Pestel en Colombia PDF

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Country Profile Series
Colombia
In-depth PESTLE insights
PESTLE Country Analysis Report: Colombia ML00002-036/Published 10/2018

REFERENCE CODE:ML00002-036
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PUBLICATION DATE: October 2018
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OVERVIEW
Catalyst
This profile analyzes the political, economic, social, technological, legal and environmental (PESTLE) structure in
Colombia. Each of the PESTLE factors is explored on four parameters: current strengths, current challenges, future
prospects and future risks.
Summary
Key findings
Although the success of the peace deal with FARC guerrillas has vastly improved the security situation, the
country’s weak judicial system is a major concern
Since November 2012, the Colombian government has been engaged in peace talks with the Revolutionary Armed
Forces of Colombia (Fuerzas Armadas Revolucionaries de Colombia [FARC]), the country’s largest guerilla group. In
November 2016, a peace deal was negotiated successfully and was passed by the Colombian Congress. According to
the agreement, FARC will compensate the victims of the conflict using its own assets. One year after the historic deal,
the EU has removed FARC from its list of terrorist organizations. Moreover, the UN Security Council had also praised the
remarkable achievements of the peace process as “a major milestone in the transition between war and peace.” In
September 2017, the former rebel group re-launched as a political party under the ‘Common Alternative Revolutionary
Force (Fuerza Alternativa Revolucionaria del Común [FARC]), changing their logo of rifles to a red rose. The group has
taken part in the 2018 congressional elections as well.
The Colombian business climate is plagued with judicial corruption, which makes legal transparency difficult. In addition,
the judicial system is lengthy and cumbersome, especially the lower courts, which have been accused of inefficiency and
involvement in corrupt practices. Delays of five to seven years in these courts are common. A simple commercial dispute
settlement can take more than three years, according to the OECD. Regarding the judicial independence parameter, the
country is ranked 111th out of 137 in the ‘Global Competitiveness Report 2017-18’, while it was ranked 96th out of 137
for irregular payments and bribes. In terms of the efficiency of the legal framework to settle disputes, the country is
ranked 122nd.
Utilization of natural resources remains efficient, but subpar infrastructure is a concern
Colombia is extremely rich in mineral and energy resources. Colombia had 4.9 billion tons of coal reserves in 2015,
enough for around 60 years at current production rates, even if no new discoveries are made. Furthermore, the country
had proven natural gas reserves of 104 billion standard cubic meters in 2017, mainly in the Llanos basin. The efficient
exploitation of natural resources has contributed greatly to the Colombian economy. Also, the liberalization of the
hydrocarbon and mining sectors has played a huge part in enhancing this efficiency. Annual petroleum production has
increased substantially from 603.67 thousand barrels per day (KBPD) in 2008 to around 878.52 KBPD in 2017. The
country’s annual petroleum consumption stood at 317 KBPD in 2015.
Colombia suffers from inadequate transport infrastructure, with poor roads and railways affecting its competitiveness in
terms of trade and tourism, according to the ‘2017 Economic Survey on Colombia’, published by the OECD. The quality
and size of Colombia’s road network is poor, resulting in high freight costs. Road length as a proportion of land area is
just 10% of the OECD average. Paved roads (quality roads) account for only 10% of the total road length. Despite this,

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road transport represents 80% of the country’s total freight due to the relatively undeveloped nature of railway and river
transport, which account for 15% and 4% of domestic transport, respectively. Among the 160 countries considered in the
‘2018 Logistics Performance Index’, Colombia ranked 58th while Brazil, Mexico and Chile ranked 56th, 51st and 34th,
respectively.
Despite the presence of a robust welfare system, high poverty ratios and the wellbeing of the country’s old
population are a major struggle
The Colombian government has put in place a robust social welfare system. All workers must be affiliated with either the
Social Security Institute (Instituto de Seguros Sociales [ISS]) or a private health or pension provider. Low-income
individuals who are not able to pay the necessary contributions must enroll in the subsidized plan in which the
government and the Solidarity Fund for low wage earners participate. The social security system includes coverage for
all general illnesses, treatment in a quality facility, pharmacy services and ambulance services. The social welfare
system also provides for short-term disability, long-term disability and survivors' benefits. The individual only has to make
some co-payments and remit moderate dues to the social welfare system. The ISS provides medical care, pensions and
other benefits to Colombian workers who enroll. The 1993 reforms enabled the creation and implementation of a new
system of health insurance providers known as Entities Promoting Healthcare (Entidad Promotora de Salud [EPS]),
some of which are public, and some are state-owned. The EPS collects insurance contributions from the worker, and
then enters into a service contract with healthcare providers on behalf of the worker. For people unable to pay the
monthly contributions, the government has created a subsidized regime under Entidades Promotoras de Salud
Subsidiadas (EPS-S), which enters into a contract with the healthcare providers, similar to the EPS program.
The Colombian poverty ratio is one of the highest in the South American region and across the globe. After a period of
systematic poverty reduction from 2008 until 2015, 2016 witnessed the reverse. In 2008, the poverty headcount ratio at
national poverty lines stood at 42% of the population, which declined to 27.7% of the population by 2015. However, the
ratio increased to 28% in 2016, according to the World Bank. High levels of income inequality regarding the old age
population are another major concern. According to the OECD, the relative poverty rates among the elderly population
are the highest out of all the age groups in Colombia. This clearly highlights the low reach of the pension program,
especially in the case of women and the elderly population, as the only section of society that actively contributes to the
pension system is workers. The reformation of the pension system and old age support is essential in order to counter
social problems, such as income inequality and the wellbeing of the old age population.
Growth has been witnessed in the ICT sector, but R&D remains limited
Both the public and private sector have helped to improve telecom and internet access in Colombia. The government has
launched several initiatives, such as Computers for Schooling, Vive Digital, Compartel and the National Fiber Optic
Project, to increase the country’s fixed broadband penetration rate, especially among students and rural and low-income
households. As a result, there were approximately 58.69 million mobile subscribers and 28.34 million internet users in
2016 compared to 2.3 million and 0.89 million, respectively, in 2000. This growth is set to continue in the near term.
According to the National Administrative Department of Statistics (DANE), 62.3% of the population over five years of age
used the internet in 2017. The use of the internet is also very frequent, and the majority of the population use internet
services every day, or at least once a week. Furthermore, the emergence of 3G and 4G technology is expected to boost
the mobile internet penetration rate, which is very low compared to other services.
Colombia lags behind its peers in terms of R&D expenditure. According to the World Bank, total Colombian expenditure
on R&D in 2015 was 0.24% of GDP. R&D expenditure was lower than neighboring Latin American countries, such as
Mexico (0.55%), Argentina (0.63%), Chile (0.38%) and Uruguay (0.34%). According to OECD recommendations, a

nation must spend at least 1% of its GDP on science and technology to achieve sustainable development. By these
standards, Colombia has a long way to go, and despite the post-2000 economic revival, the country has failed to improve
its technical capabilities.
The country has a well-developed legal framework, but product market regulations remain cumbersome
Colombia has a well-developed court structure to address judicial issues. The judicial system comprises the Supreme
Court of Justice, the Council of State, the Constitutional Court, and the Superior Judicial Council at the top level. The
Supreme Court of Justice has three chambers of civil, criminal, and labor matters; it decides appeals on errors of law and
has the power to quash the decisions made by the lower courts. The Council of State is the highest court of
administrative law. It also takes appeals from departmental administrative courts and some national officials.
Furthermore, there is the Constitutional Court to review the constitutional validity of laws approved by the legislative
branch and some decrees issued by the executive branch. The court system, with its specialized agencies, is well-
equipped to establish an efficient judicial process.
Colombia’s product market regulations are restrictive and are above the OECD average. The barriers to trade are still
high, the lowering of which could improve productivity and growth. A lack of strong competition exists in sectors such as
telecommunications, retail and food. Though Colombia has come a long way in terms of modifying its earlier framework
of regulations in the telecommunications industry and has taken active steps to promote the use of internet in
businesses, the country’s concentration in the mobile and fixed-line market segment is among the highest in the world.
The presence of strong competition is necessary to extend the benefits of telecommunications to the entire country.
Although Colombia prioritizes international cooperation and conventions for environmental conservation,
increasing emission and pollution levels are a challenge
Colombia is part of an Andean Environmental Agenda (AAA), along with Bolivia, Ecuador and Peru. In April 2012, the
Andean Community (CAN) approved the agenda for 2012–2016, which consisted of three focus areas: biodiversity,
climate change and water resources. It also stated the common actions and measures that would build capacity in the
aforementioned areas for Colombia and the other three Latin American countries. The 20th Meeting of the Forum of
Ministers of the Environment of Latin America and the Caribbean, under the flagship of the United Nations Environment
Programme, recognized that the AAA was aligned to the UN 2030 Agenda for Sustainable Development. Colombia has
proven that it can bring in environment related laws on a timely basis. Colombia has targets regarding the reduction of
greenhouse emissions, which were developed as part of its Intended Nationally Determined Contributions (INDCs)
targets. The same were submitted to United Nations Framework Convention on Climate Change (UNFCCC) in 2015.
Colombia also ratified the Paris climate agreement in 2017.
Rising CO2 emissions could affect the country's air quality, which could impact the population’s health. According to
MarketLine, there was an increase in CO2 emissions during 2011–2015, from 71.53 million tons in 2011 to 83.30 million
tons in 2015. The population in urban agglomerations (with more than one million people), as a percentage of the total
population, increased from 40.49% in 2011 to 43.47% in 2017, and the population in the largest city, as a percentage of
the urban population, increased from 25.05% to 26.91% in the same period.

PESTLE highlights
Political landscape
 The peace accord with FARC was approved by the Colombian Congress in November 2016 after
four years of negotiations. One year after the historic deal, the EU removed FARC from its official list
of terrorist organizations. The former rebel group has transformed into a political party and
participated in the 2018 congressional elections.
 In terms of political stability and the absence of violence, Colombia had a low percentile rank of
13.81 out of 100 in 2016 according to the World Bank governance indicators.
Economic landscape
 According to the IMF, the current account deficit decreased from 4.3% of GDP in 2016 to 3.4% of
GDP in 2017. It is expected to further decline to 2.3% by 2023, according to IMF forecasts.
 The Colombian capital market is relatively underdeveloped. Only the large companies participate in
the local stock or bond markets. Bolsa de Valores de Colombia (BVC) is a part of Mercado Integrado
Latinoamericano (MILA), and its share in MILA a mere 14.73%.
Social landscape
 According to CIA - The World Factbook, the median age in Colombian society was 30 years in 2017,
indicating that the society is young. The gender ratio was 97.52 males per 100 females in 2017.
 Colombia is one of the most inequitable countries in the Latin American region. According to the
World Bank, the country’s Gini index was 50.8 in 2016.
Technological landscape
 In 2017, the country had approximately 59.84 million mobile subscribers compared to 30.06 million
in 2006, according to MarketLine.
 Although the country’s telecom market is highly saturated, with a penetration rate of 121.42 (per 100
people) as of 2017, mobile penetration is comparatively low in rural areas and among low-income
households.
Legal landscape
 As the country moves towards OECD membership, the nation is reforming its tax structures to align
them to OECD standards and recommendations. Comprehensive tax reforms were conducted in
2012, 2014 and 2016, and further reforms are expected under the Duque presidency.
 The US has retained Colombia on its Priority Watch List, with an Out-of-Cycle Review status for
2018, according to the Special 301 report published by the Office of the US Trade Representative.
Environmental landscape
 A carbon tax was established in 2016, along with a voluntary exchange carbon market. The carbon
tax was extended to liquid fossil fuels and industrial uses of natural gas and a national policy on
climate change was introduced in 2017.
 In the ‘2018 Environmental Performance Index’ by Yale University, the country ranked 42nd out of
the 180 countries. For the SO2 emissions intensity and NOX emissions intensity, the country ranked

69th and 66th, respectively, while for CO2 emission intensity, the country ranked 106th out of 180
nations.
Key fundamentals
Table 1: Colombia – Key Fundamentals, 2015–2022f
2015 2016 2017 2018f 2019f 2020f 2021f 2022f
359.12 366.46 373.01 382.98 394.96 408.81 423.15 437.59

GDP, constant 2010 prices ($ billion)
3.05 2.04 1.79 2.67 3.13 3.51 3.51 3.41
GDP growth rate (%)
7,450.09 7,517.41 7,567.27 7,686.69 7,842.41 8,032.43 8,227.08 8,418.74
GDP, constant 2010 prices, per capita ($)
4.99 7.51 4.31 3.47 3.44 2.99 3.04 3.02
Inflation
14.75 13.72 12.64 12.49 11.95 11.67 11.26 10.97
Exports, total as a percentage of GDP
22.60 19.67 18.33 18.05 17.37 16.96 16.43 16.02
Imports, total as a percentage of GDP
48.20 48.75 49.29 49.82 50.36 50.89 51.43 51.98
Mid-year population (millions)
8.93 9.22 9.38 9.28 9.18 9.08 8.97 8.94
Unemployment rate (%)
118.90 120.40 121.42 122.25 122.93 123.48 123.93 124.30
Mobile penetration (per 100 people)
Source: Country Statistics, MarketLine MARKETLINE

TABLE OF CONTENTS
Overview .................................................................................................................................................................... 2
Catalyst .................................................................................................................................................... 2
Summary .................................................................................................................................................. 2
Key findings.......................................................................................................................................................... 2
PESTLE highlights.................................................................................................................................................. 5
Key fundamentals................................................................................................................................................. 6
Key Facts and Geographic Location............................................................................................................................14
Key facts .................................................................................................................................................14
Geographical location ..............................................................................................................................15
PESTLE Analysis .........................................................................................................................................................16
Summary .................................................................................................................................................16
Political analysis ......................................................................................................................................18

Overview.............................................................................................................................................................18
Current strengths ................................................................................................................................................19
Current challenges ..............................................................................................................................................20
Future prospects .................................................................................................................................................21
Future risks .........................................................................................................................................................21
Economic analysis ...................................................................................................................................23

Overview.............................................................................................................................................................23
Future risks .........................................................................................................................................................36
Social analysis .........................................................................................................................................40

Overview.............................................................................................................................................................40
Future risks .........................................................................................................................................................46
Technological analysis .............................................................................................................................49

Overview.............................................................................................................................................................49
Future risks .........................................................................................................................................................52
Legal analysis ..........................................................................................................................................54
Overview.............................................................................................................................................................54
Future risks .........................................................................................................................................................57
Environmental analysis ............................................................................................................................58

Overview.............................................................................................................................................................58
Future risks .........................................................................................................................................................60
Political Landscape ....................................................................................................................................................62
Summary .................................................................................................................................................62
Evolution .................................................................................................................................................62
Structure and policies ..............................................................................................................................64

Key political figures .............................................................................................................................................64
Structure of government .....................................................................................................................................64
Key political parties .............................................................................................................................................64
Composition of government ................................................................................................................................66
Key policies .........................................................................................................................................................66
Performance ............................................................................................................................................68
Governance indicators.........................................................................................................................................68
Outlook ....................................................................................................................................................69
Economic Landscape..................................................................................................................................................70
Summary .................................................................................................................................................70
Evolution .................................................................................................................................................70

Financial authorities and regulators .....................................................................................................................71
Stock markets......................................................................................................................................................72
Performance ............................................................................................................................................73
GDP and growth rate ...........................................................................................................................................73
Fiscal situation ....................................................................................................................................................77
Exports and imports ............................................................................................................................................77
Current account ..................................................................................................................................................78
Debt situation .....................................................................................................................................................79
International investment position ........................................................................................................................79
Credit rating ........................................................................................................................................................79
Monetary situation..............................................................................................................................................79
Inflation ..............................................................................................................................................................79
Interest rate ........................................................................................................................................................80
Employment........................................................................................................................................................81
Outlook ....................................................................................................................................................83
Social Landscape........................................................................................................................................................84
Summary .................................................................................................................................................84
Evolution .................................................................................................................................................84

Demographic composition ...................................................................................................................................84
Education ............................................................................................................................................................86
Healthcare ..........................................................................................................................................................86
Social welfare ......................................................................................................................................................87
Performance ............................................................................................................................................88
Healthcare ..........................................................................................................................................................88
Education ............................................................................................................................................................89
Income distribution .............................................................................................................................................89
Outlook ....................................................................................................................................................90
Technology Landscape ...............................................................................................................................................91
Summary .................................................................................................................................................91
Evolution .................................................................................................................................................91

Innovation governance ........................................................................................................................................91
Intellectual property............................................................................................................................................92
Performance ............................................................................................................................................92
Telecommunications ...........................................................................................................................................92
R&D expenditure .................................................................................................................................................93
Outlook ....................................................................................................................................................94
Legal Landscape.........................................................................................................................................................95
Summary .................................................................................................................................................95
Evolution .................................................................................................................................................95

Judicial system ....................................................................................................................................................95
Legislation affecting business ..............................................................................................................................96
Tax regulations ....................................................................................................................................................96

Performance ............................................................................................................................................96
Effectiveness of the legal system .........................................................................................................................96
Outlook ....................................................................................................................................................97
Environmental Landscape..........................................................................................................................................98
Summary .................................................................................................................................................98
Evolution .................................................................................................................................................98

Environmental regulations...................................................................................................................................98
Participation in global efforts, agreements, and pacts ..........................................................................................99
Performance ............................................................................................................................................99
Environmental impact .........................................................................................................................................99
Outlook ..................................................................................................................................................100
Appendix .................................................................................................................................................................102
ISO codes of selected countries .............................................................................................................102
Ask the analyst ......................................................................................................................................103
Disclaimer..............................................................................................................................................103

LIST OF FIGURES
Figure 1: Map of Colombia ....................................................................................................................................15
Figure 2: Petroleum Production and Consumption in Colombia (1,000 Barrels per Day), 1980–2017 ................24
Figure 3: Primary Coal Production and Consumption in Colombia (Million Tons), 1980–2016 ...........................25
Figure 4: Natural Gas Production and Consumption in Colombia (Billion Standard Cubic Meters), 2013–2017 26
Figure 5: External Debt Balance Guaranteed by the Central Government ($ Billion), 1990–2017 .......................27
Figure 6: Gross Capital Formation in Colombia (COP Trillion/Constant Prices), 2011–2016 ..............................28
Figure 7: Infrastructure Quality in Comparison to the OECD, 2015 .....................................................................29
Figure 8: Quality of Transport Infrastructure in Colombia, Logistics Performance Index, 2018 .........................30
Figure 9: Tax Revenue as a Percentage of GDP, 2016 .........................................................................................31
Figure 10: Expanding Banking Business (Commercial Banks/Borrowers), 2008–2017.......................................32
Figure 11: Depositors with the Commercial Banks (Number of Depositors), 2008–2017 ....................................33
Figure 12: Growing Domestic Credit (% of GDP), 2007–2016 ...............................................................................34
Figure 13: Agricultural Land Area (1,000 Square Kilometers/% of Land Area), 2006–2015 .................................35
Figure 14: Increasing Agricultural Output (Value Added per Worker), 2008–2017 ..............................................36
Figure 15: Current Account Balance ($ Billion/% of GDP), 2008–2017.................................................................37
Figure 16: Bank Nonperforming Loans to Total Gross Loans (%), 2008–2017 ....................................................38
Figure 17: Bank Capital to Assets Ratio (%), 2018–2017 ......................................................................................39
Figure 18: Poverty Headcount Ratio at National Poverty Lines (% of Population), 2016.....................................42
Figure 19: Relative Income Poverty by Age Group (%), 2013–2014 .....................................................................43
Figure 20: Informal and Formal Employment in Colombia (Million Persons/%), 2008–2018 ...............................44
Figure 21: Protection of Permanent Workers Against Individual and Collective Dismissals, 2014 .....................45
Figure 22: Healthcare Expenditure in Colombia ($/% of GDP), 2007–2016 ..........................................................46
Figure 23: Distribution of Income by Population Quintile in Colombia (%), 2016 ................................................47
Figure 24: Income Inequality in Select Nations from South America (%), 2016 ...................................................48
Figure 25: R&D Intensity (%) in Selected Latin American Countries, 2015 ..........................................................50
Figure 26: Innovation in the Manufacturing Sector as a Percentage of All Manufacturing Firms, 2015 ..............51
Figure 27: Product Market Regulations, 2014.......................................................................................................56
Figure 28: Natural Resources Rents (% of GDP), 2007–2016 ...............................................................................60
Figure 29: Growing Urbanization and Pollution Level (Micrograms per Cubic Meter/%), 2010–2017..................61

