Economy of Colombia

European explorers reached what is now Colombian territory as early as 1510 in Santa María Antigua del Darién (in present-day Chocó department). For the next couple of decades Colombia, and South America in general, remained largely unexplored. From 1533 to 1600, Europeans began expeditions into the interior of current Colombia. The intent of these expeditions was mainly to conquer new lands and exploit village resources. Legends of El Dorado that reached Spaniard explorers continued to fuel exploration and raiding of Indian villages.

In the 17th century, Spanish conquerors explored Colombia and made the first settlements, and this was the beginning of Colombia's modern economic history. Major conquistadors from this period were Pedro de Heredia, Gonzalo Jimenez de Quesada, Sebastián de Belalcazar, and Nikolaus Federmann.

During the 16th and 17th centuries, the colonial settlements in Colombia served purposes of extraction of precious metals and other natural resources, and later slavery trade. This economic arrangement left the Colony with little room for building solid institutionality for economic development. The main non-extractive institutions emerging in this centuries were the fortified port of Cartagena and the Viceroyalty of New Granada. Cartagena developed military defenses mainly out of necessity from frequently having to deal with pirate attacks. A primitive form of colonial administration was organized in Santa fé de Bogotá with the Viceroyalty of New Granada, especially under the tenure of José Solís y Folch de Cardona (1753–1761), who conducted a census and built roads, bridges and aqueducts.

Following the War of the Thousand Days (1899–1902), Colombia experienced a coffee boom that catapulted the country into the modern period, bringing the attendant benefits of transportation, particularly railroads, communications infrastructure, and the first major attempts at manufacturing.

Colombia's consistently sound economic policies and aggressive promotion of free trade agreements in recent years have bolstered its ability to weather external shocks. Real GDP has grown more than 4% per year for the past three years, continuing almost a decade of strong economic performance.[7]

In 1990, the administration of President César Gaviria Trujillo (1990–94) initiated economic liberalism policies or "apertura economica" and this has continued since then, with tariff reductions, financial deregulation, privatization of state-owned enterprises, and adoption of a more liberal foreign exchange rate. Almost all sectors became open to foreign investment although agricultural products remained protected.

The original idea of his then Minister of Finance, Rudolf Homes, was that the country should import agricultural products in which it was not competitive, like maize, wheat, cotton and soybeans and export the ones in which it had an advantage, like fruits and flowers. In ten years, the sector lost 7,000 km² to imports, represented mostly in heavily subsidized agricultural products from the United States, as a result of this policy, with a critical impact on employment in rural areas.[27] Still, this policy makes food cheaper for the average Colombian than it would be if agricultural trade were more restricted.

Until 1997, Colombia had enjoyed a fairly stable economy. The first five years of liberalization were characterized by high economic growth rates of between 4% and 5%. The Ernesto Samper administration (1994–98) emphasized social welfare policies which targeted Colombia's lower income population. These reforms led to higher government spending which increased the fiscal deficit and public sector debt, the financing of which required higher interest rates. An over-valued peso inherited from the previous administration was maintained.

The economy slowed, and by 1998 GDP growth was only 0.6%. In 1999, the country fell into its first recession since the Great Depression. The economy shrank by 4.5% with unemployment at over 20%. While unemployment remained at 20% in 2000, GDP growth recovered to 3.1%.

The administration of President Andrés Pastrana Arango, when it took office on 7 August 1998, faced an economy in crisis, with the difficult internal security situation and global economic turbulence additionally inhibiting confidence. As evidence of a serious recession became clear in 1999, the government took a number of steps. It engaged in a series of controlled devaluations of the peso, followed by a decision to let it float. Colombia also entered into an agreement with the International Monetary Fund which provided a $2.7 billion guarantee (extended funds facility), while committing the government to budget discipline and structural reforms.

By early 2000 there had been the beginning of an economic recovery, with the export sector leading the way, as it enjoyed the benefit of the more competitive exchange rate, as well as strong prices for petroleum, Colombia's leading export product. Prices of coffee, the other principal export product, have been more variable.

