lack of coordination among government entities such as the Tax
and Customs Directorate (DIAN; Dirección de Impuestos y Aduanas Nacionales de Colombia), prosecutors, and the
national police act as a stumbling block to the timely resolution of cases.

Impressive performance on environment index, however, widespread deforestation remains a challenge

Colombia was ranked 10th out of 163 countries in the 2010 Environmental Performance Index (EPI) conducted by Columbia
and Yale universities. The country performed well in managing forestry, fisheries, cropland use and reducing ground level
ozone, a pollutant from human activities that causes significant health problems. According to Colombian Ministry of
Environment officials, the country reduced the national consumption of ozone-depleting substances, such as
chlorofluorocarbons, by 86% between 1995 and 2007.

Despite maintaining good environmental quality, deforestation and soil erosion pose challenges for the Colombian
government. Soil erosion has been the direct result of vegetation loss and heavy rainfall, and soil has further been
damaged by the overuse of pesticides. Increasing demand for palm oil, a significant source of biofuel, has led to further
deforestation to make room for new plantations, and large tracts of forest are also disappearing because of gold mining.
Increasing deforestation has led to a growth in the number of endangered species.

PESTLE highlights

Political landscape

• As of 2009, Colombia was ranked in the very low 8.1 percentile of the World Bank’s Worldwide Governance
indicators, in terms of political stability and absence of violence.

• The new administration of President Juan Manuel Santos has laid out plans in August 2010 to raise $2bn in
financing to cover a budget gap.

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The Gini index in Colombia was 0. a decline from 0.8% of the population belongs to the 15–64 age group.1% in 2008. up from COP678 billion in 2008.6 years. 66. Legal landscape • Colombia has been ranked as the 58th freest economy by the Wall Street Journal’s index of economic freedom in 2010.8% of GDP in 2009.7 trillion ($7. The median age in Colombian society is 27. and in 2009. • Colombia. Social landscape • In Colombia. Technological landscape • Implementation of IPR laws has remained poor as multiple parties involved in the process make enforcement cumbersome. • Most of the R&D fund goes to public enterprises. • Colombia is one of the most inequitable countries in the Latin American region. Environmental landscape • The CO2 emissions in Colombia increased from 53 million metric tons in 2002 to over 71 million metric tons in 2009.51 in 2000. up from 0. law. The deficit amounted to COP13. • There are laws which restrict the movement of personnel in professional areas. This brief is a licensed product and is not to be photocopied Page 4 . which is the second most biologically diverse country on earth. The country’s GDP is expected to recover to around 2. 27. such as architecture. • The Colombian government posted a consolidated budget deficit of 2. There are also limitations on employing foreign nationals. indicating that the country has a demographic advantage in terms of number of people in the working age.4. is home to about 10% of the world's species.14 billion). and construction. engineering. It ranks 12th out of 29 countries in the Americas.2% of the population to the 0–14 age group and 6% of the population is in the 65-plus group.58 in 2008. the GDP growth slowed down to 0.5% in 2010. Colombia: Country Analysis Report – In-depth PESTLE Insights Published 08/2010 © Datamonitor. Growing deforestation has also led to an increase in the number of endangered species. and its overall score is equal to the regional average. the largest benefactor of the tax deduction is the research arm of Ecopetrol. the state oil company.3% during 2002–09.Overview Economic landscape • The economy recorded an average growth of 4.

8 14.8 3.095 3.1 3.7 45.9 Imports.4 97.0 2.2 22.1 GDP growth rate (%) 2. constant 2000 prices. per capita ($) 3. (million) 43.1 4.4 13.7 44. total as % of GDP 17.7 148.8 97.0 14.190 3.069 3.4 161.2 24.4 142.2 44.Overview Key fundamentals Table 1: Colombia – Key fundamentals 2008 2009 2010 2011 2012 2013 2014 GDP.1 43.3 12.7 46.108 3.8 21.3 23.0 137.9 Exports.9 Mid-year population. This brief is a licensed product and is not to be photocopied Page 5 .1 3.8 10.7 97.8 97.6 3.3 154.9 4.3 GDP.9 96.2 97.2 13.5 0.5 19.2 Unemployment rate (%) 11. total as % of GDP 19.8 Mobile penetration (per 100 people) 91.375 3.1 10. Constant 2000 Prices ($ billion) 133.4 2.2 45.1 24.4 14.483 Inflation 7.5 134.1 11.277 3.9 3.8 15.9 Source: Datamonitor DAT AMONITOR Colombia: Country Analysis Report – In-depth PESTLE Insights Published 08/2010 © Datamonitor.5 3.7 10.7 2.7 10.

Table of Contents TABLE OF CONTENTS Overview 1 Catalyst 1 Summary 1 Key facts and geographic location 10 Key facts 10 Geographical location 11 PESTLE analysis 12 Summary 12 Political analysis 13 Economic analysis 16 Social analysis 19 Technology analysis 22 Legal analysis 25 Environmental analysis 28 Political landscape 31 Summary 31 Evolution 31 Structure and policies 33 Performance 37 Outlook 38 Economic landscape 39 Summary 39 Evolution 39 Structure and policies 40 Performance 43 Outlook 55 Social landscape 56 Summary 56 Evolution 56 Structure and policies 56 Performance 59 Colombia: Country Analysis Report – In-depth PESTLE Insights Published 08/2010 © Datamonitor. This brief is a licensed product and is not to be photocopied Page 6 .

This brief is a licensed product and is not to be photocopied Page 7 .Table of Contents Outlook 61 Technological landscape 62 Summary 62 Evolution 62 Structure and policies 62 Performance 63 Outlook 66 Legal landscape 67 Summary 67 Evolution 67 Structure and policies 67 Performance 70 Outlook 70 Environmental landscape 71 Summary 71 Evolution 71 Structure and policies 71 Performance 72 Outlook 74 APPENDIX 75 Ask the analyst 75 Datamonitor consulting 75 Disclaimer 75 Colombia: Country Analysis Report – In-depth PESTLE Insights Published 08/2010 © Datamonitor.

2004–09 50 Figure 13: Current account balance of Colombia. 2009 45 Figure 9: Agriculture output of Colombia. 2002–09 46 Figure 10: Industrial output of Colombia. 2002–13 (real GDP at constant 2000 prices) 44 Figure 8: GDP composition by sectors. 2002–09 47 Figure 11: Services output of Colombia. 2002–09 48 Figure 12: External trade of Colombia. 2002–13 65 Figure 22: Carbon dioxide emissions in Colombia. 2009 58 Figure 18: Expenditure on healthcare in Colombia. 2002–08 51 Figure 14: Total foreign investment in Colombia.Table of Contents TABLE OF FIGURES Figure 1: Map of Colombia 11 Figure 2: Colombia – key political events time line 32 Figure 3: Key political figures in Colombia 33 Figure 4: Composition of the house of representatives (Colombian parliament) 35 Figure 5: Historical GDP growth rate in Colombia (real GDP at constant 2000 prices) 40 Figure 6: Market capitalization of the Colombian Stock Exchange (BVC). 2002–13 64 Figure 21: Internet users and growth rate in Colombia. 2002–12 74 Colombia: Country Analysis Report – In-depth PESTLE Insights Published 08/2010 © Datamonitor. 2003–13 60 Figure 19: Expenditure on Education in Colombia. 2003–13 61 Figure 20: Growth rate of mobile and fixed-line subscribers in Colombia. 2003–08 42 Figure 7: GDP and GDP growth rate in Colombia. 2002–08 53 Figure 15: Consumer price index and CPI-based inflation in Colombia. 2002–13 73 Figure 23: Carbon fuel usage in Colombia. 2002–13 54 Figure 16: Unemployment and rate of unemployment in Colombia. 2002–13 55 Figure 17: Major religions of Colombia. This brief is a licensed product and is not to be photocopied Page 8 .

2009 57 Colombia: Country Analysis Report – In-depth PESTLE Insights Published 08/2010 © Datamonitor. This brief is a licensed product and is not to be photocopied Page 9 .Table of Contents TABLES Table 1: Colombia – Key fundamentals 5 Table 2: Colombia – key facts 10 Table 3: Analysis of Colombia’s political landscape 13 Table 4: Analysis of the Colombian economy 16 Table 5: Analysis of Colombia’s social system 19 Table 6: Analysis of Colombia’s technology landscape 22 Table 7: Analysis of Colombia’s legal landscape 25 Table 8: Analysis of Colombia’s environmental landscape 28 Table 9: Mid-year population of Colombia by age (millions).

fuels. white (20%). electricity Source: CIA DAT AMONITOR Colombia: Country Analysis Report – In-depth PESTLE Insights Published 08/2010 © Datamonitor.31 years (total population) 70.910 sq km Language Spanish Exports Petroleum.138. paper products. mulatto (14%). nickel. This brief is a licensed product and is not to be photocopied Page 10 . transportation equipment.2 million Currency Colombian peso GDP per capita (PPP) $9.Key facts and geographic location KEY FACTS AND GEOGRAPHIC LOCATION Key facts Table 2: Colombia – key facts Country and capital Full name Republic of Colombia Capital city Bogota Government Government type Republic Head of state and head of government President Juan Manuel Santos Population 44. apparel. coffee. others (4%) Major religion (2001 census) Roman Catholic (90%).98 years (men) 77. black (4%). coal. emeralds.84 years (women) Ethnic composition (2000) Mestizo (58%). consumer goods. chemicals. bananas.200 Internet domain .co Demographic details Life expectancy 74. cut flowers Imports Industrial equipment. other (10%) Country area 1.

between Ecuador and Panama. bordering the Caribbean Sea. This brief is a licensed product and is not to be photocopied Page 11 . and bordering the North Pacific Ocean. between Panama and Venezuela. Figure 1: Map of Colombia Source: CIA The World Fact book DAT AMONITOR Colombia: Country Analysis Report – In-depth PESTLE Insights Published 08/2010 © Datamonitor.Key facts and geographic location Geographical location Colombia is located in northern South America.

In August 2010. and it is this attitude that has been the backbone of his victorious campaigns in the last two presidential elections in 2002 and 2006. especially the lower courts. the legal system has remained cumbersome and the courts.4% in 2009. and struggled to achieve the necessary growth to raise the living standards of the entire population. This brief is a licensed product and is not to be photocopied Page 12 . The country has managed to maintain fairly good standards for its environment but there is further scope for improvement by effective implementation of environmental policies.5% in 2008 from a high of around 7% in 2007 due to the global economic slowdown. However. Despite liberalization measures. Furthermore. Having undertaking liberalization programs since the late 1990s. It was at this time that presidential candidate Alvaro Uribe advocated the adoption of a hard-line stance against the rebels. the government resorted to strengthening capital controls on foreign portfolio investments in May 2008 to ease the pressure of the peso. as the extent of R&D expenditure is far below the average. despite limited economic success. the IMF bailout package led to economic recovery. with poverty a major issue. The economy also opened up for foreign investment and undertook large scale privatization. A four-year peace process between the authorities and the main rebel group broke down in February 2002. the country has made little progress with respect to enhancing its technological capabilities. with an annual average GDP growth of 4. Colombia: Country Analysis Report – In-depth PESTLE Insights Published 08/2010 © Datamonitor.PESTLE analysis PESTLE ANALYSIS Summary The Colombian political landscape has been dominated by a long-running civil conflict between Marxist rebel groups. Juan Manuel Santos Calderon was elected as President of Colombia. The education and healthcare policies also require a revamp to improve accessibility for the poor. the economy slipped into recession in 1998–99. have remained susceptible to corruption and intimidation. rightist paramilitaries and the beleaguered armed forces. GDP further decelerated to 0. As with the social condition.8% during 2000–08. amid allegations that the rebels had merely used the intervening cease fire to rearm and regroup. Affected by the ongoing civil war and external shocks. the country has not been able to ensure an equitable growth for its population. after he won the two rounds of elections in June 2010. Colombia’s GDP growth came down to 2.

after he won the two rounds of elections in June 2010. Furthermore. With the strong majority. In the 2010 elections. 2010. including the one in May 2006. and it is this attitude that was the backbone of his victorious campaigns in the two presidential elections.6 percentile. Santos won the election with over 69% of the vote compared to his opponent Antanas Mockus. Improvement in regulatory quality and government effectiveness In terms of government effectiveness. Colombia’s performance was ranked at 60. the president can undertake major reforms.5% of the vote. clampdown on rampant corruption or kick-start the ailing economy has bred increasing political frustration.2 percentile in 2008. the Social National Unity Party has continued with the agenda of uniting parliamentary supporters of President Santos into one single party. the perceived failure of either party to control the long- running civil war. However. when it was ranked at 52. who won only 27. as given by the world governance indicators. Santos was the founder of the Social National Unity Party (U Party). He took over the presidential office on August 7. This brief is a licensed product and is not to be photocopied Page 13 . but his tough approach has also been accused of human rights violations from some quarters. The independent neo-liberal candidate Alvaro Uribe won the presidential polls in the May 2002 presidential polls.PESTLE analysis Political analysis Overview Since independence from Spain in the early 19th century. Table 3: Analysis of Colombia’s political landscape Current strengths Current challenges ■ President’s majority in parliament ■ Low ranking on political stability and absence of internal violence ■ Improvement in regulatory quality and government effectiveness ■ Andean tensions Future prospects Future risks ■ New policies ■ Drug trafficking ■ Continued activities of terror groups Source: Datamonitor DAT AMONITOR Current strengths President’s majority in the parliament President Juan Manuel Santos has succeeded former President Uribe in imparting political stability to the country after winning the presidential elections in June 2010. Colombia’s political direction has been dictated by the center- right Conservative Party and the populist Liberal Party. This is an improvement over its ranking in 2003. Uribe advocated the adoption of a hard line stance against the rebels. Under Colombia: Country Analysis Report – In-depth PESTLE Insights Published 08/2010 © Datamonitor. this party won 47 deputies and 28 senators. Juan Manuel Santos Calderon was elected as president of Colombia. Former president Uribe has succeeded in arresting the murder and kidnapping rate.

Such cases of internal threats derail the democratic setup of the country.PESTLE analysis former President Uribe. There is also an improvement in terms of regulatory quality. Prior to the presidential election. Ties were partly restored in late 2009. the government effectiveness has improved due to various reform measures and it is expected that the new president being from same government will continue with similar policies. the government aims not to increase taxes. Political stability and absence of violence measures perceptions of the likelihood that the government will be destabilized or overthrown by unconstitutional or violent means. Relations with Ecuador have improved since a Colombian army raid across its border to attack a Revolutionary Armed Forces of Colombia (FARC) rebel camp in 2008. On a number of occasions the election process was disrupted. former President Alvaro Uribe announced that the sale would be postponed until the new government took office. While a military conflict is unlikely. Venezuelan President Hugo Chavez and Ecuador's President Rafael Correa. which is an improvement over its 2004 score of 52. The new government has decided against selling.4 in 2008.6bn (0. there is a risk of a border incident. Venezuela has curbed trade with Colombia. but it does want to increase the taxpayer base to bolster state revenue. including domestic violence and terrorism. is focused on creating jobs and generating economic growth. The presence of warfare groups has always threatened stability in the region. Current challenges Low ranking on political stability and absence of internal violence Colombia was only ranked in the 8. when contesting members were killed. with conflicts involving outlawed armed groups and drug cartels which have led to restrictions on citizens’ rights. citing the sale as only a Colombia: Country Analysis Report – In-depth PESTLE Insights Published 08/2010 © Datamonitor. Andean tensions Relations between Colombia and its left-wing Andean neighbors. This brief is a licensed product and is not to be photocopied Page 14 . Colombia’s percentile ranking in terms of regulatory quality was 59. The new government led by President Santos.1 percentile in terms of political stability and absence of violence in 2008. Regulatory quality measures the ability of the government to formulate and implement sound policies and regulations that permit and promote private-sector development. Venezuela and Colombia clashed over Uribe's accusations that Venezuela was harboring Colombian rebels on its territory. a former finance minister who once helped bring Colombia out of a fiscal crisis. Chavez says the plan is a US threat to his OPEC nation. The country has witnessed prolonged violence. The long-awaited ISAGEN sale would have brought in $1. were at their worst during 2009 and this will test the newly formed Santos government. The two neighbors also have sparred over a plan to allow the US troops more access to Colombia's military bases to help combat drug trafficking.6% GDP) in revenue and was already accounted for in the medium-term fiscal figures the outgoing government presented in June 2010. Future prospects New policies The new administration of President Juan Manuel Santos laid out plans in August 2010 to raise $2bn in financing to cover a budget gap resulting from its decision not to sell the government’s stake in the power generation company ISAGEN and the delay of another set of privatizations that had been slated for 2010.2. Along with strong growth. But a probe into charges that Colombian agents spied on Correa and top officials in mid 2010 has increased tensions again.