Figure 30: Colombia – Key Political Events Timeline ...........................................................................................63
Figure 31: Key Political Figures in Colombia .......................................................................................................64
Figure 32: Composition of the Chamber of Representatives (Lower House) after the 2018 Congressional
Elections ...............................................................................................................................................................66
Figure 33: Historical GDP Growth Rate in Colombia (%), 2008–2017...................................................................71
Figure 34: GDP and GDP Growth Rate in Colombia ($ Billion/%), 2013–2022f ....................................................73
Figure 35: GDP Composition by Sectors, 2017 ....................................................................................................74
Figure 36: Agriculture Output of Colombia (CPL Trillion/%), 2012–2017 .............................................................75
Figure 37: Industrial Output of Colombia (CPL Trillion/%), 2012–2017 ................................................................76
Figure 38: Services Output of Colombia (CPL Trillion/%), 2012–2017 .................................................................77
Figure 39: External Trade of Colombia ($ Billion), 2013–2017..............................................................................78
Figure 40: Consumer Price Index and Consumer Price Index-based Inflation in Colombia, 2012–2022f ............80
Figure 41: Unemployment and Rate of Unemployment in Colombia (Millions/%), 2012–2022f ...........................82
Figure 42: Major Religions in Colombia, 2014 ......................................................................................................86
Figure 43: Total Expenditure on Healthcare in Colombia ($ Billion/%), 2008–2017 .............................................88
Figure 44: Public Expenditure on Education in Colombia ($ Billion/%), 2007–2016 ............................................89
Figure 45: Internet Users in Colombia (Million Users/%), 2008–2017...................................................................93
Figure 46: Research and Development Expenditure in Colombia (% of GDP), 2006–2015 ..................................94
Figure 47: CO2 Emission in Colombia (Tons/%), 2008–2015.............................................................................. 100

LIST OF TABLES
Table 1: Colombia – Key Fundamentals, 2015–2022f 6
Table 2: Colombia – Key Facts, 2018 14
Table 3: Analysis of Colombia’s Political Landscape 19
Table 4: Analysis of the Colombian Economy 23
Table 5: Analysis of Colombia’s Social System 40
Table 6: Analysis of Colombia’s Technological Landscape 49
Table 7: Frequency of Internet Use in Colombia (Number of People in Thousands), 2017 52
Table 8: Holdings of ICT Goods in Micro-establishments According to Economic Activities in

Colombia, 2016 53
Table 9: Analysis of Colombia’s Legal Landscape 54
Table 10: Analysis of Colombia’s Environmental Landscape 58
Table 11: Banco de la República Policy Interest Rate, 2016–2018 81
Table 12: Mid-year Population by Age in Colombia (% by Gender), 2017 85
Table 13: Patents Granted by US Patent and Trademark Office, 2010–2015 92

Key Facts and Geographic Location
KEY FACTS AND GEOGRAPHIC LOCATION

Key facts
Table 2: Colombia – Key Facts, 2018
Country and capital

Full name Republic of Colombia
Capital city Bogota
Government
Republic; executive branch dominates government
Government type structure
Head of state and head of government President Iván Duque Márquez
Population (2017) 49.29 million
Currency Colombian peso (COP)
GDP per capita, adjusted by PPP (2017) $14,484.9
Internet domain .co
Demographic details
Life expectancy (2017 est.) 75.9 years (total population)
72.8 years (men)
79.3 years (women)
Ethnic composition (2005 est.) Mestizo and white (84.2%), Afro-Colombian (10.4%),
Amerindian (3.4%), Romani (<.01) and unspecified
(2.1%)
Roman Catholic (79%), Protestant (14%), other (2%),

Major religions (2015 est.) unspecified (5%)
Country area 1,138,910 sq. km
Language Spanish (official)
Exports Petroleum, coal, emeralds, coffee, nickel, cut flowers,

bananas, apparel
Imports Industrial equipment, transportation equipment,

consumer goods, chemicals, paper products, fuels,
electricity
Source: CIA – The World Factbook MARKETLINE

Key Facts and Geographic Location
Geographical location
Colombia is located in Northern South America, bordering the Caribbean Sea between Panama and Venezuela, and
bordering the North Pacific Ocean between Ecuador and Panama.
Figure 1: Map of Colombia

PESTLE Analysis
PESTLE ANALYSIS
Summary
After four years of intense negotiations, a peace agreement was reached between FARC guerillas and the Colombian
government in November 2016. Around 7,000 rebels have laid down their arms and transitioned into civilian life as a
result of the peace deal. As per the agreement, FARC will compensate the victims of the conflict using its own assets. In
September 2017, the former rebel group re-launched as a political party under the ‘Common Alternative Revolutionary
Force (Fuerza Alternativa Revolucionaria del Común [FARC]) and have taken part in the 2018 congressional elections.
Regional alliances and relations with the US and the EU have dominated Colombia’s foreign policy. The country is keen
to maintain its diplomatic and economic relations with Latin American countries, especially Mexico, Chile, Peru and
Costa Rica. The country has close relations with the US, as the latter is an important trade partner and plays a significant
role in curbing drug trafficking in Colombia through inter-governmental aid.
The country faces significant challenges regarding the implementation of reforms due to corruption and inefficiencies in
the system. The country continues to face security risks from paramilitary organizations and non-compiling guerilla
groups, which pose risks to the successful implementation of the government’s land restitution programs, despite peace
talks.
After decelerating from a growth rate of 6.9% in 2007 to 1.65% in 2009, the Colombian economy recovered and has
posted growth rates higher than most of the Latin American countries since 2010. The major reason for this economic
success was the booming mining sector, which received an impetus from both exports and investments due to the rise in
commodity production and prices in 2011. According to the World Bank, domestic credit to the private sector has
increased from 37.64% of GDP in 2007 to 47.51% in 2016. A high measure of domestic credit to the private sector
indicates the large financial resources of the private sector. However, the Colombian tax revenue as a percentage of
GDP is one of the lowest compared to other OECD countries. This is the result of factors such as tax evasion, high and
unnecessary exemptions, and inefficient tax administration.
The biggest challenges to economic growth come from poor transport infrastructure, which is preventing companies from
exploiting economies of scale. However, in the coming years, the Colombian government is expected to upgrade its
infrastructure as the administration seeks up to $100 billion worth of investments in transportation infrastructure by 2021.
The fluctuating commodity prices also pose a major risk to the economy, especially as the country depends on
commodities such as coffee, oil, gold and coal for 57.2% of its total export revenues.
With a median age of 30 years as of 2017 (according to CIA - The World Factbook), Colombia has a demographic
advantage in terms of the number of people of working age. Colombia also has a robust social welfare system with
health and pensions systems in place since 1993. Despite the presence of these systems, inefficiencies and corruption
have affected pension coverage and the quality of healthcare. The government wants to increase the pension system
coverage and improve the quality of healthcare services through various reforms. Colombia’s major social issues are
high-income inequality, which is reflected by a Gini index of 50.8 in 2016, and continued violations of human rights, the
major victims of which are civilians instead of violent rebels. Informality in the labor market exacerbates problems related
to income inequality, which is perceived to be a consequence of high minimum wages and high non-wage labor costs.
Colombia’s progress in terms of technological development has been limited and the country has been unsuccessful in
utilizing its FDI inflows to develop its technological capabilities. The country also lags behind in terms of technical
manpower and has inadequate science and technology infrastructure.
According to the World Bank, the country’s gross expenditure on R&D in 2014 was 0.25% of GDP, which dropped

PESTLE Analysis
marginally to 0.24% of GDP in 2015. The public sector plays a dominant role in R&D expenditure, while the business
sector has very low involvement. IPR enforcement in Colombia is also considered to be weak, so the US Trade
Representative’s Special 301 Report 2018 retained Colombia on its Piracy Watch List. Despite these deficiencies, the
ICT sector has emerged as a bright spot in terms of the country’s technological landscape and its growth is expected to
continue in the near term.
Although liberalization has attracted substantial foreign investment, making Colombia one of the major FDI destinations
in South America, the legal system has remained cumbersome and the courts, especially the lower courts, have
remained susceptible to corruption and intimidation. The Victims’ Law has been implemented, but its success depends
on the ability of the government to protect those displaced by armed groups who are against land restitution.
The country has managed to maintain fairly strong environmental standards, but there is further scope for improvement
through the effective implementation of environmental policies. However, rising CO2 emissions could affect the country's
air quality, which in turn could impact the health of the population.

PESTLE Analysis
Political analysis
Overview
The Colombian conflict between the government and the far-left Revolutionary Armed Forces of Colombia (FARC)
guerillas was a major concern for the country from 1964 to 2016. The support of the country’s left-wing parties, which
favored peace talks with the FARC guerillas, helped Juan Manuel Santos to win a second-term in office in the 2014
congressional elections. These peace negotiations also marked a policy shift from the hardline stance of former
President Alvaro Uribe. In July 2015, an agreement was reached between the government and FARC to de-escalate the
military actions, which provided an unanticipated push to peace talks between the two parties. After around four years of
intense negotiations with FARC, a deal was reached between the government and FARC in August 2016 which was put
to a referendum. However, after a very close referendum which went against the peace agreement, the Colombian
Congress approved a revised version of the peace deal with FARC in November 2016. With the historic peace
agreement, which ended more than half a century of internal conflict, the nation has witnessed increased confidence and
social cohesion. The former rebel group FARC has re-launched as a political party, under the name ‘Common Alternative
Revolutionary Force (FARC), and changed its logo of rifles to a red rose. As a part of the 2016 peace treaty, five
members of FARC are to be provided membership to the senate, and five to the lower house of congress, in the 2018
and 2022 elections. The group took part in the 2018 congressional elections as well. However, the armed conflict still
continues in a minor scale with the emergence of FARC Dissidents, which is assessed to have between 1,200-2,500
members, according to several estimates.
The Santos administration sought better diplomatic and economic relations with other Latin American countries,
especially Mexico, Chile, Peru and Costa Rica. The country also has close relations with the US, as the latter is an
important trade partner and plays a significant role in curbing drug trafficking in Colombia through inter-governmental aid.
However, there were conflicts between Colombia and the US regarding the expansion of cocoa cultivation in Colombia,
which facilitated increased production of cocaine and the drug trafficking to the US. The US threatened Colombia with
decertification, in the absence of a considerable reduction in the cocoa area in Colombia. The country’s ties with
Nicaragua have deteriorated after the International Court of Justice’s ruling over the San Andrés y Providencia Islands
and the surrounding territorial waters.
Iván Duque Márquez took the office of president on August 7, 2018 after his victory in the 2018 congressional elections.
Duque was a candidate of right-wing the Democratic Centre. He has hardline stances over drug trafficking and cocoa
production of the same and is expected to have better coordination with his US counterpart, President Trump, in these
matters, than former president Santos.

PESTLE Analysis
Table 3: Analysis of Colombia’s Political Landscape
Current strengths Current challenges

■ Strong foreign policy ■ Alleged corruption in the public sector
■ Peace accord with FARC ■ Weak judicial system
Future prospects Future risks
■ Reform to eliminate presidential re-elections and corruptions ■ Non-compiling and emerging guerrilla groups
■ Implementation of anti-drug policies such as aerial fumigation
and arising rehabilitation
Source: MarketLine MARKETLINE
Current strengths
Strong foreign policy
Regional alliances and relations with the US and the EU have dominated Colombia’s foreign policy. The country’s free
trade agreements (FTAs) with the US and the EU, which came into force in May 2012 and August 2013, respectively,
have strengthened the country’s relations with the two economic giants. The fact that these two regions account for more
than 45% of the global market in terms of GDP makes these FTAs a good prospect for Colombian economic growth.
Plan Colombia (until 2015) and Peace Colombia (since 2017) are major the US military and financial assistance
programs which have helped Colombia to curb drug smuggling.
Colombia has been a member of the Andean Community since 1969, and has an FTA with the other member states,
Bolivia, Ecuador, and Peru. The Andean Community has had an FTA with Mercosur countries (Argentina, Brazil,
Paraguay and Uruguay) since 2005. Colombia also signed FTAs with Costa Rica, South Korea, Panama, and Israel in
2013, and is in the process of signing FTAs with Turkey and Japan. The country also has FTAs with Canada, Chile,
Mexico, and with associations such as the European Free Trade Association (EFTA), European Union (EU) and Central
American Northern Triangle. Colombia has also been a part of the Pacific Alliance since 2012, a trade block consisting of
Chile, Colombia, Mexico, and Peru as members, as well as Australia, Canada, New Zealand, and Singapore, which are
associate members.
The country also served as the non-permanent member of the UN Security Council for 2011–2012. Colombia is an active
member of the East Asia-Latin American Cooperation (FEALAC) and is also seeking membership of APEC. The process
of acquiring OECD membership is also underway.
Peace accord with FARC
From November 2012 to November 2016, the Colombian government was engaged in peace talks with the Revolutionary
Armed Forces of Colombia (Fuerzas Armadas Revolucionaries de Colombia [FARC]), the country’s largest guerilla
group. FARC, which claimed to represent the poor against the rich bourgeoisie class, was involved in an armed conflict
with the state from 1964 until the peace accord was established and funded their operations through kidnapping and
drug trafficking. FARC was estimated to have more than 20,000 members in early 2000, which was reduced to almost
half by the end of the decade, according to various sources. The Colombian forces were successful in decreasing the
strength of FARC leading up to the accord because of the financial and training support from the US.
By the end of July 2015, the two parties had reached an agreement to stop military actions. However, in July 2015, there
was eruption of mass anger against FARC after the diffusion of two bombs in Bogota. The guerilla group was blamed for
PESTLE Analysis
it. This also affected the president’s popularity on the grounds of public security and a failure in his approach towards the
peace process. Despite this setback, after four years of negotiations with FARC, a deal was reached between the
government and FARC in August 2016. However, in October 2016, the peace deal was rejected by the Colombian
people in a referendum as people perceived it as too lenient towards the atrocities committed by FARC. In November
2016, a modified version of the original peace agreement was passed by the Colombian Congress. Around 7,000 rebels
have laid down their arms and have transitioned into civilian life as a result of the peace deal. As per the agreement,
FARC will compensate the victims of the conflict using its own assets. FARC was allowed to form a political party as part
of the accord. In September 2017, the former rebel group re-launched itself as a political party under the name ‘Common
Alternative Revolutionary Force (Fuerza Alternativa Revolucionaria del Común [FARC]), changing their logo of rifles to a
red rose. As a part of the 2016 peace treaty, five members of FARC are to be provided membership to the senate, and
five to the lower house of congress, in the 2018 and 2022 elections. The group has taken part in the 2018 congressional
elections as well. Former president Santos was awarded with the Nobel Peace Prize regarding his efforts to bring peace
to Colombian society by reaching an accord with FARC (guerilla group). This changed scenario is expected to improve
the country’s social scenario and business atmosphere over the coming years.
Current challenges
Alleged corruption in the public sector
Despite economic growth, better security conditions, improvements to the rule of law and the implementation of
institutional reforms, high levels of corruption haunt Colombia, just as they do other countries in the Latin American
region, including Peru, Ecuador and Panama. Two of the last four presidents and a quarter of its Congressmen have
been investigated for political transgression and the misuse of power.
Several officials from the administration of former President Uribe have also been charged with corruption. In May 2011,
the Colombian attorney general charged the ex-director of the now-dissolved state intelligence agency Departamento
Administrativo de Seguridad (DAS) and former President Alvaro Uribe’s chief of staff with the illegal wiretapping of
judges, journalists, politicians from opposition groups, and human rights activists. In the same month, President Santos
announced that the tax and customs agency Direccion de Impuestos and Aduanas Nacionales (DIAN) was a victim of
embezzlement to the tune of $555 million. In June 2017, the national director of anti-corruption, Luis Gustavo Moreno
Rivera, was arrested at the direction of US Drug Enforcement Administration for conspiring to launder money to promote
foreign bribery. During 2017, the holding president, Santos, apologized for receiving funds from Brazilian conglomerate
Odebrecht SA for his 2010 and 2014 election campaigns. Odebrecht SA is currently being investigated for corruption in
many nations, including Colombia.
In addition to political corruption, cases of collusion between national security forces and narco-paramilitary groups have
also come to the fore. Due to their cooperation with the government against the left-wing guerillas, the paramilitary
groups have involved themselves in the political process.
According to the ‘Global Competitiveness Report 2017-18’, published by the Global Economic Forum, rampant corruption
is identified as the most problematic factor for doing business in Colombia. The country is ranked 117th out of 137
nations for the institutions pillar in the ‘Global Competitiveness Report 2017-18’. The ethical behavior of firms is ranked
113th in the report, while favoritism in terms of decisions made by government officials is ranked at 119th out of 137
nations.
Weak judicial system
The Colombian business climate is plagued with judicial corruption, which makes legal transparency difficult. In addition,

PESTLE Analysis
the judicial system is lengthy and cumbersome, especially the lower courts, which have been accused of inefficiency and
involvement in corrupt practices. In 2015, the president of the constitutional court, Jorge Pretelt, was accused of favoring
Fidupetrol, an oil company, which has a dispute with the government. He had allegedly taken a $210,000 bribe to issue a
ruling in favor of the oil company. Mr Jorge Pretelt denied any charges and only temporarily stepped down as the
president of the constitutional court, but not as a judge, although his colleagues directly requested his resignation.
Delays of five to seven years are common in these courts. A simple commercial dispute settlement can take more than
three years, according to the OECD. The independence of judges is also under threat, as they are subject to intimidation.
On a number of occasions, the lower courts have failed to act independently. Unless adequate measures are taken, they
will remain susceptible to corruption and intimidation. Similarly, the independence of the Constitutional Court has been
questioned, as it has been found to be interfering with the legislative process. The judiciary is also marred by lax
absence policies for senior judges; they are entitled to five days of leave every month in addition to mandatory holidays.
Moreover, a lack of co-ordination among government entities such as the Colombian Tax and Customs Organization
(DIAN), public prosecutors, attorney general and the national police, coupled with resource constraints, complicates the
timely resolution of cases.
The country is ranked 111th out of 137 in the ‘Global Competitiveness Report 2017-18’ in terms of the parameter
regarding judicial independence, while Colombia was ranked at 96th out of 137 countries for irregular payments and
bribes. The efficiency of the country’s legal framework in settling disputes is ranked 122nd out of 137 nations.
Future prospects
Reforms to eliminate presidential re-elections and corruptions
In June 2015, the Colombian Congress passed a bill that will eliminate presidential re-elections starting in 2018. The
“Balance of Political Powers Reform” bill was passed after its eighth and final debate before the Chamber of
Representatives. The new reform (along with other reforms) will help the country give more strength to the democratic
setup of Colombia. Furthermore, the incumbent president also has a mandate regarding the strengthening of democracy
by limiting the terms of public elected officials. President Duque also has mandates to curb corruption through legal
reforms and strengthening institutions.
Future risks
Non-compiling and emerging guerrilla groups
Though the majority of the FARC guerillas have accepted the peace accord and have restructured themselves into the
FARC political party, there has been an emergence of FARC Dissidents who have not heeded to the peace treaty.
Furthermore, although small in number, guerilla groups such as the National Liberation Army [Ejército de Liberación
Nacional[ELN]), Popular Liberation Army (Ejército Popular de Liberación [EPL]), and Indigenous Revolutionary Armed
Forces of the Pacific (Fuerzas Armadas Revolucionarias Indígenas del Pacífico [FARIP]) are still active in Colombia.
These guerrilla groups may have implications for the painstakingly achieved peace deals; especially as President Duque
is a right-wing politician who has advocated combating guerillas through the modernization of the Colombian armed
forces.
Implementation of anti-drug policies such as aerial fumigation and arising rehabilitation
The US is putting pressure on Colombia to reduce its cocoa cultivation, as it often becomes a source for cocaine
production and a channel for drug trafficking. Former president Santos implemented manual eradication, which was often
criticized as ineffective. The US wants the country to use aerial fumigation with glyphosate as it is deemed an effective
remedy; however, the procedure was stopped in Colombia as early as in 2015 due to the large scale health impacts of
PESTLE Analysis
the organophosphorus compound for humans and animals. The effective curbing of drug sources through the
implementation of proper anti-drug policies, without costs to human and environmental health, is narrow beam for
president Duque to balance upon. Furthermore, the rehabilitation of those who will be displaced from cocoa cultivation,
voluntarily or due to the possible adoption of aerial fumigation policies, will also become a major factor for the Duque
administration to handle.

