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The study is by Carlos Martinez Zabala, a Colombian native who currently [May 2017] lives in San Francisco; this study presents the Colombian government's economic policies as compared to the MIEPA list of policies as outlined above. The ratings herein are based on the following rating scale:
5.0 Perfect Facilitation of Wealth Creation
4.0 Midway between Perfect and Neutral
3.0 Neutral Effect on Wealth Creation
2.0 Midway between Neutral and Obstructionist
1.0 Perfectly Obstructionist to Wealth Creation
[Rating scale copyright Mike P. McKeever, 2017. Used herein with permission]
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COLOMBIA - CARLOS MARTINEZ ZABALA
COLOMBIA: ECONOMIC POLICY ANALYSIS - CARLOS MARTINEZ ZABALA
RATING SUMMARY POLICY NUMBER RAW SCORE ADJUSTED SCORE POSSIBLE PERCENTAGE 1 3.5 10.5 15.0 70 % 2 4.0 12.0 15.0 80 3 2.2 6.6 15.0 44 4 3.8 11.4 15.0 76 5 4.5 13.5 15.0 90 6 4.4 13.2 15.0 88 7 4.2 12.6 15.0 84 8 4.0 12.0 15.0 80 9 1.5 4.5 15.0 30 10 4.0 12.0 15.0 80 11 3.0 9.0 15.0 60 12 5.0 10.0 10.0 100 13 3.0 6.0 10.0 60 14 5.0 10.0 10.0 100 15 3.0 6.0 10.0 60 16 3.9 7.8 10.0 78 17 4.0 8.0 10.0 80 18 2.5 5.0 10.0 50 19 1.5 3.0 10.0 30 20 5.0 10.0 10.0 100 21 2.2 4.4 10.0 44 22 3.4 6.8 10.0 68 23 4.5 9.0 10.0 90 24 1.3 2.6 10.0 26 25 3.0 6.0 10.0 60 26 4.6 9.2 10.0 92 27 3.8 7.6 10.0 76 28 3.7 7.4 10.0 74 29 3.0 3.0 5.0 60 30 2.7 2.7 5.0 54 31 4.5 4.5 5.0 90 32 3.5 3.5 5.0 70 33 4.0 4.0 5.0 80 34 4.5 4.5 5.0 90 TOTAL 120.7 258.3 365.0 70.8% ===== ====== ===== =====
COLOMBIA - CARLOS MARTINEZ ZABALA
1. Freedom from internal control 3.5
In February 2008, millions of Colombians demonstrated against the FARC and other outlawed groups. 26,648 FARC and ELN combatants have decided to demobilize since 2002. During these years the military forces of the Republic of Colombia managed to be strengthened. The government and left-wing guerrillas from the Revolutionary Armed Forces of Colombia (FARC) reached a deal on a peace accord in August. Although it was narrowly rejected in an October referendum, renegotiations yielded a revised accord in November, which the legislature ratified without an additional plebiscite. Overall the security in Colombia is improving with the years.
2. Freedom of speech 4.0
The Constitution provides for freedom of speech and press and the Government generally respected these rights in practice. Individuals criticized the Government both publicly and in private, and the media expressed a wide spectrum of political viewpoints and often sharply criticized the Government, all without fear of Government reprisal. However, journalists regularly practiced self-censorship to avoid retaliation and harassment by criminals and members of illegal armed groups. Several major newspapers and news magazines circulated nationally, and there were many influential regional publications. There were two major national radio networks and many national and regional television channels. The National Television Commission continued to oversee television programming, although it did not censor substantive content. Major international wire services, newspapers, and television networks had a presence in the country and generally operated free of Government interference.
3. Effective, fair police force 2.2
Policia Nacional de Colombia is the national police. The force's official functions are to protect the Colombian nation, enforce the law by constitutional mandate, maintain and guarantee the necessary conditions for public freedoms and rights and to ensure peaceful cohabitation among the population. The National Police continues to have some corruption and human rights problems but the improvement has been considerable, including the education of personnel in other countries' law enforcement institutions and educational institutions through cooperation agreements. The institution is also highly involved in the Plan Colombia.