Continued activities of terror groups Guerilla groups like the FARC have continued to exist in Colombia despite the government’s tough policies. Luis Francisco Cuellar. Despite a demobilization of paramilitaries who once fought the FARC. Many groups have used the lenient amnesty schemes of the country to win immunity from prosecution and have continued illegal operations by forming new paramilitary groups or joining the armed wings of various drug traffickers. Colombia: Country Analysis Report – In-depth PESTLE Insights Published 08/2010 © Datamonitor. Armed groups have fragmented and rebels have formed alliances with drug-trafficking gangs and former paramilitaries. making the government's task more complex. $500m from multilateral organizations and $1bn by issuing treasury bonds in the local market. This has raised the threat level in the country.. 1 cocaine producer and multiple illegal armed groups are all engaged in the drug trade. Future risks Drug trafficking In 2009. FARC rebels killed the governor of the southern state of Caqueta. This brief is a licensed product and is not to be photocopied Page 15 .PESTLE analysis palliative short-term measure. In December 2009. To replace the $2bn in privatization revenue. the new government plans to raise $500m through foreign bond issues. The country is not completely free from paramilitary groups and narcotics-trafficking syndicates. Colombia remained the world's No. The groups like the FARC and ELN remain well funded and equipped and are capable of carrying out effective guerrilla attacks against military and security forces. new crime groups have emerged and increased the threat to the government in the medium term.

The Financial Superintendence oversees the Colombian credit institutions with strict vigilance mechanisms. the economy’s GDP growth peaked at 7. The financial sector of the country has undergone Colombia: Country Analysis Report – In-depth PESTLE Insights Published 08/2010 © Datamonitor. Colombia’s GDP growth came down to 2. the growth turned out to be short-lived. FDI jumped to $10. Table 4: Analysis of the Colombian economy Current strengths Current challenges ■ Increase in FDI in diverse sectors ■ Increasing current account deficit and external debt ■ Well developed financial system ■ Poor state of infrastructure Future prospects Future risks ■ Economic reform programs ■ Increasing fiscal deficit ■ New oil and mining investments Source: Datamonitor DAT AMONITOR Current strengths Increase in FDI in diverse sectors FDI in Colombia has grown rapidly following the economic liberalization and privatization programs of the 1990s.2 billion in 2008.4% in 2009. the government’s efforts towards fiscal discipline and the reduction of public debt along with its export-oriented growth strategy have maintained investor’s confidence in the economy. This brief is a licensed product and is not to be photocopied Page 16 .3 billion from $3 billion recorded in the previous year. the financial. Furthermore. and mining sectors are the main recipients of FDI. As part of this. In 2007.5%. To overcome the economic crisis. and as part of the IMF bailout package. energy.4 billion.5% in 2008 and further down to 0. however. Nevertheless. Moreover.PESTLE analysis Economic analysis Overview The Colombian economy staged a recovery in 2000 following the government’s drastic economic reform measures. transportation. the Colombian government has passed laws to remove restrictions on foreign inflows.8% during 2000–08. despite global recession and slow down in economy. The economy recorded an average growth of around 4. the country has seen an increase in FDI flow in diverse sectors. and communications sectors have also attracted significant amounts of FDI. Although manufacturing.2 billion in 2009. one of the highest in the Latin American region. total foreign investment stood at $9. the country attracted a FDI of $7. and it increased to 10. In 2007. Well developed financial system Colombia has a comparatively well developed financial system in the region. it initiated a privatization program and opened up investment in the oil industry. as the global economic slowdown adversely affected its prospects. In 2005.

oil and mining. strong growth and peso appreciation have somehow eased the debt ratios since 2003. Moreover. The external debt increased from $41.3 billion in 2007 from an estimated $40 billion in 2006 and is expected increase further.8 billion in 2007. The new government headed by President Juan Manuel Santos aims to lower corporate taxes. and transparent information standards. the current account deficit reached $6. which is an increase of 14% from the same period in 2009. when the economy faced a recession.2% of GDP). Increasing current account deficit and external debt continue to be a major challenge for the new government. Although the government has begun to upgrade key road routes from Bogota to the west and north. up 10% from COP224 billion ($122. The Colombia: Country Analysis Report – In-depth PESTLE Insights Published 08/2010 © Datamonitor.4 billion in 2008. the market capitalization decreased to $82. The security problems on roads have aggravated the problem.5 million) in the same period in 2009. leading to an excessive dependence on air transport. housing. the Colombian capital market has witnessed significant growth. Current challenges Increasing current account deficit and external debt Colombia’s widening current account deficit and huge external debt are the major challenges the government has to deal with.7 billion) during the first half of 2010. with GDP growth falling to 0. Poor state of infrastructure The poor infrastructural facilities of Colombia have acted as a significant barrier against fulfilling the country’s full potential to attract foreign investments.6 billion. The external debt rose to $41. The current account deficit is expected to further widen as a result of rising import bills and higher debt interest payments.1 billion in 2009 (2. As a result of the ensuing mergers and acquisitions. Banco Davivienda.7 billion from $5.4% in 2009.PESTLE analysis consolidation following the 1998–99 crises. Although the market capitalization came down to around $88 billion in 2008. protection of the rights of minority shareholders. Colombia's banking sector posted a net profit of COP3. booked a net profit of COP247 billion ($135. In 2009. clear barriers on investment and help drive growth by focusing on the following five areas: infrastructure.9 billion in 2008. the economy’s electricity capacity is low and transmission lines and oil pipelines have remained frequent targets of guerilla attacks. Furthermore. there have been delays in the concessions process. Over the years. agriculture and education.08 trillion ($1. However. The external debt rose to $47. the country has been able to contain the fallout of the global economic crisis to a certain extent. 2009 and it is expected to go up further.5% in 2008. This brief is a licensed product and is not to be photocopied Page 17 . The country had a current account deficit of $5. Furthermore. In 2008.6 million) in the first half of 2010. compared to $6. Legislation introduced in 2005 has helped to strengthen the capital markets through improved corporate governance. the communication infrastructure of the country is poor by regional standards.3 billion in 2007 to reach $ $46. market capitalization of the leading stock exchange Bolsa de Valores de Colombia (BVC) has increased from $10 billion to more than $100 billion during 2002–07. the new institutions have broadened the distribution structures and have improved accessibility for the customers.3 billion as of December 31. The country's largest bank. The current account deficit as a percentage of GDP increased from 3% in 2007 to reach 3. Future prospects New reform programs Colombia went through an economic slowdown during 2008–09.

The government expects oil output to reach 1 million barrels per day in 2011.7 trillion ($7. Future risks Increasing fiscal deficit The Colombian government posted a consolidated budget deficit of 2. the government is not in favor of complicated tax reforms and privatization. the increasing government deficit will stall government efforts to improve infrastructure in the country.8% of GDP in 2009.5% increase from 2010. an oil block auction in June 2010 drew more than $1 billion in new investment offers in to the country. However. The government expects the deficit in 2010 to reach 4. Santos wants to reduce unemployment to single digits from around 12% in first quarter of 2010. However. New oil and mining investments Due to better security and pro-business environment. a major coal exporter and a growing player in gold production.14 billion). 4 oil producer in 2009. The government would also try to expand the tax base to generate revenue. The deficit amounted to COP13. up from COP678 billion in 2008. Canadian companies like Pacific Rubiales and other foreign operators are making investments in exploring Colombia's untouched oil fields.PESTLE analysis government plans to create 2. This brief is a licensed product and is not to be photocopied Page 18 . Colombia: Country Analysis Report – In-depth PESTLE Insights Published 08/2010 © Datamonitor.6 billion).3 trillion ($79. The government also plans auction of coal and other minerals before the end of 2010. Furthermore. up from 0.4 million jobs in the formal sector by 2014. a 2.4% of gross domestic product (GDP) and to shrink in 2011 to 3.1% in 2008. The government announced in July 2010 that budget for 2011 will reach COP147. .9% of GDP. Colombia has been ranked Latin America's No.

which improved the accessibility to healthcare services.PESTLE analysis Social analysis Overview According to the UNDP. there is disparity at the level of accessibility to these services. This brief is a licensed product and is not to be photocopied Page 19 . pharmacy services. Although its performance is better compared to other countries of the Latin American region. although enrolment rates in schools have somewhat increased since 2002. The Social Security Institute (ISS. Nevertheless. pensions. the Colombian government’s social reactivation plan is expected to go a long way in improving the social conditions of its population. which gives the country a rank of 77 out of 182 countries assessed. has not improved the standard of living of its people. However. The country’s economic advancement. On a related note. Instituto de Seguros Sociales) provides medical care. All workers are required to be affiliated with either the ISS or a private health or pension provider.807. and other benefits to Colombian workers. The country has also made little progress in advancing the education level of its population. and the ambulance service. The individual assumes some co-payments and moderate dues to the system. it performs poorly compared to other emerging nations. Table 5: Analysis of Colombia’s social system Current strengths Current challenges ■ Social welfare system in place ■ Poor rank on human development index ■ A young society ■ Income inequality Future prospects Future risks ■ International support ■ Fiscal sustainability of social initiatives Source: Datamonitor DAT AMONITOR Current strengths Social welfare system in place The Colombian government has put in place a robust social welfare system. the HDI of Colombia is 0. This rank is indicative of Colombia’s moderate performance in social development. The social security system also includes coverage for all general illnesses. a positive development has taken place in the healthcare sector after the reforms of 1993. Moreover. treatment in a decent quality facility. low-income persons who are not able to pay the contribution must enroll in the subsidized plan. However. The 1993 reform also provided for the creation and implementation of a new system of private healthcare providers known as Colombia: Country Analysis Report – In-depth PESTLE Insights Published 08/2010 © Datamonitor. which came through restructuring. the Colombian society inequitable as 5% of the population own nearly 90% of the wealth of the country and nearly 60% of the Colombian households live below the poverty line. in which the government and the Solidarity Fund (fund for low wage earners) participate.

2% are in the 0–14 age group and only 6% in the 65+ group. This brief is a licensed product and is not to be photocopied Page 20 . Colombia: Country Analysis Report – In-depth PESTLE Insights Published 08/2010 © Datamonitor. A young society Unlike many other advanced economies. As of 2009. The median age in Colombia is 27. In Colombia as of 2010. The Gini index measures total inequality on a scale of zero to one. The Gini index in Colombia was 0. the HDI of Colombia is 0. indicating that the country has a demographic advantage in terms of number of people in the working age. below the Latin American average of 25% and the OECD average of 54%. Current challenges Poor rank on human development index Colombia performs poorly on the HDI index as given by the UNDP. it has worsened the economic and social problems.5% of GDP on education. The government has not been able to implement any redistributive policies as well. the Colombian society is far from the challenges of an ageing population. a huge amount of debt burden has been a challenge for the national government. with the poor continuing to suffer relatively high mortality rates. which calls for an increasing government provision. which competes for members directly with the Social Security system and is governed by the same regulations and restrictions. Despite economic growth.8% of the population belongs to the 15–64 age group. According to the UNDP.58 in 2008. The social welfare system also provides for short term disability.PESTLE analysis Entidad Promotora de Salud (EPS). a decline from 0. Individuals may opt out of Social Security and join an EPS. which is expected to bring improvements in the social landscape of the country. Although various governments of Colombia have resorted to neo-liberal policies for reducing inequities. which is higher than the Latin American average but much less than other advanced nations. There are over a dozen EPSs. Similarly.807. zero corresponding to total equality and one to total inequality. 66. The new government led by President Juan Manuel Santos is focusing on job creation and rural development. The level was 20% of the population group. and a member may change his or her EPS every two years.6 years. The country fares poorly in terms of providing healthcare and education facilities to its population. The rank indicates the poor living standards of its population. 27. The healthcare sector is also faced with challenges such as large scale corruption and evasion of health-fund contributions. Income inequality Colombia is one of the most inequitable countries in the Latin American region. which gives the country a rank of 77 out of 182 countries assessed. especially those living in rural areas. Penetration of higher education in Colombia is also below international averages. as well as misallocation of funds.51 in 2000. the Colombian government spends nearly 4. The extent of inequality can be gauged from the figures that 5% of the population own nearly 90% of the property in the country and nearly 60% of Colombian households are below the poverty threshold. a drop of 30 places from 1990 rankings. disparities in healthcare have continued to persist. long term disability and survivor’s benefits.

4% in 2009. with increases in pension benefits and the economic slowdown. Colombia: Country Analysis Report – In-depth PESTLE Insights Published 08/2010 © Datamonitor. and stimulating household investment in child health and education. the creation of a technical evaluation committee. According to World Bank estimates.4% of GDP in 2000 to 6. During 2000–04. the Inter-American Development Bank approved a $220 million loan to support Colombia’s Familias en Accion conditional cash transfer program aimed at improving the health. The reforms are expected to include the update of the obligatory national health plan. while payouts have been increasing from 4. the cash flow deficit will remain at about 4% of GDP until 2020. The objective of the program is poverty reduction through direct cash transfers to families.1% of GDP. Future risks Fiscal sustainability of social initiatives The financial sustainability of the existing social expenditure programs has become doubtful. promotion of preventive healthcare services.PESTLE analysis Future prospects International support In August 2010. nutrition and education of poor families. Although the social security system underwent reforms in 1993 which expanded the user base. This brief is a licensed product and is not to be photocopied Page 21 . average contributions to the system have remained constant at 1. the unification of the subsidized and contributive systems. it is still generating deficits that need to be covered through large central government transfers. and the formalization and creation of further employment.

The National Council for Social and Economic Policy provides funds for R&D together with exemptions. This brief is a licensed product and is not to be photocopied Page 22 . which incorporates scientific and technological research into national development plans while creating the necessary conditions to stimulate innovation and technological management in national companies. the National Learning Service (SENA) was entrusted with the responsibility of promoting and facilitating the generation and consolidation of new entrepreneurial initiatives demonstrating a high innovation and technological development content within the framework of the national program. The country spends very little on R&D (less than 0.PESTLE analysis Technology analysis Overview Colombia’s progress in terms of technological development has been limited. Another significant decision made by the Finance Ministry allows universities to import equipment with the prior authorization of the Colombian Institute for the Development of Science and Technology (COLCIENCIAS). The country also lags behind in terms of technical manpower and inadequate S&T infrastructure. It also promotes the National System of Scientific and Technological Information. Table 6: Analysis of Colombia’s technology landscape Current strengths Current challenges ■ Science and technology policy in place ■ Low gross expenditure on R&D as percentage of GDP ■ Weak implementation of IPR laws Future prospects Future risks ■ World Bank loan ■ Public sector dominance of R&D activities ■ Emerging opportunities in telecommunications Source: Datamonitor DAT AMONITOR Current strengths Science and technology policy in place The Colombian government has put in place a national S&T policy. a nation must spend at least 1% of its GDP on science and technology activities to achieve sustainable development.2% of GDP) and has failed to take advantage of FDI inflow to develop its technological capabilities. According to the OECD recommendations. By these standards. and despite the post-2000 economic revival. Colombia: Country Analysis Report – In-depth PESTLE Insights Published 08/2010 © Datamonitor. the country has failed to improve its technical capabilities. Colombia has a long way to go. tax discounts and other financial stimuli. Moreover.

PESTLE analysis

Current challenges

Low gross expenditure on R&D as percentage of GDP

Colombia lags behind in terms of R&D expenditure. According to UNESCO statistics, total expenditure on R&D made by
Colombia as percentage of GDP was 0.3% of GDP in 2008, indicating a decline from the level of expenditure in 1996 (3%),
and far below the desirable level of 1% of GDP as stipulated by the OECD. The per capita expenditure on R&D has also
declined during these years. The public sector plays a dominant role in R&D expenditure, while the business sector’s
contribution to R&D stood at 18%. The limited involvement of the business sector has also delayed innovative activities in
the country.