Economic growth reached 3.1% during 2000 and inflation 9.0%. Colombia's international reserves have remained stable at around $8.35 billion, and Colombia has successfully remained in international capital markets. Colombia's total foreign debt at the end of 1999 was $34.5 billion with $14.7 billion in private sector and $19.8 billion in public sector debt. Major international credit rating organizations have dropped Colombian sovereign debt below investment grade, primarily as a result of large fiscal deficits, which current policies are seeking to close.

Former president Álvaro Uribe (elected 7 August 2002) introduced several neoliberal economic reforms, including measures designed to reduce the public-sector deficit below 2.5% of GDP in 2004. The government's economic policy and controversial democratic security strategy have engendered a growing sense of confidence in the economy, particularly within the business sector, and GDP growth in 2003 was among the highest in Latin America, at over 4%. This growth rate was maintained over the next decade, averaging 4.8% from 2004 to 2014.[28]

The following table shows the main economic indicators in 1980–2017. Inflation under 5% is in green.[31]

Year	GDP (in Bil. US$ PPP)	GDP per capita (in US$ PPP)	GDP growth (real)	Inflation rate (in percent)	Unemployment (in percent)	Government debt (in % of GDP)
1980	78.9	2,772	4.4%	25.9%	5.4%	n/a
1981	88.2	3,032	2.2%	27.4%	6.5%	n/a
1982	94.5	3,181	0.9%	24.8%	7.1%	n/a
1983	99.8	3,288	1.6%	19.6%	8.7%	n/a
1984	106.8	3,446	3.4%	16.2%	9.0%	n/a
1985	113.7	3,691	3.1%	24.1%	8.7%	n/a
1986	122.7	3,904	5.8%	18.8%	7.7%	n/a
1987	132.6	4,132	5.4%	23.3%	7.4%	n/a
1988	142.8	4,359	4.1%	28.1%	6.5%	n/a
1989	153.4	4,588	3.4%	25.8%	6.8%	n/a
1990	165.9	4,862	4.3%	29.1%	6.6%	n/a
1991	175.5	5,039	2.4%	30.3%	6.4%	n/a
1992	187.3	5,273	4.4%	27.0%	5.9%	n/a
1993	202.8	5,600	5.7%	22.5%	5.0%	n/a
1994	217.7	5,906	5.1%	22.8%	4.9%	n/a
1995	233.8	6,237	5.2%	20.9%	5.6%	n/a
1996	243.0	6,378	2.1%	20.8%	7.8%	23.1%
1997	255.6	6,623	3.4%	18.5%	7.9%	25.1%
1998	259.9	6,629	0.6%	18.7%	9.7%	27.3%
1999	252.8	6,367	−4.2%	10.8%	13.1%	33.8%
2000	266.1	6,603	2.9%	9.2%	13.3%	37.7%
2001	276.7	6,780	1.7%	8.0%	15.0%	40.8%
2002	288.0	6,968	2.5%	6.4%	15.6%	47.2%
2003	305.2	7,294	3.9%	7.1%	14.1%	44.7%
2004	330.4	7,797	5.3%	5.9%	13,7%	41.2%
2005	357.0	8,325	4.7%	5.1%	11.8%	38.3%
2006	392.7	9,046	6.7%	4.3%	12.0%	35.8%
2007	430.9	9,810	6.9%	5.5%	11.2%	32.5%
2008	455.0	10,235	3.5%	7.0%	11.3%	32.1%
2009	465.9	10,360	1.7%	4.2%	12.0%	35.2%
2010	490.4	10,776	4.0%	2.3%	11.8%	36.4%
2011	533.5	11,587	6.6%	3.4%	10.8%	35.7%
2012	565.3	12,136	4.0%	3.2%	10.4%	34.1%
2013	602.4	12,785	4.9%	2.0%	9.7%	37.8%
2014	640.2	13,432	4.4%	2.9%	9.1%	43.7%
2015	666.9	13,835	3.1%	5.0%	8.9%	50.6%
2016	689.2	14,138	2.0%	7.5%	9.2%	50.7%
2017	714.0	14,485	1.8%	4.3%	9.3%	49.4%

Although Colombia has been producing domestic appliances since the 1930s, it wasn't until the late 1990s that Colombian corporations began exporting to neighboring countries. One of Colombia's largest producers of domestic appliances, HACEB has been producing refrigeration since 1940. Some domestic corporations include: Challenger, Kalley, HACEB, Imusa, and Landers. In 2011, Groupe SEB acquired Imusa as a form to expand to the Latin American market.[35] Colombia also manufactures for foreign companies as well, such as Whirlpool and GE.[36] LG has also been interested in building a plant in Colombia. Colombia is also Latin America's 3rd largest producer of appliances behind Mexico and Brazil and is growing rapidly.