PESTLE Analysis
Economic analysis
Overview
In 2017, the economy grew at a moderate rate of 1.79% due to the decline in consumer spending, comparatively low
growth in the mining and energy sector, and due to the uncertainties regarding policy regime changes with the scheduled
general elections in early 2018. However, the growth rate has previously been among the highest in the Latin American
region. Between 2011 and 2016, the economy grew by an average annual rate of 4.17%, according to MarketLine. The
major reason for this economic success was the efficient natural resources mining sector, which received impetus from
both exports and investments due to the rise in commodity production and prices in 2011. In 2016, the commodity boom
ended, and Colombia’s terms of trade fell sharply. The economy has adjusted well to the fall in the global commodity
prices and growth was well above the regional average. According to the World Bank, domestic credit to the private
sector increased from 44.71% of GDP in 2011 to 47.51% in 2016.
The biggest challenges to economic growth come from fluctuating commodity prices, and poor transport infrastructure,
which is preventing companies from exploiting economies of scale and scope. According to the ‘2018 Logistics
Performance Index’ from the World Bank, Colombia scored 2.94 out of 5, compared to Peru (2.69), Argentina (2.89),
Brazil (2.99), Mexico (3.05) and Chile (3.32). Lower scores reflect the low quality of the country’s transport related
infrastructure. Colombia ranked 58th out of 160 nations considered in the ‘Logistics Performance Index’. According to the
assessment of the quality infrastructure, Colombia ranked 72nd out of 160 nations with a score of 2.67 out of 5. This
score reflects the low quality of infrastructure, including port infrastructure. Fluctuating commodity prices pose a major
risk to the economy, especially as the country depended on commodities such as coffee, gold, oil and coal for 57.2% of
its total export revenues in 2016. The country’s extraction industries also attract more than half of the country’s FDI
inflows. A decrease could hurt the country’s balance of payments position and increase its external financing needs.
Table 4: Analysis of the Colombian Economy

■ Efficient exploitation of abundant natural resources ■ Subpar infrastructure
■ Strong macro-economic policy framework ■ Low tax revenues

■ Expanding banking and private sector ■ Wide current account deficit
■ Growing agricultural production area and output ■ Widening share of non-performing assets and its impact on the
profitability of banks
Current strengths
Efficient exploitation of abundant natural resources
Colombia is extremely rich in mineral and energy resources. Colombia had 4.9 billion tons of coal reserves in 2015,
enough for around 60 years at current production rates, even if no new discoveries are made. These deposits are

PESTLE Analysis
concentrated in the Guajira peninsula bordering the Caribbean Sea and in the Andean foothills. The country’s proven
crude oil resources stood at 1.7 billion barrels in 2017, according to the ‘OPEC Annual Statistical Bulletin 2018’.
Furthermore, the country had proven natural gas reserves of 104 billion standard cubic meters as of 2017, mainly in the
Llanos basin. It is also a leading producer of emeralds and has significant deposits of nickel, gold, iron ore, silver and
platinum.
The efficient exploitation of natural resources has contributed greatly to the Colombian economy. The liberalization of the
hydrocarbon and mining sectors has played a huge part in enhancing this efficiency. Annual petroleum production has
increased substantially from 603.67 thousand barrels per day (KBPD) in 2008 to 878.52 KBPD in 2017. The country’s
annual petroleum consumption stood at 317 KBPD in 2015.
Figure 2: Petroleum Production and Consumption in Colombia (1,000 Barrels per Day),
1980–2017
1200.0
1000.0
Quantity (1000 barrels per day)
800.0
600.0
400.0
200.0
0.0
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Total consumption Total production
Note: Latest reliable data available on consumption is from 2015
Source: U.S. Energy Information Administration MARKETLINE
Primary coal production has more than doubled since 2000 to 90.5 million tons in 2016, from 38.1 million tonnes in 2000.
The country’s primary coal consumption was a meager 10.3 million tons in 2016. A similar trend has been seen in natural
gas production.

PESTLE Analysis
Figure 3: Primary Coal Production and Consumption in Colombia (Million Tons), 1980–2016
100.0
90.0
80.0
70.0
Quantity (million tons)
60.0
50.0
40.0
30.0
20.0
10.0
0.0
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Total production Total consumption
Source: U.S. Energy Information Administration MARKETLINE
Colombia’s annual natural gas production declined from 12.8 billion standard cubic meters in 2013 to 10.3 billion
standard cubic meters in 2017, while consumption dropped from 10.7 billion standard cubic meters to10.4 billion
standard cubic meters during the same period. Prior to 2007, the country’s natural gas production was more or less in
line with consumption, rendering the country self-sufficient; however, the country emerged as a net exporter from 2007 to
2015. In 2016 and 2017, the country was a net importer of natural gas.

PESTLE Analysis
Figure 4: Natural Gas Production and Consumption in Colombia (Billion Standard Cubic
Meters), 2013–2017
13.0
12.5
Billion standard cubic metres
12.0
11.5
11.0
10.5
10.0
2013
2014
2015
2016
2017
Natural gas production (billion standard cubic meters)
Natural gas consumption (billion standard cubic meters)
Source: OPEC MARKETLINE
Strong macro-economic policy framework
The country has enacted sound macroeconomic policy reforms which included the targeting of inflation, a flexible
exchange rate system, fiscal stability and prudent financial regulations. These policies have promoted growth and
reduced volatility. The growth has aided social improvements, as is evident in regard to the reduction in poverty. GDP
per capita growth has also been improving. Since 2013, higher investment has aided infrastructure investments by
subnational governments. There has been strong residential investment assisted by the expansion of a public housing
program called the “Plan to promote and productivity and employment” (PIPE). In 2015, the government launched PIPE
2.0 to create additional 322,900 jobs. According to the Banco de la República, Colombia, the country’s central bank, the
external debt balance guaranteed by the government has been consistently declining over the last two decades, showing
that investors’ confidence in Colombia is growing, even without government guarantees. The comprehensive tax reform
undertaken in December 2016 helped the economy to adjust to the decline in global commodity prices by reducing the
country’s dependence on oil reserves.

PESTLE Analysis
Figure 5: External Debt Balance Guaranteed by the Central Government ($ Billion), 1990–
2017
9.0
8.0
7.0
6.0
5.0
$ billion
4.0
3.0
2.0
1.0
0.0
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014 *
2015 *
2016 *
2017 *
* Indicates estimated values for respective years.
Source: Banco de la República, Colombia MARKETLINE
The country’s gross capital formation is also consistently increasing at a nominal rate. Gross capital formation increased
to COP219.81 trillion ($71.97 billion) in 2016, from COP148 trillion ($80.08 billion) in 2011, according to the MarketLine.
Colombia has witnessed considerable capital formation growth during this period, at constant prices as well, with an
increase from 118.47 to 142, with a base index value of 100 for 2010.

PESTLE Analysis
Figure 6: Gross Capital Formation in Colombia (COP Trillion/Constant Prices), 2011–2016
250.0 160.0
140.0
200.0
120.0
Index (base year = 2010)

100.0
150.0
COP trillion
80.0
100.0
60.0
40.0
50.0
20.0
0.0 0.0
2011 2012 2013 2014 2015 2016
Gross capital formation
Gross capital formation at constant prices (Index base year = 2010)
Source: Country Statistics. MarketLine MARKETLINE
Current challenges
Subpar infrastructure
Colombia suffers from inadequate transport infrastructure, with poor roads and railways affecting its competitiveness in
terms of trade and tourism, according to the ‘2017 Economic Survey on Colombia’, published by the OECD. The quality
and size of Colombia’s road network is poor, resulting in high freight costs. Its road length as a proportion of land area is
just 10% of the OECD average and paved roads (quality roads) account for only 10% of the total road length. Despite
this, road transport represents around 80% of total freight within the country, due to the relatively undeveloped nature of
railway and river transport, which account for 15% and 4% of domestic transport, respectively. This excessive
dependence on road transport leads to traffic congestion and is one of the reasons why Colombia ranks among the
countries with the highest number of road accident deaths. Although the government has begun to upgrade key road
routes from Bogota to the west and north, there have been delays in the construction process.

PESTLE Analysis
Figure 7: Infrastructure Quality in Comparison to the OECD, 2015
6.0
Index scale from 1 (lowest quality) to 7 (highest quality)
5.0
4.0
3.0
2.0
1.0
0.0
Railroad Road Ports Air transport
OECD average Colombia
Source: OECD MARKETLINE
Transport infrastructure bottlenecks are also affecting oil output. Due to the economic non-feasibility of constructing oil
pipelines in small fields in the Llanos basin, and the need for special pipelines in the remote eastern Llanos Basin, oil is
transported in trucks. It is argued that the daily oil production in the Llanos basin is truncated by 30,000 barrels, mainly
due to a lack of infrastructure to move it. A similar situation has been reported from export terminals in Covenas and
Tumaco. The economy’s electricity capacity is also low. Security problems have meant that oil pipelines and
transmission lines have remained frequent targets of guerilla attacks. According to the ‘2018 Logistics Performance
Index’ from the World Bank, Colombia scored 2.94 out of 5, compared to Brazil (2.99), Mexico (3.05) and Chile (3.32).
This low score reflects the low quality of the country’s transport related infrastructure. Out of the 160 countries
considered in the ‘2018 Logistics Performance Index’, Colombia ranked 58th, while Brazil, Mexico and Chile ranked 56th,
51st and 34th, respectively.
The ‘Logistics Performance Index’ is constructed as a weighted average of the scores each country receives based on
six key dimensions, including the efficiency of border clearance, quality of transport related infrastructure, shipment
competitiveness, competiveness in logistics services, track and trace efficiency, and timeliness related to shipments. As
far as infrastructure is concerned, Colombia also lag behinds its major regional competitors.

PESTLE Analysis
Figure 8: Quality of Transport Infrastructure in Colombia, Logistics Performance Index,

2018
3.5 Colombia, 2.7

3.0
2.5
2.0
1.5
Chile, 3.2
1.0
Argentina, 2.8
0.5
0.0
Brazil, 2.9 Mexico, 2.9
Note: Index score ranges from 1 (extremely underdeveloped) to 5 (well developed and efficient by international standards)
Source: The World Bank MARKETLINE
Poor infrastructure affects the country’s competitiveness in terms of trade and tourism and restricts access to markets by
hampering companies’ abilities to exploit economies of scale and scope. It also acts as a significant deterrent to foreign
investment. Corruption, which interferes with the allocation of funds and the timely completion of projects, and a lack of
understanding regarding the feasibility of infrastructure projects are some of the biggest hurdles to infrastructure
development. The government needs to bolster its infrastructure to achieve strong economic progress.
As an initiative to overcome these infrastructure paucities, the government has initiated the 4th Generation Infrastructure
Program (4G), with capital expenditures of $15 billion. By the end of 2016, 32 projects, through public-private partnership
program (PPP) schemes, were approved, among which, 21 projects had approved finances. 20 of the 32 projects are
public initiatives, while the other 12 are private projects.
Low tax revenues
The Colombian government needs to invest heavily in public infrastructure to aid economic development. The
infrastructural investment needed to reduce the bottlenecks in transport and energy is inadequate. The government also
needs revenues to tackle its social policies and welfare programs. Raising the levels of revenue is therefore crucial to
meet the country’s growing demands. According to the World Bank, Colombian tax revenue as a percentage of GDP was
just 15.1% in 2016, one of the lowest when compared to other OECD countries. This is the result of factors such as tax
evasion, high and unnecessary exemptions, and inefficient tax administration. However, in December 2016, Congress

PESTLE Analysis
enacted a structural tax reform to the Colombian tax regime which aims to redistribute the tax burden between
businesses and individuals and strengthen public finances. The incumbent president, Duque, has mandated further tax
reforms and aims to present new tax laws to congress for approval by the end of 2018. Colombian Finance Minister,
Alberto Carrasquilla, during his first meeting with the business community in August 2018, indicated that the government
is aiming to bring more personals to the country’s tax brackets, from the present 2.6 million to 4.5 million people in the
near future. The tax bracket changing initiatives, which are not in line with Duque’s pre-election standing, have been
welcomed by the business community, but protested by the public.
Figure 9: Tax Revenue as a Percentage of GDP, 2016
40.0
35.0
30.0
Percentage (%)
25.0
20.0
15.0
10.0
5.0
0.0
Peru
EU28
Argentina
Brazil
Colombia
OECD average
Denmark
Chile
The US
World average
Israel
Italy
Nicaragua
Australia
The UK
Future prospects
Expanding banking and private sector
Over the last decade, several new banks have entered the market, while some of the existing financial service providers
have opted to form banks, alongside several foreign banks entering the market. According to the World Bank, in 2008,
the country had 13.61 commercial bank branches per 100,000 adults, which increased to 15.51 branches per 100,000
adults in 2017. By comparison, the world average was 12.6 in 2016. The number of depositors with commercial banks
has also witnessed a considerable increase since 2011. The number of depositors with commercial banks per 1,000
adults increased to 1501.73 in 2017, from 1070.37 in 2011. Similarly, the number of borrowers has also shown significant
growth over the last 10 years. Borrowers from commercial banks per 1,000 adults increased from 154.9 in 2008 to 242.3
in 2017.

PESTLE Analysis
Figure 10: Expanding Banking Business (Commercial Banks/Borrowers), 2008–2017
300.0 16.5
Number of borrowers from commercial banks

Number of commercial bank branches
16.0
250.0
15.5
200.0 15.0
14.5
150.0
14.0
100.0 13.5
13.0
50.0
12.5
0.0 12.0
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Borrowers from commercial banks (per 1,000 adults)
Commercial bank branches (per 100,000 adults)

PESTLE Analysis
Figure 11: Depositors with the Commercial Banks (Number of Depositors), 2008–2017
1,600.0
Number of depositors with commercial banks
1,400.0
1,200.0
1,000.0
800.0
600.0
400.0
200.0
0.0
2009 2010 2011 2012 2013 2014 2015 2016 2017
Depositors with commercial banks (per 1,000 adults) (Colombia)
Depositors with commercial banks (per 1,000 adults) (World)
Note: Reliable world numbers are available till 2016
The role of private sector in Colombia is expanding gradually, and a vibrant private sector is often considered a healthy
sign of economic growth. According to the World Bank, domestic credit to the private sector increased from 37.64% of
GDP in 2007 to 47.51% in 2016. A high measure of domestic credit to the private sector indicates the large financial
resources of the private sector. The growth and development of the economy is often considered positively correlated
with how big a role the private sector plays in the economy.

PESTLE Analysis
Figure 12: Growing Domestic Credit (% of GDP), 2007–2016
60.0
50.0
Percentage (%) of GDP
40.0
30.0
20.0
10.0
0.0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Growing agricultural production area and output
According to the World Bank, the country is witnessing the expansion of its agricultural industry. Its agricultural land area
as a percentage of the total land area increased from 38.01% in 2006 to 40.25% in 2015. Total agricultural land
increased from 421,740 square kilometers to 446,656 square kilometers during the same period.

PESTLE Analysis
Figure 13: Agricultural Land Area (1,000 Square Kilometers/% of Land Area), 2006–2015
460.0 41.0
40.5
450.0
Percebtage (%) of land area

40.0
Area (1000 sq. km)
39.5
440.0
39.0
430.0 38.5
38.0
420.0
37.5
37.0
410.0
36.5
400.0 36.0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Agricultural land (1000 sq. km) Agricultural land (% of land area)
The agriculture value added per worker (constant 2010 $) has been increasing over the past few years. The agriculture
value added per worker in Colombia increased from $5,257.1 in 2008 to $6,015.1 in 2017, according to the World Bank.
Growing production is also reflected in the crop production index, which is following similar trends.

PESTLE Analysis
Figure 14: Increasing Agricultural Output (Value Added per Worker), 2008–2017
6,200.0
Agriculture value added per worker (constant
6,000.0
5,800.0
5,600.0
2010 US$)
5,400.0
5,200.0
5,000.0
4,800.0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Future risks
Wide current account deficit
Fluctuating commodity prices can pose a risk to Colombian exports. Commodities such as coffee, oil and coal, and gold,
accounted for 57.2% of total export revenues in 2016, according to data from the World Bank. Instability in neighboring
Venezuela, which is also a major trade partner, has added to the country’s woes.
Sectors such as oil and mining, which attract the bulk of the country’s FDI, are also witnessing declining momentum in
FDI inflow, resulting in a deterioration of the country’s balance payments position, and increasing the country’s external
financing needs. In 2017, FDI inflows to Colombia were $14.52 billion, while the same was $16.17 billion in 2014,
according to the ‘World Investment Report 2018’, published by UNCTAD.
According to the IMF, the Colombian current account deficit narrowed from $12.13 billion (4.3% of GDP) in 2016 to
$10.36 billion (3.4% of GDP) in 2017, however, it is still considered comparatively high. Even though the present Duque
government is expected to continue deficit reduction measures, the same would be challenging due to the demand for
increased public expenditure on infrastructure and social measures, along with unemployment benefits and election
mandated corporate tax cuts.

PESTLE Analysis
Figure 15: Current Account Balance ($ Billion/% of GDP), 2008–2017
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
0.0 0.0
-2.0
-1.0
-4.0
Percentage (%) of GDP

-6.0 -2.0
-8.0
-3.0
$ billion
-10.0
-4.0
-12.0
-14.0 -5.0
-16.0
-6.0
-18.0
-20.0 -7.0
Current account balance ($ billions) Current account balance, percentage (%) of GDP
Source: IMF MARKETLINE
Widening share of non-performing assets and its impact on the profitability of banks
Along with an increase in loans and credits from the country’s commercial banks, the number of defaulters is also
increasing. Banks’ share of nonperforming loans to total loans has reached 4.2% in 2017, from 3.1% in 2016, in contrast
to a declining trend across the world. During the same period, the world average in terms of bank nonperforming loans to
total gross loans declined from 3.9% to 3.7%, according to the World Bank. This scenario forces commercial banks to
keep their capital assets ratios (CAR) quite high. In fact, Colombia has one of the biggest CARs in the world. In 2017,
Colombia’s CAR stood at 16.1%, while the world and OECD members’ average were recorded at 10.7% and 7.5%,
respectively. The health and vibrancy of the economy could be impacted if the non-performing assets mount up,
alongside the increase in private sector activities.

PESTLE Analysis
Figure 16: Bank Nonperforming Loans to Total Gross Loans (%), 2008–2017
4.5
Nonperforming loans to total gross loans (%)
4.0
3.5
3.0
2.5
2.0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Colombia OECD average World average
Note: Reliable world average data is available from 2010

PESTLE Analysis
Figure 17: Bank Capital to Assets Ratio (%), 2018–2017
18.0
16.0
Bank capital to assets ratio (%)
14.0
12.0
10.0
8.0
6.0
4.0
2.0
0.0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Colombia OECD members World
Note: Reliable world average data is available from 2010

PESTLE Analysis
Social analysis
Overview
With a median age of 30 years as of 2017 (according to CIA – The World Factbook), Colombia has a demographic
advantage in terms of the number of people of working age. Colombia also has a robust social welfare system with
health and pensions systems in place since 1993. Despite the presence of these systems, inefficiencies and corruption
have affected pension coverage (only 40% of persons aged 60 and above receive a pension) and the quality of
healthcare. The government wants to increase the efficiency of the pension system and improve the quality of healthcare
services through various reforms.
Colombia’s major social issues are high-income inequality, which is reflected by a Gini index score of 50.8 in 2016, and
continued violations of human rights, major victims of which are civilians and not violent rebels. Informality in the labor
market exacerbates the problems related to income inequality, which is perceived to be a consequence of high minimum
wages and high non-wage labor costs.
Table 5: Analysis of Colombia’s Social System

■ Social welfare system in place ■ High poverty ratios and the wellbeing of the old age population
■ Large informal sector and labor market rigidities

■ Strong public sector governance ■ Income inequality
■ Improving healthcare system
Current strengths
Social welfare system in place
The Colombian government has put in place a robust social welfare system. All workers are required to be affiliated with
either the Social Security Institute (Instituto de Seguros Sociales [ISS]) or a private health or pension provider. Low-
income individuals, who are not able to pay the necessary contributions, must enroll in a subsidized plan, in which the
all general illnesses, treatment in a quality facility, pharmacy services and ambulance services. The social welfare
system also provides for short-term disability, long-term disability and survivors' benefits. The individual only has to make
some co-payments and remit moderate dues to the social welfare system.
The ISS provides medical care, pensions and other benefits to Colombian workers who enroll. The 1993 reform allowed
Colombians to opt out of the ISS pension system and open individual savings accounts administered by private pension
funds, which eventually pay benefits to the members. The 1993 reform also provided for the creation and implementation

PESTLE Analysis
of a new system of health insurance providers known as Entities Promoting Healthcare (Entidad Promotora de Salud
[EPS]), some of which are public and some state-owned. The EPS collects insurance contributions from the worker, and
then enters into a service contract with healthcare providers on behalf of the worker. For people unable to pay the
monthly contributions, the government has created a subsidized regime under Entidades Promotoras de Salud
Subsidiadas (EPS-S), which enters into a contract with the healthcare providers, similar to the EPS program.
Current challenges
High poverty ratios and the wellbeing of the old age population
The Colombian poverty ratio is one of the highest in the South American region and across the globe. After a period of
systematic poverty reduction from 2008 till 2015, 2016 witnessed the reverse. In 2008, the poverty headcount ratio at
national poverty lines stood at 42% of the population, and the same declined to 27.7% of the population by 2015.
However, the ratio increased to 28% by 2016, according to the World Bank.
The Colombian government has been providing old age support from the Colombia Mayor program since 2004. People
above 54 (for women) and 59 (for men) years of age and belonging to the lowest socio-economic groups are eligible to
receive an unconditional monthly contribution. The benefit available is modest and is criticized as insufficient for the poor
families to keep themselves out of poverty. The number of recipients under the Colombia Mayor program was extended
to two million persons as of 2017. In recent years, the government has focused on more inclusive growth, and policies
targeted at the most vulnerable have helped to reduce absolute poverty, although relative poverty rates are still much
higher than Colombia’s Latin American peers.
High levels of income inequality in the old age population are another major concern. According to the OECD, the
relative poverty rates among the elderly population are the highest among all the age groups. This clearly highlights the
low reach of the pension program, especially in the case of women and the elderly population, as only the formal section
of society that actively contributes to the pension system is workers. The reformation of the pension system and old age
support is essential in order to counter social problems such as income inequality and the wellbeing of the country’s old
age population.