Weak implementation of IPR laws

Colombia has made changes in its intellectual property rights (IPR) laws to meet the requirements prescribed under the
WTO’s Trade Related Intellectual Property Rights (TRIPs). However, the challenge of implementing IPR laws remains. The
institutional set up remains cumbersome which makes it difficult to enforce the IPR laws. A number of government bodies
are involved in the preparation of IPR policies and their enforcement. The Superintendency of Industry and Commerce
(SIC) is the Colombian authority responsible for granting patents and the development of IPR policies. The issuance of
plant variety protection-related and agro-chemical patents is undertaken by the Colombian Agricultural Institute (ICA). While
the Ministry of Social Protection is in charge of the issuance of pharmaceutical patents, the Ministry of Justice is in charge
of the issuance of literary copyrights. Furthermore, enforcement of IPR laws is carried out by other agencies such as the
tax and customs directorate (DIAN; Dirección de Impuestos y Aduanas Nacionales de Colombia), the Prosecutor General’s
office, the national police, and the judiciary. The officials manning these activities have a limited understanding of IPR
issues and are unable to assess the severity of the offences committed.

Future prospects

World Bank loan

In July 2010, the World Bank approved a loan of $25 million to Colombia for strengthening the National System of Science,
Technology and Innovation Project. The project objective is to strengthen the capacity of the Administrative Department of
Science, Technology and Innovation to promote human capital for the knowledge economy, research and development,
and innovation. The project will also raise awareness of science, technology and innovation in Colombia.

Emerging opportunities in telecommunications

The Colombian telecommunication sector has been rapidly growing, especially in mobile telephony, as mobile phones
subscriptions grew at an annual average rate of around 38.4% during 2002–09. Mobile telephony growth peaked in 2005,
growing at a rate of 109%. However, during the same year, the fixed line segment registered a negative growth.

Colombia had nearly 6.4 million fixed lines in service in 2009, with a teledensity rate of around 18%. There were
approximately 42.01 million mobile subscribers in 2009, with a penetration rate of 96%. The number of internet users is
also witnessing an increasing trend in the country. In 2009, there were a total of 17 million internet users. During the year,
around 20% of the population had subscribed to an internet connection, showing ample scope for growth in this segment.

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PESTLE analysis

Future risks

Public sector dominance of R&D activities

The incentive programs of the Colombian government have not moved away from the traditional legacy and public sector
dominance in the sector continues. Most of the fund goes for R&D activities in public enterprises; the largest benefactor of
the tax deduction is the research arm of Ecopetrol, the state oil company. Such schemes provide little option for growth in
innovative activities in the private sector. Low R&D expenditure from the private sector will take the country back to the era
of import substitution and protectionism, where the objective was to promote the national industry.

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PESTLE analysis

Legal analysis
Overview

The 1991 constitution of Colombia provided the judiciary with greater administrative and financial independence from the
executive branch. The investment regulations of the country are comparable to other emerging markets. The policies have
encouraged foreign investment, despite threats of internal security. However, the country’s legal implementation and
enforcement mechanism have remained weak. The lower courts have failed to act independently, and unless adequate
measures are taken these courts will remain susceptible to corruption and intimidation. Similarly, the independence of the
constitutional courts has been questioned as they are found to be interfering in the legislative process. However, it is
expected that a new prosecutorial system would improve the criminal justice system of the country.

Table 7: Analysis of Colombia’s legal landscape

Current strengths Current challenges
■ Well developed court structure ■ Cumbersome legal process
■ Formal openness to foreign investment

Future prospects Future risks
■ Legal reforms ■ Government restrictions in some sectors

Source: Datamonitor DAT AMONITOR

Current strengths

Well developed court structure

Colombia has a well developed court structure to address various judicial issues. The judicial system comprises of the
Supreme Court of Justice, the Council of State, the Constitutional Court and the Superior Judicial Council at the top level.
The Supreme Court of Justice has three chambers of civil, criminal and labor matters, and decides appeals on errors of law
and has the power to quash lower court decisions. The Council of State is the highest court of administrative law. It also
takes appeals from departmental administrative courts and some national officials. Furthermore, there is the Constitutional
Court to review the constitutional validity of laws approved by the legislative branch and some decrees issued by the
executive branch. The court system, with specialized agencies, is well equipped to establish an efficient judicial system.

Formal openness to foreign investment

The legal climate for foreign investment is generally conducive in Colombia. After the country began liberalization in the
1990s, it provided for the national treatment of foreign investors. A number of controls on remittance of profits and capital
were also lifted and foreign investment was allowed in most of the sectors, except in defense and in sectors with bearing on
national security. Generally, foreign investment does not require prior authorization, except when made in restricted areas.

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The constitutional reform project was badly received by Supreme Court magistrates. such as architecture. prosecutors. new president Juan Manuel Santos. engineering. who assumed office in August 2010 also met with the 78 magistrates of the high courts to resolve the issues pertaining to judiciary. the most important outcome of the meeting was an agreement to reach a consensus on an encompassing judicial reform bill. the provision of legal services is limited to law firms licensed under Colombian law. the independence of constitutional courts has been questioned as they are found to be interfering with the legislative process. law. This brief is a licensed product and is not to be photocopied Page 26 . Foreign law firms can operate in Colombia only by forming a joint venture with a Colombian law firm and operating under the licenses of the Colombian lawyers in the firm. They were particularly opposed to provisions seeking to transfer the prosecutor- general office from the judiciary to the executive branch and to give the president the authority to name the prosecutor- general. On a number of occasions. The legal processes are lengthy and the judiciary has been accused of being less than fair on a number of occasions.2 on the World Bank’s Governance Indicators 2009. Low ranking indicates the poor and inefficient regulatory process in the country. Alongside the establishment of a permanent communication mechanism between government and judiciary. and construction. For firms with more than 10 employees. There are also barriers to enter the telecommunications sector in the form of cross subsidies. Colombia’s percentile ranking in terms of regulatory quality was only 59. a heavy workload has pressurized the legal system's resources. foreign investors are not treated differently from domestic players.PESTLE analysis Although investments involving sensitive sectors are subject to prior approval. and requirements that mandate a commercial presence in Colombia. Similarly. there are laws which restrict the movement of personnel in professional areas. employers are not allowed to recruit Colombia: Country Analysis Report – In-depth PESTLE Insights Published 08/2010 © Datamonitor. Moreover. For instance. Future risks Government restrictions in some sectors Although the Colombian government follows an investor friendly policy. and the national police along with insufficient resources complicate timely resolution of cases. Moreover. a lack of coordination among government entities such as the DIAN. Current challenges Cumbersome legal process The lower courts of Colombia are found to be inefficient and involved in corrupt practices. and unless adequate measures are taken these courts will remain susceptible to corruption and intimidation. The independence of judges is also curtailed as they are subject to intimidation. In an effort to improve communication with the judiciary. the lower courts have failed to act independently. which the government hopes to send to Congress by the end of August 2010. Interior Ministry sent a request in early August 2010 to Congress to withdraw a judicial reform bill tabled by the previous government mere days before administration was scheduled to leave office. Future prospects Legal reforms The new Colombian government has made the first steps towards reconstructing battered ties with the judiciary. there are restrictions on services sectors which restrict investment opportunity. Furthermore. There are also limitations on employing foreign nationals.

Such restrictions will limit the scope of FDI inflow in the country. Colombia: Country Analysis Report – In-depth PESTLE Insights Published 08/2010 © Datamonitor. This brief is a licensed product and is not to be photocopied Page 27 .PESTLE analysis foreign nationals in excess of 10% of the general work force and 20% of specialists.

There are expectations of high market potential for Certified Emissions Reductions (CERs). Colombia performed well in forestry. However. and promoting strong ecosystems and sound natural resource management. power plants. According to the Colombian Ministry of Environment officials. This brief is a licensed product and is not to be photocopied Page 28 . Such limitations can be overcome through necessary regulations and by reducing the reliance on voluntary compliance. Colombia has remained at the forefront with respect to maintaining environment standards. which is reflected in the country’s high rank on the EPI. The signing of Kyoto Protocol has provided new opportunities for the Colombian government. The EPI looks at success in environmental protection based on two broad objectives: reducing environmental stress on human health. conducted by Yale and Columbia universities. there are risks related to investment and a lack of funds may restrict the funding of such projects. Although decentralized environmental management has helped to encourage public participation and social control at a regional level.PESTLE analysis Environmental analysis Overview In the Latin American region. The high rank points towards better environmental quality of this Latin American country. Environmental regulations ensure the completion of the country’s environmental objectives. agro-industry (panels) and forestry are the front runners in drawing up CDM projects. the country reduced the national consumption of ozone depleting substances such as chlorofluorocarbons by 86% between 1995 and 2007. it faces the challenge of weak enforcement and inconsistent regulations. Several sectors. Table 8: Analysis of Colombia’s environmental landscape Current strengths Current challenges ■ Impressive ranking in environment performance index ■ Increasing deforestation and soil erosion ■ Signatory to major international environment pacts ■ Weak implementation of environment laws Future prospects Future risks ■ Sustainable stockbreeding management project ■ Inability to integrate sustainable development with other policies Source: Datamonitor DAT AMONITOR Current strengths Impressive ranking in environment performance index Colombia was ranked 10th among 163 countries in the 2010 Environmental Performance Index (EPI). cropland use and reducing ground level ozone. such as cement. The structural system also needs to make some changes. Colombia has played an active role with respect to its commitment in various international environment treaties. fisheries. Colombia: Country Analysis Report – In-depth PESTLE Insights Published 08/2010 © Datamonitor. a pollutant from human activities that causes significant health problems.

improvements in rural adaptation to climate change and to the reduction of land degradation. taxes required to be collected under such regulations are not collected and regular inspections are sidelined due to a weak monitoring system. since the law relies excessively on voluntary compliance. as it will contribute to the conservation of global biodiversity critical to stockbreeding systems. deforestation and the preservation of its wildlife. the World Bank approved a $7 million grant from the Global Environmental Facility (GEF) for the Sustainable Stockbreeding Management Project in Colombia. Corporación Autónoma Regional) aggravates the problem of implementation. and whose focus is to improve production systems to benefit farmers and the environment. aims at promoting the adoption of Forest Grazing Systems (FGS) that allow improvements in natural resource management. Current challenges Increasing deforestation and soil erosion Despite the country’s progress in addressing environmental issues. The project. and the government has stated its intention to increase production to 6 million hectares by 2020. Large tracts of forest are also disappearing because of gold mining.027 hectares in 1998 to 275. Colombia: Country Analysis Report – In-depth PESTLE Insights Published 08/2010 © Datamonitor. Being a party to these environment pacts shows the government’s commitment to fulfilling its environmental obligations. Soil erosion has resulted from the loss of vegetation and heavy rainfall. it faces the challenges of soil erosion. and the soil has also been damaged by the overuse of pesticides. desertification. Increasing demand for palm oil. marine life conservation. This financing mechanism will generate important local and global benefits. hazardous wastes. to the reduction of emissions caused by deforestation and forest degradation. Low level of human and technical capacities in some Autonomous Regional Environmental Authorities (CARs. Increasing deforestation has also led to a growing number of endangered species. has led to deforestation to provide for new plantations in Colombia. increasing the provision of environmental services and augmenting productivity in participating farms. achieving the environmental objectives has become a challenge. a significant source of biofuel. This would lead to a significant loss of forest land. Weak implementation of environment laws Although Colombia has a number of environmental regulations in its statute. This brief is a licensed product and is not to be photocopied Page 29 . which also implies the reduced ability of green cover to absorb greenhouse gases. endangered species. to be implemented in five of the country's regions. In many cases. implementation has remained weak. FEDEGAN).PESTLE analysis Signatory to major international environment pacts Colombia has ratified nearly 105 environment treaties and has remained at the forefront in the Latin American region with respect to the conservation of natural resources. Colombia is party to the Antarctic Treaty and various other treaties on biodiversity.317 hectares in 2005. The prevalence of corruption in the Colombian system worsens the cases. which is to be carried out by the Colombian Federation of Stockbreeders (Federacion Colombiana de Ganaderos. Furthermore. Future prospects Sustainable stockbreeding management project In March 2010. The land used for oil palm plantations in Colombia increased from 145. ozone layer protection and ship pollution.

energy and infrastructure. Similarly. it has not succeeded in integrating this with other sectoral policies on agriculture. Colombia: Country Analysis Report – In-depth PESTLE Insights Published 08/2010 © Datamonitor.PESTLE analysis Future risks Inability to integrate sustainable development with other policies Although the Colombian government has been focusing on sustainable development in its environmental policies. The consumption of energy (mainly transport) and rapid urbanization and infrastructural development have put immense pressure on the environment of the country. This brief is a licensed product and is not to be photocopied Page 30 . the incentives and taxes used for ensuring environmental adherence need to be better integrated with other sectoral policies to ensure the implementation of procedures.

Spain established the settlement of Santa Fe de Bogota. 2010. He took over the presidential office on August 7. In 1830. Juan Manuel Santos Calderon was elected as president of Colombia. after Simon Bolivar defeated Spanish forces in 1819. The incumbent president has succeeded in significantly reducing the murder and kidnapping rates. A four-year peace process between the authorities and the main rebel group broke down in February 2002. which came to be known as Bogota. Subsequently. but his tough approach has been marred by accusation of human rights violations from some quarters. after he won the two rounds of elections in June 2010. the latest of which was in May 2006. Colombia’s political evolution is depicted below: Colombia: Country Analysis Report – In-depth PESTLE Insights Published 08/2010 © Datamonitor. the Republic of Gran Colombia was formed with Ecuador. which also ruled Ecuador and Venezuela. However. Bogota also became the capital of the Spanish vice- royalty of Nueva Granada. This brief is a licensed product and is not to be photocopied Page 31 . Panama and Venezuela. Evolution Colombia came under the Spanish rule in 1525. the country has witnessed many civil wars due to the presence of armed groups and drug cartels. Gran Colombia was dissolved when Venezuela and Ecuador split off and present-day Colombia and Panama were left as a separate nation known as Nueva Granada. It was at this time that presidential candidate Alvaro Uribe advocated the adoption of a hard-line stance against the rebels. For most of the 20th century. the current capital of the country. and it is this attitude that has been the backbone of his victorious campaigns in the last two presidential elections. free from the Spanish rule. amid allegations that the rebels had merely used the intervening cease fire to rearm and regroup.Political landscape POLITICAL LANDSCAPE Summary Colombia emerged as an independent nation in 1830.