4. Private property 3.8
Colombian Constitution sets forth in its article 58 a constitutional right of private property by means of which the ownership right is guaranteed and protected as well as the other rights acquired in compliance with civil regulations. Therefore, according to Colombian Constitution the ownership right legally acquired cannot be affected by posterior laws. Nevertheless, Colombian Constitution has recognized that private property has a social function which implies several obligations by owners. In that sense, the law has developed certain regulations pertaining to the protection of public interest. Consequently, Colombian law sets forth that the owner of property has the right to use it without limitation. Nevertheless, property rights are subject to the law and to the public interest (Civil Code, Art. 669). Finally, in Colombia the ownership right over a real property may be owned by one or more individuals or legal entities or the combination of them.
5. Commercial banks 4.5
Commercial banks are allowed to complete all authorized credit operations, with the exception of leasing operations and real estate sector investments. Only commercial banks provide checking accounts. Within this group, some institutions specialize in housing and construction financing (mortgage banks). Commercial banks dominate the financial market, accounting for over 80 percent of the financial system’s assets. In 2009 a new law reforming the financial sector was passed. The reforms increased protection for financial customers, including requirements that financial institutions properly disclose the costs associated with their operations. The reforms create Advocate for Financial Consumers positions, which every financial institution must have and who are responsible for ensuring that financial institutions do not violate consumers' rights. The new law also introduces greater flexibility to the pension fund system by creating the multi-fund structure to allow for various risk investment profiles Finally, the law establishes mechanisms to promote microfinance, securitization and the development of capital markets.
6. Communication systems 4.4
Telephones - The country’s teledensity is relatively high for Latin America (17 percent in 2006). However, there is a steep imbalance between rural and urban areas, with some regions below 10 percent and the big cities exceeding 30 percent.
Radio - Radio Televisión Nacional de Colombia (RTVC) replaced the liquidated Inravisión (Instituto Nacional de Radio y Televisión) as the government-run radio and television broadcasting service, which oversees three national television stations and five radio companies which operate through 12 main networks. Colombia has about 60 television stations, including seven low-power stations. In 2003 the population had about 11.9 million television receivers in use. Of the approximately 515 radio stations, 454 are AM; 34, FM; and 27, shortwave.
Internet - Access to the Internet in Colombia shows a marked increase during the last few years. As of September 2009, the web connections surpassed two million, as compared with an estimated total of 900,000 Internet subscribers by the end of 2005. The current figure equated to 17 million Internet users, plus 3.8 millions of mobile internet users, or 38.5 percent of the 2009 population, as compared with 4,739,000 Internet users in 2005, or 11.5 percent of the 2005 population (10.9 per 100 inhabitants). This represents an overall growth of 54 percent each year, the highest in Latin America. Although as many as 70 percent of Colombians accessed the Internet over their ordinary telephone lines, dial-up access is losing ground to broadband.
7. Transportation 4.2
Road travel is the main means of transport; 69 percent of cargo is transported by road, as compared with 27 percent by railroad, 3 percent by internal waterways, and 1 percent by air. Rail transport in Colombia remains underdeveloped. Highways are managed by the Colombian Ministry of Transport through the National Roads Institute. The security of the highways in Colombia is managed by the Highway Police unit of the Colombian National Police. Colombia is crossed by the Panamerican Highway.
Maritime transportation - Seaports handle around 80 percent of international cargo. In 2005 a total of 105,251 metric tons of cargo were transported by water. Colombia's most important ocean terminals are Barranquilla, Cartagena, and Santa Marta on the Caribbean Coast and Buenaventura and Tumaco on the Pacific Coast. Exports mostly pass through the Caribbean ports of Cartagena and Santa Marta.
Aviation - Colombia has well-developed air routes and an estimated total of 984 airports, 100 of which have paved runways, plus two heliports. Of the 74 main airports, 20 can accommodate jet aircraft. Two airports are more than 3,047 meters in length, nine are 2,438–3,047 meters, 39 are 1,524–2,437 meters, 38 are 914–1,523 meters, 12 are shorter than 914 meters, and 880 have unpaved runways.
8. Education 4.0
Colombia works with a primary and a secondary school. There is a law that 10% of the budget of the government must be spent on education. The language of instruction is Spanish. There are schools in which instruction is in English, German or French, but these are private schools and must be paid for. The country’s human capital deficiencies can partly be attributed to inadequate funding for higher education. While government investment in higher education accounts for 0.4% of Colombia’s GDP, the average in the rest of Latin America is three times higher, about 1.2% of GDP. Unfortunately, in a political system such as Colombia’s, the capacities of city governments in general are quite limited. Indeed, the future of education of Colombia depends on the political will of the national government. About 20% of adults who attend college will graduate with a degree compared to the United States at 41%.