PESTLE Analysis
Figure 18: Poverty Headcount Ratio at National Poverty Lines (% of Population), 2016
45.0
Poverty headcount ratio (% of population)
40.0
35.0
30.0
25.0
20.0
15.0
10.0
5.0
0.0
Argentina
Bangladesh
Paraguay
Bolivia
Peru
Colombia
Ecuador*
Russia
Georgia
Panama
Indonesia*
Belarus
China*
Costa Rica*
Nicaragua
Bulgaria
Note: For counties marked with *, the data is provided for 2017

PESTLE Analysis
Figure 19: Relative Income Poverty by Age Group (%), 2013–2014
40.0
35.0
Relative income poverty (%)
30.0
25.0
20.0
15.0
10.0
5.0
0.0
0-17 18-25 26-40 41-50 51-65 66-75 75+ All
Colombia Chile OECD average
Large informal sector and labor market rigidities
The high-level of informality in the labor sector in Colombia has made it an important topic for discussion. According to
the National Administrative Department of Statistics (DANE), at least 48.4% of the population living in 23 cities and
metropolitan areas were employed in the informal sector during 2017.

PESTLE Analysis
Figure 20: Informal and Formal Employment in Colombia (Million Persons/%), 2008–2018
7.0 54.0
53.0
6.0
Percentage (%) of informal employment

52.0
Employed persons (millions)
5.0
51.0
4.0 50.0
3.0 49.0
48.0
2.0
47.0
1.0
46.0
0.0 45.0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Formal employment Informal employment Percentage of informal employment to total
Note: 2018 average is calculated based on available data from January - June 2018.
Source: National Administrative Department of Statistics - Colombia MARKETLINE
This sector includes a variety of activities ranging from unpaid labor to a number of salaried jobs which are not regulated.
The statistical office defines the informal sector as firms with fewer than five workers, unpaid family members, and
housekeepers. These workers in the informal sectors generally earn much lower wages than their counterparts in the
formal sector and are subjected to poor working conditions and a lack of social security, which renders them vulnerable
to poverty if they lose their jobs or retire. According to the OECD, more than two-thirds of the workers in the informal
sector earn below the minimum wage. This dualism in the labor market also fuels income inequality. The high number of
workers in the informal sector is a consequence of the high minimum wage and high non-wage labor costs. In Colombia,
the trade unions, firms and the government negotiate the minimum wage annually, which is mandatorily increased by at
least the inflation rate. Over the years, productivity growth has not been able to match the growth in minimum wage,
which has forced employers to reduce their formal workforce. The major brunt of this is borne by the population with low-
productivity, which constitutes less qualified and young workers. This effect is compounded by high non-wage labor
costs, which include health and pension contributions, payroll taxes and transport subsidies. As a result, the policies
designed for the protection of workers actually worsen their plight by encouraging informality. The government needs to
make continued efforts to reduce the high non-wage labor costs to reduce informality in the labor market.

PESTLE Analysis
Future prospects
Strong public sector governance
The Colombian government has improved its public policy framework, which has enhanced its policies which aim to
strengthen the economy. It has undertaken a good-governance model by adopting performance assessment systems
matching OECD standards. It has made progress by modifying the budget process and also made improvements to
reforming the country’s public institutions by reducing red tape. The National Council for Economic and Social Policy has
approved policy document (CONPES 3816 of 2014) with an emphasis on the importance of impact assessment and
other tools, while forming the other necessary institutions. The adoption of this policy helps the country to achieve better
assessments and the improved governance of public expenditure. The protection of workers against unemployment has
also improved as the “Mecanismo de protección al cesante” program was developed to provide social protection to
unemployed workers, along with a provision to reintroduce them to the labor market
Figure 21: Protection of Permanent Workers Against Individual and Collective Dismissals,
2014
3.0
Higher value represents restrictiveness
2.5
2.0
1.5
1.0
0.5
0.0
El Salvador
Guatemala
Bahamas
Jamaica
Panama
Brazil
Peru
Colombia
Honduras
Argentina
Bolivia
Costa Rica
Nicaragua
Ecuador
Uruguay
The UK
Barbados
Paraguay
Individual dismissal Collective dismissals
Improving healthcare system
The government is spending significant amounts on the country’s healthcare system. According to the MarketLine, the
healthcare expenditure per capita in Colombia increased from $214.35 in 2007 to $437.28 in 2016. Public healthcare
expenditure, which constituted 74.95% of total healthcare expenditure in 2016, increased from 4.54% of GDP in 2007 to
7.53% in 2016. The infant mortality rate (per 1,000 live births) decreased from 18.4 in 2007 to 13.6 in 2017, according to
MarketLine.

PESTLE Analysis
Figure 22: Healthcare Expenditure in Colombia ($/% of GDP), 2007–2016
500.0 8.0
Per capita public healthcare expenditure ($)
450.0
7.0
Public healthcare expenditure (%)

400.0
6.0
350.0
5.0
300.0
250.0 4.0
200.0
3.0
150.0
2.0
100.0
1.0
50.0
0.0 0.0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Per capita public healthcare expenditure Public healthcare expenditure (% of GDP)
Future risks
Income inequality
Colombia is one of the most inequitable countries in Latin America. According to the World Bank, the income share of the
top 10% of the income group was 40%, while the lowest 10% earned just 1.3% in 2016. The top 20% income group and
lowest 20% income group have 55.7% and 3.9% shares, respectively, for the same year. In comparison, its neighbors
Mexico, Argentina and Peru are more equal. In the past, the country has witnessed mass protests against rising
inequality. Although various governments have formulated policies in an attempt to reduce inequity, these moves have
not had the desired effect. The government needs to introduce poverty reduction programs and strengthen equitable
labor policies to reduce income inequality.

PESTLE Analysis
Figure 23: Distribution of Income by Population Quintile in Colombia (%), 2016
Income share held

Income share held
by lowest 20%,
by second 20%,
3.9%
8.0%
Income share held

by third 20%, 12.6%
Income share held

by highest 20%,
Income share held 55.6%
by fourth 20%,
19.9%

PESTLE Analysis
Figure 24: Income Inequality in Select Nations from South America (%), 2016
Colombia
Paraguay
Costa Rica
Mexico
Peru
Bolivia
Argentina
El Salvador
0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 40.0 45.0
Income share held by highest 10% Income share held by lowest 10%

PESTLE Analysis
Technological analysis
Overview
Colombia’s progress in terms of technological development has been limited and the country has been unsuccessful in
utilizing its FDI inflows to develop its technological capabilities. The country also lags behind in terms of technical
manpower and has an inadequate science and technology infrastructure. It spent only 0.24% of GDP on R&D during
2015, much lower than the OECD’s benchmark of at least 1% to achieve sustainable technological development. IPR
enforcement in Colombia has been weak and the US Trade Representative’s ‘Special 301 Report 2018’ retained
Colombia on its Piracy Watch List. Despite these deficiencies, the ICT sector has emerged as a bright spot in terms of
the country’s technological landscape and its growth is expected to continue in the near term.
Table 6: Analysis of Colombia’s Technological Landscape

■ Science and technology policy in place ■ Low R&D intensity
■ Inadequate technological development
■ Growth in the ICT sector ■ Low R&D contribution of business enterprises
Current strengths
Science and technology policy in place
The Colombian National Department of Planning (PND), in collaboration with the innovation agency ‘Colciencias’, has
put in place a national science and technology policy, which incorporates scientific and technological research into the
National Development Plan (Plan National de Desarrollo), while creating the necessary conditions to stimulate innovation
and technological management in national companies. PND also incorporates plans to modify the laws covering free
trade zones in order to support enterprises focused on innovation. It also promotes the National System of Scientific and
Technological Information (NSSTI). The National Council for Social and Economic Policy provides funds for R&D as well
as exemptions, tax discounts, and other financial stimuli. These measures could help improve the country’s poor R&D
environment.
Current challenges
Low R&D intensity
Colombia lags behind its peers in terms of R&D expenditure. According to the World Bank, Colombian total expenditure
on R&D in 2015 was 0.24% of GDP. R&D expenditure as percentage of GDP was lower than neighboring Latin American
countries, such as Mexico (0.55%), Argentina (0.63%), Chile (0.38%) and Uruguay (0.34%).
According to OECD recommendations, a nation must spend at least 1% of its GDP on science and technology to achieve
sustainable development. By these standards, Colombia has a long way to go, and despite the post-2000 economic

PESTLE Analysis
revival, the country has failed to improve its technical capabilities.
Figure 25: R&D Intensity (%) in Selected Latin American Countries, 2015
0.60 Argentina,
0.59
0.50
0.40
0.30
0.20
Uruguay, Chile, 0.38
0.34 0.10
-
Colombia,
0.24
Mexico, 0.55
Inadequate technological development
Colombia has failed to take advantage of FDI inflows to develop its technological capabilities. Innovation from the
manufacturing house is quite low in Colombia compared to its regional competitors. About 70% of the manufacturing
houses are a family business time, with a family CEO, according to the OECD. Its workforce with technological skills is
also comparatively low in terms of availability in Colombia. Only 10% of the labor force works in S&T jobs, which shows
that the country also lags behind in terms of its technical work force. In addition, the country suffers from inadequate
science and technology infrastructure. As the country wants to be a member of the OECD, the nation needs to perform
well in indicators such as patents, publications, inventions and the number of scientists as well. Although the Department
of Science, Technology and Innovation (Colciencias) was given a near-ministry status in 2009, the department lags in
terms of financial aid or the work force required to run an organization at the expected high level.

PESTLE Analysis
Figure 26: Innovation in the Manufacturing Sector as a Percentage of All Manufacturing

Firms, 2015
90.0
Innovation in manufacturing sector as percentage (%) of all
80.0
70.0
60.0
manufacturing firms
50.0
40.0
30.0
20.0
10.0
0.0
Greece
Portugal
Germany
Italy
Ireland
Russia
India
Japan
The UK
Colombia
Chile
Turkey
Denmark
Brazil
Australia
Switzerland
France
Austria
Marketing or organisational innovation only
Product or process & marketing or organisational innovation
Product or process innovation only
Insufficient capacity to innovate is identified as one of the major problematic factors of doing business in the ‘Global
Competitiveness Report 2017-18’. Out of 137 countries, Colombia is placed 89th for its capacity to innovate. The quality
of scientific research institutions parameter was ranked as 64th, while the parameter for companies spending on R&D
ranked 89th.
Future prospects
Growth in the ICT sector
Both the public and private sector have helped to improve telecom and internet access in Colombia. The government has
launched several initiatives such as Computers for Schooling, Vive Digital, ‘Compartel” and the National Fiber Optic
Project to increase the fixed broadband penetration rate, especially among students and rural and low-income
households. The government has an extensive e-government program, which provides citizens and businesses with
services.
The private sector has installed new-generation wireless data-transmission services to provide the population with the
latest technologies in the ICT sector. As a result, there were approximately 58.69 million mobile subscribers and 28.34
million internet users in the country in 2016 compared to 2.3 million and 0.89 million, respectively, in 2000. This growth is
set to continue in the near term. According to the DANE, 62.3% of the population over five years of age used the internet
in 2017. The use of the internet is also very frequent, and the majority of the population uses internet services every day,
or at least once a week.

PESTLE Analysis
Although the country’s telecom market is highly saturated, with a penetration rate in excess of 100%, mobile penetration
is low in rural areas and among low-income households. Therefore, the mobile telecom sector still has the potential to
grow. Furthermore, the emergence of 3G and 4G technology is expected to boost the country’s mobile internet
penetration rate, which is very low compared to other services. The government’s policies will also ensure the robust
growth of fixed-line broadband services. Subsequently, growth in the ICT sector is expected to increase the country’s
export potential in the services sector.
Table 7: Frequency of Internet Use in Colombia (Number of People in Thousands), 2017

At Least
Total People 5 At Least
Total People At Least Once Once a
Years and Over Every Day Once a Year,
5 Years and a Week, But Month, But
Who Used the of the Week But Not
Over Not Every Day Not Every
Internet Every Month
Week
Total 44,932 27,483 19,403 7,338 1,134 99
Male 35,060 23,880 18,017 5,547 705 53
Female 9,872 3,472 1,386 1,791 429 46
Source: National Administrative Department Of Statistics (DANE) MARKETLINE
Future risks
Low R&D contribution of business enterprises
The business sector in Colombia accounts for very little R&D and STI (science technology innovation) expenditure in
comparison with regional peers, such as Mexico and Argentina. This is evident from the low business expenditure as a
percentage of GDP, which amounted to only 0.08% in Colombia, compared to 0.16% in Mexico and 0.12% in Argentina
in 2015. According to the DANE, only 31.92% of micro enterprises used ICT goods in 2016, while only one third of the
total enterprises used desktop or laptop computers. As a result, only a small proportion of manufacturing and services
sector firms introduce new products to the market.
The Colombian government’s incentive programs have not moved away from the traditional approach and public sector
dominance in the field continues. The largest benefactor of the tax deduction is the research arm of Ecopetrol, the state-
owned oil company. Such schemes provide few opportunities for growth in terms of innovative activities in the private
sector. The limited involvement of the business sector is slowing innovation. Low R&D expenditure from the private
sector could take the country back to an era of import substitution and protectionism, where the objective was to promote
national industries.

PESTLE Analysis
Table 8: Holdings of ICT Goods in Micro-establishments According to Economic Activities in

Colombia, 2016
Establishments
Establishments Establishments Establishments using
Number
that use some ICT that use Desktop that use Laptop Smartphones,
of
Sector Goods Computers Computers Tablets or PDA-
Establish-
DMCs
ments
Proportion Proportion Proportion Proportion
Units Units Units Units
(%) (%) (%) (%)
Total 33,013 10,538 31.92 8,050 24.38 2,413 7.31 2,837 8.59
Commerce 20,086 4,864 24.22 3,426 17.06 1,011 5.03 1,465 7.29
Industry 3,260 1,264 38.77 1,042 31.96 229 7.02 344 10.55
Service 9,667 4,410 45.62 3,582 37.05 1,173 12.13 1,028 10.63
Source: National Administrative Department Of Statistics (DANE) MARKETLINE

PESTLE Analysis
Legal analysis
Overview
Colombia’s constitution, enforced in 1991, provided the judiciary with greater administrative and financial powers, and
independence from the executive branch. The country’s investment regulations are among the best in the region and its
policies have encouraged foreign investment despite internal security threats. However, the country’s legal
implementation and enforcement mechanisms remain weak. The lower courts have failed to act independently, and
unless adequate measures are taken, they will remain susceptible to corruption and intimidation. Similarly, the
independence of the constitutional courts has been questioned, as they are found to be interfering in the legislative
process. This inefficiency in the judicial system, along with continued intimidation by paramilitary groups, poses
significant challenges to the successful implementation of the Victims and Land Restitution Law.
Table 9: Analysis of Colombia’s Legal Landscape

■ Well-developed legal system ■ Weak IPR implementation
■ Openness to foreign investment ■ Product market regulations
■ Tax reforms
■ Better business environment ■ Slow progress in the implementation of the Victims Law
■ Reforms to drug laws
Current strengths
Well-developed legal framework
Colombia has a well-developed court structure to address various judicial issues. The judicial system comprises the
Supreme Court of Justice, the council of state, the constitutional court, and the superior judicial council at the top level.
The Supreme Court of Justice has three chambers of civil, criminal, and labor matters; it decides appeals on errors of law
and has the power to override decisions by the lower courts. The council of state is the highest court of administrative
law. It also takes appeals from departmental administrative courts and some national officials. Furthermore, there is the
constitutional court to review the constitutional validity of laws approved by the legislative branch and some decrees
issued by the executive branch. The court system, with its specialized agencies, is well-equipped to establish an efficient
judicial process. The country has performed moderately in terms of improving its legal climate, with favorable business
policies despite the persistence of violence and threats to internal security.
Openness to foreign investment
According to the United Nations Conference on Trade and Investment (UNCTAD)’s ‘2018 World Investment Report’, FDI
inflows stood at $14.52 billion in 2017. The Colombian government has always been a supporter of foreign direct
investment (FDI) and has encouraged FDI over the years. The government began liberalization reforms in the 1990s,
paving the way for lifting controls on the remittance of profits and capital, and allowing foreign investors in most sectors.
Laws regarding foreign investment are formulated by the Ministry of Trade, Industry, and Tourism in association with the
Ministry of Finance and Public Credit. Current regulations on foreign investment are laid down in Law 9 of 1991.

PESTLE Analysis
The country has hastened its efforts to open up the economy since 2002 and the results are apparent in the
telecommunications, accounting, energy, mining and tourism sectors, which were fully opened up by the Santos
administration. Sectors such as banking and insurance allow 100% foreign ownership of assets. As a result, there has
been a surge of FDI into the country in recent times.
Tax reforms
The government is constantly engaged in tax reforms to improve the country’s business environment. As the country
moves towards OECD membership, the nation is reforming its tax structures to align them to OECD standards and
recommendations. Comprehensive tax reforms were conducted in 2012, 2014 and in 2016, and further reforms are
expected under Duque presidency. During the previous reforms, the corporate income tax (CIT) rate was brought closer
to OECD averages, and value added tax rates were standardized. Dividend tax was introduced, along with a carbon tax
and tax on plastic covers. The CREE and its surtax, special corporate taxes in Colombia, were integrated into CIT as well
during the past reforms. Tax regulations were strengthened to reduce the instances of tax evasion and improve efficiency
in terms of tax collection. A reduction in corporate tax, along with the widening of the tax base, is expected from the
beginning of 2019, with the intended tax reforms by the Duque government.
Current challenges
Weak IPR implementation
The US has retained Colombia on its Priority Watch List, with an Out-of-Cycle Review status for 2018, according to the
Special 301 report published by Office of the US Trade Representative. The same status was provided during 2017, as
well a review focused on provisions related to provisions of the United States-Colombia Trade Promotion Agreement
(CTPA) and Colombia’s National Development Plan (NDP). In the 2017 301 report, the US applauded Colombia for the
steps taken to reduce its backlog of pending patent applications and its efforts to train judges and enforcement officials
on IPR issues. However, in both the 2017 and 2018 reports, the US raised concerns over Colombia’s lack of cooperation
in relation to its CTPA obligations. In its previous reports, the US also raised concerns about online piracy, which is
growing continuously, mostly via mobile devices. Business piracy is also an issue for concern, especially in small- and
medium-sized companies. Although Colombia has one of the lowest software piracy rates in Latin America, the piracy of
both business and entertainment software continues to affect revenues. Moreover, due to slow and cumbersome judicial
processes, IPR violators are rarely punished. The government has to do a lot more to interrupt the organized distribution
of illegal goods, especially in the border areas.
Product market regulations
Colombia’s product market regulations are restrictive and are above the OECD average. The barriers to trade are still
high, the lowering of which can aid productivity and growth. A lack of strong competition exists in sectors such as
telecommunications, retail and food. Though it has come a long way in modifying its earlier framework of regulations in
terms of telecommunications and has taken active steps to promote the use of internet in businesses, concentration in
terms of the mobile and fixed- line market segment is among the highest in the world. The presence of strong
competition is necessary to extend the benefits of telecommunications to the entire country. The competition law of 2009
was a step in the right direction, but it needs to be improved to strengthen its functionality. The political independence of
the Superintendence of Industry and Commerce is needed to tighten the existing framework in order to make its
enforcements more transparent.