Colombia is a major producer of electronics in Latin America, and is South America's 2nd largest high-tech market.[37] Colombia is also the 2nd largest producer and exporter of electronics made by domestic companies in Latin America. Since the early 2000s, major Colombian corporations began exporting aggressively to foreign markets. Some of these companies include: Challenger, PcSmart, Compumax, Colcircuirtos, and Kalley. Colombia is the first country in Latin America to manufacture a domestically made 4K television.[38] In 2014, the Colombian Government launched a national campaign to promote IT and Electronic sectors, as well as investing in Colombia's own companies.[37] Although innovation remains low on the global scale, the government sees heavy potential in the high tech industry and is investing heavily in education and innovation centers all across the nation. Because of this, Colombia could become a major global manufacturer of electronics and play an important role in the global high tech industry in the near future. In 2014, the Colombian government released another national campaign to help Colombian companies have a bigger share of the national market.[39]

Construction recently has played a vital role in the economy, and is growing rapidly at almost 20% annually. As a result, Colombia is seeing a historic building boom. The Colombian government is investing heavily in transport infrastructure through a plan called "Fourth Generation Network". The target of the Colombian government is to build 7,000 km of roads for the 2016–2020 period and reduce travel times by 30% and transport costs by 20%. A toll road concession program will comprise 40 projects, and is part of a larger strategic goal to invest nearly $50bn in transport infrastructure, including: railway systems; making the Magdalena river navigable again; improving port facilities; as well as an expansion of Bogotá's airport.[40] Long-term plans include building a national high-speed train network, to vastly improve competitiveness.

Colombia is one of the 5 largest producers in the world of coffee, avocado and palm oil, and one of the 10 largest producers in the world of sugarcane, banana, pineapple and cocoa.[41]

Colombia produced, in 2018, 36.2 million tons of sugarcane (7th largest producer in the world), 5.8 million tons of palm oil (5th largest producer in the world), 3.7 million tons of banana (11th largest producer in the world) and 720 thousand tons of coffee (4th largest producer in the world, behind Brazil, Vietnam and Indonesia). Although its neighbor Brazil is the largest producer of coffee in the world (3.5 million tons produced in the same year), the advertising carried out by the country for decades suggests that Colombian coffee is of higher quality, which generates greater added value to the country's product. [42] In the same year, Colombia produced 3.3 million tons of rice, 3.1 million tons of potato, 2.2 million tons of cassava, 1.3 million tons of maize, 900 thousand tons of pineapple, 670 thousand tons of onion, 527 thousand tons of tomato, 419 thousand tons of yam, 338 thousand tons of mango, 326 thousand tons of avocado, in addition to smaller productions of other agricultural products such as orange, tangerine, lemon, papaya, beans, carrot, coconut, watermelon etc.[43]

The share of agriculture in GDP has fallen consistently since 1945, as industry and services have expanded. However, Colombia's agricultural share of GDP decreased during the 1990s by less than in many of the world's countries at a similar level of development, even though the share of coffee in GDP diminished in a dramatic way. Agriculture has nevertheless remained an important source of employment, providing a fifth of Colombia's jobs in 2006.[44]

The most industrially diverse member of the five-nation Andean Community, Colombia has four major industrial centers—Bogota, Medellin, Cali, and Barranquilla, each located in a distinct geographical region. Colombia's industries include textiles and clothing, particularly lingerie, leather products, processed foods and beverages, paper and paper products, chemicals and petrochemicals, cement, construction, iron and steel products, and metalworking. Its diverse climate and topography permit the cultivation of a wide variety of crops. In addition, all regions yield forest products, ranging from tropical hardwoods in the hot country to pine and eucalyptus in the colder areas.

