Colombia is a free market economy with major commercial and investment ties to the United States. In 1990, the administration of President Cesar Gaviria (1990-94) initiated economic liberalization or "apertura," with tariff reductions, financial deregulation, privatization of state-owned enterprises, and adoption of a more liberal foreign exchange rate. These policies eased import restrictions and opened most sectors to foreign investment, although agricultural products remained protected.
The Uribe administration seeks to maintain prudent fiscal policies and has pursued tough economic reforms including tax, pension, and budget reforms. A U.S. Agency for International Development (USAID) study shows that Colombian tax rates (both personal and corporate) are among the highest in Latin America. The unemployment rate in 2008 was 10.8%, down from 15.7% in 2002.
Colombia's average annual economic growth rate of over 5% from 2002 to 2007 can be attributed to an increase in domestic security, resulting in greater foreign investment; prudent monetary policy; and export growth. The Andean Trade Preference Act, which was extended through December 2009, also plays a pivotal role in Colombia's economic growth. The signing of a trade promotion agreement with the U.S. in November 2006 provides further opportunity for growth if approved by the U.S. Congress and implemented.
Industry and Agriculture
The most industrially diverse member of the Andean Community, Colombia has four major industrial centers--Bogotá, Medellín, Cali, and Barranquilla--each located in a distinct geographical region. Colombia's industries include textiles and clothing, leather products, processed foods and beverages, paper and paper products, chemicals and petrochemicals, cement, construction, iron and steel products, and metalworking.
Colombia's 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 lowlands, to pine and eucalyptus in the colder areas. Cacao, 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, flowers, corn and other vegetables, 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.
Colombia is the United States' fifth-largest export market in the Western Hemisphere behind Canada, Mexico, Brazil, and Venezuela and the largest agricultural export market in the hemisphere after the North American Free Trade Agreement (NAFTA) countries. U.S. exports to Colombia in 2008 were U.S. $11.4 billion, up 33% from the previous year. U.S. imports from Colombia were U.S. $14 billion, up 35%. Colombia's major exports are petroleum, coffee, coal, nickel, cut flowers, and bananas. The United States is Colombia's largest trading partner, representing about 37% of Colombia's exports and 29% of its imports.
Mining and Energy
Colombia has considerable mineral and energy resources, especially coal and natural gas reserves. In 2009, gas reserves totaled 3.7 trillion cubic feet. Gas production totaled 922 million cubic feet per day. The country's current refining capacity is 323,000 barrels per day. Colombia had 1.36 billion barrels of proven crude oil reserves in 2009, the fifth-largest in South America. The country produced 600,000 barrels per day of oil in 2008, up from 540,000 bbl/d in 2007. Mining and energy related investments have grown because of higher oil prices, increased demand and improved output. Colombia has significantly liberalized its petroleum sector, leading to an increase in exploration and production contracts from both large and small hydrocarbon industries.
Colombia is presently the 5th-largest coal exporting country, accounting for about 1.1% of the world's total annual coal production, and the largest producer in Latin America (71.7 million tons in 2007). Colombia has proven recoverable coal reserves of about 7.4 billion short tons, the majority of which are located in the north of the country. Colombia historically has been the world's leading producer of emeralds, although production has fallen in recent years. Emerald production fell from 5.73 million carats in 2006 to 3.39 million carats in 2007. Colombia is also a significant producer of gold, silver, and platinum.
The United States is the largest source of new foreign direct investment (FDI) in Colombia, particularly in the areas of coal and petroleum. In 2008, FDI totaled U.S. $10.5 billion, more than quadruple the amount in 2002. The bulk of the new investment is in the manufacturing, mining, and energy sectors. The only activities closed to foreign direct investment are defense and national security, and disposal of hazardous wastes. In October 2008, Colombia eliminated controls on foreign investment in fixed income securities to increase access to capital and investment inflows. The controls were imposed in May 2007 to stem appreciation of the Colombian peso.
Information by U.S. Department of State