PESTLE Analysis
Figure 27: Product Market Regulations, 2014
3.0
Index scale, 0 (least restrictive) to 6 (most restrictive)
2.5
2.0
1.5
1.0
0.5
0.0
Mexico
Brazil
Chile
Italy
Portugal
Latvia
Lithuania
Slovenia
Colombia
Turkey
The UK
Greece
Russia
China
The Netherlands
Bulgaria
Malta
Germany

PESTLE Analysis
Future prospects
Better business environment
The Colombian government has pursued a plethora of reforms in recent years to improve the country’s business climate.
For instance, Colombia reduced the number of days it takes to register with the Social Security System in 2010, following
this up by giving more leeway to start-ups for the payment of commercial license fees in 2011, and eliminating the
mandatory purchase and registering of accounting books at the time of incorporation in 2012. All these measures created
a better environment for starting a business. Moreover, the establishment of a mandatory electronic filing and payment
system for some of the major taxes has helped the country to deal with the payment of taxes efficiently. The ‘2018 World
Bank Doing Business Report’, which measures business regulations, ranked Colombia 59th out of 190 countries.
Colombia, along with Australia, set the best performance in the index regulatory frontier for the “minimum capital (% of
income per capita)” parameter under the starting a business segment. It was ranked second in terms of getting credit,
16th in terms of protecting minority investors and 33rd in terms resolving insolvency. The country has one of the best
business climates in Latin America. All these measures are expected to create a better environment in the future for both
domestic and multinational enterprises.
Reforms to drug laws
In the late 20th century, when drug trafficking grew in importance in the country’s economy, Colombia introduced tough
penalties against drug use. However, in 1994, the Constitutional court ruled that criminalization would not be associated
with the use of drugs. There are still obstacles which prevent decriminalization coming into full effect. However, the
government’s stance has changed as the bill which was brought in to legalize cannabis was passed by the Senate in
November 2014. This highlights the efforts that the government is making towards reforms in terms of drug regulations.
Further reforms related to the drug laws can be expected under Duque’s presidency as he intends to curb the excess
cocoa plantations which primarily provide raw materials for cocaine production.
Future risks
Slow progress in the implementation of the Victims Law
In 2011, the Colombian government enacted the Victims and Land Restitution Law, which aims to provide restitution to
the 6.3 million people affected by the country’s armed conflict. The law allows compensation to be paid to the relatives of
those who were killed and aims to give back 5-8 million hectares of land, which was coercively acquired by the
paramilitaries and the guerrillas, to its rightful owners. However, progress has been slow in the implementation of this
program so far. The major reason for the slow progress of the reform is the constant intimidation faced by displaced land
claimants and their leaders from paramilitary groups, which has created an environment of intimidation for those seeking
restitution in rural areas. In 2016, 37 land and environmental defenders were killed. One of the major elements of the
peace treaty signed in 2016 with the FARC guerillas also includes the returning of coercively acquired land and
resources to its owners; its implementation has not seen solid progress. Furthermore, due to the existence of non-
complying guerillas, such as FARC Dissentients, means that the conflict between guerillas and paramilitary forces is
expected to continue. In the midst of judicial inefficiencies, continuing threats from rebel guerrillas and the constant threat
of intimidation from paramilitary groups, means that the implementation of this law seems to be an uphill task.

PESTLE Analysis
Environmental analysis
Overview
Colombia has remained at the forefront of maintaining environmental standards in Latin America. Colombia has been
keen to maintain its commitment to various international environment treaties. Several sectors such as cement, power
plants, agro-industry (panels) and forestry are the frontrunners in clean development mechanism projects. However,
there are risks related to investment, and a lack of funds may be detrimental to many of the proposed reforms and
policies.
Table 10: Analysis of Colombia’s Environmental Landscape

■ Strong regional cooperation ■ Weak implementation of environment laws
■ Evolving environmental legislations on a timely basis
■ Declining natural resources rent ■ Increase in emission and pollution levels
■ Low ranking in terms of the Environmental Performance Index
Current strengths
Strong regional cooperation
Colombia is a part of the Andean Environmental Agenda (AAA) along with Bolivia, Ecuador and Peru. On April 2012, the
Andean Community (CAN) approved the agenda for 2012–2016, focusing on the following areas: biodiversity, climate
change and water resources. The agenda also outlines the common actions and measures to be undertaken by
Colombia, and the other three Latin American countries, to build capacity in these areas. In the field of biodiversity, the
agenda aims strengthen the sharing of information on biodiversity management and the identification of the benefits of
such management. There will also be the development of joint actions regarding the Nagoya Protocol on Access to
Genetic Resources and the Fair and Equitable Sharing of Benefits Arising from their Utilization (ABS). The agenda
reflects the priorities of the government, which considers it an opportunity to open up channels regarding cooperation
and implementation at an international level. The 20th Meeting of the Forum of Ministers of the Environment of Latin
America and the Caribbean, under the flagship of United Nations Environment Programme, recognized the AAA agenda
as aligned to the 2030 Agenda for Sustainable Development.
Evolving environmental legislations on a timely basis
Colombia is good at bringing environment related laws on a timely basis. In 2012, the Low Carbon Development Strategy
2020-2030 was introduced. The country’s Intended Nationally Determined Contributions (INDCs) targets towards the
reduction of greenhouse gas emissions were submitted to United Nations Framework Convention on Climate Change
(UNFCCC) in 2015. A carbon tax was established in 2016, along with a voluntary exchange carbon market. Carbon tax
was extended to liquid fossil fuels and industrial uses of natural gas, and a national policy on climate change was
introduced in 2017.

PESTLE Analysis
Current challenges
Weak implementation of environment laws
Although Colombia has a number of environmental regulations in its statute, implementation has remained weak. In
many cases, the taxes required to be paid under such regulations are not collected, and regular inspections are not
undertaken due to a weak monitoring system. One of the most important problems the country faces in tackling climate
change and strengthening environmental bodies is the local government. The country’s Autonomous Regional
Environmental Authorities (Corporaciones Autonomas Regionales [CARs]) are regional bodies that have the dual
function of implementing environmental policy and licensing companies. It has been reported that in terms of large
commercial ventures, ties between CAR directors and business groups are common, with regulations often being
overlooked. Since the law relies on voluntary compliance, achieving environmental objectives has become a challenge.
Future prospects
Declining natural resources rent
According to the World Bank, the rent for many natural resources has been declining over the past few years. The coal
rent (the difference between the value of coal production at world prices and the cost of production including normal
profits), declined from 1.57% of GDP in 2011 to 0.51% of GDP in 2016. The mineral rent declined from 0.98% of GDP to
0.64% of GDP during the same time period. Similarly, natural gas rent declined from 0.17% of GDP in 2011 to 0.09% of
GDP in 2016. Oil rent declined from 6.43% of the GDP to 2.18% during 2011–2016, while forest rent has fallen from
0.13% of GDP to 0.1% during the same period. The total natural resources rent (a measure combing oil rents, natural
gas rents, coal rents, mineral rents, and forest rents) has declined significantly since 2011.

PESTLE Analysis
Figure 28: Natural Resources Rents (% of GDP), 2007–2016
10.0
9.0
8.0
Natural resources rents (% of GDP)
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0.0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Future risks
Increase in emission and pollution levels
Rising CO2 emissions could affect the country's air quality, which could impact the population’s health. According to
MarketLine, there was an increase in CO2 emissions during 2011–2015, from 71.53 million tons in 2011 to 83.30 million
tons in 2015. Rising CO2 emissions are a risk in the medium term. According to the World Bank, the mean annual
exposure of PM2.5 air pollution increased from 16.7 micrograms per cubic meter in 2010 to 17.12 micrograms per cubic
meter in 2016. The rising pollution levels coincided with the rising urban population. The population in urban
agglomerations (with more than one million people) as a percentage of the total population increased from 40.49% in
2011 to 43.47% in 2017 and the population in the largest city as a percentage of the urban population increased from
25.05% to 26.91% in the same period.

PESTLE Analysis
Figure 29: Growing Urbanization and Pollution Level (Micrograms per Cubic Meter/%),
2010–2017
47.0 18.5
18.0
42.0
Micrograms per cubic meter
17.5
Percentage (%)
37.0
17.0
32.0
16.5
27.0
16.0
22.0 15.5
2010 2011 2012 2013 2014 2015 2016 2017
PM2.5 air pollution, mean annual exposure (micrograms per cubic meter)
Population in the largest city (% of urban population)
Population in urban agglomerations of more than 1 million (% of total population)
Linear (PM2.5 air pollution, mean annual exposure (micrograms per cubic meter))
Note: Reliable PM2.5 air pollution data for Colombia available until 2016
Low ranking in terms of the Environmental Performance Index
In the ‘2018 Environmental Performance Index’ by Yale University, the country ranked 42nd out of 180 countries. For the
SO2 emissions intensity and NOX emissions intensity, the country ranked 69th and 66th respectively, while for CO2
emission intensity, the country was ranked 106th among 180 nations. Colombia ranked 71st out of 180 in terms of the
safety of drinking water, which indicates the lower quality of country’s water resources, while it was ranked 61st in terms
of the sanitation parameter, pointing to the low levels of sanitation facilities. The country’s low environmental standards
are a cause for concern. The country performed the worst in terms of agriculture and ranked 164th in terms of nitrogen
use efficiency with a score of 9.6 out of 100.

Political Landscape
POLITICAL LANDSCAPE
Summary
Colombia emerged as an independent nation in 1830, freeing itself from Spanish rule. For most of the 20th century, the
country was affected by civil war due to the presence of armed groups and drug cartels. A four-year peace process
between the authorities and the main rebel group FARC broke down in February 2002, amid allegations that the rebels
had used the intervening ceasefire to rearm and regroup. It was at this time that presidential candidate Alvaro Uribe
advocated the adoption of a hardline stance against the rebels. This approach formed the backbone of his victorious
campaigns in both the 2002 and 2006 congressional elections. His successor, Juan Manuel Santos, was also elected to
maintain this hardline stance; but later he made a policy shift and agreed to enter into peace negotiations with the
guerillas, which has become the highlight of his presidency. After four years of negotiations with the FARC, a deal was
reached between the government and FARC in August 2016. In November 2016, a modified version of the original peace
agreement was passed by the Colombian Congress. President Santos was awarded the Nobel Peace Prize in 2016 for
his contribution to bringing peace and harmony to the country and the region. In 2017, the former rebel group FARC
transformed into a political party ‘Fuerza Alternativa Revolucionaria del Común (FARC; also known as the Common
Alternative Revolutionary Force. The Common Alternative Revolutionary Force competed during the 2018 congressional
elections and won five out of 172 seats in the house and five out of 108 seats in the senate. Iván Duque Marquez won
the 2018 congressional elections to become the 33rd president of Colombia and assumed office on August 7, 2018.
Evolution
Colombia came under Spanish rule in 1525. Subsequently, Spain established the settlement of Santa Fe de Bogota,
which came to be known as Bogota, the country’s current capital. Bogota also became the capital of the Spanish vice-
royalty of Nueva Granada, which ruled Ecuador and Venezuela. However, after Simon Bolivar defeated the Spanish
forces in 1819, the Republic of Gran Colombia was formed with Ecuador, Panama, and Venezuela. In 1830, Gran
Colombia was dissolved when Venezuela and Ecuador split off and present day Colombia and Panama became a
separate nation known as Nueva Granada. Colombia’s political evolution is depicted in the following figure.

Political Landscape
Figure 30: Colombia – Key Political Events Timeline
Pre-1900 1900-1960 1961-1990 1991-2000 2001 onwards
• Present day Colombia • Civil war broke • New rebel groups • Andres Pastrana • Independent candidate Alvaro
and Panama, known between the such as the Leftist Arango Uribe won a first round
as Nueva Granada, Liberals and National Liberation (Conservative) was presidential election victory in
emerged from the Conservatives Army (ELN), Maoist elected president in 2002, promised to crack down
collapse of Gran during 1899-1903. People’s Liberation 1998 and began hard on rebel groups.
Colombia in 1830, with During the same Army (EPL), peace talks with the
Ecuador and period, Panama Revolutionary Armed guerrillas. • President Uribe won a second
Venezuela. became an Forces of Colombia term in office in 2007.
independent state. (FARC) emerged • Pastrana and FARC
• The Liberal and during 1960-1965. leader Manuel • In 2009, Colombia and US
Conservative parties • Liberal President ‘Sureshot’ signed a deal giving the US
were founded in 1848 Olaya Herrera was • President Julio Marulanda met in military access to seven
and 1849 respectively. elected by coalition Turbay (Liberal) 1999. Colombian bases.
in 1930; social began an intensive
• The Liberal Party’s legislations were fight against drug • In 2000, Pastrana’s • In August 2010, Juan Manuel
rule during 1861-1865 introduced and traffickers in 1978. "Plan Colombia" Santos took over as president.
saw the country divide trade unions were was based on $1 In 2014, Santos was reelected
into nine largely encouraged. • Conservative billion worth of for a second successive term.
autonomous entities President Belisario military aid from the
and the church was • Conservatives Bentancur granted US to fight drug • In November 2016, Colombian
separated from the returned to power guerrillas amnesty trafficking and Congress approved the peace
state. in 1946. and freed political rebels. accord with FARC.
prisoners.
• In 1885, the • There was civil war • The government • In September 2017, FARC re-
Conservative Party’s again during 1948– • Virgilio Barco Vargas and FARC signed launched themselves as a
rule began, which 1957. (Liberal) won the the San Francisco political party and participated in
lasted 45 years. Power presidential elections agreement, the 2018 elections.
recentralization and • The Conservatives in 1986; Cesar committing
church influence was and Liberals Gaviria was elected themselves to • Iván Duque Marquez won the
restored. agreed to form based on his anti- negotiate a 2018 elections and assumed
National Front in drug platform in 1989. ceasefire. the president's office on August
1958 in a bid to 7, 2018
end civil war. • Peace talks failed in
2000.

Political Landscape
Structure and policies
Key political figures
Key political figures in Colombia:
 President: Iván Duque Márquez.
Figure 31: Key Political Figures in Colombia
Iván Duque Márquez is the incumbent president of the Republic of Colombia, having
been voted into office on August 7, 2018. He served as a senator of Colombia from
July 2014 – April 2018. He obtained a degree in law in 2000 from Sergio Arboleda
University. He also holds an LLM in International Economic Law from the American
University and a Masters in Public Policy Management from Georgetown University.
He has served in the capacities of consultant and advisor for Andean Development
Corporation (CAF), Colombian Ministry of Finance and Public Credit, former
Colombian president Álvaro Uribe Vélez and the UN. His presidential candidature was
supported by the Democratic Centre Party during the election in 2018.
Structure of government
Colombia has a democratically elected presidential system with a strong executive. The president, elected to a four-year
term, is the head of the state and the government. However, the recent political reforms do not allow the president to be
re-elected (beginning 2018) and he/she can only serve up to four years in office. There is a bicameral parliament and the
congress consists of 108 senate members (the upper house) and 171 members of Chamber of Representatives (the
lower house). In the Chamber of Representatives, 165 members are elected through congressional elections, five
members nominated from the People’s Alternative Revolutionary Force political party (for the 2018 and 2022 elections
only, as per the 2016 peace pact), and one seat reserved for the runner-up vice presidential candidate in the recent
election. The senate has 102 members elected during congressional election, two members elected in a special
nationwide constituency for indigenous communities, five members nominated from the People’s Alternative
Revolutionary Force political party (for the 2018 and 2022 elections only, as per the 2016 peace accord), and one seat
reserved for the runner-up presidential candidate in the recent election. All the congress members have a tenure of four
years.
Key political parties
Colombia had traditionally maintained a two-party system: the Colombian Liberal Party (Partido Liberal Colombiano
[PLC]) and the Colombian Conservative Party (Partido Conservador Colombiano [PC]). However, with the growing
dissidence within these parties, a number of independent parties have emerged over the years. The current coalition
under Iván Duque Márquez was formed with the help of the Colombian Liberal Party, Democratic Center, Colombian
Conservative Party, Citizen Option, Movimiento Independiente de Renovación Absoluta (MIRA) and Colombia Justa
Libres. The major political parties in Colombia are as follows:

Political Landscape
The Colombian Liberal Party
The Colombian Liberal Party (Partido Liberal Colombiano [PL]) is a social democratic party. During 1958–1974, the party
shared power with the Colombian Conservative Party (Partido Conservador Colombiano [PC]) under the name National
Front (Frente Nacional). Although, in 2002, it was the single largest party in the Colombian Congress, with 54 members
in the lower house and 28 in the upper house, its representation fell heavily in the 2006 congressional elections, leaving
it with 38 members in the lower house and 18 members in the upper house. In the 2014 congressional elections, the
party won 39 seats in the Chamber of Representatives and 17 seats in the Senate. After the 2018 election, the party has
35 seats in the lower house and 14 seats in senate. The party also has 181 mayors out of 1,102 total mayors in 2018.
The Colombian Conservative Party
The Colombian Conservative Party (Partido Conservador Colombiano [PC]), a center-right party, came into existence as
a revolutionary party and fought for independence from Spanish rule. In 1885, the party’s rule began, lasting for 45 years.
The party entered into a partnership with the Colombian Liberal Party (Partido Liberal Colombiano [PL]) to establish the
National Front (Frente Nacional) in 1958 in a bid to end the civil war that had broken out after the assassination of the
left-wing mayor of Bogota, Jorge Eliecer Gaitan Ayala. Both parties shared presidential terms in turn until 1974. The
party supports privatization and free trade. The party supported President Uribe in the 2006 congressional elections, and
thus did not field its own candidate. In the congressional elections held in March 2014, the party won 27 seats in the
Chamber of Representatives and 18 seats in the Senate. In the 2018 congressional elections, the party won 21 seats in
the lower house and 15 seats in the senate. It has 194 mayors out of 1,102 as of August 2018.
The Social Party of National Unity
The Social Party of National Unity (Partido Social de Unidad Nacional [U Party]) is one of the largest parties in Colombia.
It won 25 seats in the lower house and 14 seats in the senate in the 2018 congressional elections. The former president,
Juan Manuel Santos, officially formed the party in 2005 to unite parliamentary supporters of President Uribe into a single
party. However, due to differences with President Santos over the government’s softening stance towards the FARC and
Venezuela, Uribe has distanced himself from the party, which was originally formed to support him in the 2006
congressional elections. It has four governors out of 32 and 258 mayors out of 1,102, as of August 2018.
Democratic Center (Colombia)
Democratic Center (Centro Democrático [CD]) was founded by former president Uribe in in 2014, as a spilt off from the
Social Party of National Unity. It is considered as a right-wing party, through the party does not have an official stance.
Often considered as a self-styled party, its members include former politicians from the Conservative Party (right-wing),
Social Party of National Unity (the center-left), and Alternative Democratic Pole (left-wing). In the 2014 congressional
elections, the party won 19 lower house seats and 20 senate seats. In 2018, the presidential candidature of Duque was
supported by the party and it won 19 senate seats and 32 lower house seats in the congressional elections. The party
also has 154 mayors as of August 2018.
Radical Change
Radical Change (Cambio Radical [CR]) gained significance after the 2006 elections, where it won 15 seats in the lower
house and 20 in the upper house. The party’s support is needed to fulfill the absolute majority requirement of the present
government. In the elections held in March 2010, the party won 15 seats in the lower house and eight seats in the
senate. The party continued to expand its representation in both the lower house and the upper house by winning 16
seats in the former and nine seats in the latter in the 2014 elections. In the 2018 congressional elections, it won 30 lower
house seats and 16 senate seats. The party also has 12 out of 32 governors as of August 2018.
Political Landscape
Composition of government
Figure 32: Composition of the Chamber of Representatives (Lower House) after the 2018
Congressional Elections
Others, 13
Green
Alliance,
9
Liberal Party (PL),

35
Conservative Party
(PC), 21
Democratic Center
Social National (CD), 32
Unity Party (U
Party), 25
Radical Change
(CR), 30
Key policies
Economic policies
Since the Colombian economy came out of recession in the late 1990s, the country's economic policy has focused on
narrowing its fiscal deficit. The government under President Uribe adopted the Fiscal Responsibility Law in 2003 to make
public finances more transparent. The law requires the government to set a medium-term fiscal plan, which sets a
framework, targeting the primary balance of the non-financial public sector for the next 11 years. The government under
President Santos supplemented the 2003 law by passing the 2011 fiscal rule, which set plans to achieve a structural
deficit of 1% by 2022 and save revenue windfalls from commodity prices over their long-term levels in a newly created
Savings and Stabilization Fund, managed by the Colombian central bank. Through this fund, royalties from energy,
mining and central government savings will be used to boost the economy when the pace of economic expansion falls
significantly. Congress also approved the royalty reform, which aims to redistribute royalties more fairly to non-
commodity producing regions for the purpose of infrastructure development and to foster innovation. These reforms aim
to consolidate the substantial oil-related revenue expected in the coming decades and to boost economic growth. At the
same time, the central bank has used monetary policy to maintain price stability and to encourage private investment by

Political Landscape
improving the business environment.

