Colombia
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World Rank: 58 Regional Rank: 12 of 29
Ten Economic Freedoms of Colombia
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En cuanto a libertad económica, Colombia está en el lugar 58
entre 175 países del mundo, y el 12 entre 29 naciones de
América Latina. Posteriormente iremos dando más elementos en
nuestro idioma.
Quick Facts
Population:
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44.5 million
GDP (PPP):
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$395.7 billion
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2.5% growth
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5.7% 5-year compound annual growth
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$8,885 per capita
Unemployment:
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11.3%
Inflation (CPI):
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7.0%
FDI Inflow:
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$10.6 billion
Colombia’s economic freedom score is 65.5, making its
economy the 58th freest in the 2010 Index. Its
overall score is 3.2 points higher than last year,
reflecting improved business and labor freedom, better
protection of property rights, and reduced corruption.
Colombia is ranked 12th out of 29 countries in the South and
Central America/Caribbean region, and its overall score is
higher than the regional average.
As one of South America’s most stable economies, Colombia
continues its transition to greater economic freedom.
Improvements in its entrepreneurial environment, facilitated
by openness to trade and investment, have led to steady
economic growth. Recent reforms have focused on improving
regulation and fostering a strong private sector.
Colombia’s overall economic freedom remains obstructed by
persistent institutional weaknesses. The rule of law remains
problematic. Despite nominal openness to foreign investment,
regulations are complex and uncertain. Business contracts
are generally respected, but judicial corruption undermines
legal transparency and efficiency. State ownership is
limited to a few utilities, but public expenditure is high
because of large transfers to regional state-owned
enterprises.
Background Back to the top
Colombia is one of South America’s oldest continuous
democracies. President Alvaro Uribe, re-elected by a
landslide in 2006, has restored security by enforcing the
law against both the Revolutionary Armed Forces of Colombia
and its anti-Communist paramilitary nemesis. He has also
waged a vigorous war on narcotics trafficking. The quality
of life has improved substantially, and unemployment has
dropped significantly. Like all of Latin America, Colombia
was buffeted by global economic turbulence in 2008–2009. The
economy depends heavily on exports of petroleum, coffee, and
cut flowers. A trade agreement with the U.S. that would
encourage economic diversification and stimulate further
growth was submitted to the U.S. Congress in 2008 but is
still awaiting action. Uribe has been seeking constitutional
changes to allow him to run for a third consecutive term.
Business Freedom83.6 Back to the top
The overall freedom to start, operate, and close a business
is relatively well protected under Colombia’s regulatory
environment. Starting a business takes 20 days, compared to
the world average of 35 days. Obtaining a business license
takes much less than the world average of 18 procedures and
218 days.
Trade Freedom72.5 Back to the top
Colombia’s weighted average tariff rate was 8.7 percent in
2008. Import bans and restrictions, import price bands for
certain goods, services market access limits, restrictive
standards and regulations, restrictive import licensing,
issues involving the enforcement of intellectual property
rights, non-transparent customs administration and
valuation, export-promotion programs, and corruption add to
the cost of trade. Ten points were deducted from Colombia’s
trade freedom score to account for non-tariff barriers.
Fiscal Freedom74.3 Back to the top
The top income and corporate tax rates are 33 percent. Other
taxes include a value-added tax (VAT) and a financial
transactions tax. In the most recent year, overall tax
revenue as a percentage of GDP was 19.8 percent. Tax
evasion, though on the decline, is still relatively high.
Government Spending74.8 Back to the top
Total government expenditures, including consumption and
transfer payments, are moderate. In the most recent year,
government spending equaled 29.0 percent of GDP.
Monetary Freedom74.0 Back to the top
Inflation has been relatively moderate, averaging 6.4
percent between 2006 and 2008. The government controls
prices for ground and air transport, some pharmaceutical
products, petroleum derivatives, natural gas, some
petrochemicals, public utility services, residential rents,
schoolbooks, and school tuition, and the Agriculture
Ministry may intervene temporarily to freeze prices of basic
foodstuffs through agreements with regional wholesalers. Ten
points were deducted from Colombia’s monetary freedom score
to adjust for measures that distort domestic prices.
Investment Freedom55.0 Back to the top
Foreign investment receives national treatment, and 100
percent foreign ownership is permitted in most sectors.
Foreign investment in television concessions and nationwide
private television operators, radio broadcasting, movie
production, maritime agencies, national airlines, and
shipping companies is limited to minority stakes. The legal
and regulatory systems are generally transparent and
consistent with international norms. Frequent changes in
business rules and a burdensome judiciary impede investment.
For firms with more than 10 employees, no more than 10
percent of the general workforce and 20 percent of
specialists can be foreign nationals. Foreign investments
must be registered with the central bank to allow
repatriation of profits and remittances and to access
foreign exchange. Residents who work in certain
internationally related companies may hold foreign exchange
accounts. Assets expropriated by eminent domain will be
compensated.
Financial Freedom60.0 Back to the top
Colombia’s relatively large financial sector has become more
stable and modern. Banking has undergone significant
consolidation and privatization since early 2000. The
government has strengthened regulations and seized some
banks for falling below solvency requirements. Seven of the
17 commercial banks are foreign-owned. Two private financial
groups account for about 45 percent of bank assets. Foreign
banks accounted for less than 20 percent of total assets in
2008. Credit is allocated on market terms. As of early 2008,
the government retained 15 percent of total banking assets.
Foreign companies are prominent in the insurance sector, and
competition has intensified since 2003. Colombia’s small
capital market provides limited access to long-term credit.
The market is heavily concentrated in government bonds.
Accounting for only 5 percent of total trading, equity
trading is dominated by a few listed companies.
Property Rights50.0 Back to the top
Colombia’s constitution explicitly protects the right to
private property. Contracts are generally respected.
Arbitration is complex and dilatory, especially with regard
to the enforcement of awards. The law guarantees
indemnification in expropriation cases. Enforcement of
intellectual property rights remains erratic. Infringements,
especially unauthorized use of trademarks, are common. In
areas still controlled by terrorist groups, property rights
cannot be guaranteed.
Freedom From Corruption38.0 Back to the top
Corruption is perceived as significant. Colombia ranks 70th
out of 179 countries in Transparency International’s
Corruption Perceptions Index for 2008. Despite notable
improvements in fighting corruption and narcotics
trafficking, concerns remain over the influence of criminal
organizations on the police, the military, and lower levels
of the judiciary and civil service.
Labor Freedom72.7 Back to the top
Labor regulations have become more flexible. The non-salary
cost of employing a worker remains somewhat burdensome, but
dismissing a redundant employee can be relatively
inexpensive. Regulations controlling work hours are
relatively flexible.