Betancur Betancurgranted granted and andprotected protectedthe the guerrillas guerrillas amnestyand amnesty and trade. ceasefire. 1830. trade. ininaabid bidto toend endthe thecivil civil inin1986. prisoners. Olaya OlayaHerrera Herrerawas was "Sureshot" "Sureshot"Marulanda Marulanda parties partieswere werefounded foundedinin elected elected bycoalition by coalitioninin •• President PresidentJulio JulioTurbay Turbay met metinin1999. Panama. 1986. •• President PresidentUribe's Uribe's 1949. 1885. guerrillas. war. Liberation Army (ELN). This brief is a licensed product and is not to be photocopied Page 32 . leader leaderManuel Manuel •• Conservative Conservativeand andliberal liberal rebel rebel groups.the the •• Civil Civilwar warsparked sparkedoff off freed freedpolitical political US USsigned signedaadeal deal Conservative ConservativeParty’s Party’s again againinin1948–57. Venezuela. 2000. elected electedononanti-drug anti-drug platform in 1989. 1946.with with became becamean an Revolutionary RevolutionaryArmed Armed guerrillas. 1960-65. 1978. 2002. Forces of Colombia Forces of Colombia 2002. began. was was electedpresident elected president •• Independent Independentcandidate candidate emerged emergedfrom fromthe the 1899–1903.Juan Juan National National Front in1958 Front in 1958 presidential elections presidential elections to tonegotiate negotiateceasefire.Political landscape Figure 2: Colombia – key political events time line Pre 1900 1900-60 1961-90 1991-2000 2001 Onwards •• Present-day Present-dayColombia Colombia •• Civil Civilwar warbroke broke •• New Newrebel rebelgroups groupssuch such •• Andres AndresPastrana Pastrana •• Peace Peacetalks talksfailed failedinin and andPanama. Source: Datamonitor DAT AMONITOR Colombia: Country Analysis Report – In-depth PESTLE Insights Published 08/2010 © Datamonitor. to topower powerinin1946. election electionvictory victoryinin Ecuador and Ecuador and independent state. Colombian Colombianbases. groups. 1930. largely autonomous largely autonomous encouraged. platform in 1989.known knownasas between betweenLiberals Liberalsand and as asLeftist LeftistNational National Arango Arango(Conservative) (Conservative) 2002.Pastrana's Pastrana's reforms reformswere wererejected rejected during during1861–65 1861–65saw sawthe the introduced introducedand andtrade trade drug drugtraffickers traffickersinin "Plan "PlanColombia" Colombia"won won by byvoters votersininaa country countrydivided dividedinto intonine nine unions unionswere were 1978. peace peacetalks talkswith with first-round first-roundpresidential presidential Colombia Colombiainin1830. 2010. 2002. recentralized and recentralized and Liberals Liberalsagreed agreedtotoform form (Liberal) (Liberal)won wonthe the committing themselves committing themselves church influence was church influence was •• In InAugust August2010. 1949. prisoners. 1948–57. 2007. 1899–1903. Nueva Granada. 2009. (FARC) (FARC)emerged emerged •• Pastrana Pastranaand andFarc Farc crack crackdown downhard hardon on •• Liberal LiberalPresident President during during1960-65. promisedto promised to Venezuela.Colombia Colombiaandand •• In In1885. independent state. restored. referendum.which whichlasted lasted FARC FARCsigned signedthe theSan San access accesstotoseven seven for for45 45years. state. •• In In2009. $1 $1billion billionininmilitary militaryaid aid referendum. from the US to fight from the US to fight •• President PresidentUribe Uribewonwonaa entities entitiesand andthe thechurch church •• Conservative Conservative drug-trafficking drug-trafficking andand second secondterm termininoffice officeinin was wasseparated separatedfrom fromthe the •• Conservatives Conservativesreturned returned President PresidentBelisario Belisario rebels rebelswhowhoprofited profited 2007. social 1930. bases. encouraged. social (Liberal) (Liberal)began began planned plannedpolitical political •• The TheLiberal LiberalParty’s Party’srule rule legislations legislationswere were intensive intensivefight fightagainst against •• In In 2000. president. Nueva Granada.Power Powerwaswas •• Conservatives Conservativesandand •• Virgilio VirgilioBarco BarcoVargas Vargas Francisco Franciscoagreement. years. war. •• The Thegovernment governmentand and giving givingthe theUS USmilitary military rule rulebegan. 1999. agreement. (EPL). state.InInthe the Maoist MaoistPeople's People's inin1998 1998and andbegan began Alvaro AlvaroUribe Uribewon wonaa collapse collapseof ofGran Gran same sameperiod periodPanama Panama Liberation LiberationArmy Army(EPL). Manuel ManuelSantos Santostook took restored. Conservatives Conservativesduring during Liberation Army (ELN).Cesar CesarGaviria Gaviria over overas aspresident.

During 1958–74 it shared power with the Colombian Conservative Party under the name “National Front”. the number declined to 16 in 2006. Cesar Gaviria Trujillo is the present chief of the party. He was then appointed as the president of the VII United Nations Conference on Trade and Development in 1992. He also served as the president of the United Nations Economic Commission for Latin America and the Caribbean (ECLAC) and served as director of the Corporación Andina de Fomento (CAF) for the period 2001–02. after he won the two rounds of elections in June 2010. He took over as the president on August 7. Although there was a total of 70 smaller parties in 2002. However. The president. Although it was the single largest party in the Colombian Congress. He was minister of foreign trade during the administration of president Cesar Gaviria in 1991. Santos also founded the Social National Unity Party (Party of the U). There is a bicameral parliament consisting of 102 members (the upper house) and the 165-member Chamber of Representatives (the lower house). Partido Liberal Colombiano) is a social democratic party in Colombia. Cambio Radical and ALAS-Equipo Colombia. In 1994. Source: Datamonitor DAT AMONITOR Structure of government Colombia has a democratically elected presidential system with a strong executive. Santos founded the Good Government Foundation. This brief is a licensed product and is not to be photocopied Page 33 . elected for a four year term. is the head of state and the government. Colombian Liberal Party The Colombian Liberal Party (PL. The constitution allows for a re-election for a second term. Before taking over as the president. he served as the Minster of Defense. with growing dissidence within these parties. a number of independent parties have emerged over the years. 2010.Political landscape Structure and policies Key political figures Key political figures in Colombia are: • The President: Juan Manuel Santos Figure 3: Key political figures in Colombia Juan Manuel Santos was elected as president of Colombia. whose stated objective was helping and improving the governability and efficiency of the Colombian government. The members of parliament are also directly elected for four year terms. Key political parties Colombia had traditionally maintained a two-party system: the Colombian Liberal Party (Partido Liberal Colombiano) and the Colombian Conservative Party (Partido Conservador Colombiano). The supporters of Alvaro Uribe formed new alliances leading to the emergence of new parties such as the Partido Social de Unidad Nacional. following changes in electoral rules. with 54 members in the lower Colombia: Country Analysis Report – In-depth PESTLE Insights Published 08/2010 © Datamonitor.

a center right party. which had broken out after the assassination of the left-wing mayor of Bogota.Political landscape house and 28 in the upper house. the party won 4 seats in House of Representatives and 8 seats in Senate. who came second with 22. came into existence as a revolutionary party and fought for independence from the Spanish rule. This brief is a licensed product and is not to be photocopied Page 34 . The party entered into a partnership with the Liberal party to establish the National Front in 1958 in a bid to end the civil war. The party has 38 members in the lower house and 18 members in the upper house after the 2006 elections. he contested the election as an independent candidate in 2006. Polo Democratico Alternativo) is an alliance of the Independent Democratic Pole (PDI) and the Democratic Alternative (AD). Partido Conservador Colombiano). the party won the majority share of 47 seats in House of Representatives and 28 seats in Senate. Radical Change The Radical Change (Cambio Radical) party is also a new party but has gained significance after the 2006 elections. which lasted for 45 years. In the recently held elections in March 2010. In March 2010 elections. The Social National Unity Party The Social National Unity Party’s (Partido Social de Unidad Nacional) main agenda is to unite parliamentary supporters of President Uribe into a single party. The party supported President Uribe and did not field its own candidate for the 2006 elections. Colombia: Country Analysis Report – In-depth PESTLE Insights Published 08/2010 © Datamonitor. It has nine members in the lower house and 11 in the upper house. Although President Uribe belonged to this party. In the 2006 elections. The party supports privatization and free trade. In 1885. It won 15 seats in the lower house and 20 in the upper house. and the party’s support is needed to fulfill the absolute majority requirement of the present government. In March 2010 elections. Alternative Democratic Pole The Alternative Democratic Pole (PDA. the party fielded Carlos Gaviria. In the recently held elections in March 2010. Colombian Conservative Party The Colombian Conservative Party (PC. the Conservative party’s rule began. In the recently held elections in March 2010. the party won 37 seats in House of Representatives and 17 seats in Senate. its representation came down in the 2006 elections. the party won 15 seats in House of Representatives and 8 seats in Senate. the party won 38 seats in House of Representatives and 22 seats in Senate. It is also an ally of President Uribe. it won 30 deputies and 20 Senators. Both the parties shared the presidential terms by turns until 1974. after the 2006 elections. In the presidential elections.04% of total votes.

Political landscape Composition of government Figure 4: Composition of the house of representatives (Colombian parliament) Others. The government may find it difficult to arrest huge public debt and a large central government deficit. succeeded former President Alvaro Uribe. 37 PC. after he won the two rounds of elections in June 2010. 38 Source: Datamonitor DAT AMONITOR Key policies Key policy areas Juan Manuel Santos Calderon was elected as president of Colombia. He took over as president on August 7. the economic policy has centered on narrowing the fiscal deficit. 15 PL. Juan Manuel Santos. Santos is also in a strong position in Congress to push through fiscal reforms after securing support from the Conservative and Cambio Radical parties. 47 CR. Although economic growth during 2000–06 allowed the present government to follow the reform policies. a former defense minister and finance minister. 27 U party. maintaining a disciplined policy framework will become harder if growth weakens. At the same time. This brief is a licensed product and is not to be photocopied Page 35 . 2010. Colombia: Country Analysis Report – In-depth PESTLE Insights Published 08/2010 © Datamonitor. The result is seen as a sign that Uribe's tough security line against rebels and his pro-business policies will continue. Economic policies After the Colombian economy came out of recession in the late 1990s. the central bank has used monetary policy to maintain price stability and encourage private investment by improving the business environment.

which offers legal alternative income to families located in strategic ecosystems or in conservation areas where illicit crops are grown. The new government is also expected to take up social development with fiscal discipline in place. citing numerous human rights abuses by the armed forces and the links between the army and the vicious paramilitary groups. he says he will not increase taxes but instead increase the taxpayer base to bolster state revenue to help fight the budget deficit. is focused on creating jobs and generating economic growth. besides widening the tax base.Political landscape Other significant policies of the government include tax reforms and privatization. According to the new president. Social policies During the Uribe administration. concurrently. Venezuelan President Hugo Chavez broke diplomatic ties with neighboring Colombia in July 2010 and ordered a "maximum alert" along the border. Colombia’s constitution decentralized education. also aimed at improving the transparency and fairness of the tax regime. In order to bring the economies closer. One of the significant steps that the government has taken is with respect to setting up more schools and creating opportunities for more students to enroll in them. The tax reform bill of 2006. with strong growth. Mexico. The government has launched a program called “forester families”. In addition.5% in 2006 to 33% in 2007. health and other public services to regional governments. 62% of the resources of the national budget (excluding debt service) have been allocated to social sectors like social security. healthcare and education. The new government led by President Santos. a former finance minister who once helped bring Colombia out of a fiscal crisis. and the US has become increasingly involved in Colombia’s long-running civil war. the government succeeded in increasing the availability of micro credit for small entrepreneurs and managed to reduce unemployment from 17. which resulted in the reduction of the waiting period that displaced families were facing before they received humanitarian assistance. Foreign policies Colombia’s foreign policy has been dominated by regional alliances and its relation with the US. after Colombia charged in the Organization of American States that leaders of the Revolutionary Armed Forces Colombia: Country Analysis Report – In-depth PESTLE Insights Published 08/2010 © Datamonitor. social spending in Colombia has increased. Human right groups have criticized the US administration for cooperating with the Colombian military. and Venezuela. This brief is a licensed product and is not to be photocopied Page 36 . and was passed by the Colombian Congress in 2007. In 1980. It chaired the Non-Aligned Movement from 1994–1998. Colombia has entered into free trade agreements with Chile. the Brazilian government has offered to mediate a dispute involving Venezuela and Colombia. Nearly 47 towns destroyed by terrorist attacks were rebuilt. It has yet to receive the approval of the US Congress. The government’s agenda also includes ensuring a smooth return for the displaced population from the rural areas.3% in 2002 to 12. Colombia is a member of the Andean Community since 1969. Furthermore. The Bush government saw achieving victory in Colombia as a key stage in the dual wars on terrorism and narcotics. According to the president’s statement in 2004. The VAT base was expanded and income tax rates were gradually reduced from 38. Thus. it consolidates strategies for forest management and ecological sustainability. it is a program that contributes to the reduction of illicit crops and. supports the generation of communitarian organizations. Families entering this program commit themselves to protect and preserve these selected areas. The government also took steps to check government expenditure. The US-Colombia Trade Promotion Agreement was signed by President Bush in November 2006.1% in 2009. In July 2010. it also joined the Contadora Group and the Group of Eight (now the Rio Group).

freedom of association. Regulatory quality measures the ability of the government to formulate and implement sound policies and regulations that permit and promote private-sector development. with conflicts involving outlawed armed groups and drug cartels. leading to restrictions on citizens’ rights. while Venezuela was ranked lower at the 50. Government effectiveness measures the quality of public services. the quality of policy formulation and implementation.2. Colombia’s performance is better and is ranked in the 60. which is an improvement over its 2004 score of 52. regulatory quality. Brazil was ranked higher at the 61. Colombia has failed to make any mark given the political instability and high order of domestic violence. a marginal decline over its 2004 ranking of 39. For any country. The voice and accountability parameter measures the extent to which a country's citizens are able to participate in selecting their government. Colombia’s percentile ranking in terms of regulatory quality was 59.0 in 2008. Performance Governance indicators The World Bank report on governance uses voice and accountability. including domestic violence and terrorism. Brazil was ranked at 54. government effectiveness. The presence of warfare groups has always threatened stability in the region. President Uribe succeeded in arresting violence to some extent. On this parameter. On the governance indicators. The Uribe government has undertaken economic liberalization and privatization at a massive scale. and Aart Kraay of the World Bank Development Economics Research Group.2. This brief is a licensed product and is not to be photocopied Page 37 . in terms of political stability and absence of violence. and "control of corruption" as indicators to assess 212 countries and territories over the period 1996–2008. except those of national security. The Venezuelan leader accused Colombian former President Alvaro Uribe of orchestrating the accusations with the help of the US. and the availability of free media. Colombia ranked in the 39. or FARC. The new government is expected to steps to reduce tensions with Venezuela. Brazil was ranked in the 38. a decades-old Marxist guerrilla group. along with freedom of expression. This is also an improvement over its ranking in 2004 when it was ranked in the 54 percentile. rule of law".5 and Venezuela had a much lower percentile rank of 36. a percentile rank of 0 corresponds to the lowest and 100 correspond to the highest rank.8 percentile in the same year.1 percentile for Colombia in 2008. The country has witnessed prolonged violence. the quality of the civil service and the degree of its independence from political pressures. The study was carried out by Daniel Kaufmann and Massimo Mastruzzi of the World Bank Institute. In terms of government effectiveness.5 percentile in 2008. Political stability and absence of violence measures perceptions of the likelihood that the government will be destabilized or overthrown by unconstitutional or violent means. political stability and absence of violence. On a number of occasions the election process has been disrupted. The above factors have led to an even lower rank of 8. when contesting members were killed. the government effectiveness index has improved. Most of the sectors. and the credibility of the government's commitment to such policies.4 percentile for voice and accountability in 2008.Political landscape of Colombia.9 percentile. but his tough anti-terrorism laws are also blamed for its alleged role in the violations of human rights. In comparison.1 percentile.3 percentile whereas Venezuela was ranked in the 29. have been opened up for foreign Colombia: Country Analysis Report – In-depth PESTLE Insights Published 08/2010 © Datamonitor. had base camps in Venezuela.2 percentile in 2008. Following President Uribe's reform measures.

Outlook Juan Manuel Santos Calderon was elected as president of Colombia. and in particular the quality of contract enforcement.9 percentile. Colombia had a percentile rank of 37. Brazil was ranked at 58. as well as the likelihood of crime and violence. citing the sale as only a palliative short-term measure. To replace the $2bn in privatization revenue the new government plans to raise $500m through foreign bond issues. after he won the two rounds of elections in June 2010. is focused on creating jobs and generating economic growth. Prior to the presidential election. the police.0 on this parameter. the government aims not to increase taxes and instead increase the taxpayer base to bolster state revenue to help fight the budget deficit. Control of corruption measures the extent to which public power is exercised for private gain.9 percentile in 2008. which is an improvement over its 2004 ranking of 22. Colombia: Country Analysis Report – In-depth PESTLE Insights Published 08/2010 © Datamonitor. Brazil ranked comparatively higher at 46.4 percentile on this index whereas Venezuela had a lower percentile rank of 25. The government has also ensured national treatment for foreign investors. The long-awaited ISAGEN sale would have brought in $1.5 percentile whereas Venezuela was ranked at 19. a former finance minister who once helped bring Colombia out of a fiscal crisis.7 in the same year. The new administration of President Juan Manuel Santos has laid out plans in August 2010 to raise $2bn in financing to cover a budget gap resulting from its decision not to sell the government’s stake in the power generation company ISAGEN and the delay of another set of privatizations that had been slated for 2010. The new government led by President Santos.Political landscape players.8 in 2008 for the rule of law parameter.6bn (0. but Venezuela had a poor rank of 43. Along with strong growth. and the extent to which the state is controlled by elite and private interests. including both petty and grand forms of corruption. has been accused of corrupt practices. and the courts. Colombia’s percentile ranking in terms of control of corruption was 50. and the system is plagued by a low level of transparency. $500m from multilateral organizations and $1bn by issuing treasury bonds in the local market.2 in 2008. The new government will also delay privatizations. The new government has decided against selling. especially the lower courts. The Colombian judiciary.9 percentile during the year.6% GDP) in revenue and was already accounted for in the medium-term fiscal figures the outgoing government presented in June 2010. This brief is a licensed product and is not to be photocopied Page 38 . Brazil had a comparable ranking of 58. former President Alvaro Uribe had announced that the sale would be postponed until the new government took office. Rule of law measures the extent to which agents have confidence in and abide by the rules of society.