Other significant government policies include tax reforms, privatization and liberalization. The various tax reforms since
2006 have been aimed at improving the transparency and fairness of the tax regime and widening the tax base.
Liberalization has also progressed under the administrations of President Uribe and President Santos as the government
allows uninhibited foreign ownership in telecommunications, accounting/auditing, energy, mining and tourism, and, to a
lesser extent, in legal services, insurance, distribution services, advertising, and data processing. The government
approved an extensive tax reform in December 2016 to reduce the dependence of the budget on oil revenues to help the
economy adjust to the fluctuations from the oil sector.
The congress approved 2018 budget has witnessed an increase of around 1% from the previous year. However, with the
COP235 trillion ($79.79 billion) budget, the government aims to reduce the fiscal deficit to 3.1% by 2018. The defense
sector has been provided COP31 trillion ($10.5 billion) in the 2018 budget.
Social policies
Colombia’s 1991 constitution decentralized education, health and other public services, turning over these
responsibilities to regional governments. One of the significant steps that the government took involved setting up more
schools and creating opportunities for more students to enroll. The 1993 reform also laid the foundation of a healthcare
and pension system, where private players have a major role to play.
The country has a conditional cash transfer scheme known as Families in Action since 2000, which provides cash
subsidies to poor families which have a child 18 years or younger and live under the poverty line, conditional on school
and health service attendance. The Santos government allocated $948 million to this program in 2013, which is nearly
55% more than the 2012 allocation. In addition to the existing 2.3 million people covered, the government aims to extend
coverage to 300,000 more - a move dubbed ‘More Families in Action’. In order to further support the poorest families, the
government under former President Uribe launched the Forester Families Program in 2003, which offers a legal
alternative income to families located in strategic ecosystems or in conservation areas where illicit crops are grown. The
ongoing land restitution process under the Victims Law has the potential to restore lands to 6.3 million displaced land
claimants and further improve the country’s social landscape. In the 2018 budget, the education sector has been
allocated COP37 trillion ($12.54 billion). COP2.4 trillion ($ 813.19 million) has also been allocated for post-conflict
projects, as a part of the peace deal with the disarmed FARC guerillas.
Foreign policies
Regional alliances and the country’s relations with the US and the EU have dominated Colombia’s foreign policy.
Colombia has been a member of the Andean Community since 1969. In 1980, it joined the Contadora Group and the
Group of Eight (now known as the Rio Group). It chaired the Non-Aligned Movement from 1994 to 1998. Colombia has
strong foreign relations, particularly economic relations, with South and Central American countries as well. In order to
bring regional economies closer, Colombia signed free-trade agreements with Chile, Mexico, and Venezuela. The
country also supported the integration of the stock markets of Colombia, Peru, and Chile, a move that came into effect in
May 2011. The three countries, along with Mexico, also launched the Pacific Alliance in 2012, a new economic grouping
that acts as an alternative to the Mercosur (a trading bloc comprising Uruguay, Paraguay, Brazil, and Argentina).
Colombia also signed an FTA with Costa Rica, South Korea, Panama, and Israel 2013 and is in the process of signing
FTAs with Turkey and Japan. Colombia is an active member of the East Asia-Latin American Cooperation (FEALAC) and
is also seeking APEC membership.
The US-Colombia Trade Promotion Agreement was signed by then US President Bush in November 2006 and came into
force in May 2012. Under “Plan Colombia” and “Peace Colombia”, American military and financial assistance to curb
Political Landscape
drug smuggling will continue. Colombia’s free trade agreement with the EU also came into force in August 2012. The
country also has FTAs with associations such as the European Free Trade Association (EFTA) and Central American
Northern Triangle. The country is also in the process of becoming a member of the OECD.
Maritime disputes with Venezuela and discontent over its political policies are expected to intensify amidst increasing
migration pressures from Venezuela to Colombia and other neighboring nations.
Colombia, along with Peru and Ecuador, is also actively involved in easing the socioeconomic and political crisis in
Venezuela. In August 2018 alone, Colombia has provided temporary stay permits for around 440,000 Venezuelan
migrants living in the country.
Performance
Governance indicators
The World Bank report on levels of governance uses factors such as voice and accountability, political stability and
absence of violence, government effectiveness, regulatory quality, rule of law, and control of corruption as indicators for
over 200 countries and territories over 1996–2016. Daniel Kaufmann of the Brookings Institution, Massimo Mastruzzi of
the World Bank Institute, and Aart Kraay of the World Bank Development Economics Research Group conducted the
study. For any country, a percentile rank of zero corresponds to the lowest possible score and a percentile rank of 100
corresponds to the highest possible score. On governance indicators, Colombia scores relatively poorly due to the
political instability and high levels of domestic violence in the country.
Colombia ranked in the 49.75 percentile out of 100 for voice and accountability in 2016. The voice and accountability
parameter measures the extent to which a country's citizens are able to participate in selecting their government, along
with freedom of expression, freedom of association, and freedom of the media. In comparison, Brazil ranked in the 61.58
percentile in the same year.
In terms of political stability and absence of violence, Colombia had a low rank of 13.81 out of 100 in 2016. Political
stability and absence of violence measures perceptions of the likelihood that the government will be destabilized or
overthrown by unconstitutional or violent means, including domestic violence and terrorism. The presence of violent
groups has always threatened stability in the region. On a number of occasions, the country's election process has been
disrupted and contesting members killed. On this parameter, Brazil ranked in the 30 percentile in 2016.
In terms of government effectiveness, Colombia ranked in the 54.33 percentile out of 100 in 2016. Government
effectiveness measures the quality of public services, the quality of the civil service and the degree of its independence
from political pressures, the quality of policy formulation and implementation, and the credibility of the government's
commitment to such policies. In comparison, Brazil ranked in the 47.6 percentile in the same year.
Colombia’s percentile ranking in terms of regulatory quality was 67.31 out of 100 in 2016. Regulatory quality measures
the ability of the government to formulate and implement sound policies and regulations that permit and promote private
sector development. The government has undertaken economic liberalization and privatization on a massive scale. Most
sectors – with the exception of those that relate to national security – have been opened up to foreign players. Brazil had
a ranking of 46.63 on this parameter in 2016.
Colombia had a percentile rank of 41.35 out of 100 in 2016 for the rule of law parameter. Rule of law measures the
extent to which agents have confidence in and abide by the rules of society, and in particular the quality of contract
enforcement, the police, and the courts, as well as the likelihood of crime and violence. In comparison, Brazil ranked in
the 51.9 percentile in 2016.

Political Landscape
Colombia’s percentile ranking in terms of control of corruption was 44.23 out of 100 in 2016. Control of corruption
measures the extent to which public power is exercised for private gain (including both petty and grand forms of
corruption) and the extent to which elite and private interests control the state. The Colombian judiciaries, especially the
lower courts, have been accused of corrupt practices, and the system is plagued by a low level of transparency. In
comparison, Brazil ranked in the 38.46 percentile in 2016.
Outlook
During his second term, President Santos managed to reach a peace deal with the FARC guerillas. The peace accord
with FARC was approved by the Colombian Congress in November 2016 after four years of negotiations and is expected
to bring much needed peace after 50 years of violence. The former rebel group is now a political party and took part in
2018 elections. Colombia has strong trade and diplomatic relations with the US, the EU and neighboring nations from the
region. Colombia has signed free-trade agreements with the US and the EU and is seeking to expand trade ties with
Asian countries such as South Korea, Singapore, Turkey and Japan. The incumbent president Duque is expected to
strengthen Colombia’s diplomatic relations with the US. The country’s disputes with Venezuela over its maritime claims
and political policies are expected to continue without a solution in near future.

Economic Landscape
ECONOMIC LANDSCAPE
Summary
After entering a recession in the late 1990s, the Colombian economy staged a recovery following the implementation of
the government’s drastic economic reform measures. The economy recorded average growth of 4.75% during 2003–
2013. In 2014, economic growth dipped slightly to 4.39%, from 4.87% in 2013, due to pressure from falling commodity
prices. The growth rate declined further to 3.05% in 2015, 2.04% in 2016 and 1.79% in 2017, but is expected to reach
3.51% by 2020, according to MarketLine. The country is highly dependent on commodities for export revenues of
petroleum and mining products (oil, gold, and coal), and coffee, and the same accounted for around 57.2% of total export
earnings in 2016, according to the World Bank. Colombia recorded an inflation rate of 4.3% in 2017, while the
unemployment rate was 9.38% in the same year.
Evolution
During colonial times, Colombia was mainly an exporter of raw materials, particularly precious metals. During those
years, the economy was primarily agrarian, focused on mining, agriculture, and cattle rearing. Very few small enterprises
were present. By the late 19th century, tobacco and coffee exports developed, making agriculture and commerce the two
most important economic activities.
In the early 20th century, Colombia witnessed a coffee boom. Subsequently, the communication and transport
infrastructure was developed to facilitate exports. During 1905–1915, Colombia saw a rapid increase in GDP, with the
expansion of exports and government revenue. Coffee was the most important item of trade and contributed nearly 75%
of total export revenue in 1920. There was a large-scale public works program and huge inflows of capital through private
investment.
During the course of the country's post-war expansion, the government focused on economic integration, and heavy
industries were established in the six largest cities. During 1950–1967, Colombia followed an import substitution program
to develop domestic industries. However, after this period, there was a shift to export promotion, leading to the growth of
non-traditional sectors such as clothing and other manufactured items. Until the 1970s, there was sustained economic
growth of around 5%. The economy slowed somewhat in the early 1980s because of the global recession of 1981;
however, the Colombian economy was better placed than other Latin American countries because of its strong foreign
exchange reserves and large amounts of foreign aid. In 1990, the process of economic liberalization started. Although
the economy grew at 3.74% during 1991–1997, it experienced a slowdown in 1998, followed by a sharp recession during
1999, resulting in a slide in the currency and financial sector distress.
An International Monetary Fund (IMF) supported fiscal adjustment program helped to rein in fiscal deficit. The economy
steadily grew during 2002–2007, recording an average GDP growth rate of 5.01%. Growth decelerated to 3.55% and
1.65% in 2008 and 2009, respectively, due to the global economic slowdown and decreased international demand.
Strong domestic consumption, increasing private investment, high public expenditure and strong exports resulted in
economic recovery in 2010 and 2011 (growth rates of 3.97% and 6.59%, respectively). Although external uncertainties
again led to economic deceleration in 2012 (4.04% growth), economic growth improved to 4.87% in 2013 supported by
strong government spending, fixed investment and private consumption. During 2014–2017, the economy witnessed a
decline in GDP growth to 2.82%, owing to the global economic slowdown, which resulted in falling commodity prices and
a volatile export market. The GDP growth rate for 2017 was 1.79%. However, with the rising commodity price trends and
slight growth in export demands, the GDP growth rate is expected to reach 2.67% in 2018, according to MarketLine.

Economic Landscape
Figure 33: Historical GDP Growth Rate in Colombia (%), 2008–2017
7.0
6.0
5.0
Growth rate (%)
4.0
3.0
2.0
1.0
0.0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Year
Financial authorities and regulators
As the central bank of Colombia, Banco de la Republica Colombia is responsible for monetary policy and maintaining
price stability. It is also the issuer of currency. With regard to the tendering of credit by the central bank to the
government, rigorous conditions exist, and it is allowed only where there is a dire necessity, and only after the central
bank’s board of directors gives their unanimous approval. Furthermore, the bank is allowed to acquire government bonds
in the secondary market. As with any other central bank, Banco de la Republica Colombia also acts as the banker’s
bank and is entrusted with the task of formulating foreign exchange policy.
The financial laws and regulations were consolidated in 1993 under the Organic Statute of the Financial System
(Estatuto Organico del Sistema Financiero), which defined financial institutions under the Supervision of the Banking
Superintendency (Superintendencia de Bancos). Colombia faced a severe financial sector crisis during the 1990s. As a
result, between 1998 and 2000, the banking sector lost almost 40% of its net worth. In the insurance sector, the impact
was less severe, and no insurers failed due to the effects of the crisis. However, post-crisis, the government undertook a
cleanup process in the financial sector and strengthened regulations. In 2005, Colombia consolidated the supervision of
the banking and securities sectors under the Financial Superintendence (Superfinanciera).
Superfinanciera is the regulator of the following segments:
 Credit institutions
Economic Landscape
 Financial services companies
 The securities market
 Insurance companies and insurance and reinsurance brokers.
Stock markets
The Colombian capital market is relatively underdeveloped. Only the large companies participate in the local stock or
bond markets. While a number of firms rely on the banking system for their capital requirements, unofficial private
lenders also meet the financing needs of small and medium-sized companies. Bolsa de Valores de Colombia (BVC) is
the leading stock exchange in Colombia. It came into existence in 2001 after the merger of three stock exchanges in
Colombia: Bolsa de Bogota, Bolsa de Medellin, and Bolsa de Occidente. The BVC is regulated by the Superfinanciera,
which oversees market intermediaries, brokers’ fees, and financial disclosures of listed companies. The market
capitalization of BVC as of September 2018 was COP397.79 trillion ($134.78 billion)
In 2010, Chile, Colombia, and Peru signed an agreement to merge their stock exchanges into a regionally integrated
stock exchange called the Mercado Integrado Latinoamericano (MILA). The MILA started trading operations in May
2011. According to the World Bank, in Latin America, the MILA countries have the highest prospects for GDP growth at
4-6% per annum. However, the sluggish integrated regional stock exchange is yet to achieve a significant volume of
trade. According to MILA, it had market capitalization of $930.71 during June 2018, in which BVC had a 14.73% share.
BVC has also been a part of the United Nation's Sustainable Stock Exchanges initiative since July 2014.

Economic Landscape
Performance
GDP and growth rate
The economy suffered a sharp recession in 1999, resulting in a slide in the country's currency and a degree of financial
sector distress. However, an IMF supported fiscal adjustment program helped to control both the fiscal deficit and the
process of economic liberalization. Since then, there has been a return to growth, although the economy remained
extremely sluggish during 2008–2009. Strong export growth due to high commodity prices was one of the major reasons
for the resurgence of the economy in 2010 and 2011, when growth reached 3.97% and 6.59%, respectively. In spite of
external vulnerabilities, the economy posted growth of 4.04% in 2012, led by the construction sector. Economic growth in
2013 improved to 4.87%, supported by strong government spending, fixed investment and private consumption. In 2014,
economic growth dipped slightly from 4.87% in 2013 to 4.39% due to pressure from falling commodity prices. The growth
rate declined further to 3.05% in 2015, 2.04% in 2016 and 1.79% in 2017, but is expected to reach 3.51% by 2020 with
rising commodity prices, an increase in exports and an expected high inflow of FDIs, according to MarketLine.
Figure 34: GDP and GDP Growth Rate in Colombia ($ Billion/%), 2013–2022f
500.0 6.0
450.0
5.0
400.0
Growth rate (%)

350.0
4.0
$ billiion
300.0
250.0 3.0
200.0
2.0
150.0
100.0
1.0
50.0
0.0 0.0
2013 2014 2015 2016 2017 2018f 2019f 2020f 2021f 2022f
Year
GDP Real GDP growth rate

Economic Landscape
GDP composition by sector
The Colombian economy is largely dependent on the services sector, which constituted around 60.94% of GDP in 2017,
compared to contributions of 7.03% and 32.03% made by the agricultural and industrial sectors, respectively.
Figure 35: GDP Composition by Sectors, 2017
Agriculture, 7.03%
Industry, 32.03%
Services, 60.94%

Economic Landscape
Agriculture
The agriculture sector constituted 7.03% of GDP and produced output worth COP59.3 trillion ($20 billion) in 2017. After
the historic peace accord in 2016, the agricultural sector can grow significantly in coming years since rural development
has been identified as one of the government’s priority sectors in the post-accord era. The sector is expected to witness
a growth rate of 5.84% in 2018, according to the MarketLine.
Colombia’s principal agricultural activities are cattle rearing, concentrated in the Caribbean coastal area and the eastern
plains, and coffee growing, prevalent in the western and central ranges of the Andes. The country’s climatic conditions
and favorable topography provide a suitable environment for agriculture. In the hot regions of Colombia, cocoa,
sugarcane, coconuts, bananas, rice, cotton, tobacco and cassava are key agricultural products. In the colder areas, there
is a higher yield of forest products such as pine and eucalyptus. Coffee, flowers, corn, pears, pineapples, and certain
vegetables are grown in the temperate regions. The cooler elevations are suitable for the production of wheat, barley,
potatoes, vegetables, flowers, dairy cattle, and poultry.
Figure 36: Agriculture Output of Colombia (CPL Trillion/%), 2012–2017
70.0 18.0
16.0
60.0
14.0
50.0 12.0
Growth rate (%)

10.0
40.0
CLP trillion
8.0
30.0
6.0
20.0 4.0
2.0
10.0
0.0
0.0 -2.0
2012 2013 2014 2015 2016 2017
Year
Agriculture output Growth rate

Note: Sectoral figures are given in local currency due to fluctuations in exchange rates.

Economic Landscape
Industry
The industrial sector constituted 32.03% of GDP in 2017. Buoyed by increases in commodity prices, especially oil,
industrial output grew from COP64.13 trillion ($22.28 billion) in 2003 to COP120.45 trillion ($61.21 billion) in 2008. The
average annual growth rate of the industrial sector during 2012–2017 was 4.26%. The sector is expected to witness
5.99% growth in 2018, from 5.72% growth in 2017.
Colombia has four major industrial centers: Bogota, Medellin, Cali, and Barranquilla. Processed food, beverages, textiles,
clothing and chemicals are the main manufactured goods. Oil and oil products, mining products (coal and gold) and
coffee are the most important export-oriented commodities and accounted for around 57.2% of total exports revenues in
2016.
Figure 37: Industrial Output of Colombia (CPL Trillion/%), 2012–2017
280.0 10.0
270.0 8.0
260.0
6.0
250.0
4.0
CLP trillion
Growth rate (%)

240.0
2.0
230.0
0.0
220.0
210.0 -2.0
200.0 -4.0
2012 2013 2014 2015 2016 2017
Year
Industry output Growth rate


Economic Landscape
Services
The services sector constituted 60.94% of GDP and contributed COP514 trillion ($174.16 billion) to the Colombian
economy in 2017. The sector registered a nominal growth rate of 8.22% in 2017. The services sector is dominated
mainly by commercial activity. Telecommunications has been one of the most dynamic sectors in recent years, due to
the development of services such as long-distance and wireless communications in large urban centers.
Figure 38: Services Output of Colombia (CPL Trillion/%), 2012–2017
600.0 9.8
500.0 9.3
400.0 8.8
Growth rate (%)

CLP trillion
300.0 8.3
200.0 7.8
100.0 7.3
0.0 6.8
2012 2013 2014 2015 2016 2017
Year
Services output Growth rate

Fiscal situation
The government of former President Alvaro Uribe followed prudent fiscal policies and introduced tough tax, pension and
budget reforms. Although a large fiscal deficit was one of the major challenges faced by Colombia in the early 1990s,
favorable international conditions such as higher oil prices and Colombia’s economic expansion aided the efforts of the
Uribe administration in terms of bringing the country's public finances under control. Colombia has consistently reduced
the debt to GDP ratio as a part of its fiscal policies. According to the former Finance Minister, Mauricio Cardenas, the
government plans to reach a fiscal deficit of 3.1% in 2018.
Exports and imports
In 2017, total trade amounted to $95.85 billion, while imports amounted to $56.74 billion and exports amounted to $39.11
billion, according to MarketLine. According to CIA - The World Factbook, the US is Colombia’s principal trading partner,
Economic Landscape
accounting for around 28.5% of total exports in 2017. Colombia also trades widely with various European countries,
Panama (6.3%) and China (5.1%). On the import side, the US again dominates, accounting for 26.3% of total Colombian
imports in 2017, while China accounted for 19.3%. Other major import partners are Mexico (7.5%), Brazil (5%) and
Germany (4.1%).
Figure 39: External Trade of Colombia ($ Billion), 2013–2017
160.0
139.79
138.06
140.0
108.88
120.0
95.85
94.29
100.0
77.93
72.31
$ billion
65.88
65.75
80.0
61.85
56.74
55.55
60.0
43.00
38.75
39.11
40.0
20.0
0.0
2013 2014 2015 2016 2017
Year
Exports Imports Total trade
Current account
The current account balance is considered to be the broadest measure of a country’s foreign transactions and it includes
trade, interest payments and remittances. The expansion of commodity exports, and the higher prices associated with
them, gave the country’s exports a boost over the last few years, but the strong external demand for intermediate and
capital goods, some of which is linked to FDI inflows in the hydrocarbon and mining sectors, along with the stagnation in
the country’s oil production due to declining oil reserves, have worsened the current account deficit. According to data
from the IMF, the Colombian current account deficit, which was 0.7% of GDP in 2004, increased to 2.6% of GDP in 2008
and reached 3.0% in 2010. After declining slightly to 2.9% of GDP in 2011, the current account deficit widened
considerably to 3.3% of GDP by 2013. The deficit increased from 5.2% of GDP in 2014 to 6.4% of GDP in 2015.
According to the IMF, the current account deficit has decreased from 4.3% of GDP in 2016 to 3.4% of GDP in 2017. It is
expected to further decline to 2.3% by 2023, according to IMF forecasts. The comprehensive tax reform of December
2016, and the expected reforms by the end of 2018, will help the economy to adjust to the global slow down by reducing
its dependence on export revenues.
Economic Landscape
Debt situation
External and public debt
When Colombia was in the midst of an economic crisis during the late 1990s, its external debt rose sharply from 23.8%
of GDP in 1995 to 34.1% of GDP in 2000, as the government turned to external borrowing to finance the growing fiscal
deficit. Consequently, public sector debt also rose from 12.2% of GDP to 31.8% of GDP during the same period. The
Colombian government used its creditworthiness (investment grade rating) to increase the share of sovereign bonds over
multilateral and commercial loans during this period. However, with the loss of its coveted investment grade rating in
1999, bond issuance and commercial loans became restricted, and the public sector once again turned to multilateral
financing. Nevertheless, since 2001, the government has been implementing a successful program to reduce its external
debt through voluntary swaps, repurchases, and prepaying foreign debt. The country’s gross debt in 2017 was at 49.41%
of GDP, a slight reduction from 50.65% of GDP in 2016, according to the IMF. Gross debt is expected to decline further
to 40.21% of GDP by 2023, according to the IMF.
International investment position
Foreign direct investments
FDI in Colombia has grown rapidly following the economic liberalization and privatization program of the 1990s. In 2005,
FDI inflows saw a huge jump to around $10.23 billion, compared to $3.11 billion in 2004. The increase materialized
mainly because of the acquisition of two of Colombia’s largest corporations by investors from South Africa and the US.
FDI inflows moderated in subsequent years and fell to $6.43 billion in 2010, amid global turmoil. Liberalized policies,
increasing commodity production and rising prices attracted FDI worth $14.65 billion in 2011, which increased to $15.04
billion in 2012 and further to a record $16.21 billion in 2013, according to data from UNCTAD’s ‘World Investment Report
(WIR) 2018’. According to the report, the country attracted $16.17 billion of FDI in 2014, which declined to $11.73 billion
in 2015. After a decrease in 2015, FDI recovered to $13.84 billion in 2016 and $14.52 billion in 2017. Similarly, Colombia
has recorded an increase in FDI stock, from $164.51 billion in 2016 to $180.23 billion in 2017, according to ‘WIR 2018’.
Credit rating
In March 2017, Fitch ratings affirmed the country’s credit rating for the long term at ‘BBB’, but with a stable outlook from a
negative one, due to a sharp reduction in its current account deficit. S&P changed its rating to BBB- with a stable outlook
during December 2017, from BBB with a negative outlook. Moody’s rating has changed from a Baa2 stable outlook to a
negative outlook during February 2018, due to an expected lower pace in financial consolidation resulting from expected
low economic growth and low fiscal revenues.
Monetary situation
Key monetary indicators
Inflation
The Colombian economy experienced high inflation during the 1990s, when the average rate of inflation was around
22.15%, according to MarketLine. However, with the central bank’s stringent measures, inflation subsided to 6.35% in
2002 and further declined to 4.29% in 2006. Following the global price increases of 2007, inflation reached 5.54%. The
upward trend continued into 2008, with inflation reaching 7%, before the global economic slowdown and price decreases
helped bring inflation down to 4.2% in 2009 and 2.27% in 2010. In 2011, inflation was 3.4%, which fell further to 3.17% in
2012 due to the drop in global demand. Prudent macroeconomic management and stable prices of imports such as oil
and foodstuffs resulted in a record low inflation of 2.02% in 2013. Inflation was recorded at 2.89% in 2014 and further

