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- GDP (PPP):
- $472.0 billion
- 5.9% growth
- 4.4% 5-year compound annual growth
- $10,249 per capita
- Inflation (CPI):
- FDI Inflow:
Colombia’s economic freedom score is 69.6, making its economy the 37th freest in the 2013 Index. Its overall score is 1.6 points higher than last year, with improvements in half of the 10 economic freedoms including investment freedom, financial freedom, and the management of public spending. Colombia is ranked 5th out of 29 countries in the South and Central America/Caribbean region.
Colombia’s government has undertaken wide-ranging reforms to address structural weaknesses and improve competitiveness, notably in the context of various free trade agreements. Resilient economic growth has averaged over 4 percent during the past five years. Recent reforms have put greater emphasis on improving regulatory efficiency and enhancing financial-sector competitiveness. Management of public finance has been relatively prudent, and debt has been kept under control.
Despite progress, lingering institutional shortcomings undermine prospects for broad-based long-term economic development. Anti-corruption laws have had little impact, and the judicial system remains vulnerable to political interference. Other weaknesses include security issues that undercut the protection of property rights, infrastructure deficiencies, and complex tax and labor systems.
The policy of “democratic security” pursued by President Alvaro Uribe (2002–2010) significantly reduced crime and violence and increased government control of national territory. Uribe also helped to re-establish business confidence. Former Defense Minister Juan Manuel Santos, elected president in June 2010, has strongly emphasized integration into the global economy. The U.S.–Colombia free trade agreement, approved by the U.S. Congress in October 2011, entered into force in May 2012. Colombia has also pursued free trade agreements with dozens of other nations and is working with other countries to develop a Pacific trade alliance. Colombia’s economy depends heavily on exports of petroleum, coffee, and cut flowers. Colombia has experienced an upsurge in foreign investment in recent years and is positioned to become South America’s second-largest economy.
Property rights are generally respected, but infringement of intellectual property rights is common. Despite improvements in fighting corruption and narcotics trafficking, concerns remain over criminal influence on the police, the military, and lower levels of the judiciary and civil service. The public was outraged in June 2012 when the legislature voted down a constitutional provision to reform the judiciary.
The top income and corporate tax rates are 33 percent. Other taxes include a value-added tax (VAT) and a financial transactions tax. The overall tax burden is equal to 14.4 percent of total domestic income. Government spending has stabilized at about 29 percent of total domestic output, with the budget deficit falling to 2.1 percent of GDP. Public debt remains below 35 percent of GDP. A strong fiscal climate was reaffirmed by a boost in bond ratings.
The overall regulatory framework has become more efficient, and business procedures have been streamlined. With no minimum capital required, launching a business costs about 7 percent of the level of average annual income. Reforms are needed to improve labor flexibility and lower non-wage costs. Inflation fell in early 2012 as a result of lower food and housing costs, but the government regulates prices of certain products.
The trade-weighted average tariff rate is 8.9 percent, but non-tariff barriers are relatively low. The investment regime can be cumbersome but is generally transparent. Foreign investment receives national treatment, and 100 percent foreign ownership is allowed in most sectors. Private institutions dominate the growing and well-capitalized financial sector. Non-performing loans have declined, and the financial transaction tax is scheduled to be reduced.