The economy slowed somewhat in the early 1980s because of the global recession of 1981. the Colombian economy was better placed than other Latin American countries because of its strong foreign exchange reserves and the large quantum of foreign aid. there was a sustained economic annual average growth of around 5%. recording an average GDP growth of 4. Colombia: Country Analysis Report – In-depth PESTLE Insights Published 08/2010 © Datamonitor. Evolution During colonial times.8% during 2002–06. particularly precious metals. During those years the economy was primarily agrarian. agriculture. with the expansion of exports and government revenue. Very few small enterprises were present. the government’s efforts to improve fiscal discipline and reduce public debt along with an export- oriented growth strategy have maintained investors’ confidence in the economy. the GDP growth slowed down to 0. This brief is a licensed product and is not to be photocopied Page 39 .Economic landscape ECONOMIC LANDSCAPE Summary After entering a recession in the late 1990s. widening current account deficit and rising external debt pose significant challenges. Until the 1970s. Colombia saw a rapid increase in GDP. However. making agriculture and commerce the two most important economic activities in the country. after this period. economic growth rate decelerated to 2. In the early 20th century. there was a shift to export promotion. Colombia followed an import substitution program to develop domestic industries. Furthermore.28% it experienced a sharp recession during 1998–99. However. During 1905–15. the Colombian economy was mainly an exporter of raw materials. due to global economic slowdown and decrease in international demand. which will bring the economies of the US and Colombia closer. Although the economy registered a growth of 4. The move to a free float for the currency in 1999 and the introduction of inflation targeting in 2000 introduced a renewed credibility and flexibility to monetary and exchange rate policies. Coffee was the most important item of trade and contributed nearly 75% of total exports revenue in 1920. resulting in a slide in the currency and a degree of financial sector distress. There was a large scale public works program and huge inflow of capital through private investment. the process of economic liberalization started. During 1950–67.3% during 2002–09. An IMF-supported fiscal adjustment program helped to rein in the fiscal deficit.5% in 2010. the communication and transport infrastructure developed to facilitate exports. and cattle raising. The economy has steadily grown since 2002. comprising activities such as mining. the Colombian economy has staged a recovery since implementing the government’s drastic economic reform measures. Subsequently. By the late 19th century.4. however. According to Datamonitor forecasts. Colombia witnessed a coffee boom. Nevertheless. leading to the growth of non- traditional sectors like clothing and other manufactured items. the country’s GDP is expected to recover to around 2.4% in 2008 and 2009.5% in 2007. In 1990. The business sector is looking forward to the US Congress approval of the FTA. and heavy industries came to be established in six largest cities. The economy recorded a growth of 7. and in 2009. the tobacco and coffee exports developed. The economy recorded an average growth of 4.5% and 0. During the course of the country's postwar expansion the government focused on economic integration.

Economic landscape Figure 5: Historical GDP growth rate in Colombia (real GDP at constant 2000 prices) 10 8 6 4 Growth rate (%) 2 0 1991 1993 1995 1997 1999 2001 2003 2005 2007 2008 2009 -2 -4 -6 Year Source: Datamonitor DAT AMONITOR Structure and policies Financial authorities/regulators Central Bank of Colombia The Central Bank of Colombia (Banco de la Republica Colombia) is responsible for monetary policy with the objective of maintaining price stability. Colombia: Country Analysis Report – In-depth PESTLE Insights Published 08/2010 © Datamonitor. the bank is allowed to acquire government bonds in the secondary market. Furthermore. and is the issuer of legal currency. very rigorous conditions exist for the concession of credit. In effect. This brief is a licensed product and is not to be photocopied Page 40 . As with any other central bank. although not prohibited by the new regime. the Colombian central bank also acts as the banker’s bank and is entrusted with the task of formulating foreign exchange policy. this sort of credit is limited to instances of dire necessity and is provided only with unanimous approval of the board of directors. As regards the tendering of credit by the central bank to the government.

• insurance companies. and financial disclosures of listed companies.7 billion. The market capitalization of the exchange has increased from $10 billion to nearly $102 billion during 2002–07. This brief is a licensed product and is not to be photocopied Page 41 . the government undertook a clean-up process of the financial sector and strengthened its financial sector regulation. In 2009. Due to the global economic slowdown. the banking sector lost almost 40% of its net worth. Colombia: Country Analysis Report – In-depth PESTLE Insights Published 08/2010 © Datamonitor. unofficial private lenders also meet the financing needs of small and medium-sized companies. Colombia consolidated the supervision of the banking and securities sectors under the Financial Superintendence (Superfinanciera). Stock markets Bolsa de Valores de Colombia Bolsa de Valores de Colombia (BVC) is the leading stock exchange in Colombia.Economic landscape Financial Superintendence The financial laws and regulations were consolidated in 1993 under the Organic Statute of the Financial System (EOSF. and insurance and reinsurance brokers. Only the large companies participate in the local stock or bond markets. • financial services companies. post-crisis. Superfinanciera is the regulator of the following segments: • Credit institutions.6 billion. Colombia faced a severe financial sector crisis during the 1990s. While a number of firms rely on the banking system for their capital requirements. It came into existence in 2001 after the merger of three stock exchanges in Colombia: Bolsa de Bogota. In 2005. brokers’ fees. The Colombian capital market is relatively underdeveloped. • securities market. However. between 1998 and 2000. BVC lost almost 13% of its market capitalization at the end of 2008 to reach $87. The BVC is regulated by the Superfinanciera. As a result. Estatuto Orgánico del Sistema Financiero) which defined financial institutions under the Supervision of the Banking Superintendency (Superintendencia de Bancos). which oversees market intermediaries. the market capitalization decreased to $82. In the insurance sector. Bolsa de Medellin and Bolsa de Occidente. the impact was less severe and no insurers failed as a result of the crisis.

the fear instilled by the past crisis is also an important factor that influences this. its premium per capita.0 20. However. which is the same as the Latin American average.1 billion came from life insurance segment. Bolivar.13 billion in 2007. The life insurance sector grew at 21% and non-life registered a growth of 31% during the year compared to the previous year.4% of GDP. Mapfre.Economic landscape Figure 6: Market capitalization of the Colombian Stock Exchange (BVC).46%) over the twelve month period ending September 2008.4 billion. It has been observed that a good majority of high-income individuals obtain insurance abroad. The top ten insurers in the market by total premium are Suramericana. is significantly below that of the Latin American average ($126). The sector is dominated by the non-life segment.0 40. insurance premiums in Colombia amounted to 2.0 0. BBVA and QBE. Previsora. up $462 million (9. Colombia: Country Analysis Report – In-depth PESTLE Insights Published 08/2010 © Datamonitor. Alfa.0 2003 2004 2005 2006 2007 2008 Year Source: Datamonitor DAT AMONITOR Insurance The Colombian insurance industry is also underdeveloped. but the life insurance segment is growing. In 2006.0 80. Liberty.0 100. Colseg. While $1. Total premiums for the previous twelve months as of the end of September 2009 reached $5. Although financial liberalization has allowed them to go for foreign insurance.0 $ billion 60. This brief is a licensed product and is not to be photocopied Page 42 . 2003–08 120. rest came from non-life in 2007. with premiums totaling $4. at $69.

5% in 2007. President Juan Manuel Santos. which could help Colombia attain investment-grade status for its bonds. Since then there has been a return to positive growth. although the economy remains extremely sluggish. Due to the global economic slowdown. Economic growth has remained steady since 2000.5% in 2008. Nevertheless. an IMF-supported fiscal adjustment program has helped to control the fiscal deficit and the process of economic liberalization. who was sworn in early August 2010. Colombia: Country Analysis Report – In-depth PESTLE Insights Published 08/2010 © Datamonitor. prioritizing on development and raising private capital than taking the route of privatization.8% during 2002–08. This brief is a licensed product and is not to be photocopied Page 43 . annual economic growth averaged 4%. The economic policies of the outgoing government basically favored foreign capital. the GDP growth decelerated to 0.Economic landscape Key policies During the eight years (2002–10) that former President lvaro Uribe governed Colombia. It is expected that the economic growth will recover to around 2. Performance GDP and growth rate The Colombian economy registered an average annual growth rate of 4. The economy registered a growth rate of 7. The economy had gone through a sharp recession during 1998–99. The new government is focused on formulating market-friendly economic policies. The government’s drive towards privatization has been contrary to that of previous government.4% in 2009. turning Colombia into a tax haven. resulting in a slide in the currency and a degree of financial sector distress. has taken over a country with the highest unemployment rate in Latin America. but it came down to 2. However. The administration has pledged to reduce the government fiscal deficit.5% by the end of 2010.

Colombia: Country Analysis Report – In-depth PESTLE Insights Published 08/2010 © Datamonitor. compared to contributions of 36.0 1.0 140.2% and 8.0 0.0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Year GDP Real GDP growth rate Source: Datamonitor DAT AMONITOR GDP composition by sector The Colombian economy is largely dependent on the services sector.1% of GDP in 2009.0 60.0 80.0 40.0 4.0 120.Economic landscape Figure 7: GDP and GDP growth rate in Colombia.0 $ billion 100.0 0.0 2.0 20.0 Growth rate (%) 5.0 160. This brief is a licensed product and is not to be photocopied Page 44 . 2002–13 (real GDP at constant 2000 prices) 180.0 8. respectively.0 7. which constituted around 55.0 6.0 3.7% made by the industrial and agriculture sectors.

9% during 2009. bananas. cold-climate vegetables. In the hot regions of Colombia. Colombia: Country Analysis Report – In-depth PESTLE Insights Published 08/2010 © Datamonitor. Colombia’s climatic conditions along with a favorable topography provide a suitable environment for agricultural growth. which is mostly concentrated in the Caribbean coastal area and the eastern plains. cotton. flowers. This brief is a licensed product and is not to be photocopied Page 45 . prevalent in the western and central ranges of the Andes. coconuts. Coffee. sugarcane. rice. tobacco and cassava are some of the important agricultural produce. corn. pears.7% Industry. and other vegetables are grown in the temperate regions. potatoes. and coffee-growing. In the colder areas. however. flowers. a wide variety of crops is cultivated in this region.9% during 2002–08.1% Source: Datamonitor DAT AMONITOR Agriculture The principal agricultural activities of Colombia are cattle-rearing.Economic landscape Figure 8: GDP composition by sectors. Agricultural output in Colombia increased at an annual average rate of 7. 36. Cacao. As a result. 55. 8.2% Services. the agricultural output contracted by 4. there is a higher yield of forest products such as pine and eucalyptus. dairy cattle and poultry. barley. 2009 Agriculture. The cooler elevations are suitable for the production of wheat. pineapples. plantains.

0 35. This brief is a licensed product and is not to be photocopied Page 46 . along with coffee. The industrial output growth rate. after peaking in 2003 at 21%.0 8.0 5. produced in the Guajira peninsula. Medellin.0 10.0 45.0 COP billion 25. In addition.0 0.000.000. Mining (accounting for 5% of GDP).0 20.000.000.0 0. and Barranquilla.Economic landscape Figure 9: Agriculture output of Colombia.1% in 2009.000.0 14.000. are the two principal mining activities.000.0 6. Cali. is one of the most important export-oriented activities in the country.0 -2.0 12. beverages.000.000.0 -4. textiles.0 2.0 2002 2003 2004 2005 2006 2007 2008 2009 Year Agriculture output Growth rate Source: Datamonitor DAT AMONITOR Note: Sectoral figures are given in local currency due to fluctuation in exchange rates Industry Colombia has four major industrial centers: Bogota. clothing and chemicals are the main manufactured goods. and coal. Processed food. 2002–09 50. Colombia: Country Analysis Report – In-depth PESTLE Insights Published 08/2010 © Datamonitor.0 40.0 Growth rate (%) 30. has decelerated to 1.0 -6.000.0 15. and accounts for over one-third of the total exports. oil extracted from large fields in the eastern plains.0 4.0 10.

0 COP billion 100.0 5. has been one of the most dynamic sectors in recent years.0 140.0 10.000.000.0 60. This brief is a licensed product and is not to be photocopied Page 47 . During 2002–08. 2002–09 200.8%. In 2009.000.Economic landscape Figure 10: Industrial output of Colombia. respectively.0 20.5% growth in 2009 compared to over 14% and 8% growth seen in 2007 and 2008.000.000.000. accounting for 3% of GDP. the service sector output decelerated to 4.000.0 80. as of 2009.000.000.0 180. Financial services and retail are important segments.0 20. Telecommunications. with a share of 18% and 8% of GDP. owing to the development of services.0 15. such as long-distance and wireless communications in large urban centers. Colombia: Country Analysis Report – In-depth PESTLE Insights Published 08/2010 © Datamonitor. the sector grew at an average annual rate of around 10. respectively.000.0 25.0 0.0 2002 2003 2004 2005 2006 2007 2008 2009 Year Industry output Growth rate Source: Datamonitor DAT AMONITOR Note: Sectoral figures are given in local currency due to fluctuation in exchange rates Services The services sector of Colombia is dominated mainly by commercial activity.0 0.0 Growth rate (%) 120.0 40.0 160.

pension and budget reforms.0 250.0 2002 2003 2004 2005 2006 2007 2008 2009 Year Services output Growth rate Source: Datamonitor DAT AMONITOR Note: Sectoral figures are given in local currency due to fluctuation in exchange rates Fiscal situation The former government continued with its prudent fiscal policies and has pursued tough economic reforms including tax.0 2.0 16.000.000. The deficit amounted to COP13. as compared with 5% of GDP in 2005.0 12.000.9% of GDP. who took office in early August 2010.0 Growth rate (%) 10.0 50.0 0.1% of GDP.0 8.8% of GDP in 2009.000. The budget was drafted by the administration of former President Alvaro Uribe and could see alterations since it will be authorized by the new government headed by President Juan Manuel Santos. The estimated 2006 budget deficit was 5.3 trillion ($79. up from 0.5% increase from 2010. 2002–09 300. up from COP678 billion in 2008.Economic landscape Figure 11: Services output of Colombia.0 0. the government deficit declined to 3. The Colombian government posted a consolidated budget deficit of 2.14 billion) in 2009. favorable international conditions such as higher oil prices and Colombia’s economic expansion aided the efforts of the Uribe administration to bring Colombia’s public finances under control. The government expects the deficit in 2010 to reach 4.0 100.000. a 2.0 200.0 14. The government announced in July 2010 that budget for 2011 will reach COP147.0 6.4% of gross domestic product (GDP) and to shrink in 2011 to 3.3%. Colombia: Country Analysis Report – In-depth PESTLE Insights Published 08/2010 © Datamonitor. In 2007. This brief is a licensed product and is not to be photocopied Page 48 .0 4. Although large scale fiscal deficit was one of the major challenges of the Colombian economy in the beginning of the noughties.0 COP billion 150.1% in 2008.000.7 trillion ($7.6 billion).

the country had recorded a small trade surplus of $0. accounting for 30. accounting for around 32. the size of the ‘black’ economy is substantial. On the import side the US again dominates. In 2000. In 2009.16% of total exports. followed by Mexico (8. Imports from China make up a further 10. since exports and imports associated with the illegal narcotics trade or with the operations of the various rebel groups are not captured.96%) are the other important sources of imports.92%) and Germany (3. However. Outside the western hemisphere. the EU (14% of exports) is the only significant export market. respectively. Colombia has experienced an adverse balance of payments during 1995–2006.02%. since then the balance of trade has remained negative. Given that Colombia accounts for about 80% of cocaine consumed in the US. The US is Colombia’s principal trading partner. showing a year-on-year increase of 24% and 18%.Economic landscape Exports and imports With the exception of a few years.7 billion and total imports reached $44. Colombia’s trade statistics are likely to offer only a partial picture of the actual external situation. Colombia: Country Analysis Report – In-depth PESTLE Insights Published 08/2010 © Datamonitor. Colombia also trades widely with its Andean community neighbors.05%) and Brazil (5.6 billion. accounting for 17. France (5. Venezuela is the leading regional export market.92%).61% of total imports in 2009.45% of total exports in 2009. exports stood at $29. Trade with the rest of Latin America is less pronounced.2 billion. This brief is a licensed product and is not to be photocopied Page 49 .

