Increasing its economic openness will be vital for Colombia’s success post-crisis, helping the country fulfil its potential as a regional leader and improve the lives of its citizens.

New report on Economic Openness in Colombia reveals major improvements to infrastructure, border facilitation, and legal system are key to boosting Colombia's economy

A new report on Economic Openness in Colombia by the Legatum Institute highlights that improving the country’s infrastructure and border facilitation, as well as reforming its court system, are Colombia’s greatest opportunities for increasing its economic openness as it emerges from the coronavirus crisis.

The report reveals that Colombia ranks 72nd globally, and 8th in Latin America, in the Institute’s Global Index of Economic Openness, which ranks more than 150 economies according to their performance on four pillars.

Out of the four pillars, 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. However, to make the most of these trade deals and increase its connectedness, Colombia needs to improve its digital and physical infrastructure at the border and within the country.

To further develop its Market Access and Infrastructure, the report recommends that Colombia should enhance its border facilitation by aligning the systems of the Colombian Agricultural Institute (ICA), the National Food and Drug Surveillance Institute (Invima) and the Superintendence of Industry and Commerce (SIC), as well as continuing 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, especially for the Atlantic Coast where cities such as Barranquilla experience over 60 hours of cuts a year. Equally, Colombia should attract further investment to transport projects, particularly the fourth and fifth generation programmes of roads, to reduce the time required to move goods around the country.

Dr Stephen Brien, Director of Policy at the Legatum Institute and author of the report, commented: “Prosperity is much more than material wealth, but without an open and competitive economy it is very challenging to create lasting social and economic wellbeing where individuals, communities, and businesses are empowered to reach their full potential.

“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 fulfil its potential as a regional leader and improve the lives of its citizens.

“Colombia has made significant progress over the past decade in opening up its economy, and seen 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. As a result, and given its geographical location with ports on both the Atlantic and Pacific coasts, Colombia is well placed to become a regional trade hub.”

The report also shows that Colombia ranks 68th in the world for Governance, which is essential to attract investment and create the conditions for enterprise. 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.

Similarly, although Colombia has seen its Investment Environment improve in the last decade, it has dropped four places in the rankings to 71st globally. 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 Governance and Investment Environment, the report recommends major reform of Colombia’s court system as well as further efforts to tackle corruption as a matter of urgency. Introducing 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, would improve efficiency and help increase the speed at which cases are resolved. In addition, corruption could be reduced through more transparent government processes and by increasing the independence of the national oversight bodies, such as the National Electoral Council, and giving them more powers to prosecute cases of corruption.

Out of the four pillars in the Index, 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.

Dr Brien remarked: “Colombia faces a number of challenges. In addition to the coronavirus pandemic, the country is managing one of the largest refugee crises in the world as millions of Venezuelan refugees have entered the country over the last few years, which has led to increased government expenditure, pressure on the labour market and increased demand for public services. However, Colombia also has many strengths. Although security challenges remain and peace within the country is still fragile, it has managed to isolate conflict to the periphery, enabling the development of its major urban centres. It also has a robust democracy that most international observers see as fair, albeit with flaws and challenges. These achievements provide great cause for optimism that the country will be able to grasp the further opportunities for reform that we have identified.

“The recommendations included in our report support and reinforce the need for President Duque to deliver on his three main policy focuses of establishing the rule of law, generating the conditions for entrepreneurship to flourish, and creating greater fairness and social equity. Tackling these challenges and introducing the necessary reforms is never straightforward or politically easy. But we are hopeful that, even in these times, Colombia will be able to start laying the foundations for greater economic openness in the coming years.”

For more information, please contact:

  • Fredericka Arrowsmith, Media and Communications Manager:
  • Jo Nussbaum, Director of Communications: / +44 (0) 7407 810 796

Notes to editors:

The Legatum Institute’s Colombia Case Study is part of its Global Index of Economic Openness research programme, which aims to provide the international community with a tool to identify and tackle economic inequality. The in-depth country case studies focus on the structural drivers of Economic Openness and assess the extent to which countries have the four fundamental characteristics of open economies:

  • Market Access and Infrastructure, such that products and services can be easily produced and delivered to customers.
  • Investment Environment, such that domestic and foreign sources of finance are widely available.
  • Enterprise Conditions that ensure markets are contestable and free from burdensome regulation.
  • Governance that is underpinned by the rule of law, as well as government integrity and effectiveness.

More information is available here.