ALL ABOUT COLOMBIA
Medellín’s Carrera 43A is a traffic-filled avenue lined with posh malls, banks and hotels. Out for an evening stroll, a 35-year-old architect who has grown up in Colombia’s second biggest city stops for a moment to take a look at the people on the sidewalk and the cars whizzing by him. “It’s strange,” he says. “I’ve never walked down this street at night before. I’ve never been sure how safe it is.”
If the rest of the world is trying to figure out what it’s like to live and do business in Colombia now, so are Colombians themselves. Medellín was long world famous as headquarters of the late Pablo Escobar and his murderous drug cartel. But in the last decade, the attractive mountain city of 2.3 million people has transformed into something quite different. Crime is still high by Canadian standards. (In 2007, Colombia’s murder rate was 38.8 per 100,000; in 2008, Canada’s was 1.7, the U.S.’s was 5.2 and Mexico’s 11.6.) But there’s a sense that security in the city’s entertainment, business and good residential districts is now comparable to other big Latin American cities. The transformation resulted in part from the death of Escobar in 1993, in part from aggressive efforts by former president Alvaro Uribe Vélez to crack down on the cocaine industry and the leftist guerilla group known by their Spanish abbreviation FARC, and in part from a strong local leadership intent on remaking the city. Market forces, which seemed to have moved the dangerous transportation sector of the drug business to Mexico, have also played a role. The government estimates that Colombia cocaine production dropped from 700 tonnes in 2001 to about 300 tonnes now.
With 44 million citizens, the world’s third most populous Spanish-speaking nation is trying to take advantage of this new level of peace across the country. An energized civic and entrepreneurial culture has been working hard to reposition Colombia as a good place to do business. A 2011 J.P. Morgan survey named Colombia as the second most promising country in Latin America for investment over the next three years. In a survey of 40 institutional North American and European investors, optimism towards Colombian investment opportunities was second only to Brazil.
After decades of isolation, there’s certainly a lot of business to be done in Colombia, especially when it comes to infrastructure, the booming oil and mining industries, and agriculture, all sectors which play to Canada’s strengths.
To start, the country’s roads, railways and ports were neglected for decades, partially because of fears of guerilla and drug-related violence; safety-conscious Colombians who could afford it flew or avoided intercity travel altogether. Now the government of President Juan Manuel Santos, which came to power in August 2010, has created a national planning office to prioritize and co-ordinate $50 billion in projects, including eight megaprojects that will be worth $17 billion. Much of the work is in jungle and mountain terrain.
“We have so many resources, the challenge is to invest them in the best way,” says Juan Maurico Ramirez, sub-director of the Department of National Planning. “Before, we had a very narrow view of how to develop the country’s infrastructure. Now we have a new methodology which involves more private-sector involvement.”
Better security has increased access to remote areas, including the central east, where oil reserves are believed to rival neighbouring Venezuela’s. Colombia expects to be producing up to 1.5 million barrels a day within the next decade. Security and infrastructure are also key in allowing rural farmers, many of whom have been pushed off their land by rebels and cartels, to expand their production and get food to market more easily.
“Of the countries that have managed well in oil and gas, Colombia is the only country that hasn’t had an agriculture boom. Why? For the last 20 years, we were fighting against the bad guys,” says Juan Carlos Echeverry Garzón, national minister of finance and public credit. “Everything we’re doing now is to manage the boom in exports, and avoid the Dutch disease. In the 1990s, we had a similar boom and at the time we behaved liked nouveau riche and spent on everything, including cocaine. Not this time. It’s not that we’re smart. It’s that we’ve been through this before.” In spring 2011, Colombia regained the investment-grade credit rating it had lost during its 1999 financial crisis.
A free trade agreement with Canada, Colombia’s first with a developed country, came into effect in August 2011. That the deal came through before a free trade deal was finalized with the U.S., and Canada’s ratification did not go unnoticed in Colombia. It put Canada on the country’s radar. At the same time, the Canadian deal is expected to have less dramatic effects on the national economy than the U.S. deal, which was passed by Congress and signed by President Barack Obama in October 2011, or the deal Colombia is currently negotiating with industrial powerhouse South Korea. That makes the Canadian deal more popular with many business people, who see the opportunities as outweighing the risks.
“Canada took the chance to look seriously at Colombia and discover what was in it. It’s a real show of confidence,” says Ximena Teicher, president of the Bogotá-based Colombian Canadian Chamber of Commerce.
Teicher also points to legislative reforms, initiated by both the Uribe and Santos governments, which have has made Colombia a better place to invest and do business. New anti-corruption laws came into effect this year, as well as rules that protect foreign investment. Declining security risks has meant an increase in visitors—tourism has doubled in the past nine years, to about 1.8 million visitors in 2010.
“We love foreigners,” says Echeverry. “Why? We haven’t had foreigners here for ages.” The strategy seems to be working. Foreign direct investment into Colombia rose 63% in the first six months of 2011, to US$7.4 billion.
As the country shakes off its darker days, challenges remain. Teicher says it’s still difficult for Colombian citizens to get visas to come to Canada, an issue that was raised when Prime Minister Stephen Harper visited in August 2011 to mark the start of the free trade agreement. During that same visit, FARC rebels set fire to a remote oil reservoir owned by Canada’s PetroMagdalena Energy Corp. Though weakened, guerillas are still a presence. As well, the American Federation of Labour and Congress of Industrial Organizations (AFL-CIO) says 22 union leaders in Colombia have been killed in 2011, 15 since the U.S. and Colombia agreed to reform labour rights. Michael McKinley, U.S. ambassador to Colombia, has pointed out that those are better statistics than a decade ago, when, on average, 125 union activists were killed annually.
Although GDP per capita more than doubled between 2000 and 2010, poverty remains an issue; 40% of Colombians live below the poverty line, 12.5% in extreme poverty. A new constitutional reform on resource royalties aims to distribute the proceeds more widely among the regions, since the royalty-producing regions tend to have lower populations. Although the current government is reform-minded, it will take time to see if the new approaches to business, security and equality have real effects.
“We’re not trying to avoid a crisis next year. We’re avoiding a crisis for the next 10 years,” says Echeverry. “Colombia is a very pragmatic country. We’re not very ideological when it comes to solving our problems.”