Moreover. The current account deficit as a percentage of GDP increased from 3% in 2007 to reach 3.3 60. Furthermore.3 billion in the same month last year.145 billion in Colombian reserves.0 2004 2005 2006 2007 2008 2009 Year Exports Imports Total trade Source: Datamonitor DAT AMONITOR Current account The Colombian economy is faced with the challenge of a widening current account deficit. This brief is a licensed product and is not to be photocopied Page 50 .5bn Flexible Credit Line was approved by the IMF in May 2009 and two international bond issues in 2009 have served to bolster the sovereign's position and stabilize the currency following a sharp drop in the first quarter. Although the current account deficit has been growing in recent years.0 44.6 25. Foreign direct investment fell to $4.6 31.9 27. in August 2009.5% in 2008.7 billion from $5.7 50.0 33.1 billion in 2009 (2.4 80.0 59. it was more than offset by surplus on the capital account.8 $ billion 49. including foreign direct investment and remittances. The country had a current account deficit of $5.0 40.6 70.8 billion in 2007. a precautionary $10. which is aimed at increasing liquidity in the country.Economic landscape Figure 12: External trade of Colombia.6 18. the current account deficit reached $6.3 72.7 billion in July 2009 from $5.2% of GDP).0 74.0 10. The current account deficit is expected to further widen as a result of a rising import bill and higher debt interest payments. the deficit has continued to be fully covered by long-term financing flows.7 29.6 39. compared to $6.7 30.0 0.0 90. Colombia: Country Analysis Report – In-depth PESTLE Insights Published 08/2010 © Datamonitor.9 billion in 2008.1 41.8 20.4 20.0 23.0 88. The International Monetary Fund released $1. 2004–09 100. In 2008.6 39.0 46. held by the multilateral lender.

However.0% -7.00 0. Furthermore.00 -2. public external debt fell to $26. since 2001. Nevertheless. bond issuance and commercial loans became restricted. with the loss of the coveted investment grade rating in 1999.5% -2.0% Year Current account balance Current account balance as % of GDP Source: Datamonitor DAT AMONITOR External debt When Colombia was in the midst of an economic crisis during the 1990s. 2002–08 0.00 -3.2 billion (19.00 -1. According to the central bank figures. and the public sector has since turned again to multilateral financing.00 -2. This will ease the pressure on the currency. repurchases and prepayment of foreign debt.00 -1.3% of GDP) at the end of 2006.5% -6.0% 2002 2003 2004 2005 2006 2007 2008 -1.5% Percentage $ billion -4. The government has also managed to reduce the foreign component of the public debt from 50% at the end of 2002 to 33% in early 2007.00 -0. the Colombian government used its improved creditworthiness to increase the share of sovereign bonds over multilateral and commercial loans. This brief is a licensed product and is not to be photocopied Page 51 .0% -3.00 -4.5% -8.Economic landscape Figure 13: Current account balance of Colombia.0% -5. Subsequently. public sector external debt rose sharply as the government turned to external borrowing to finance the growing fiscal deficit. the government has been implementing a successful program to reduce its external debt by taking measures of voluntary swaps. Colombia: Country Analysis Report – In-depth PESTLE Insights Published 08/2010 © Datamonitor. since 2005 the government has limited the monetization of foreign debt and has substituted external indebtedness for domestic debt. The policy has also helped to extend maturities. reducing the amount due for repayment during 2008–12.00 -3.

In 2005. This brief is a licensed product and is not to be photocopied Page 52 . Since then. The external debt rose to $47. The increase had come about mainly as a result of the acquisition of two of Colombia’s largest corporations (beer and tobacco producers) by investors in South Africa and the US. transportation. In the services sector. and mining sectors are the main recipients of FDI. FDI inflow has remained moderate. which has remained one of the country’s main weaknesses. financial. International investment position Foreign direct and portfolio investments FDI in Colombia has grown rapidly following the economic liberalization and privatization program of the 1990s. the Colombian government passed laws to remove restrictions on foreign inflows. It initiated a privatization program and opened up investment in the oil industry. To overcome the economic crisis and as part of the IMF bailout package. The manufacturing.2 billion in 2009.3 billion as of December 31. accounting for nearly 33% and 32% of the total stock of FDI respectively during 2002–07. energy.Economic landscape Colombia is yet to overcome the challenge of external debt. 2009 from $44. In spite of the global economic slowdown. 2007 and it is expected to go up further. The FDI flows into the country decreased to $7. Colombia: Country Analysis Report – In-depth PESTLE Insights Published 08/2010 © Datamonitor. FDI saw a huge jump to reach around $10 billion. and communications have seen an increase in FDI too. compared to $4 billion in the previous year. The US and the EU are the largest sources of foreign investment in Colombia.55 billion as of December 31. the country has registered a marginal increase in FDI from around $9 billion in 2007 to reach around $10 billion in 2008.

00 3. The increasing trend has continued in 2008 with inflation reaching around 7.44 8.09 10.29 10. due to global economic slowdown and decrease in prices.2% in 2002 and further declined to 4% in 2006. along with the global price increases in 2007.00 1. The outlook has been pronounced as stable.6%.00 2002 2003 2004 2005 2006 2007 2008 Year Total foreign investments Source: Datamonitor DAT AMONITOR Credit rating Standard & Poor's Ratings Services has affirmed its 'BB+/B' foreign-currency and 'BBB+/A-2' local-currency sovereign credit ratings in August 2010.7% in 2008.10 0. indicating a balance of favorable and unfavorable factors affecting the sovereign's creditworthiness. However. Monetary situation Key monetary indicators Inflation The Colombian economy experienced high inflation during the 1990s. the Colombian economy also experienced price increases when inflation reached 5.00 1. when the average rate of inflation was around 18%.00 10.00 7. with the central bank’s stringent measures. Colombia: Country Analysis Report – In-depth PESTLE Insights Published 08/2010 © Datamonitor. inflation subsided to 7. the inflation came down to 2% in 2009.00 9. This brief is a licensed product and is not to be photocopied Page 53 . However.93 4. 2002–08 12. However.Economic landscape Figure 14: Total foreign investment in Colombia.82 2.11 $ billion 6.

which is an increase of 14% from the same period in 2009.0 0.6 million) in the first half of 2010. registering a smaller growth of 1.0 200.0 1.3%.08 trillion ($1. in 2009. During 2002–08. Colombia's banking sector posted a net profit of COP3.0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Year Consumer price index Inflation Source: Datamonitor DAT AMONITOR Banking sector Colombia has a fairly developed banking system. Colombia: Country Analysis Report – In-depth PESTLE Insights Published 08/2010 © Datamonitor. followed by the agriculture and secondary sectors with shares of 23% and 19%. However. employment grew at an average rate of 3.0 150.0 Consumer price index 6. By the end of 2007.0 7.0 4. up 10% from COP224 billion ($122. booked a net profit of COP247 billion ($135. Employment The tertiary sector employs the majority of the working population with a share of 58%. as of 2007.24%. Foreign owned banks accounted for one-fifth of the assets. 2002–13 250.7 billion) during the first half of 2010.0 3. The country's largest bank. there was a decline in employment growth. respectively.0 0.1% in 2009.0 100.0 Inflation (%) 5. Although the rate of unemployment has declined from 17% in 2002. compared to other countries in the region. Banco Davivienda.5 million) in the same period in 2009. it was still at a high of 12.Economic landscape Figure 15: Consumer price index and CPI-based inflation in Colombia.0 9. This brief is a licensed product and is not to be photocopied Page 54 . banking giants the Sarmiento Group (Grupo Aval) controlled about one-quarter and the Sindicato Antioqueno Group (Bancolombia) about one-fifth of banking assets.0 2.0 50.0 8.

4% year on year and 1.2% year on year) and the recovery of construction growth (up 15. 2002–13 3.50 6. unemployment remains high.1% in May 2010. Colombia: Country Analysis Report – In-depth PESTLE Insights Published 08/2010 © Datamonitor.0 Rate of unemployment (%) 2. The new government headed by President Santos aims to lower corporate taxes. the government is not in favor of complicated tax reforms and privatization. which is expected to reach 3.00 14. The government plans to create 2. President Santos wants to lower unemployment to single digits from around 12% in first quarter of 2010.00 0.0 0.5% compared with the fourth quarter of 2009. accounting for 11. housing.0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Year Total unemployment Rate of unemployment (%) Source: Datamonitor DAT AMONITOR Outlook Colombia went through an economic slow down during 2008–09. owing mainly to increased public transportation and mining infrastructure projects.8 percentage points of the 53.8% in 2011 according to the forecasts of Datamonitor.9%) in the first quarter of 2010. The government would also try to expand the tax base to generate revenue.4% in 2009.0 Number of unemployed (millions) 12.50 2. One noteworthy trend has been the consolidation of China as an important buyer of traditional exports.00 8.50 10. Although Colombia’s economic recovery has been strong and confidence continues to rise. clear barriers on investment and help drive growth by focusing on the following five areas: infrastructure. The economy is expected to post an over all growth rate of 2. oil and mining.3% overall increase.0 3. agriculture and improved education.0 2.4 million jobs in the formal sector by 2014. hitting 12.50 16. In the first quarter of 2010 the Colombian economy grew by 4. This brief is a licensed product and is not to be photocopied Page 55 . The reasons for strong growth was the result of the strong performance of oil and mining activities (up 13. with GDP growth falling to 0.5% by the end of 2010.7% a year earlier.0 1.00 4. up from 11.0 1.0 0.Economic landscape Figure 16: Unemployment and rate of unemployment in Colombia. However. China was the second-largest contributor of the increase of traditional exports in January–June 2010.

After the mid-1980s. the regional government’s role also increased in imparting education. the ongoing civil war and large scale illegal drug trafficking have adversely affected the social development of the country. social development has taken a back seat.06 males per female. but proved insufficient to meet the surging healthcare demand. as 5% of the population own nearly 90% of the property in the country. Nevertheless. Between 1970 and 1980 the number of medical colleges almost doubled. Although the economy came out of recession and began growing in the noughties. with a strong colonial influence. There was also a great degree of decentralization in the healthcare system. The median age in Colombian society is 27.Social landscape SOCIAL LANDSCAPE Summary Colombia is classified as a developing country. and nearly 60% of Colombian households are below the poverty threshold.2% of the population to the 0–14 age group and 6% of the population is in the 65-plus group. The church played an important role in the individual’s life and profoundly influenced the role played by education in society. Evolution Colombia was traditionally an agrarian and rural society. 27.6 years. the Colombian government’s social reactivation plan is expected to go a long way in improving the social conditions of its population. In addition.31 Colombia: Country Analysis Report – In-depth PESTLE Insights Published 08/2010 © Datamonitor. with the Spanish population belonging to the higher strata of society. which improved the accessibility to healthcare services. government funding for education increased five-fold in real terms between 1966 and 1986. increasing violence and guerilla wars led to a large scale exodus of the rural population to urban centers. Structure and policies Demographic composition Age and gender-wise composition In Colombia. Colombian society is also an inequitable one. However. As per the United Nations Development Program's (UNDP) Human Development Index (HDI). A clear division existed between the Spanish population and the indigenous people. and steps were taken to reform the education system in the 1960s and 1970s. indicating that the society is younger than average. This also laid the foundation of the Colombian social welfare system. The gender ratio at birth is 1. which in turn led to internal migration. mainly because of cash crops. Nevertheless. employees have been required to pay for healthcare plans to which employers also contribute. Growth of agricultural activities. there is a disparity in the accessibility of these services. and the development of industries led to urbanization. This brief is a licensed product and is not to be photocopied Page 56 . Life expectancy for the total population is 74. The government increased its expenditure on education over the years. On a related note. A positive development has taken place in the healthcare sector after the reforms of 1993. The prevalence of this system is often blamed for reinforced social stratification. The higher educational infrastructure in Colombia is yet to match the needs of a growing economy. Growing industrialization and urbanization necessitated the establishment of modern social institutions. Subsequently. The country’s performance in the educational sphere has lagged in terms of enrolments in primary and secondary schools. Healthcare reforms in 1993 transformed the structure of public health-care funding by shifting the burden of subsidy from providers to users. 66. the country ranks in the 77h position in a list of 182 countries in 2009.8% of the population belongs to the 15–64 age group. The disparity has continues to date.

2 4.7 0.6 1.5 3. This brief is a licensed product and is not to be photocopied Page 57 . Females comprise 51% and males comprise 49% of the total population.4 0.0 2. Cali.2 4. Population distribution in Colombia is heavily skewed. A large percentage of the younger population has left rural areas to remain away from guerrilla and paramilitary violence.7 1.6 21.4 5–9 2. Around 10% of the Colombian population is estimated to be living in other countries.7 1. Migration from rural to urban areas has continued to exist. Although population density was 44 in 2005.68 migrant(s) per 1.5 0. However.8 44.4 10–14 2.2 2.6 60–64 0. The percentage of the urban population stood at 74% in 2008. 1.9 70–74 0.4 1.2 million Colombians migrated from the country legally during 2000–05. The net migration rate in 2010 was –0.6 3.9 1. for the male population it is 70. According to the 2005 census.98 years and for the female population it is 77.54 million Colombians were victims of forced displacement between 1995 and 2005. Table 9: Mid-year population of Colombia by age (millions).9 0. and Barranquilla. compared to 57% in 1951.1 0. About 35% of the total population is concentrated in the four cities of Bogota.2 4. Medellin. There has been low level of immigration to Colombia mainly because of security issues existing in the country.1 1.2 0. a large number of the population was forcefully displaced.4 15–19 2. the country is facing increased emigration.2 2.Social landscape years.5 1.84 years.1 45–49 1.3 0.2 2.2 0.9 3.7 1. 2009 Age group Female Male Total 0–4 2.3 0.1 20–24 1.7 3.1 4.7 75–79 0.2 65–69 0. in some areas of the eastern regions it is less than one person per square kilometer. the US and Venezuela.8 25–29 1.7 3.4 Total 22.7 1. but the actual number may be higher at 2–3 million.1 55–59 0. which indicates a shift away from agriculture. Preferred destinations for migration are Ecuador.7 50–54 1. Colombia: Country Analysis Report – In-depth PESTLE Insights Published 08/2010 © Datamonitor. due to the problems of security and unemployment.4 Source: Datamonitor DAT AMONITOR Urban/rural composition and migration Colombia has a largely urban population.4 30–34 1.000.4 0.3 35–39 1.5 80+ 0. Although the immigration laws are restrictive in Colombia.3 2. The 2005 census estimates that a total of 1.0 2.4 40–44 1.

Schooling begins with nursery schools and daycare centers. The next level is secondary education which again takes five years to complete and is divided into two components: basic secondary (6th–9th grade) and mid secondary (10th–11th grade). Colombia: Country Analysis Report – In-depth PESTLE Insights Published 08/2010 © Datamonitor. About 3% of Colombians are members of various Protestant groups and the rest belong to other minority groups. high school. with 90% of the population belonging to this religion.Social landscape Religious composition Roman Catholicism is the dominant religion of Colombia. To be eligible to access college or technical education. This is followed by the elementary level. elementary. These educational centers are commonly known as Hogares Comunitarios and are supported by the National Institute for Family Welfare (ICBF). which are generally attended by children under five years old. Figure 17: Major religions of Colombia. 2009 Other 10% Roman Catholic 90% Source: Datamonitor DAT AMONITOR Education Formal education in Colombia comprises nursery. Instituto Colombiano para el Fomento de la Educacion Superior). This brief is a licensed product and is not to be photocopied Page 58 . technical education and college. which is taken for five years by children from 6–12 years of age. high school students must take the pruebas de estado test provided by the Colombian Institute for the Promotion of Higher Education (ICFES.

