2017 Index of Economic Freedom

Colombia

overall score69.7
world rank37
Rule of Law

Property Rights63.8

Government Integrity39.6

Judicial Effectiveness25.2

Government Size

Government Spending74.2

Tax Burden80.1

Fiscal Health89.8

Regulatory Efficiency

Business Freedom77.1

Labor Freedom77.9

Monetary Freedom77.0

Open Markets

Trade Freedom81.6

Investment Freedom80.0

Financial Freedom70.0

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Quick Facts
  • Population:
    • 48.2 million
  • GDP (PPP):
    • $667.4 billion
    • 3.1% growth
    • 4.6% 5-year compound annual growth
    • $13,847 per capita
  • Unemployment:
    • 10.0%
  • Inflation (CPI):
    • 5.0%
  • FDI Inflow:
    • $12.1 billion
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Colombia has maintained strong economic fundamentals, including macroeconomic stability and openness to global trade and finance. The relatively sound economic policy framework has contributed to economic expansion averaging over 4.5 percent annually over the past five years. Recent reforms have focused on regulatory improvements and fostering a stronger private sector. A founding member of the Pacific Alliance, Colombia has free trade agreements with the U.S. and many other nations.

More sustained growth in economic freedom will require deeper institutional reforms that include better protection of property rights and strengthening of the judicial system. Corruption remains a problem in many sectors of the economy.

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Background

A large, geographically and ethnically diverse country in the northwestern corner of South America, Colombia is Latin America’s oldest democracy. A costly five-decade guerilla insurgency, principally led by the leftist, narco-funded Revolutionary Armed Forces of Colombia (FARC), caused hundreds of thousands of casualties. President Juan Manuel Santos, reelected in 2014, made peace with the FARC his top priority and signed a cease-fire in June 2016. In an October 2016 referendum, however, skeptical voters narrowly rejected the controversial final peace treaty that would have mainstreamed demobilized FARC members, given them impunity for past crimes, and allowed them to run for political office.

Rule of LawView Methodology

Property Rights 63.8 Create a Graph using this measurement

Government Integrity 39.6 Create a Graph using this measurement

Judicial Effectiveness 25.2 Create a Graph using this measurement

Property rights are recognized and generally enforced. The justice system is compromised by corruption and extortion, although the Constitutional Court and the Supreme Court have shown independence from the executive in recent years. Drug trafficking and the violence and corruption that it engenders continue to erode institutions. Colombia was ranked 126th for corruption and 134th for security in the World Economic Forum’s 2016 Global Competitiveness Index.

Government SizeView Methodology

The top individual income tax rate is 33 percent, and the top corporate tax rate is 25 percent. Other taxes include a value-added tax and a financial transactions tax. The overall tax burden equals 16.7 percent of total domestic income. Government spending has amounted to 29.3 percent of total output (GDP) over the past three years, and budget deficits have averaged 1.8 percent of GDP. Public debt is equivalent to 49.4 percent of GDP.

Regulatory EfficiencyView Methodology

Simplified procedures for establishing and running a business have improved the efficiency of the overall business environment. The regulatory framework is generally conducive to private business activity and job growth, but reforms are needed to lower nonwage costs. A May 2016 IMF report reflects that Colombia has made progress in bringing its subsidies in line with “OECD best practices” except for increased spending on housing subsidies.

Open MarketsView Methodology

Trade is moderately important to Colombia’s economy; the value of exports and imports taken together equals 39 percent of GDP. The average applied tariff rate is 4.2 percent. Foreign and domestic investors are generally treated equally, but investment in some sectors of the economy is restricted. Domestic banks continue to dominate the banking sector, although the presence of foreign banks has increased.

Country's Score Over Time

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Regional Ranking

rank country overall change
1Chile76.5-1.2
2Colombia69.7-1.1
3Uruguay 69.70.9
4Jamaica 69.52.0
5Peru68.91.5
6Panama 66.31.5
7Saint Vincent and the Grenadines65.2-3.6
8Saint Lucia65-5.0
9Costa Rica 65-2.4
10El Salvador 64.1-1.0
11Dominica63.7-3.3
12Guatemala 631.2
13Dominican Republic62.91.9
14Paraguay 62.40.9
15Trinidad and Tobago61.2-1.7
16The Bahamas61.1-9.8
17Nicaragua 59.20.6
18Honduras 58.81.1
19Belize58.61.2
20Guyana58.53.1
21Barbados54.5-13.8
22Brazil52.9-3.6
23Argentina50.46.6
24Haiti49.6-1.7
25Ecuador49.30.7
26Suriname48-5.8
27Bolivia47.70.3
28Cuba33.94.1
29Venezuela 27-6.7
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