Colombia Economic Conditions

By | December 15, 2021

According to an expression often used by Colombian and international analysts, the economic problem of Colombia is not poverty, but wealth (potential). Slowly emerging from a colonial-style production mechanism, when the economy was almost entirely based on the export of coffee, the country it is making use of a wide range of resources and improving, at least in certain regions, the physical infrastructure and services. The recent modernization process has pushed the growth of wealth to extraordinary rates, in some periods, with rates well above 10% per year; from the beginning of the 21st century. the situation appears a little less dynamic, but the upward trend is always evident (around 5% per year). Commercial exchange has been practically in balance for years, after a long, almost traditional dependence on imports. Economic development, however, does not proceed in a balanced way at all: not from a geographical point of view, so it is almost impossible to compare the living conditions in urban areas, often well organized, relatively rich and similar to those of Western countries. more advanced, and in rural regions, especially the southern and eastern ones; nor from a social point of view, given that the various pressures for economic and financial restructuring have so far always been accompanied by fierce resistance and the rapid adaptation of the traditionally privileged classes (in the first place the large landowners and companies with international capital which control the production of raw materials and services). For Colombia economics and business, please check businesscarriers.com.

Due to environmental conditions and resources, Colombia has undeniable potential: the primary sector can count on the production of coffee (4th world producer), cocoa, sugar cane, palm oil (5th producer), cotton, fruit, to which are added crops intended for internal consumption (rice, tubers, corn). Also noteworthy are the extraction of timber and cattle breeding. A separate discussion require illegal crops destined for the international drug market; these are theoretically very relevant in the Colombian economy as a whole. If it is true that the revenues from the drug trade amount to about two thirds (about 50 billion dollars) of the legal GDP, the propulsive and at the same time distorting effects of the eventual reinvestment of this mass of capital would be extraordinary. But it appears that almost all of these proceeds are laundered and placed abroad, while in Colombia there would remain about a tenth of the total, invested in substantially unproductive forms (real estate and financial instruments); drug refining and commercialization is managed by trafficking organizations, in relatively centralized, sophisticated and low-manpower forms; while the production, guaranteed by a large number of very small farmers, yields very modest revenues, although often vital for the farmers. Even the illegal economy, in essence, implements very little redistribution. The overall incidence of legal primary sector products, on the whole of national production and exports, has been declining rapidly in recent decades: coffee has long ceased to be the main voice of exports, surpassed not only by crude oil, but also by coal and chemical products derived from their respective processes, and almost equaled by the products of the steel and textile industries. In a country, however, where 21% of the assets still live on agriculture, the conditions of the primary sector are not only an economic issue, but also a social one: from this point of view, the substantial failure of land reform attempts should be noted., so much so that 4% of the owners own more than 2/3 of the cultivated land and the process of concentration does not seem to stop; the persistent omnipotence of landowners and large international capital continues to crush the very small owners and laborers in living conditions that are too often very far from an acceptable level. Public investment in sectors such as education and health cannot be quickly resolved, while the elements of inequality are increasing and the redistribution of wealth does not extend beyond the better integrated urban classes; in fact, over half of the population has incomes below the poverty line.

All the more reason, these problems stand out in the mineral raw materials sector, where a good endowment of capital (supplied from abroad and to an extent increasing) and management skills; also in this case, the proceeds tend to be concentrated and the effects on the population remain modest. The production of oil (26.5 million tonnes in 2006), controlled by the state, was an exception, to some extent, which years ago allowed infrastructure investments and ambitious development plans, although too vulnerable to the trend of both extraction, which had a phase of reduction between the years 1970 and 1980, and then recovered both in the international price of crude oil and therefore very discontinuous over time. The oil, extracted mainly in the Magdalena valley and in the East, is largely destined for export after refining (on the coast, as in Cartagena or in Barrancabermeja, thanks to an extensive network of pipelines, but also in the extraction areas). Other important mineral products are coal (65.6 million t), natural gas, iron, nickel, gold, platinum, emeralds (1st producer). Coal and iron, together with the massive development of hydroelectric production (almost 80% of the electricity produced), have supported some industrial specializations: the steel industry, first of all, and then the chemical one, while also the traditional textile productions (based on cotton and wool) have taken considerable development and so have metalworking, the production of consumer goods and the construction sector. The secondary sector absorbs less manpower than the primary sector (less than 20%), but guarantees over 30% of GDP.

The availability of capital is crucial, and to attract foreign investments the creation of free zones has been launched in correspondence with the main industrial centers, while particular attention has been given, both by the State and by private investors, to the infrastructure of the country., as for the expansion of the credit and financial system, particularly lively in the early 21st century. The network road (about 110,000 km, less than a quarter paved) and air connections (main airports in Bogotá, Medellín, Cali, Barranquilla and Cartagena) have undergone some development, and so has traditional river navigation, essential especially in the eastern regions. Maritime traffic, on the other hand, is of little significance, to which the breezy construction of an interoceanic link would give impetus. The United States absorbs over 1/3 of the entire trade movement, but the shares of China (for imports) and of various South American countries (for both imports and exports) are growing. Tourism is of little importance, discouraged by the country’s insecurity conditions.

Colombia Economic Conditions