Economic Landscape
increased to 4.99% in 2015. In 2016, the consumer price inflation was 7.51% due to temporary shocks caused by past
depreciations and El Niño. However, it declined to 4.3% during 2017. It is expected to come down gradually to the target
range over 2018–2022. The central bank of Colombia has 2.0-4.0% as its inflation target range, with a long-term goal of
3.0%.
Figure 40: Consumer Price Index and Consumer Price Index-based Inflation in Colombia,
2012–2022f
180.0 8.0
160.0 7.0
140.0
6.0
Consumer Price Index
120.0
5.0
Percentage (%)
100.0
4.0
80.0
3.0
60.0
2.0
40.0
20.0 1.0
0.0 0.0
2012 2013 2014 2015 2016 2017 2018f 2019f 2020f 2021f 2022f
Year
Consumer price index Inflation

Interest rate
The monetary and banking crisis of 1998–1999 forced Colombia to abandon the crawling-peg exchange rate regime in
favor of a free-float for the peso. Since then, the Colombian central bank has been using an inflation-targeting framework
as its monetary policy approach. The Banrep (Banco de la Republica) cut its intervention interest rate in steps from
10.0% in July 2008 to 3.0% in May 2010. With economic recovery and price pressures, the central bank gradually
increased the policy rate to 5.25% in February 2012. The slowdown due to the Eurozone global crisis again pushed the
central bank to cut its rate to 3.25% in March 2013. Strong GDP growth and upward pressure on inflation propelled the
central bank to raise rates by 25 basis points each during April–July and September 2014. The benchmark interest rate
at the end of December 2015 stood at 5.75%. In 2016, the central bank increased the policy rate from 6% in February
2016 to 7.75% in August 2016. However, since December 2016, the central bank has been consistently decreasing the
policy rate from 7.75% in August 2016 to 4.25% in April 2018.

Economic Landscape
Table 11: Banco de la República Policy Interest Rate, 2016–2018
Effective Date's Policy Rate Modification Central Bank's Policy Rate
April 30, 2018 4.25%

January 30, 2018 4.50%
November 27, 2017 4.75%
October 30, 2017 5.00%
September 1, 2017 5.25%
July 28, 2017 5.50%
July 4, 2017 5.75%
May 30, 2017 6.25%
May 2, 2017 6.50%
March 27, 2017 7.00%
February 27, 2017 7.25%
December 19, 2016 7.50%
August 1, 2016 7.75%
Employment
According to MarketLine, the tertiary sector employs the majority of the working population, with a 64.14% share in 2017,
followed by the secondary and primary sectors with shares of 20.1% and 15.64% each. The average annual
unemployment rate was 11.02% during 2007–2013. In 2014, the unemployment rate stood at 9.1%, but further
decreased to 8.9% in 2015. In 2016, the unemployment rate was 9.22%, which got increased slightly to 9.38% in 2017.
MarketLine expects the unemployment rate to decline to 8.94% by 2022.

Economic Landscape
Figure 41: Unemployment and Rate of Unemployment in Colombia (Millions/%), 2012–2022f
2.45 10.50
2.40
10.00
2.35
Unemployment (million)
Unemployment rate (%)

2.30
9.50
2.25
9.00
2.20
2.15
8.50
2.10
2.05 8.00
2012 2013 2014 2015 2016 2017 2018f 2019f 2020f 2021f 2022f
Year
Total unemployment Rate of unemployment (%)

Economic Landscape
Outlook
Colombia witnessed a decline in GDP growth from 2.04% in 2016 to 1.79% in 2017, due to the global slowdown during
the past two years and its externalities. However, GDP is expected to witness 2.67% growth in 2018 owing to the rising
commodity process and consumer spending. The historic peace agreement in 2016, better financing conditions, and a
robust labor market will drive public-sector consumption. Security gains due to the peace agreement with the left-wing
guerillas will also have an economic impact in the form of a boost to GDP. The agriculture sector is expected to witness
higher growth during the coming years. Though the banking sector continues to be strong, problems persist with rising
non-performing assets and household debts. Low quality infrastructure, especially transport, is another major deterrent.
On the policy front, fiscal policy-underpinned by the new fiscal rule is expected to be sound, while monetary policy is
expected to be neutral, with expectations of a stronger economy and more inclusive growth.

Social Landscape
SOCIAL LANDSCAPE
Summary
Colombia is classified as a developing country. However, the civil war and large-scale illegal drug trafficking have
adversely affected the country’s social development. According to the United Nations Development Program's (UNDP)
‘2016 Human Development Index’ (HDI), the country was ranked 95th out of 188 countries. Colombia’s performance in
the educational sphere has improved vastly in terms of secondary and tertiary enrolment, but its higher educational
infrastructure is yet to match the needs of the growing economy. Positive developments have taken place in the
healthcare sector following the reforms of 1993, which improved access to healthcare services. Nevertheless, disparities
in the accessibility of these services persist. On a related note, Colombian society is highly inequitable, as the income
share of the top 10% of the income group was 40%, while the lowest 10% earned just 1.3% in 2016, according to the
World Bank.
Evolution
Colombia was traditionally an agrarian and rural society with a strong colonial influence. A clear division existed between
the Spanish population and the indigenous people. The disparity has continued, with the Spanish population belonging to
the higher strata of society. The church played an important role in Colombian life and profoundly influenced the role of
education. The prevalence of this system is often blamed for reinforced social stratification. The growth of agricultural
activities, mainly due to cash crops, and the development of industries led to urbanization, which in turn led to internal
migration. Increasing violence and guerilla wars led to a large-scale exodus of the rural population to urban centers.
Growing industrialization and urbanization necessitated the establishment of modern social institutions, and steps were
taken to reform the education system in the 1960s and 1970s. The government increased its expenditure on education
over the years, with funding for education increasing fivefold in real terms between 1966 and 1986. After the mid-1980s,
the role of regional governments in education increased. There was also a great degree of decentralization in the
healthcare system. Between 1970 and 1980, the number of medical colleges almost doubled, but this still proved
insufficient to meet surging healthcare demands. Healthcare reforms in 1993 transformed the structure of public
healthcare funding by shifting the burden of subsidy from providers to users. Subsequently, employees have been
required to pay for healthcare plans to which employers also contribute. This laid the foundation for the Colombian social
welfare system.
Demographic composition
Age and gender-wise composition
According to MarketLine, in Colombia, 68.34% of the population belonged to the 15–64 age group, 24.21% to the 0–14
age group, and 7.44% to the 65-plus group, as of 2017. According to CIA - The World Factbook, the median age in
Colombian society was 30 years in 2017, indicating that the society is young. The gender ratio was 97.52 males per 100
females in 2017.

Social Landscape
Table 12: Mid-year Population by Age in Colombia (% by Gender), 2017
Mid-year Population by Age Female Male

0–4 7.66 8.26
5–9 7.77 8.35
10–14 7.93 8.50
15–19 8.22 8.77
20–24 8.52 9.02
25–29 8.32 8.72
30–34 7.54 7.82
35–39 6.63 6.73
40–44 6.42 6.36
45–49 6.62 6.49
50–54 6.21 5.95
55–59 5.34 4.96
60–64 4.27 3.78
65–69 3.15 2.58
70–74 2.26 1.65
75–79 1.52 1.09
80+ 1.64 0.97
Urban/rural composition
Colombia has a largely urban population. According to CIA -The World Factbook, the percentage of the urban population
stood at 80.8% in 2018, and the anticipated annual rate of change is 1.22% for 2015–2020. Population distribution in
urban areas is also heavily skewed.
Religious composition
Roman Catholicism is the dominant religion in Colombia, accounting for 79% of the population, followed by Protestants
comprising 14%, while the rest belong to other minority groups.

Social Landscape
Figure 42: Major Religions in Colombia, 2014
Unspecified, 5.0%
Other, 2.0%
Protestant ,
14.0%
Roman Catholic,
79.0%
Education
Formal education in Colombia comprises nursery, elementary, high school, technical education, and college. Schooling
begins with nursery schools and daycare centers, which are generally attended by children under five years old. These
educational centers are commonly known as Hogares Comunitarios and are supported by the National Institute for
Family Welfare. This is followed by the elementary level, which is taken for five years by children from six to 12 years of
age. The next level is secondary education, which again takes five years to complete and is divided into two
components: basic secondary (sixth to ninth grade) and mid-secondary (10th to 11th grade). To be eligible to access
college or technical education, high school students must take the “pruebas de estado” test provided by the Colombian
Institute for the Promotion of Higher Education (Instituto Colombiano para el Fomento de la Educacion Superior).
University education is divided into undergraduate degrees and postgraduate degrees. Most Colombian university
degrees are five years long, but technical education usually lasts for three years.
Healthcare
Healthcare services
The Colombian healthcare system comprises hospitals classified as local, regional, specialized, and university hospitals.
The other three major components of the healthcare infrastructure are the Social Security Institute (Instituto de Seguros
Sociales [ISS]), para-governmental social security institutions, and the private sector. The Colombian healthcare sector
underwent major reforms in 1993, when the burden of subsidy was shifted from providers to users. After this reform,

Social Landscape
employees have been obliged to pay for healthcare plans to which employers also contribute. Although the reform
encouraged private participation, it also led to inequalities in the distribution of healthcare resources.
Social welfare
Social welfare policies
The Colombian government has put in place a robust social welfare system. All workers are required to be affiliated with
either the Social Security Institute (Instituto de Seguros Sociales [ISS]) or a private health or pension provider. Low
income individuals who are not able to pay the necessary contributions must enroll in the subsidized plan, in which the
all general illnesses, treatment at a suitable facility, and pharmacy and ambulance services. The social welfare system
also provides for short-term disability, long-term disability and survivors' benefits. The individual only has to make some
co-payments and is charged moderate dues.
Like most Latin American countries, Colombia also has had a conditional cash transfer scheme known as Families in
Action (FA) since 2000. The program provides subsidies to indigenous communities and poor families with a child 18
years or younger, conditional on school and health service attendance. In order to support the poorest families, the
government of former President Uribe launched the Forester Families Program in 2003, which offers legal alternative
income to families located in strategic ecosystems or in conservation areas where illicit crops are grown. Families
entering this program commit themselves to protect and preserve these selected areas. In 2012, “More Families in
Action” was introduced by the Santos administration as an extended version of FA. ‘More Families in Action’ aimed to
add 300,000 more people to the 2.3 million personals already covered by the FA program in 2013. Public-private
partnership is another major boost to human development in Colombia. For instance, the Family Compensation Fund of
Antioquia, a non-profit social enterprise, provides education, health, credit, housing, job training, and other social
services to vulnerable families in co-operation with international organizations.

Social Landscape
Performance
Healthcare
In 2017, total healthcare expenditure stood at $18.93 billion, which was equal to 6.1% of GDP. Although the healthcare
system increased the population coverage from 25% in 1993 to 98% in 2012, disparities in healthcare have persisted, as
evidenced by the higher mortality rates among the poor. The healthcare sector also faces other challenges such as
large-scale corruption, the evasion of health fund contributions and the misallocation of funds.
Declining healthcare spending since 2014 also shows the priority the sector is receiving, and the reduced expenditure
has an impact on the modernization of the sector. In 2014, healthcare spending accounted for 6.4% of GDP, while the
same declined to 6.1% by 2017, according to the MarketLine. General government expenditure on health as a
percentage of the total expenditure on health was 65.27% in 2017, while the same was 70.95% in 2014.
Figure 43: Total Expenditure on Healthcare in Colombia ($ Billion/%), 2008–2017
30.0 6.5
6.4
25.0
6.3
20.0
6.2
Percentage (%)
15.0 6.1
$ billion
6.0
10.0
5.9
5.0
5.8
0.0 5.7
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Year
Total healthcare expenditure Total healthcare expenditure as % of GDP

Social Landscape
Education
Colombia’s performance in the educational sphere has improved vastly in terms of secondary and tertiary enrolment, but
its higher educational infrastructure is yet to match the needs of the growing economy. According to MarketLine, public
expenditure on education increased from $16.21 billion in 2012 to $20.41 billion in 2016. As of 2017, the literacy rate of
Colombian males stood at 98.4%, while that of females stood at 99.24%, according to the MarketLine. The total literacy
rate was 98.7% in 2017.
Figure 44: Public Expenditure on Education in Colombia ($ Billion/%), 2007–2016
25.0 8.0
7.0
20.0
6.0
5.0
15.0
Percentage (%)
4.0
$ billion
10.0
3.0
2.0
5.0
1.0
0.0 0.0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Year
Public expenditure on education Public expenditure as % of GDP
Income distribution
The country’s HDI rank is indicative of its moderate performance in terms of social development. Although Colombia’s
performance is better than other countries in the Latin American region, it performs poorly compared to other emerging
nations. According to the ‘Human Development Report 2016’, the country's HDI was 0.73 out of one in 2015, and it was
ranked 95th among 188 countries, indicative of the poor living standards experienced by some of the population.
Moreover, Colombia is one of the most inequitable countries in the Latin American region. According to the World Bank,
the country’s Gini index (a measure of income disparity, with zero corresponding to complete equity and 100 to extreme
inequity) was 50.8 in 2016.

Social Landscape
Outlook
Inequality is one of the major problems faced by the country. Various programs to enhance social welfare and reduce
inequality have been put forward by the administration from time to time, for instance, the landmark ‘Victims and Land
Restitution Law’. However, the slow implementation of these programs is a major hurdle to reducing the social and
economic gaps. The poor coverage of the country’s pension schemes is also a major detriment to general welfare. Low
spending on old age support adds to this. High wages as a percentage of minimum wages has attributed further to the
poor prospects of the less skilled workers. Modifying the wage system as per inflation standards and not above the
inflation rate is considered a welcome step, however, these high wages also act as the catalyst to the high share informal
sector employment.

Technology Landscape
TECHNOLOGY LANDSCAPE
Summary
Colombia’s progress in terms of technological development has been limited. The country spends very little on research
and development (R&D) and it has failed to take advantage of FDI inflows to develop its technological capabilities. The
country moved from the import substitution policy of the 1950s and 1960s to one of liberalization during the 1990s, which
required firms to restructure. The National Science and Technology Policy of 1990 laid the foundation of an integrated
policy, which included support for a National System of Science, Technology and Innovation (NSSTI), which was
implemented by 1999. The NSSTI is an open system, which includes all science and technology programs, strategies,
and activities of both public and private bodies. The government has also put in place a system of R&D incentives but
has failed to achieve the desired results because of poor implementation. The government needs to rethink its strategy
towards science, technology and innovation.
Evolution
Technological development in Colombia started with a necessary improvement to the country’s agricultural productivity,
which primarily had been an agrarian economy. The first step towards developing science and technology systems came
through the establishment of the National Science and Technology Council in 1968. The council was formed with the
objective of providing consultative and advisory services to the government. In the same year, the Colombian Institute for
the Development of Science and Technology (Instituto Colombiano para el Desarrollo de lat Ciencia y la Technologia
[COLCIENCIAS]) was set up, which was later renamed the Administrative Department of Science, Technology and
Innovation (Departamento Administrativo de Ciencia, Tecnología e Innovación [COLCIENCIAS]) in 2009. This body is
responsible for the promotion and funding of science and technology activities, principally in the area of research.
Although a few attempts at development were made, the National Science and Technology Policy of 1990 led to the
systematization of the science and technology process.
In 1995, the National System of Innovation and Regional Systems was developed, and the Colombian Observatory of
Science and Technology was established. During the late 1990s, the focus shifted to developing technical manpower.
During the 1990s, regional agendas for developing science and technology were developed, and private participation in
research in various fields was called for, in areas such as biodiversity and genetic resources; advanced materials and
nanotechnology; prevalent diseases in tropical areas; biotechnology, agro-alimentary, and agro-industry innovation; and
information and communications technologies.
In 2012, iNNpulsa was established as a management unit for promoting business growth in Colombia through
entrepreneurship, innovation and productivity promotions. The government organization was established with a mandate
to make Colombia one of the top three competitive and innovative economies in Latin America by 2018.
Innovation governance
The National Council of Science and Technology is the main agency responsible for the development of science and
technology policy in Colombia. The council is the director of the NSSTI and the Regional Science and Technology
Systems. It is also the national government’s principal consultant in matters of science and technology.
COLCIENCIAS is responsible for the funding of science and technology activities, and coordinates with NCST to carry

out of its initiatives, principally in the area of research. The 2009 Act transformed the agency into an administrative
department (a near-ministry status) and gave it greater budget independence. Currently, the COLCIENCIAS budget is
divided among three main policy initiatives. Around 40% of the total budget is spent on strengthening STI capacities
through funding basic and applied research conducted by universities and other public research organizations. Around
30% of it is spent on the S&T training of graduate and post-graduates, and the remaining 20% is allocated to incentives
given for business innovation.
Intellectual property
Colombia has intellectual property rights (IPR) regulations in place, but enforcement is weak. The Colombian
government has ratified legislation to implement its obligations under the Uruguay Round Agreement on Trade-Related
Aspects of Intellectual Property Rights. Colombia is also a member of the World Intellectual Property Organization, the
Paris Convention for the Protection of Industrial Property and the Berne Convention for the Protection of Literary and
Artistic Works. Colombia is also a signatory to the Patent Cooperation Treaty and the International Union for the
Protection of New Varieties of Plants. In 2012, the Madrid Protocol and the Trademark Law Treaty entered into force in
Colombia.
A number of government bodies are involved in the preparation and enforcement of IPR policies. The Superintendence
of Industry and Commerce is the Colombian authority for granting patents and is responsible for the development of IPR
policies. The Colombian Agricultural Institute (Instituto Colombiano Agropecuario) undertakes the issuance of plant
variety protection-related and agro-chemical patents. While the Ministry of Social Protection is in charge of the issuance
of pharmaceutical patents, the Ministry of Justice is in charge of the issuance of literary copyrights. Furthermore, the
enforcement of IPR laws is carried out by other agencies such as the Tax and Customs Directorate (Direccion de
Impuestos y Aduanas Nacionales de Colombia [DIAN]), the prosecutor general’s office, the national police and the
judiciary. According to the USPTO, Colombia was granted 33 patents in 2015; in comparison, Brazil, Mexico, Argentina
and Venezuela received 323, 172, 66, and 22 patents, respectively, in the same year.
Table 13: Patents Granted by US Patent and Trademark Office, 2010–2015

2010 2011 2012 2013 2014 2015
Brazil 175 215 196 254 334 323
Mexico 101 90 122 155 172 172
Argentina 45 49 63 75 71 66
Venezuela 13 18 25 14 12 22
Colombia 6 6 12 16 21 33
Source: USPTO MARKETLINE
Performance
Telecommunications
The Colombian telecommunications sector has grown rapidly. The principal telecom operators in Colombia are Claro,
Movistar, and Tigo. In 2017, the country had approximately 59.84 million mobile subscribers compared to 30.06 million in
2006, according to MarketLine. Although the country’s telecom market is highly saturated, with a penetration rate of
121.42 (per 100 people) as of 2017, mobile penetration is low in rural areas and among low-income households. The
number of internet users has registered a rapid rise. In 2006, the number of internet users stood at just 6.66 million,

which increased to 29.63 million by the end of 2017, according to the MarketLine
Figure 45: Internet Users in Colombia (Million Users/%), 2008–2017
35.0 70.0
30.0 60.0
25.0 50.0
Internet users in millions
Percentage (%)
20.0 40.0
15.0 30.0
10.0 20.0
5.0 10.0
0.0 0.0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Year
Number of users Percentage of population
R&D expenditure
R&D intensity has declined since 1996, when it stood at 0.3% of GDP. According to the World Bank, the country’s gross
expenditure on R&D in 2014 was 0.25% of GDP and dropped marginally to 0.24% of GDP in 2015. The public sector
plays a dominant role in R&D expenditure, while the business sector has very low involvement.