9. Social mobility 1.5
The lower-middle class, constituting the bulk of the middle class, comes primarily from upwardly mobile members of the lower class. A large number are clerks or small shopkeepers. Many have only a precarious hold on middle-class status and tend to be less concerned with imitating upper-class culture and behavior than with making enough money to sustain a middle-class lifestyle. Such families tend to be just as concerned as those at higher social levels with giving their children an education. Many hope to send at least one of their children through a university, regardless of the financial burden. There are several reasons for these coexisting disparities, the main one being perhaps the strong upward mobility allowed by the illegal-drug industry wealth that did not necessarily lead to a change in self-perception. The living expenses of this group of drug traffickers are very high, but they retain some of the cultural identity, education, and self-perceptions of the lower classes
10. Freedom from outside control 4.0
For the most part, Colombian judicial system handles most of the operations within the country. Ecuador closed its borders because the fear of illegal armed groups crossing over to their country. Colombia does not face any known foreign threats. The only neighbor that might pose a potential military challenge over as-yet unresolved territorial disputes relating to the maritime boundary, where there may be oilfields, would be Venezuela.
11. Protection of domestic enterprises 3.0
Although tourism is a major industry, the growth of this sector has been hindered by instability in the Andean and forested regions. As of 2015 Colombia had a negative trade balance of $14.1B in net imports. The most recent imports are led by Refined Petroleum which represent 9.8% of the total imports of Colombia, followed by Planes, Helicopters, and/or Spacecraft, which account for 4.32%. The most recent exports are led by Crude Petroleum which represent 33.7% of the total exports of Colombia, followed by Coal Briquettes, which account for 14.3%. There are new laws that protect companies and their employees from internal armed groups.
12. Foreign Currency transactions 5.0
The peso has been the currency of Colombia since 1810. It replaced the real at a rate of 1 peso = 8 reales. PESOS is the only currency accepted in Colombia. Other currency is accepted within the country but to make transactions, an exchange must be made.
13. Border control 3.0
Following the consolidation of economically important regions in the country during the two administrations of former President Alvaro Uribe (2002 – 2008), Colombian rebel groups were forced into the jungle and regions bordering neighboring countries like Venezuela, Brazil, and Ecuador. Former paramilitary groups and drug traffickers are present in the border regions to smuggle Colombian-made drugs to the neighboring countries and via the Pacific Ocean. Approximately 2,000 soldiers will be moved to specifically protect Venezuela’s 1,379-mile border with Colombia, where there are allegedly organizations linked to drugs, especially cocaine, as well as operating guerrilla, paramilitary, and kidnapping groups.
14. Currency 5.0
The official currency of Colombia is the PESO.
1 PESO = 100 cents.
The coins: $5, $10, $20, $50, $100 $200, $500 y $1000 pesos.
The bills: $1.000, $2.000, $5.000, $10.000, 20,000 y 50,000 pesos
The Banco de la República de Colombia administrates the legal currency. The primary objective of monetary policy is to reach and maintain a low and stable inflation rate, and to achieve a long-term GDP growth trend.
15. Cultural, language homogeneity 3.0
Regional cultural traditions are diverse, with a broad range of distinct groups that have unique customs, accents, social patterns, and cultural adaptations. With a population of 42.3 million, Colombia is a nation of mixed race. It is estimated that about 75 percent of the population is of mixed heritage, with 55 percent of this group being mestizos, 16 percent mulattoes, and 4 percent zambos. The other 20 percent of the population is of European, African, or Indian ancestry. There are over fifty Indian groups, many of which live in relative isolation. The official language is Spanish, which was imposed during the colonial period. All Colombians speak it except some of the indigenous populations in the Amazonian basin. Colombian Spanish is marked by the presence of numerous cultural expressions. In addition to Spanish, over 200 indigenous languages and dialects are spoken.