Instituto de Seguros Sociales). pharmacies. The Colombian healthcare sector underwent major reforms in 1993. regional. treatment in a facility of decent quality. Although the new healthcare system widened population coverage by the social and health security system from 21% in 1993 to 70% in 2009. and the private sector. specialized and university hospitals. employees have been obliged to pay for healthcare plans to which employers also contribute. with the poor continuing to suffer relatively high mortality rates. In 2009. para-governmental social security institutions. pensions. However. The individual assumes some co-payments and moderate dues as co-payment for the system. Social welfare Social welfare policies The ISS provides medical care. in which the government and the solidarity fund (fund for low wage earners) participate. Colombia: Country Analysis Report – In-depth PESTLE Insights Published 08/2010 © Datamonitor. All workers are required to be affiliated with either the ISS or a private health or pension provider. which competes for members directly with the social security system and is governed by the same regulations and restrictions. such as large scale corruption and evasion of health-fund contributions. Although the reform encouraged private participation. There are over a dozen EPSs. The healthcare sector is also faced with other challenges. it also led to worsening inequalities in the distribution of healthcare resources. After this reform. Performance Healthcare The healthcare reform of 1993 brought in many changes in Colombia and the proportion of GDP going to healthcare has increased dramatically. The 1993 reform also provided for the creation and implementation of a new system of private healthcare providers known as Entidad Promotora de Salud (EPS). The per capita expenditure on healthcare in 2009 was around $306. when the burden of subsidy was shifted from providers to users. The other three major components of the healthcare infrastructure are the Social Security Institute (ISS.Social landscape University education is divided into undergraduate degrees and postgraduate degrees. healthcare expenditure stood at $14 billion. This brief is a licensed product and is not to be photocopied Page 59 . Healthcare Healthcare services The Colombian healthcare system comprises hospitals classified as local. disparities in healthcare has persisted. long term disability and survivor’s benefits. Individuals may opt out of social security and join an EPS. low-income persons who are not able to pay the contribution must enroll in the subsidized plan. which was equal to 6. Most Colombian university degrees are five years long. and a member may change his or her EPS every two years. The social security includes coverage for all general illnesses. as well as the misallocation of funds. and other benefits to Colombian workers. but technical education usually lasts for three years.2% of GDP. The social welfare system also provides for short term disability. and ambulance services.

The extent of inequality is evident from the estimates that 5% of the population own nearly 90% of the property.0 14. zero referring to total equality and one total inequality.0 1.0 0. the Colombian government spends nearly 4.0 8.0 4. huge amount of debt burden has been a challenge for the national government.0 3.Social landscape Figure 18: Expenditure on healthcare in Colombia.0 2.5% of GDP on education. and nearly 60% of the Colombian households are below the poverty threshold.0 6.0 7. Although various governments of Colombia have resorted to neo-liberal policies for economic progress.0 0. In addition. Despite economic growth. The Gini index measures total inequality on a scale of zero to one. The Gini index in Colombia was 0.0 8. As of 2009.0 2.0 16.0 6. Colombia: Country Analysis Report – In-depth PESTLE Insights Published 08/2010 © Datamonitor.0 Percentage (%) 5.0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Year Healthcare expenditure Healthcare expenditure as % of GDP Source: Datamonitor DAT AMONITOR Income distribution The Colombian society is one of the most inequitable countries in the Latin American region. with similar literacy levels for both men and women.7%.51 in 2000. Furthermore. Education According to 2005 census.0 12. a decline from 0. on the parameters of the UNDP’s HDI. which is higher than the Latin American average but much below the level of other advanced nations. the Colombian literacy rate is 90. delivery of higher education in Colombia is below international averages. The government has not been able to implement any redistributive policies.0 $ billion 10. This brief is a licensed product and is not to be photocopied Page 60 .58 in 2008.0 4. Colombia has fallen from 50th position in 1990 to 77th position in 2009.0 18. 2003–13 20. it has worsened the economic and social problems.

and the formalization and creation of further employment.00 4.40 $ billion 8.60 10.0 3.80 12.00 14.80 0.0 4. and stimulating household investment in child health and education. 2003–13 16. it performs poorly when compared to other emerging nations.60 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Year Expenditure on education Expenditure as % of GDP Source: Datamonitor DAT AMONITOR Outlook The HDI rank of the country is indicative of its moderate performance in social development.20 6.0 4.0 Percentage 4. In August 2010. The objective of the program is poverty reduction through direct cash transfers to families. nutrition and education of poor families. democratic checks and balances and rural development.0 2. promotion of preventive healthcare services. the unification of the subsidized and contributive systems. The new government led by President Juan Manuel Santos is focusing on job creation. The reforms are expected to include the update of the obligatory national health plan.0 3.0 4. This brief is a licensed product and is not to be photocopied Page 61 . the creation of a technical evaluation committee.0 5. the Inter-American Development Bank approved a $220 million loan to support Colombia’s Familias en Accion conditional cash transfer program aimed at improving the health. Colombia: Country Analysis Report – In-depth PESTLE Insights Published 08/2010 © Datamonitor.0 4.Social landscape Figure 19: Expenditure on Education in Colombia. Although its performance is better compared to other countries in the Latin American region.

Technological landscape TECHNOLOGICAL LANDSCAPE Summary Colombia’s progress in terms of technological development has been limited. and is the national government’s principal consultant in matters of S&T. the Colombian Institute for the Development of Science and Technology (COLCIENCIAS. the focus also shifted on developing technical manpower. such as: biodiversity and genetic resources. In the same year. strategies. The NSST is an open system. The government has also put in place a system of R&D incentives. It also promoted the National System of Scientific and Technological Information. During the noughties. The Council is the director and coordinator of the National S&T system and Regional S&T Systems. which primarily had an agrarian economy. and is assigned to the National Planning Department (DNP) which also provides its budget. The first step towards developing science and technology systems came through the establishment of the National Science and Technology Council in 1968. and activities of both public and private bodies. but it has failed in achieving the desired objectives because of poor implementation. The Colombian S&T Observatory is a private institution and receives funding support from the COLCIENCIAS. Evolution Technological development in Colombia started with the necessity of improving agricultural productivity of the country. and oversees national programs. agro-alimentary and agro-industry innovation. The Council was formed with the objective of providing consultative and advisory services to the government. regional agenda for developing S&T were developed and private participation in research of various fields were called for. Instituto Colombiano para el Desarrollo de la Ciencia y la Tecnología) was set up. which includes all S&T programs.2% of GDP) and has failed to take advantage of FDI inflow to develop its technological capabilities. prevalent diseases in tropical areas. the National S&T policy of 1990 led to the systematization of the S&T process. which required restructuring by the firms. advanced materials and nanotechnology. This body was responsible for the promotion and funding of S&T activities. biotechnology. laid the foundation of an integrated policy. principally in the area of research. the National System of Innovation and Regional Systems were developed and the Colombian Observatory for S&T was established. The institute is also responsible for the consolidation of NSST and innovation. The country moved from the import substitution policy of the 1950s and 1960s to one of liberalization during the 1990s. The country spends very little on R&D (less than 0. The national S&T policy incorporated scientific and technological research into national development plans while creating the necessary conditions to stimulate innovation and technological management in national companies. This brief is a licensed product and is not to be photocopied Page 62 . which included support for a national system of science and technology (NSST). During the late 1990s. and information and communications technologies. Although few attempts were made for S&T development. In 1995. Another significant decision was made by the Finance Colombia: Country Analysis Report – In-depth PESTLE Insights Published 08/2010 © Datamonitor. Structure and policies The National Council for S&T is the main government body responsible for the development of S&T policy in the country. COLCIENCIAS aims to create favorable conditions for the generation of scientific and technological knowledge. The S&T policy of 1990.

The Colombian government has ratified legislation to implement its obligations under the Uruguay Round Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs). Servicio Nacional de Aprendizaje) was entrusted with the responsibility of promoting and facilitating the generation and consolidation of new entrepreneurial initiatives demonstrating high innovation and technological development content within the framework of the national program Intellectual property Colombia has intellectual property rights (IPR) regulations in place but enforcement is weak. Instituto Colombiano Agropecuario). growing at a rate of 109%. there were over 17 million internet users in Colombia. which allowed universities to import equipment with the prior authorization of the COLCIENCIAS. Dirección de Impuestos y Aduanas Nacionales de Colombia).4 million fixed lines in service in 2009. The principal telecom operators in Colombia are Comcel. The media is also asked to report on S&T activities. Furthermore.7% during the same period. Mobile telephony growth peaked in 2005. A number of government bodies are involved in the preparation of IPR policies and its enforcement. and TIGO. However. and the judiciary. While the Ministry of Social Protection is in charge of the issuance of pharmaceutical patents.Technological landscape Ministry. This brief is a licensed product and is not to be photocopied Page 63 . the Paris Convention for the Protection of Industrial Property and the Berne Convention for the Protection of Literary and Artistic Works. Moreover. The fixed line tele-density rate is around 18%. The National Council for Social and Economic Policy provides funds for R&D together with exemptions.01 million mobile subscribers in 2009. There were approximately 42. The number of internet users is also witnessing an increasing trend in Colombia. Colombia is also a member of the World Intellectual Property Organization (WIPO). the national police. Movistar. during the same year. the prosecutor general’s office. fixed line segment registered a negative growth. The issuance of plant variety protection-related and agro-chemical patents is undertaken by the Colombian Agricultural Institute (ICA. the National Learning Service (SENA. The mobile phone subscriber base grew at an annual average rate of around 38. During 2009. Colombia is also a signatory to the Patent Cooperation Treaty and the International Union for the Protection of New Varieties of Plants. enforcement of IPR laws is carried out by other agencies such as the Tax and Customs Directorate (DIAN. tax discounts and other financial stimuli. the Ministry of Justice is in charge of the issuance of literary copyrights. The Superintendency of Industry and Commerce (SIC) is the Colombian authority for granting patents and is also responsible for the development of IPR policies. Colombia: Country Analysis Report – In-depth PESTLE Insights Published 08/2010 © Datamonitor. with a penetration rate of 96%.4% during 2002–09. while the fixed line segment registered a growth of 1. Performance Telecommunications The Colombian telecommunications sector has been a rapidly growing segment. Colombia had nearly 6.

0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 -20. This brief is a licensed product and is not to be photocopied Page 64 .0 0.0 100.0 Growth rate (%) 60.0 80. 2002–13 120.0 20.0 -40.0 Year Mobile phones growth Fixed line growth Source: Datamonitor DAT AMONITOR Colombia: Country Analysis Report – In-depth PESTLE Insights Published 08/2010 © Datamonitor.0 40.Technological landscape Figure 20: Growth rate of mobile and fixed-line subscribers in Colombia.

0 80. The per capita expenditure on R&D has also declined during these years. indicating a decline from the level of expenditure in 1996 (3%). The government sector contributed 8% in total R&D expenditure and the educational institutions’ contribution stood at 60%. The Colombian government has been providing R&D incentives. According to the UNESCO statistics.0 10.00 30.00 70.0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Year Number of users Growth rate Source: Datamonitor DAT AMONITOR R&D expenditure Colombia lags behind in terms of R&D expenditure. total expenditure on R&D as a percentage of GDP was 0.00 50.0 20. Colombia: Country Analysis Report – In-depth PESTLE Insights Published 08/2010 © Datamonitor.00 0. • tax exemption on imports of certain capital goods for technology projects by non-profit organizations and educational institutions.0 40.00 90.Technological landscape Figure 21: Internet users and growth rate in Colombia. This brief is a licensed product and is not to be photocopied Page 65 .00 10. The remaining contributions were accounted for by the NGOs.0 Number of users (millions) 60.0 20.3% as of 2008.0 5. • VAT exemptions on imported machinery. • income tax exemption for profits on software and natural medicines. These incentives come in various forms such as: • a tax deduction of 125% on the value of a science and technology project. The public sector plays a dominant role in R&D expenditure. equipment and raw materials.0 0. 2002–13 25.0 Growth rate (%) 15. with the business sector’s contribution to R&D at 18%.

with only 55 per 1. it was found that the largest share of firms’ expenditure is on so-called quasi- fixed factors such as ‘R&D machinery and equipment’ and ‘new information technologies’.000 people in 2008 having access to PCs. Furthermore. The country does not have a significant high-tech sector. This brief is a licensed product and is not to be photocopied Page 66 . however it is considered to be one of the best in terms of its internet bandwidth in Latin America. According to OECD recommendations. compared to 1% for medium-sized companies and 0. This suggests that innovation is used in the machines. and innovation. the World Bank approved a loan of $25 million to Colombia for strengthening the National System of Science. The ICT infrastructure is not highly developed in Colombia. technology and innovation in Colombia. In July 2010. Furthermore. with the ICT export share of exported goods constituting around 0.8% of their sales on R&D. in terms of size. Outlook Colombia’s technological landscape indicates a dismal picture with a very low level of R&D expenditure and very little innovative activities. Technology and Innovation to promote human capital for the knowledge economy. Large companies spend 1. and the country is ranked in 70th place on the 2009 Legatum Prosperity Index. Only 1% of total R&D expenditure represents the so-called ‘technologies developed by the establishment’. large manufacturing establishments are somewhat more innovative than smaller ones. research and development. The project objective is to strengthen the capacity of the Administrative Department of Science. Colombia: Country Analysis Report – In-depth PESTLE Insights Published 08/2010 © Datamonitor. Despite the post-2000 economic revival. The high-tech export share is 4%. while the number of secure internet servers is relatively low. Colombia has a long way to go. which reflects adaptation of outside technologies to the processes of the firms in question.Technological landscape According to a survey conducted by the IMF.3% in 2008. The country also lags behind in terms of technical manpower and S&T infrastructure. the country has failed in improving its technological landscape. a nation must spend at least 1% of its GDP in science and technology activities to achieve sustainable development.7% for small companies. Colombians have very limited access to personal computers. By these standards. The project will also raise awareness of science. Technology and Innovation Project.

in certain admiralty matters. along with corrupt practices and cumbersome procedures. which established the written codification of its laws. This move towards a transition to the US model system has been accepted by major Colombian cities. and guards the integrity and supremacy of the constitution. the Colombian legal system is based on the civil law jurisdiction. The new Colombian government is expected to bring in greater transparency into the judicial system and establish a permanent communication mechanism between the judiciary and government. It has also drawn heavily from Italian and Spanish legal traditions. The investment regulations of the country are comparable to other emerging markets. This code reached its complete implementation in 2008. was influenced by Spanish and French traditions. the constitutional court and the superior judicial council at the top level. family. However. The constitutional court reviews the constitutional validity of laws approved by the legislative branch and some decrees issued by the executive branch. Evolution With roots in Roman law and heavily influenced by the French system. These codes were subsequently amended: the commercial code was amended in 1971. the system has been often criticized for the lack of transparency. The policies have encouraged foreign investment. judicial. labor. The Supreme Court of Justice has three chambers of civil. agrarian. The council of state is the highest court of administrative law. It also takes appeals from departmental administrative courts and some national officials. The 1991 constitution strengthened the judicial administration by providing for the introduction of an oral. The first commercial. commercial and criminal cases. Nevertheless. This brief is a licensed product and is not to be photocopied Page 67 . It is also responsible for Colombia: Country Analysis Report – In-depth PESTLE Insights Published 08/2010 © Datamonitor. Structure and policies Judicial system Structure of the system The Colombian judicial system comprises the Supreme Court of Justice. criminal and labor matters and decides appeals on errors of law. The most significant of these was the 1991 constitution. the system has undergone many changes. in controversies between departments or relating to government contracts. which provided the judiciary with greater administrative and financial independence from the executive branch. in the past. the council of state. However. The first civil and penal codes appeared in 1873. the criminal code in 2000 and the judicial code was amended in 2004. and mining codes came into being in 1887. It also has original jurisdiction in certain proceedings against high functionaries. and has power to quash lower court decisions. the country’s legal implementation and enforcement mechanism has remained weak.Legal landscape LEGAL LANDSCAPE Summary The Colombian judicial system. It is also the highest court with jurisdiction over civil. accusatory system to replace the traditional system in order to expedite the judicial process and reduce the enormous backlog of cases. despite threats of internal security.