Figure 46: Research and Development Expenditure in Colombia (% of GDP), 2006–2015
0.30
0.25
R&D expenditure (% of GDP)
0.20
0.15
0.10
0.05
0.00
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Outlook
The government has undertaken initiatives to encourage scientific research by offering different types of grants and
financial aid. The government provides funds for innovation and business development. In order to encourage R&D
initiatives, non–profit organizations as well as educational institutions such as universities are exempted from income tax.
The Legislative Act of 2009 requires the government to invest 10% of royalties generated from the exploitation of natural
resources into STI. ProColombia (an organization to promote nontraditional exports and attract FDIs) undertakes
initiatives to promote the nation’s image as a growing player in IT and technology investments, and the active
involvement of this agency can benefit Colombia in the long run. Despite these initiatives, Colombia’s technological
landscape remains extremely underdeveloped, with a very low level of R&D expenditure and very few innovative
activities. The passiveness of the private sector in the Colombian R&D environment may hinder technological
development, unless these structural challenges are addressed.

Legal Landscape
LEGAL LANDSCAPE
Summary
The Colombian judicial system was influenced by Spanish and French traditions but has undergone many changes. The
most significant of these was the introduction of the 1991 constitution that provided the judiciary with greater
administrative and financial independence from the executive branch. The ‘2018 Index of Economic Freedom’ published
by the Heritage Foundation and the Wall Street Journal ranked Colombia as the 42nd freest economy in the world out of
180 nations considered, while the World Bank’s ‘2018 Doing Business Indicator’ ranked Colombia 59th out of 190
countries. Nevertheless, the legal landscape has often been criticized for its lack of transparency and is accused of
fostering corrupt practices and cumbersome procedures. However, the country’s investment regulations are among the
best in the region as a result of policies that have encouraged foreign investment despite internal security threats. At the
same time, country’s legal implementation and enforcement mechanism remain weak.
Evolution
With its roots in Roman law, and influenced by the French system, the Colombian legal system is based on civil law
jurisdiction. It has drawn heavily from Italian and Spanish legal traditions, which established the written codification of its
laws. The first civil and penal codes were implemented in 1873. The first commercial, judicial, and mining codes came
into being in 1887. These codes were subsequently amended: the commercial code was amended in 1971, the criminal
code in 2000, and the judicial code in 2004. These codes reached its complete implementation in 2008.
The 1991 constitution strengthened the judicial administration by providing for the introduction of an oral, accusatory
system to replace the traditional system in order to expedite the judicial process and reduce the enormous backlog of
cases. This move towards a US model system has been accepted by major Colombian cities.
Judicial system
Structure of the system
The Colombian judicial system comprises the Supreme Court of Justice, the Council of State, the Constitutional Court,
and the Superior Judicial Council at the top level.
The Supreme Court of Justice comprises the three chambers of civil, criminal, and labor matters. It is the highest court
with jurisdiction over civil, family, labor, agrarian, commercial and criminal cases. It also has the power to repeal lower
court decisions, as well as original jurisdiction over certain proceedings regarding high functionaries, admiralty matters,
inter-department controversies, and government contracts.
The Council of State is the highest court of administrative law which takes appeals from national officials and
departmental administrative courts.
The constitutional validity of laws approved by the legislature and certain decrees issued by the executive are reviewed
by the Constitutional Court, which guards the constitution’s integrity and supremacy. It also establishes the procedures to
be followed to protect the rights of the accused in crimes, and takes action against public administration officials,
including the judiciary.
The Superior Judicial Council, through its two chambers, is responsible for disciplining judges and resolving jurisdictional
issues between courts.
Legal Landscape
The country also has lower courts including ordinary courts, courts with peace jurisdiction (handling minor criminal and
civil matters), administrative courts with jurisdiction over administrative matters, authorities of indigenous territories with
jurisdiction on indigenous communities, and departmental administrative courts that handle cases pertaining to
departmental ordinances, municipal resolutions, departmental and municipal executive decisions, and tax matters.
Legislation affecting business
The legal climate for foreign investment is generally conducive in Colombia. A number of controls on the remittance of
profits and capital were lifted, and foreign investment has been allowed in most sectors, with the exception of defense
and other sectors important to national security.
Generally, foreign investment does not require prior authorization, except when it is made in restricted areas. Investment
in the financial sector requires the prior authorization of the Financial Superintendence. In addition, investment in the
mining sectors and portfolio investments are subject to a special regime, for which investors need prior permission.
Tax regulations
Taxation
The Colombian tax system comprises national and local taxes. The main national taxes are income tax, wealth (capital)
tax, VAT, consumption tax, and tax on financial transactions.
Income tax
The income tax rate in Colombia is 0-33%, with certain exemptions and deductions applicable to taxable income. The
country provides allowances for expenditure on healthcare and the purchase of residential property.
Corporate tax
Since January 2013, the corporate tax rate has been 25% in Colombia for resident companies. A special 20% corporate
income tax rate applies to companies located in free trade zones. However, the tax rate of foreign companies which do
not have a branch in Colombia is 33%. From 2018, the tax for resident and permanent establishments was revised to
33%. A temporary surcharge of 4% is also in place for 2018, on a net income exceeding COP800 million. The general
capital gains tax rate in the country for 2018 is 10%.
Sales tax (VAT)
This is a national tax on services rendered, and on the sale and import of physical goods. The tax reform of 2012 has
simplified the VAT code into three categories of 5% and 19% from the previous seven rates, which ranged from 0–35%.
Financial transactions tax
The government has been implementing a financial transaction tax of 0.4% on withdrawals from checking accounts,
savings accounts, and accounts with the central bank since January 2004.
Performance
Effectiveness of the legal system
Colombia’s regulatory framework has become more efficient and red tape has been cut over the years to foster a friendly
business environment. The ‘2018 Index of Economic Freedom’ published by the Heritage Foundation and the Wall Street
Journal ranked Colombia as the 42nd freest economy in the world while the World Bank’s ‘2018 Doing Business
Indicator’ ranked Colombia 59th. The overall freedom to start, operate and close a business is relatively well protected by

Legal Landscape
Colombia's national regulatory environment. Starting a business takes an average of nine days and eight procedures. In
relation to regulatory practice, Colombia, along with Australia ranks, first with respect to the minimum capital requirement
as a percentage of income per capita.
Outlook
Colombia has performed moderately well in improving its legal climate, with favorable business policies despite the
persistence of violence and threats to internal security. The government has remained committed to the revival of the
economy and has consistently encouraged foreign direct investment. The opening up of several sectors for foreign
investment indicates growing liberalization, and although such a move represents a significant opportunity, the country
has to improve its judicial climate in terms of the enforcement of laws. The 1991 constitution has brought the country
closer to internationalization. However, the legal system has continued to suffer from a lack of transparency and poor law
enforcement. The lower courts have failed to act independently, and unless adequate measures are taken, they will
remain susceptible to corruption and intimidation. Similarly, the independence of the constitutional courts has been
questioned, as they have been found to be interfering in the legislative process.

Environmental Landscape
ENVIRONMENTAL LANDSCAPE
Summary
In the Latin American region, Colombia has remained at the forefront with regards to maintaining environmental
standards. Since the 1970s, the government has instituted a number of acts and regulations to improve environmental
compliance. The environmental management system is decentralized, given the size of the country. Colombia is faced
with challenges such as soil erosion, deforestation, and the preservation of its wildlife. Colombia’s environmental laws
are also evolving based on the needs of the time; the introduction of a carbon tax and the establishment of a carbon
trading market in 2016 are some of the latest initiatives. However, the country’s regulatory and enforcement mechanisms
need to be strengthened to ensure greater compliance to environmental standards.
Evolution
The conservation of Colombia's natural resources began in 1974, when the country enacted regulations governing the
protection and management of renewable natural resources, known as the Renewable Natural Resource and
Environmental Protection Code. The 1991 constitution took an important step towards modernizing its environmental
regime. The country enshrined rights and obligations related to the duty of every citizen to protect natural resources.
Furthermore, various government agencies were entrusted with environmental planning, prevention, and defense
responsibilities. In 1993, the government created the Ministry of Environment. In 2003, the ministry was also given the
responsibility of housing and land management portfolios and the ensuing agency came to be known as the Ministry of
Environment, Housing and Territorial Development. It was instrumental in the creation of the National Environmental
System (Sistema Nacional Ambinetal) and established general environmental principles in subsequent years. In 2011,
amid increasing pressure to speed up its licensing process, President Santos again split the ministry into the Ministry of
Environment and Sustainable Development, and the Ministry of Housing, City and Territory.
The Ministry of Environment and Sustainable Development is the agency in charge of all environmental matters. It is
responsible for the administration of the nation's renewable natural resources and for setting policies and regulations for
the management of renewable natural resources and the environment.
Besides this ministry, there are the Autonomous Regional Environmental Authorities (Corporaciones Autonomas
Regionales [CARs]), which are government agencies that look after areas in the same ecosystem, or geopolitical, bio-
geographical or hydro-geographical units. These authorities have financial and administrative autonomy and work with
their own corporate capital. The Urban Environmental Units operate in municipalities, districts, or metropolitan areas with
over 1 million inhabitants, where they have the same role as the CARs do in rural areas. The CARs and the Urban
Environmental Units act as the environmental authority of their corresponding jurisdictions and enforce the general
guidelines given by the Ministry of Environment and Sustainable Development. The regional CARs are subject to audit
by the National Comptroller's Office.
Environmental regulations
The environmental law of 1993 set the following general principles:

 The country's economic and social development will be guided on the basis of the sustainable
development and universal principles contained in the June 1992 Rio de Janeiro Declaration on
Environment and Development.
 The country's biodiversity is a national treasure and is of interest to all mankind. It must be protected
as a priority and exploited only on a sustainable basis.
 The state shall promote the implementation of environmental costs and the use of economic
instruments to prevent, correct, and restore environmental deterioration and to preserve renewable
natural resources.
 Disaster prevention shall be a matter of collective interest, and measures taken to avoid or mitigate
the effects of any disasters that occur shall be mandatory.
In pursuance of such rules, the country currently has a set of regulations applicable to renewable natural resources,
including the atmosphere and national air space; water, land, soil, and subsoil; and flora and fauna. These sets of rules
also regulate all other elements and factors comprising the environment, such as leftover products, waste, garbage, and
trash; noise; and living conditions resulting from urban or rural human settlement processes. The environmental
legislation has also established administrative procedures for environmental licensing and permits to use renewable
natural resources.
Aligned with the environmental laws, the Low Carbon Development Strategy 2020-2030 was introduced in 2012. In 2016,
a carbon tax was introduced, along with a voluntary carbon trading market. The carbon tax was extended to liquid fossil
fuels and industrial uses of natural gas and a national policy on climate change was introduced in 2017. Similarly, a
plastic tax was introduced in 2017, with a tax provision of COP20 ($0.007) for each plastic bag, and the tax is scheduled
to increase by COP10 ($0.003) each year until 2020.
Participation in global efforts, agreements, and pacts
Colombia has ratified nearly 105 environmental treaties and has remained at the forefront of the conservation of natural
resources in Latin America. Colombia is party to the Antarctic Treaty and various other treaties on biodiversity, climate
change (namely the Kyoto Protocol), desertification, endangered species, hazardous wastes, marine life conservation,
ozone layer protection and ship pollution. It has signed the Law of the Sea but is yet to ratify it. In 2015, the country’s
Intended Nationally Determined Contributions (INDCs) targets regarding the reduction of greenhouse gas emissions
were submitted to United Nations Framework Convention on Climate Change (UN6FCCC). Colombia also ratified the
Paris climate change agreement in 2017.
Performance
Environmental impact
Colombia ranked 42nd out of 180 countries in the ‘2018 Environmental Performance Index’ (EPI), conducted by Yale
University. The EPI looks at successes relating to environmental protection based on two broad objectives: reducing
environmental stress on human health and promoting strong ecosystems and sound natural resource management.
Colombia faces challenges relating to soil erosion, deforestation, and the preservation of its wildlife. Soil erosion has
resulted from the loss of vegetation and heavy rainfall, and the soil has further been damaged by the overuse of
pesticides. The country’s environmental health parameter ranked 61st, while the agriculture parameter ranked 164th.
Increasing demand for palm oil, a significant source of biofuel, has led to deforestation to make room for new plantations.
The country’s Autonomous Regional Environmental Authorities serve the dual function of implementing environmental

policy and licensing companies. However, this has led to corruption in many of the CARs, which manage close to $500
million between them. It has been reported that in large commercial ventures, ties between CAR directors and business
groups are common, with regulations often overlooked.
According to MarketLine, CO2 emissions in Colombia increased from 73.82 million tons in 2012 to 83.3 million tons in
2015. The recorded CO2 emissions growth rate for 2015 was 4.46%, while the same was 1.46% in 2008.
Figure 47: CO2 Emission in Colombia (Tons/%), 2008–2015
90.0 6.0
80.0
5.0
70.0
60.0 4.0
Percentage (%)
Tons (millions)
50.0
3.0
40.0
30.0 2.0
20.0
1.0
10.0
0.0 0.0
2008 2009 2010 2011 2012 2013 2014 2015
Year
Volume Growth rate
Outlook
Colombia has played an active role regarding its commitment to various international environmental treaties. Sectors
such as cement, power plants, and forestry are frontrunners in clean development mechanism projects. Colombia has an
Andean Environmental Agenda (AAA) along with Bolivia, Ecuador and Peru. In April 2012, the Andean Community
(CAN) approved their agenda for 2012–2016. The three main areas of the agenda were biodiversity, climate change, and
water resources. The 20th Meeting of the Forum of Ministers of the Environment of Latin America and the Caribbean in
2016, under the flagship of the United Nations Environment Programme in 2016, recognized that the AAA was aligned to
the 2030 Agenda for Sustainable Development. However, the low level of environmental standards in the country,
indicated by its low ranking in the ‘Environmental Performance Index’ (EPI), is a major cause for concern. It lacks
significantly in terms of access to sanitation and the quality of its water resources. Its agriculture parameter, considered
under the environment vitality segment, recorded one of its worst performances. However, its preparations to join the
OECD, and its increasing commitments towards the reduction of CO2 and containing pollution, are expected to improve
the country’s environmental health drastically in near future.

Appendix
APPENDIX
ISO codes of selected countries
Country ISO code Country ISO code

Australia AUS Japan JPN
Austria AUT Korea KOR
Belgium BEL Luxembourg LUX
Canada CAN Mexico MEX
Chile CHL Netherlands NLD
Czech Republic CZE New Zealand NZL
Denmark DNK Norway NOR
Estonia EST Poland POL
Finland FIN Portugal PRT
France FRA Slovak Republic SVK
Germany DEU Slovenia SVN
Greece GRC Spain ESP
Hungary HUN Sweden SWE
Iceland ISL Switzerland CHE
Ireland IRL Turkey TUR
Israel ISR United Kingdom GBR
Italy ITA United States USA
Brazil BRA Indonesia IDN
China CHN Russian Federation RUS
India IND South Africa ZAF

Appendix
Ask the analyst
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Appendix
MarketLine
PESTLE| Country
John Carpenter
AnalysisHouse,
Report:John Carpenter Street |
Colombia ML00002-036/Published 10/2018
London, United Kingdom, EC4Y 0AN
T: +44(0)203 377 3042, F: +44 (0) 870 134 4371
E: reachus@marketline.com

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Country Profile Series

PESTLE Country Analysis Report: Colombia ML00002-036/Published 10/2018

Utilization of natural resources remains efficient, but subpar infrastructure is a concern

PESTLE Country Analysis Report: Colombia ML00002-036/Published 10/2018

PESTLE Country Analysis Report: Colombia ML00002-036/Published 10/2018

PESTLE Country Analysis Report: Colombia ML00002-036/Published 10/2018

PESTLE Country Analysis Report: Colombia ML00002-036/Published 10/2018

Table 1: Colombia – Key Fundamentals, 2015–2022f

2015 2016 2017 2018f 2019f 2020f 2021f 2022f

359.12 366.46 373.01 382.98 394.96 408.81 423.15 437.59

Source: Country Statistics, MarketLine MARKETLINE

PESTLE Country Analysis Report: Colombia ML00002-036/Published 10/2018

Key Facts and Geographic Location............................................................................................................................14

Key facts .................................................................................................................................................14

Geographical location ..............................................................................................................................15

PESTLE Analysis .........................................................................................................................................................16

Political analysis ......................................................................................................................................18

Economic analysis ...................................................................................................................................23

Social analysis .........................................................................................................................................40

Technological analysis .............................................................................................................................49

Environmental analysis ............................................................................................................................58

Political Landscape ....................................................................................................................................................62

Structure and policies ..............................................................................................................................64

Structure and policies ..............................................................................................................................71

Structure and policies ..............................................................................................................................84

Technology Landscape ...............................................................................................................................................91

Structure and policies ..............................................................................................................................91

Structure and policies ..............................................................................................................................95

PESTLE Country Analysis Report: Colombia ML00002-036/Published 10/2018

Structure and policies ..............................................................................................................................98

ISO codes of selected countries .............................................................................................................102

Ask the analyst ......................................................................................................................................103

PESTLE Country Analysis Report: Colombia ML00002-036/Published 10/2018

Figure 7: Infrastructure Quality in Comparison to the OECD, 2015 .....................................................................29

Figure 9: Tax Revenue as a Percentage of GDP, 2016 .........................................................................................31

Figure 10: Expanding Banking Business (Commercial Banks/Borrowers), 2008–2017.......................................32

Figure 12: Growing Domestic Credit (% of GDP), 2007–2016 ...............................................................................34

Figure 15: Current Account Balance ($ Billion/% of GDP), 2008–2017.................................................................37

Figure 17: Bank Capital to Assets Ratio (%), 2018–2017 ......................................................................................39

Figure 22: Healthcare Expenditure in Colombia ($/% of GDP), 2007–2016 ..........................................................46

Figure 27: Product Market Regulations, 2014.......................................................................................................56

Figure 28: Natural Resources Rents (% of GDP), 2007–2016 ...............................................................................60

PESTLE Country Analysis Report: Colombia ML00002-036/Published 10/2018

Figure 31: Key Political Figures in Colombia .......................................................................................................64

Figure 33: Historical GDP Growth Rate in Colombia (%), 2008–2017...................................................................71

Figure 35: GDP Composition by Sectors, 2017 ....................................................................................................74

Figure 36: Agriculture Output of Colombia (CPL Trillion/%), 2012–2017 .............................................................75

Figure 37: Industrial Output of Colombia (CPL Trillion/%), 2012–2017 ................................................................76

Figure 38: Services Output of Colombia (CPL Trillion/%), 2012–2017 .................................................................77

Figure 39: External Trade of Colombia ($ Billion), 2013–2017..............................................................................78

Figure 42: Major Religions in Colombia, 2014 ......................................................................................................86

Figure 43: Total Expenditure on Healthcare in Colombia ($ Billion/%), 2008–2017 .............................................88

Figure 44: Public Expenditure on Education in Colombia ($ Billion/%), 2007–2016 ............................................89

Figure 45: Internet Users in Colombia (Million Users/%), 2008–2017...................................................................93

Figure 47: CO2 Emission in Colombia (Tons/%), 2008–2015.............................................................................. 100

PESTLE Country Analysis Report: Colombia ML00002-036/Published 10/2018

Table 2: Colombia – Key Facts, 2018 14

Table 3: Analysis of Colombia’s Political Landscape 19

Table 4: Analysis of the Colombian Economy 23

Table 5: Analysis of Colombia’s Social System 40

Table 6: Analysis of Colombia’s Technological Landscape 49

Table 7: Frequency of Internet Use in Colombia (Number of People in Thousands), 2017 52