16. Political effectiveness 3.9
Colombia has made some improvements in terms of rule of law in the last decade. The current peace talks with the FARC (Fuerzas Armadas Revolucionarias de Colombia) are a clear symptom of increasing political stability. Additionally, a mining boom and improved security conditions have driven strong economic growth since the early 2000s. Colombia still faces several structural corruption challenges like the collusion of the public and private sectors and policy capture by organized crime, lack of state control and weak service delivery in remote areas of the country, and the inefficiency of the criminal justice system. Although the swift development of extractive industries in the country has boosted the economy, the lack of adequate regulation and accountability mechanisms is a cause for concern.
17. Institutional Stability 4.0
In recent decades, Colombia has enjoyed constitutional and institutional stability based on the strict separation of powers between the executive, the legislature and the judiciary, and the relatively weak influence of the military in government affairs. According to the Constitution, and the interpretation made by the Constitutional Court, Colombia has adopted a flexible distribution of the different functions of public power that rests on the principle of collaboration among different state organs and that uses mechanisms of political control. This means that although the functions needed to achieve state goals are given to autonomous and independent organs, under the constraints of mutual collaboration and reciprocal control such separation is not absolute.
18. Honest Government 2.5
The government's polling numbers have grown increasingly negative over time due to the corruption. In November 2009, for example, Gallup-Colombia showed 46 percent of Colombians thought that things in the country were getting worse as opposed to better; by contrast, following Uribe's 2006 election to a second term, 57 percent believed that things in the country were improving. In Colombia, political or grand corruption takes place at the highest levels of the political system. Several high ranking officials, including two of the last four Presidents and 25 per cent of the Congress, have been recently investigated for political misconduct and abuse of power. Despite some prosecutions, however, over 25% of public administration officials reported that government officials and parliamentarians still exercise irregular influence in the activities of the civil service (DANE, 2013).
19. Common Laws 1.5
Colombia’s justice system is a multi-headed behemoth in bad need of reform. The country’s government knows this, but has proposed a judicial reform that is not going to fix the real problems of the system. At times it seems that the three Colombian high courts cannot agree on many issues, and it is even not rare for them to ignore the opinions of each other. The result is what Colombians call a ‘train crash’ only that instead of bent and charred metal what you get is inconsistent interpretations of the law by two high courts. The criminal system is also in dire shape. In 2005 Colombia adopted a new regime for adversarial criminal proceedings which give more weight to oral hearings. A report by the Justice Ministry calculates that in the three years until 2008 there had been convictions on only 2,7% of all homicides cases. The system is somewhat better at convicting the guilty of theft, domestic violence, and assault, but nowhere near the levels of any reliable criminal system. Cases of corruption and bribery seem to end in the courtroom only after the media has uncovered the scandal.
20. Central Bank 5.0
The Banco de la Republica, Colombia’s central bank, is one of the most important economic institutions in the country. The law that invested in the bank the powers to carry out its functions also created the Board of Directors, whose main role is to analyze the factors affecting the economy to determine the optimal level for the central bank’s interest rate. Ten members from private and public sectors of the economy with the power to enforce regulatory and monetary controls. The Board was also given the responsibility of establishing the discount rate and intervening to control interest rates. The Bank doesn’t have any connection or receives any pressure from the government.
21. Domestic budget management 2.2
Tax revenue (% of GDP) in Colombia was reported at 14.69 % in 2014, according to the World Bank collection of development indicators, compiled from officially recognized sources. In 2014, Colombia's budget deficit amounted to around 1.78 percent of GDP.
22. Government debt 3.4
External debt: 120010.49 COP Billion 38%
Internal debt: 167,283 million dollars 44.23%
Colombia recorded a government debt equivalent to 38 percent of the country's Gross Domestic Product in 2014. The public debt is 44.23% of the country’s GDP.
23. Economic statistics 4.5
Colombia's economic statistics are available online with the booming of technology. The National administrative department of statistics (DANE) in Colombia is responsible for more than 30 research projects in the fields of economics, industry, population, agriculture, and quality of life, among others. There are some delays in international update because some websites do not provide the most recent information. Although, the businessmen find it very reliable and accurate.
24. Protection of public health and safety 1.3
Colombia has one public health insurance company, Nueva EPS, and dozens of private companies. All Colombian policyholders have the same basic health care plan, which includes medical, dental, and vision care. Colombia’s health care system isn’t perfect, but it’s beginning to attract a lot of outside attention. On the other hand, public safety is still a major concern with an increase in crime rates and kidnapping. Bogotá and other large cities in Colombia share many of the same problems that plague large cities around the world. The perception of wealth is a primary reason why criminals target Americans and other foreign nationals.
