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Why Investing in Colombia Is So Hard: Red Tape

By: Guest Contributor - Jun 16, 2016, 12:43 pm
Colombian notes and coins
Colombian notes and coins

By Julian Villabona

EspañolIn recent years, Colombia’s economy has grown at an accelerated pace, thanks to numerous factors like oil prices, the possibility of a peace accord with the Revolutionary Armed Forces of Colombia and improved relations with neighboring countries that has resulted in several free trade agreements.

These factors have bolstered exports and investor confidence. Exports rose from US $12 billion in 2012 to a current US $50 billion. But these numbers hide the huge difficulties that economists have to deal with in-country.

As economic growth is dampened, local and foreign investors have to jump over more and more hoops to close deals and create companies. This is mainly due to the high imposition rate and the inefficient state apparatus that handles permits, registries, etc.

There are some important infrastructure projects in the country that are in an unknown advance status. Oil exploration in the Colombian eastern plains was sabotaged. The construction of the Ruta del Sol — the road that would connect the center of the country with the Atlantic coast — has had some environmental  problems that have stalled progress. Railroad operations in the Atlantic coast were suspended, affecting coal exports that can’t reach the ports.

The Colombian economy is dependent on commodities, especially coal and oil. Nevertheless, there is major rejection toward mining in the country, which has obstructed much exploration projects. This, along with oil prices, has brought a considerable slump to Colombian economy.

This scenario creates a huge challenge to Colombia, for it requires the harmonization of three different interest groups. On the one side, you have governmental interests that include producing income and achieving economic growth. On the other hand, you have the companies’ interests that are set on generating profit and which can be very helpful when creating jobs in the country. Finally, you have the demands of local communities that are being affected by mining exploitation.

Nevertheless, Colombia needs to find new ways to generate income for the country. Primary products generate little added value. The difficulty of exploiting natural resources, mostly because of bureaucratic obstacles, makes this industrial effort increasingly unfeasible.

Finally, Colombia’s government is set to sign a peace accord with the FARC guerrillas, that according to the country’s high officials, requires a great deal of money. This will only bring additional burdens to taxpayers and will further complicate the progress entrepreneurs are trying to make.

Source: Revista Semana