there are five types of business companies. which are subdivided into three groups: • interest-based companies. The stock corporation is normally a large company. Generally. municipal resolutions. Legislation affecting business The legal climate for foreign investment is generally conducive in Colombia. The most common forms of companies in Colombia are the stock corporation and the limited liability company. This brief is a licensed product and is not to be photocopied Page 68 . The superior judicial council. or actions against abuses of public administration officials. Tax regulations Taxation The Colombian tax system has national and local taxes. including members of the judiciary. except when made in the restricted areas. decisions of departmental and municipal executives. • share-based companies. there are the departmental administrative courts which hear cases regarding departmental ordinances. Investment in the financial sector requires prior authorization of the Financial Superintendence. Structure for doing business According to Colombian law. which include general partnerships. is responsible for resolving jurisdictional conflicts arising between other courts. windfall tax. and disciplines judges. it provided for the national treatment of foreign investors. a limited liability company is frequently adopted by small and medium enterprises. A number of controls on remittance of profits and capital were also lifted. and tax matters. joint-stock companies and limited liability companies. which include stock corporations. Besides these supreme judicial bodies. and stamp tax. property tax and registration tax. foreign investment does not require prior authorization. there are lower courts consisting of ordinary courts. VAT. tax on financial transactions. and authorities of indigenous territories with jurisdiction on indigenous communities. In addition. Besides these.Legal landscape procedures related to actions created to protect the rights of those accused of criminal offenses. The main national taxes are income tax. and foreign investment was allowed in most of sectors except defense and in such sectors important to national security. Local taxes include industry and commerce tax. administrative courts with jurisdiction over administrative matters. investments in the hydrocarbon and mining sector as well as portfolio investments are subject to a special regime for which investors need to take prior permission. After the country began liberalization in the 1990s. which include limited partnerships. Colombia: Country Analysis Report – In-depth PESTLE Insights Published 08/2010 © Datamonitor. wealth (capital) tax. through its two chambers. courts with peace jurisdiction (over minor criminal and civil matters). • quota-based companies. While general and limited partnerships are normally used by family or small enterprises.

there is windfall tax. in which case it is 20%. This brief is a licensed product and is not to be photocopied Page 69 . profits from the liquidation of companies that have existed for over two years. Windfall income is also subject to a 33% rate. and 20% on “sensitive” goods. In addition to the basic import duties. It regulates the minimum rights and guarantees to which employees are entitled. there are a number of regulations which put forth corporate governance requirements. and union members have a special legal protection that prevents them from being fired or forming unions. This framework. bets. The 2001 resolution of the Superintendency of Finance contains the corporate governance standards to be followed by companies issuing securities that may be purchased by Colombian pension funds. since 2005. The Colombian labor legislations are considered as a matter of public order. 10% on manufactured goods with some exceptions. Colombia: Country Analysis Report – In-depth PESTLE Insights Published 08/2010 © Datamonitor. lotteries and similar chance games. Labor laws The constitution of 1991 provides the regulatory framework for labor legislations in Colombia.Legal landscape Income tax The income tax rate in Colombia is 33%. with certain exemptions and deductions applicable to the taxable income. which cannot be waived by the employees or modified by labor contracts. the decree of 2006 regulates the information system to the securities market named Sistema Integral de Informacion del Mercado de Valores (SIMEV). the constitution protects the right to constitute labor unions. which is complementary to income tax and is levied on extraordinary income. along with the Colombian Labor Code. Additionally. Corporate governance In Colombia. The average general rate is 16%. depending on the good or service to which it applies. income from inheritances. although this tax is subject to differential rates ranging between 0% and 35%. Some sources of windfall income are profits from the sale of fixed assets owned for over two years. some agricultural products fall under a variable “price band” import duty system. Trade regulations Colombia imposes a four tier tariff duty: 0% on capital goods. It also requires the board of directors to be composed of at least 25% of independent directors to ensure independence. Sales tax (VAT) This is a national tax on services rendered and on sales and imports of physical goods. raffles. another law has introduced new mandatory corporate governance requirements for all issuers whose securities are publicly traded in the Colombian stock market. except in the case of amounts won through raffles. legacies and donations and profits from lotteries. Besides this. Moreover. bets and similar chance games. 5% on industrial goods and raw materials. Moreover. provides fundamental labor legislations.

The opening up of several sectors for foreign investment is evidence of growing liberalization. incumbent president Juan Manuel Santos. and its overall score is equal to the regional average. and construction. Colombia: Country Analysis Report – In-depth PESTLE Insights Published 08/2010 © Datamonitor. and some bureaucratic procedures have been simplified. compared to the world average of 35 days. who assumed office in August 2010.2 percentage points higher than the previous year. Similarly. However. and has consistently encouraged the inflow of FDI. It ranks 12th out of 29 countries in the Americas. The country ranks 37th on World Bank’s Doing Business Indicators 2010. the independence of constitutional courts has been questioned. which the government hopes to send to Congress by the end of August 2010. For firms with more than 10 employees. Closing a business is also relatively easy. including investment and monetary freedom. there are laws which restrict the movement of personnel in professional areas. The constitutional reform project has been badly received by Supreme Court magistrates. The Interior Ministry sent a request in early August 2010 to the Congress to withdraw a judicial reform bill tabled by the previous government mere days before administration was scheduled to leave office. the Colombian business climate is plagued with judicial corruption. The lower courts have failed to act independently and unless adequate measures are taken. Outlook Colombia has performed moderately in improving its legal climate. law. as they are found to be interfering in the legislative process. these courts will remain susceptible to corruption and intimidation. There are also limitations on employing foreign nationals. In an effort to improve communication with the judiciary. Colombia has succeeded in retaining its business freedom. Its overall score is 3. Alongside the establishment of a permanent communication mechanism between government and judiciary. Despite numerous instances of domestic violence. This brief is a licensed product and is not to be photocopied Page 70 . operate. the most important outcome of the meeting was an agreement to reach a consensus on an encompassing judicial reform bill. which makes legal transparency difficult.Legal landscape Performance Effectiveness of the legal system th Colombia has been ranked as the 58 freest economy by the Wall Street Journal’s index of economic freedom in 2010. Although the present government has stepped up efforts to open up the economy. the country has to improve its judicial climate in terms of enforcement of laws. The 1991 constitution has taken the country closer towards internationalization of its laws. However. They have been particularly opposed to provisions seeking to transfer the prosecutor-general office from the judiciary to the executive branch and to give the president the authority to name the prosecutor-general. engineering. with favorable business policies despite the persistence of violence and threats to internal security. the index rates labor freedom and property rights as poor. employers are not allowed to recruit foreign nationals in excess of 10% of the general work force and 20% of specialists. The overall freedom to start. The government has remained committed to the revival of the economy. The new Colombian government has made the first steps towards reconstructing battered ties with the judiciary. reflecting improved scores in seven freedom indexes. such as architecture. met with the 78 magistrates of the high courts to resolve the issues pertaining to judiciary. and close a business is relatively well protected by Colombia's national regulatory environment. The judicial system is lengthy and cumbersome. Although it presents a growing opportunity. Furthermore. Starting a business takes an average of 20 days. the system has continued to suffer from a lack of transparency and the poor enforcement of laws.

corporaciones autónomas regionales). Housing and Territorial Development is the main agency in charge of managing all environmental matters. The regulatory and enforcement mechanism also needs to be strengthened to ensure greater compliance to environmental standards. Since the 1970s the government has instituted a number of acts and regulations to improve environmental compliance. now known as the Ministry of Environment. various government agencies were entrusted with environmental planning. Furthermore. In 1993. The Urban Environmental Units operate in municipalities. there are the Autonomous Regional Environmental Authorities (CARs. the government created the Ministry of Environment. The country is ranked ninth in the 2008 Environmental Performance Index (EPI). where they play the same role as the CARs do in the rural areas. however. The environmental management system is also decentralized. Colombia has made substantial progress in curbing ozone depletion. when the country enacted the regulations governing the protection and management of renewable natural resources: the Renewable Natural Resource and Environmental Protection Code. It was instrumental in the creation of the National Environmental System (SINA. districts or metropolitan areas with over one million inhabitants. or a geopolitical. Housing and Territorial Development. deforestation and the preservation of its wildlife. Structure and policies The Ministry of Environment. given the size of the country. Housing and Territorial Development. bio- geographical or hydro-geographical unit. Nevertheless. The CARs and the Urban Environmental Units act as the environmental authority of their corresponding jurisdictions and enforce the general guidelines given by the Ministry of Environment. It is responsible for the administration of the nation's renewable natural resources and setting the policies and regulations for the management of renewable natural resources and the environment. Colombia has remained at the forefront with respect to maintaining environmental standards. which are government agencies composed of the territorial agencies of areas in the same ecosystem. and established general environmental principles in subsequent years. Besides this ministry. prevention and defense responsibilities. The 1991 constitution took an important step to modernize the environmental regime. These authorities have financial and administrative autonomy and work with their own corporate capital.Environmental landscape ENVIRONMENTAL LANDSCAPE Summary In the Latin American region. This brief is a licensed product and is not to be photocopied Page 71 . Sistema Nacional Ambiental). the regional CARs are subject to audit by the National Comptroller's Office. the country is faced with the challenges of soil erosion. Evolution The conservation of Colombia's natural resources began in 1974. Environmental regulations The environmental law of 1993 set the general principles as follows: Colombia: Country Analysis Report – In-depth PESTLE Insights Published 08/2010 © Datamonitor. It enshrined rights and obligations related to the duty of every citizen to protect natural resources.

marine life conservation. The EPI looks at success in environmental protection based on two broad objectives: reducing environmental stress on human health. It recognizes that the climate system is a shared resource whose stability can be affected by industrial and other emissions of carbon dioxide and other greenhouse gases. Participation in global efforts/agreements/pacts Colombia has ratified nearly 105 environment treaties and has remained at the forefront in the Latin American region with respect to conservation of natural resources. garbage and trash. land. the country currently has a set of regulations applicable to the renewable natural resources. including: the atmosphere and national air space. wastes. The index measures 25 indicators in six different areas: environmental health. conducted by Yale and Columbia universities. and promoting strong ecosystems and sound natural resource management. and exploited on a sustainable basis. The convention has a universal membership. climate change (namely. No deal could be clinched in Copenhagen. it must be protected as a priority. air pollution.Environmental landscape • The country's economic and social development will be guided on the basis of the sustainable development and universal principles contained in the June 1992 Rio de Janeiro Declaration on Environment and Development. soil and subsoil. Copenhagen conference on climate change The United Nations Framework Convention on Climate Change (UNFCCC) sets an overall framework for intergovernmental efforts to tackle the challenge posed by climate change. a pollutant from human activities that causes significant health problems. • Since the country's biodiversity is a national heritage of interest for all mankind. fisheries. • The state shall promote the implementation of environmental costs and the use of economic instruments to prevent. hazardous wastes. Performance Environmental impact Colombia was ranked 10th out of 163 countries in the 2010 EPI. It has signed the Law of the Sea but is yet to ratify it. In pursuance of such rules. endangered species. correct and restore environmental deterioration and to preserve renewable natural resources. desertification. the Kyoto Protocol). cropland use and reducing local ozone or ground level ozone. water. water. productive natural resources. however. noise. and flora and fauna. such as: leftover products. • Disaster prevention shall be a matter of collective interest and any measures taken to avoid or mitigate the effects of any disasters that occur shall be mandatory. Colombia performed well in forestry. with 192 countries having ratified the convention. The environmental legislation has also established administrative procedures for environmental licensing and permits to use renewable natural resources. biodiversity and habitat. ozone layer protection and ship pollution. These sets of rules also regulate all other elements and factors comprising the environment. According to the Colombian Ministry of Colombia: Country Analysis Report – In-depth PESTLE Insights Published 08/2010 © Datamonitor. Colombia is party to the Antarctic Treaty and various other treaties on biodiversity. and climate change. talks on a binding international climate change pact continue in 2010. This brief is a licensed product and is not to be photocopied Page 72 . and living conditions resulting from urban or rural human settlement processes.

However.0 0. Soil erosion has resulted from the loss of vegetation and heavy rainfall. a significant source of biofuel has led to deforestation to make room for new plantations. According to UNEP estimates. such as chlorofluorocarbons. 64 out of 1.53 20.56 Growth (%) 40. Figure 22: Carbon dioxide emissions in Colombia.55 0. by 86% between 1995 and 2008.000 plant species were endangered. Growing deforestation has also led to an increase in the number of endangered species. and the Colombian government has stated its intention to increase production to six million hectares by 2020. This brief is a licensed product and is not to be photocopied Page 73 . 2002–13 80. Increasing demand for palm oil.57 Million metric tons 50. Despite the country’s progress in environmental conservation. it faces the challenges of soil erosion.54 30.027 hectares in 1998 to 275.0 0. The CO2 emissions in Colombia increased from 53 million metric tons in 2002 to over 71 million metric tons in 2009.0 0. which implies a reduced ability to absorb greenhouse gases and therefore contributing to climate change. and the soil has also been damaged by the overuse of pesticides.52 10.0 0. Large tracts of forest are also disappearing because of gold mining. there was an increase in carbon dioxide emissions and carbon fuel usage during 2000–08. 15 reptile species out of a total of 356.0 0. and 429 out of 51.0 0. the country reduced the national consumption of ozone-depleting substances. by 2001.58 60. 35 of Colombia's 359 species of mammals. is home to about 10% of the world's species.0 0.317 hectares in 2005.Environmental landscape Environment officials.0 0. which is the second most biologically diverse country on earth. The land used for oil palm plantations in the country increased from 145. This would lead to a significant loss of forest land.50 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Year Volume Growth rate Source: Datamonitor DAT AMONITOR Colombia: Country Analysis Report – In-depth PESTLE Insights Published 08/2010 © Datamonitor.0 0.51 0. deforestation and the preservation of its wildlife.59 70.770 breeding bird species. Colombia.60 0.

Colombia: Country Analysis Report – In-depth PESTLE Insights Published 08/2010 © Datamonitor. FEDEGAN). 2002–12 3. This financing mechanism will generate important local and global benefits.0 3.4 2.0 3.0 3. which is to be carried out by the Colombian Federation of Stockbreeders (Federacion Colombiana de Ganaderos. the World Bank has approved a $7 million grant from the Global Environmental Facility (GEF) for the Sustainable Stockbreeding Management Project in Colombia.9 -10. The project. improvements in rural adaptation to climate change and to the reduction of land degradation.0 Barrels per capita Growth (%) 3. agro-industry (panels) and forestry are the front runners in drawing up CDM projects.0 -8. However. There are expectations of high market potential for Certified Emissions Reductions (CERs). increasing the provision of environmental services and augmenting productivity in participating farms.Environmental landscape Figure 23: Carbon fuel usage in Colombia.0 3.1 -4. there are risks related to investment and a lack of funds may also restrict the financing of such projects. This brief is a licensed product and is not to be photocopied Page 74 . as it will contribute to the conservation of global biodiversity critical to stockbreeding systems. which is reflected in the country’s high rank on the EPI. to be implemented in five of the country's regions. Few sectors like cement.2 -2. aims at promoting the adoption of Forest Grazing Systems (FGS) that allow improvements in natural resource management.0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Year Carbon fuel usage Growth rate Source: Datamonitor DAT AMONITOR Outlook Colombia has been successful in putting environmental concerns at the forefront. Colombia has played an active role with respect to its commitment in various international environment treaties.0 -6. In March 2010.0 2.3 0.5 6.0 4. Environmental regulations ensure the country meets its environmental objectives.0 2. power plants. and whose focus is to improve production systems to benefit farmers and the environment.8 -12. to the reduction of emissions caused by deforestation and forest degradation.

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