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- GDP (PPP):
- $502.9 billion
- 4.0% growth
- 4.0% 5-year compound annual growth
- $10,792 per capita
- Inflation (CPI):
- FDI Inflow:
Colombia’s economic freedom score is 70.7, making its economy the 34th freest in the 2014 Index. Its overall score is 1.1 points higher than last year, reflecting improvements in trade freedom, investment freedom, and fiscal freedom. Colombia has advanced to 3rd out of 29 countries in the South and Central America/Caribbean region.
Over the 20-year history of the Index, Colombia has improved its economic freedom score by 6.2 points. Score increases have been achieved in seven of the 10 economic freedoms, notably trade freedom, monetary freedom, labor freedom, and freedom from corruption, the scores for which have improved by over 10 points. Achieving its highest economic freedom score ever in the 2014 Index, Colombia has become a “mostly free” economy for the first time.
Recent reforms have put greater emphasis on improving regulatory efficiency and enhancing financial-sector competitiveness. More important, continued reform efforts are needed to solidify the foundations of economic freedom and ensure vibrant economic development. The judicial system remains inefficient and vulnerable to political interference, and corruption, perceived as widespread, remains a cause for concern.
The “democratic security” policy pursued by former 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 engaged in controversial peace talks with the rebel group FARC. He has also emphasized global economic integration. The U.S.–Colombia Free Trade Agreement entered into force in May 2012 and has encouraged job creation and investment. Colombia has pursued free trade agreements with dozens of other nations and is one of four members in the Pacific Alliance. Colombia’s economy depends heavily on exports of petroleum, coffee, and cut flowers and is positioned to surpass Argentina as South America’s second-largest economy. Poverty has been reduced thanks to robust economic growth.
Corruption scandals have emerged in recent years in many government agencies. In 2012, a decade-long scheme to embezzle more than $2 billion from the national health system was uncovered. 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. Property rights are generally respected.
The top individual income tax rate has risen to 33 percent, and the top corporate tax rate has been cut to 25 percent. Other taxes include a value-added tax (VAT) and a financial transactions tax. Overall tax revenue is 15.1 percent of GDP, and government spending is 29 percent of the domestic economy. Public debt remains at around 33 percent of GDP.
Colombia has few regulatory bottlenecks. It takes less than 10 procedures to start a business, with no minimum capital required. Bankruptcy procedures are relatively streamlined. The non-salary cost of hiring is moderate, but the informal labor market remains sizable. In April 2013, the government increased subsidies to coffee farmers, although levels of other state subsidies remain below regional averages.
Colombia’s average tariff rate is 5.6 percent. It recently joined the Pacific Alliance, which, if counted as a single country, would be the world’s ninth-largest economy. Colombia welcomes foreign investment and has resisted calls to implement capital controls. The financial sector remains resilient. Reforms continue to promote the development of capital markets by enhancing flexibility and competition in the market.