Cacao beans, sugarcane, coconuts, bananas, plantains, rice, cotton, tobacco, cassava, and most of the nation's beef cattle are produced in the hot regions from sea level to 1,000 meters elevation. The temperate regions—between 1,000 and 2,000 meters—are better suited for coffee; cut flowers; maize and other vegetables; and fruits such as citrus, pears, pineapples, and tomatoes. The cooler elevations—between 2,000 and 3,000 meters—produce wheat, barley, potatoes, cold-climate vegetables, flowers, dairy cattle, and poultry.

The oil pipelines are a frequent target of extortion and bombing campaigns by the National Liberation Army (ELN) and, more recently, the Revolutionary Armed Forces of Colombia (FARC). The bombings, which have occurred on average once every 5 days, have caused substantial environmental damage, often in fragile rainforests and jungles, as well as causing significant loss of life. In April 1999 in Cartagena de Indias, Clinton's Secretary of Energy Bill Richardson spoke before investors from the United States, Canada and other countries. He expressed his government's willingness to use military aid to support the investment that they and their allies were going to make in Colombia, especially in strategically important sectors like mining and energy.

In 2002 there were 170 attacks on the 2nd largest pipeline, which travels 780 km from the Caño Limón to the Atlantic port of Coveñas. The pipeline was out of operation for 266 days of that year; the government estimates that these bombings reduced Colombia's GDP by 0.5%. The government of the United States increased military aid, in 2003, to Colombia to assist in the effort to defend the pipeline. Occidental Petroleum privately contracted mercenaries who flew Skymaster planes, from AirScan International Inc., to patrol the Cano Limon-Covenas pipeline. Many of these operations used helicopters, equipment and weapons provided by the U.S. military and anti-narcotics aid programs.

Mining and natural exploitation has had environmental consequences. The region of Guajira is undergoing an accelerated desertification with the disappearances of forests, land, and water sources, due to the increase in coal production.[46] Social consequences or lack of development in resource rich areas is common. 11 million Colombians survive on less than one dollar a day. Over 65% of these live in mining zones. There are 3.5 million children out of school, and the most critical situation is in the mining zone of Choco, Bolivar, and Sucre.

Economic consequences of privatization and liberal institutions have meant changes in taxation to attract foreign investment. Colombia will lose another $800 million over the next 90 years that Glencore International operates in El Cerrejon Zona Media, if the company continues to produce coal at a rate of 5 million tons/year, because of the reduction of the royalty tax from 10-15% to .04%. If the company, as is plausible, doubles or triples its production, the losses will be proportionally greater. The operational losses from the three large mining projects (El Cerrejon, La Loma, operated by Drummond, and Montelíbano, which produces ferronickel) for Colombia to more than 12 billion.

Coal production has grown rapidly, from 22.7 million tons in 1994 to 50.0 million tons in 2003.[47] Over 90% of this amount was exported, making Colombia the world's sixth largest coal exporter, behind Australia, China, Indonesia, South Africa and Russia.[48] From the mid-1980s the center of coal production was the Cerrejón mines in the Guajira department. However, the growth in output at La Loma in neighboring Cesar Department made this area the leader in Colombian coal production since 2004. Production in other departments, including Boyacá, Cundinamarca and Norte de Santander, forms about 13% of the total. The coal industry is largely controlled by international mining companies, including a consortium of BHP Billiton, Anglo American and Glencore International at Cerrejón, and Conundrum Company at La Loma, which is undergoing a lawsuit in the U.S. District Court in Alabama for union assassinations and alleged paramilitary links.

Since the early 2010s, the Colombian government has shown interest in exporting modern Colombian pop culture to the world (which includes video games, music, movies, TV shows, fashion, cosmetics, and food) as a way of diversifying the economy and changing the image of Colombia. In the Hispanic world, Colombia is only behind Mexico in cultural exports at US$750 million annually, and is already a regional leader in cosmetic and beauty exports.[24]

Tourism in Colombia is an important sector in the country's economy. Colombia has major attractions as a tourist destination, such as Cartagena and its historic surroundings, which are on the UNESCO World Heritage List; the insular department of San Andrés, Providencia y Santa Catalina; Santa Marta, Cartagena and the surrounding area. Fairly recently, Bogotá, the nation's capital, has become Colombia's major tourist destination because of its improved museums and entertainment facilities and its major urban renovations, including the rehabilitation of public areas, the development of parks, and the creation of an extensive network of cycling routes. With its very rich and varied geography, which includes the Amazon and Andean regions, the llanos, the Caribbean and Pacific coasts, and the deserts of La Guajira, and its unique biodiversity, Colombia also has major potential for ecotourism.[50]

