With so much attention focused on the trilateral drama of the Nafta renegotiations between the US, Mexico, and Canada – and on US policymaking and politics more generally – it is easy to lose sight of important events elsewhere in the Americas, such as in Colombia.
The third largest economy in South America with a population of nearly 50 million people, Colombia, like many emerging economies, is presently facing a variety of challenges, contradictions and opportunities.
Each of the seven years from 2011 through 2017 was among the top years for inward FDI in Colombia’s history. Most of this came from the US and Europe, though China is an increasing presence in Colombia for both investment and trade. Along with Colombia’s FDI expansion, there has been good, though not stellar, growth in GDP, a substantial reduction in national poverty and an improved World Bank ranking as a place to do business.
Colombia’s challenges are many, however. Its infrastructure is considered among the worst in Latin America. Corruption is an ongoing difficulty, though its democratic institutions have proven resilient over time. A peace agreement signed in 2016 with the Revolutionary Armed Forces of Colombia ended 52 years of civil conflict but remains at risk of unravelling during the current process of 'transitional justice' and renewed possibilities of renegotiation.
Securing the benefits of a 'peace dividend' will also be harder because the acreage of land dedicated to coca cultivation for cocaine production has tripled in the past six years. Also, there is neighbouring Venezuela, which continues its economic collapse and is unable to address its own humanitarian crisis. More than 1 million documented migrants have moved from Venezuela to Colombia in the past year, and some estimate the total is twice that.
These are some of the challenges facing Colombia’s new president, Iván Duque, who was elected in August 2018. A self-described “extreme centrist”, he says that he wants to be “the president of social justice in Colombia”. He also plans to cut business taxes and support private enterprise. If nothing else, he will signal to the world that Colombia plans to be business and investment friendly.
This is important and has historical precedents locally. In 2005, Colombia passed laws to provide legal security and financial protection to investors, and since then has negotiated and passed free-trade agreements with Chile, Canada, the US, the EU, South Korea and others. These business-oriented policies have helped FDI into Colombia rise dramatically, and it is now the third largest destination for FDI in Latin America after Brazil and Mexico.
Now we will see whether Colombia can successfully find a path forward that balances the many social, environmental and economic challenges it faces.
Gregg Wassmansdorf is senior managing director, consulting, at Newmark Knight Frank, a global real estate firm. He is a member of the Site Selectors Guild.