Improving infrastructure and border facilitation, and reforming the legal system, are Colombia’s greatest opportunities for increasing its economic openness.
The Legatum Institute’s mission is to create a global movement of people committed to creating the pathways from poverty to prosperity and the transformation of society. Our research work is focused on understanding how prosperity is created, and to that end, with the generous support of the Templeton World Charitable Foundation, we have published a Global Index of Economic Openness to rank countries’ ability to interact with, and benefit from, both domestic and international commerce.
This Colombia case study is one of a number of in-depth reports which analyse an individual country’s performance on the key characteristics of openness to trade, investment, ideas, competition, and talent.
Click here to download the report
The report highlights how Colombia has made significant progress over the past decade in opening up its economy, with an increase in per capita income and a reduction in poverty. It has actively sought to encourage foreign investment into the country and has developed a relatively mature Public-Private Partnerships framework. The country has also signed trade agreements with several of the world’s major economies and is one of only three Latin American countries to join the OECD. Combined with its geographical location with ports on both the Atlantic and Pacific coasts, Colombia is well placed to become a regional trade hub.
While the coronavirus pandemic has brought much global economic activity to a halt, trade between countries, regions, and communities will be fundamental to the advance of the innovation, knowledge-transfer and productivity that is needed to create future economic growth and prosperity. Increasing its economic openness will be vital for Colombia’s success post-crisis, helping the country fulfill its potential as a regional leader and improve the lives of its citizens.
EXECUTIVE SUMMARY
This report explores the extent to which Colombia has the fundamental characteristics of open economies, and where the opportunities lie for further development.
It reveals that Colombia’s overall rank in the Global Index of Economic Openness is 72nd in the world, and 8th in Latin America.
- Colombia performs most strongly in Market Access and Infrastructure ranking 66th, having risen eight places over the last 10 years. The country has significantly improved internet access and electricity coverage, and its Open Market Scale ranks 4th in the world due to trade deals with the rest of Latin America, the United States of America and the European Union. To further develop its Market Access and Infrastructure, the report recommends that Colombia should enhance its border facilitation, and continue to invest in the maturity of its procurement and project management to ensure that projects deliver their desired benefits. In addition, the country needs to improve the generation and transmission of electricity, and attract further investment to transport projects to reduce the time required to move goods around the country.
- Although Colombia has seen its Investment Environment improve in the last decade, it has dropped four places in the rankings to 71st Property Rights and Contract Enforcement remain two of the country’s biggest challenges, with ineffective court systems leading to long delays and high costs. To improve the quality of its Investment Environment, the report recommends major reform of Colombia’s court system, including the introduction of electronic case management and more specialised courts, as well as increasing the amount of time judges focus on dispensing justice rather than doing administrative tasks.
- Colombia’s poorest performance is in Enterprise Conditions, for which it ranks 79th, although it has risen three places since 2010. The country has seen an improvement in its Domestic Market Contestability, with good competition law and a bold and effective competition authority, but faces challenges around Labour Market Flexibility and the Burden of Regulation. The report recommends reducing the costs and administrative burdens facing businesses to encourage them to enter the formal sector, and increasing the flexibility of employment contracts, reducing non-wage costs, and gradually phasing out agricultural subsidies, to help increase competition and growth.
- Colombia ranks 68th in the world for Governance. Government Effectiveness and Political Accountability in Colombia have both improved over the last 10 years, but although the Constitutional Court is held in high regard, there are cases of corruption and the country has fallen from 125th to 137th for the Rule of Law. To improve the quality of its Governance the report recommends further efforts to tackle corruption as a matter of urgency, including through more transparent government processes and by increasing the independence of the national oversight bodies and giving them more powers to prosecute cases of corruption.
Download the Spanish version of the report here.
Economic Openness in Colombia: The Challenges and Opportunities
We launched our report on Economic Openness in Colombia at an online event in June 2020. Dr Stephen Brien, our Director of Policy, highlighted the challenges and opportunities facing the country across the four pillars of our Global Index of Economic Openness: Market Access and Infrastructure, Investment Environment, Enterprise Conditions, and Governance.
We were also delighted to have a number of distinguished experts join us to share their reflections on the findings of the report: Flavia Santoro, Director of ProColombia; Luis Fernando Mejía, Executive Director of Fedesarrollo Foundation; Andrés Barreto Gonzalez, Superintendent of Industry and Commerce; Rosario Córdoba, President of the Private Council on Competitiveness; and former government adviser Germán Espejo.
You can watch the launch event below, or click here.
Podcasts: Economic Openness in Colombia
You can listen to podcasts of interviews that our Director of Policy, Dr Stephen Brien, conducted with different experts in order to discuss both the key findings of the report as well as Colombia’s economy, the challenges facing the country, and the opportunities to improve its economic openness and overall prosperity.