The direct contribution of Travel & Tourism to GDP in 2013 was COP11,974.3mn (1.7% of GDP). This is forecast to rise by 7.4% to COP12,863.4mn in 2014. This primarily reflects the economic activity generated by industries such as hotels, travel agents, airlines and other passenger transportation services (excluding commuter services). But it also includes, for example, the activities of the restaurant and leisure industries directly supported by tourists.[51] The direct contribution of Travel & Tourism to GDP is expected to grow by 4.1% pa to COP19,208.4mn (1.8% of GDP) by 2024.

Eco-tourism is very promising in Colombia. Colombia has vast coastlines, mountainous areas, and tropical jungles. There are volcanoes and waterfalls as well. This makes Colombia a biodiverse country with many attractions for foreign visitors.

The Colombian coffee growing axis (Spanish: Eje Cafetero), also known as the Coffee Triangle (Spanish: Triángulo del Café), is a part of the Colombian Paisa region in the rural area of Colombia, which is famous for growing and production of a majority of Colombian coffee, considered by some as the best coffee in the world. There are three departments in the area: Caldas, Quindío and Risaralda. These departments are among the smallest departments in Colombia with a total combined area of 13873 km² (5356 mi²), about 1.2% of the Colombian territory. The combined population is 2,291,195 (2005 census).[52]

Colombia's geography, with three cordilleras of the Andes running up the country from south to north, and jungle in the Amazon and Darién regions, represents a major obstacle to the development of national road networks with international connections. Thus, the basic nature of the country's transportation infrastructure is not surprising. In the spirit of the 1991 constitution, in 1993 the Ministry of Public Works and Transportation was reorganized and renamed the Ministry of Transportation. In 2000 the new ministry strengthened its role as the planner and regulator within the sector.[53]

Colombia was a pioneer in promoting airlines in an effort to overcome its geographic barriers to transportation. The Colombian Company of Air Navigation, formed in 1919, was the second commercial airline in the world. It was not until the 1940s that Colombia's air transportation began growing significantly in the number of companies, passengers carried, and kilometers covered. In the early 2000s, an average of 72 percent of the passengers transported by air go to national destinations, while 28 percent travel internationally. One notable feature is that after the reforms of the beginning of the 1990s, the number of international passengers tripled by 2003. In 1993 the construction, administration, operation, and maintenance of the main airports transferred to departmental authorities and the private sector, including companies specializing in air transportation. Within this process, in 2006 the International Airport Operator (Opain), a Swiss-Colombian consortium, won the concession to manage and develop Bogotá's El Dorado International Airport. El Dorado is the largest airport in Latin America in terms of cargo traffic (33rd worldwide), with 622,145 metric tons in 2013, second in terms of traffic movements (45th worldwide) and third in terms of passengers (50th among the busiest airports in the world). In addition to El Dorado, Colombia's international airports are Palo Negro in Bucaramanga, Simón Bolívar in Santa Marta, Cortissoz in Barranquilla, Rafael Núñez in Cartagena, José María Córdova in Rionegro near Medellín, Alfonso Bonilla Aragón in Cali, Alfredo Vásquez Cobo in Leticia, Matecaña in Pereira, Gustavo Rojas Pinilla in San Andrés, and Camilo Daza in Cúcuta. In 2006 Colombia was generally reported to have a total of 984 airports, of which 103 had paved runways and 883 were unpaved. The Ministry of Transportation listed 581 airports in 2007, but it may have used a different methodology for counting them.[53]

After a large crisis in 1999, poverty in Colombia has had a decreasing trend. The share of Colombians below the income-based poverty line fell from 50% in 2002 to 28% in 2016. The share of Colombians below the extreme income-based poverty line fell from 18% to 9% in the same period. Multidimensional poverty fell from 30% to 18% between 2010 and 2016.[33] [54]

Colombia has a Gini coefficient of 51.7.[55]