25. High wage Policies 3.0
Colombia has an average monthly salary of $692 compared to the data from 2012 where the average was $318. In comparison to its biggest competitors in the region, the Colombian average salary is better than that of Mexico ($609) but worse than Brazil’s ($778). Also, Colombia is no longer as competitive as it was in attracting multinational corporations because the cost of labor has risen. The Inflation rate dropped to 4.6 in 2016 making possible to afford a consumer goods beyond basic living necessities. The average worker is able to buy consumer goods, appliances and have the economic freedom needed.
26. Environmental Protection 4.6
Since 2012, the Colombian government has made great efforts in the conservation of the flora and fauna by creating stricter regulations to businesses. Species found in the Amazon make up for more that 10% of world known animals. Companies flocking to Colombia to take advantage of improved security and better financial terms have put a strain on Colombia’s institutions as requests for mining and environmental permits have soared.
27. Strong Army 3.8
The armed forces number about 250,000 uniformed personnel: 145,000 military and 105,000 police, making the Colombian military one of the largest and most well-equipped in Latin America. Also, The United States government approved the Plan Colombia initiative. Part of the resources provided by this initiative would be directed to the support of the Colombian Army by strengthening its combat and logistics capabilities. Since the 60’s the country has been in an armed conflict with leftist rebel groups but recently mediated a Peace Treaty with the FARC (Fuerzas Armadas Revolucionarias de Colombia) with the help from US. The National Consolidation Plan seeks to re-establish the control and legitimacy of the country’s economic, social and counternarcotic initiatives.
28. Foreign trade impact 3.7
IMPORTS PLUS EXPORTS = 51.7+ 37.5= $89.2 Billion
TOTAL TRADE AS PERCENTAGE OF GDP = 89.2/ 292.08= 0.3053= 30.5%
The Colombian government is trying to create and support more local businesses because three years ago the economy was mainly dependent on foreign trade which affected the Colombian small businesses. The Foreign trade still has a great impact in the economy of Colombia but it improved with the new government.
29. Management of foreign currency budget 3.0
2015 GDP 292.08 Billion
Imports: 70.789 USD Billion
Exports: 42.278 USD Billion
EXPORTS MINUS IMPORTS = 42.278-70.789= -27.811
-27.811< 29.208(10% GDP)
In 2015, the imports decreased by 16% compared to the numbers in 2014 and the exports also decreased by 34% compared to 2014.
30. Layers of collective action 2.7
The country's 50-year conflict has shaped local institutions, social preferences and the capacity of people to act collectively. The progress of the peace process raises hopes that the conflict might be finally near to an end. Yet new challenges will emerge during the post-conflict phase and the country needs to be prepared.
31. Pro-business climate 4.5
Thanks to the Treaty of Peace signed between the government and the rebel groups in Colombia, the fear to start a new business has gone down rapidly after 2016. Colombia’s economy is a free-market which encourages entrepreneurship from national and international businessmen. As a result, inward foreign direct investment (FDI) has been soaring. In these uncertain times, Colombia is seen by investors as a dependable and stable place to operate.
32. Government enterprises 3.5
Colombia has privatized state-owned enterprises under article 60 of the Constitution and Law No. 226 of 1995. This law stipulates that the sale of government holdings in an enterprise should be offered to two groups: first to cooperatives and workers associations of the enterprise, then to the general public. Municipal enterprises operate many public utilities and infrastructure services. These municipal enterprises have engaged private sector investment through concessions.
33. International security agreements 4.0
Colombia has traditionally played an active role in the United Nations and the Organization of American States and in their subsidiary agencies. The country is part of the Andean Pact, now known as the Andean Community, which also includes Bolivia, Ecuador, and Peru, the bodies and institutions making up the Andean Integration System. Colombia has signed free-trade agreements with the United States, Chile, Mexico, and Venezuela.
34. Protection of domestic enterprises from government mandated costs 4.5
Since 2010, the Colombian government has been more involved in the regulation of local businesses. The cost to provide employees with healthcare is significantly economical with little time to process.
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