Colombia’s coming peace dividend

Posted on November 2, 2016

An new era is opening up for Colombia, as the promise of peace, prosperity and opportunity becomes more and more tangible.

As Latin America’s oldest democracy and one of its most open, competitive and business-friendly economies, Colombia now looks to the world and especially to the UK for trading and investment ties.

This week’s state visit to the UK by President Juan Manuel Santos (the first by a Colombian head of state) confirms his administration’s commitment to building an open and vibrant economy based on transparent markets with clear rules for foreign investors, and in a climate of peace.

In September a peace accord was reached with the rebel group Farc; in October, it was rejected in a national referendum by a slight majority. President Santos immediately initiated a frank dialogue with all sectors of society and all political factions. We are all confident that Colombia will find its way to a stable and lasting peace soon.

The recent award of the Nobel Peace Prize to President Santos is a fitting symbol of the international community’s admiration, respect and growing recognition that the nation is today living a moment of historical importance.

Despite the undoubted challenges that remain, we believe it is the right time to show investors a “greater Colombia”.

Key geographic areas and key sectors of the economy are opening up, not only to peace, justice and social inclusion but also to the investment and tourism that is driving Colombia’s emergence as a vibrant high-income developing country.

There are very solid reasons for this investor optimism. Despite the global downturn, Colombia’s economy has over the past 15 years grown at an average annual rate of 4.3 per cent, making it the market with the second best outlook for GDP growth in Latin America for 2016 and 2017, according to the IMF. It is an attractive marketplace, where the spending power of an increasingly well-educated population is growing rapidly. In the first six months of 2016, foreign direct investment grew 16.5 per cent to $8.3bn.

The World Bank’s latest Doing Business report notes improvements including reduced corporate taxes and lower business licence taxes, as well as streamlined registration procedures for new businesses. Colombia now hosts business operations from over 700 international companies that generate revenues of $25.5bn.

Clearly, these companies approve of Colombia’s Doing Business 2017 scorecard (ranked number two in terms of business-friendliness across the region, and number one for investor protection.) And next year the country is expected to join the OECD, further consolidating its status as a high-growth developing nation.

Nevertheless, we know that the best is yet come.

A broad swathe of the country is opening its doors to enterprise for the first time in two generations. Districts including Chocó, Cauca, Putumayo, Caquetá, Guaviare, Vaupés, Meta, Vichada and Arauca have significant needs and offer significant opportunities. Together with government and civil society, private investors will play a key role in driving development.

Areas such as these are certainly rich in minerals and natural resources. But one notable feature of Colombia’s growth has been substantial investor interest in projects outside the oil and minerals sector. In fact, investment in non-commodity sectors has grown five times faster than the extractive sector.

To enable progress and increase competitiveness, the Santos government is overseeing the region’s most ambitious infrastructure development programme, with projects such as 4G toll roads, rail, ports and airport construction already delivering counter-cyclical economic benefits. These changes to Colombia’s transport logistics and connectivity will boost a range of industries, including international trade and tourism.

Areas now opening up have huge potential for both large-scale agribusiness and niche production of premium agricultural commodities such as coffee and cacao. And for a global high-end tourism industry forever in search of novelty and quality, they offer unspoilt attractions for speciality activities like bird-watching and sport fishing.

In advanced service industries, Colombia boasts a raft of investment opportunities, thanks in part to a well-educated population and to its status as a regional IT hub offering outsourcing and advanced IT services.

From the perspective of a UK government now actively seeking new international trade pacts, Colombia must be a highly attractive partner. With open access both to Latin America’s most vibrant regional economies and to markets in Asia, Colombia’s location on the Pacific seaboard offers major strategic benefits to UK companies.

As a core member of the Pacific Alliance (alongside Peru, Chile, and Mexico), Colombia participates in a 21st century trade pact that is also the most successful integration process in the entire history of Latin America.

In its trade dealings, Colombia has long espoused openness, competition and innovation as the tools to modernise the economy. Yet for years the Achilles heel holding the nation back had been the absence of peace and security.

Today, as President Santos noted in his recent address to the UN General Assembly, Colombia has very good reasons to be optimistic. The nation is taking decisive steps along the growth path, with a clear policy framework and, above all, dialogue based upon a commitment to peace.

This, we firmly believe, is Colombia’s moment, in which the country is stepping into one of the most important periods in its history. This is the time to come and join us.

Felipe Jaramillo is president of ProColombia, Colombia’s trade promotion agency, responsible for promoting non-energy sector trade including exports, tourism, investment and the country brand.

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