Tuesday, May 08, 2012

Colombian economic growth

In the Financial Times, former Colombian Finance Minister (under Ernesto Samper) José Antonio Ocampo serves up a rare dish, namely a discussion about Colombian economic growth and investment that does not include a) any mention of the time it took to ratify the U.S.-Colombia FTA; or b) wide-eyed accolades for the benefits of a more open economy.

Instead, he places Colombia squarely where it should be, namely as another Latin American country riding a commodity boom and needing to enact policies recognizing that fact.

Mining and oil exports have grown sevenfold since 2003. At $37bn in 2011, they accounted for two-thirds of exports. Traditional exports, such as agriculture and manufacturing, have also grown – but only by three times. Coffee, the traditional staple, represents only about 5 per cent of exports. 
High energy and mining prices are a mixed blessing, however, as they threaten to undermine diversification of the economy, traditionally one of its strongest characteristics. As a capital-intensive activity, mining also generates limited employment, a big concern in a country that, despite significant improvements, has struggled to shrink unemployment. At an average rate of 10.8 per cent in 2011, it remains one of Latin America’s highest.


[The] redistributive possibilities of fiscal policy also need to be enhanced. This is particularly important in a country that, over the past decade, has largely missed the improvements in income distribution enjoyed by the rest of Latin America. Colombia now has one of the worst income distributions in a region famed for its inequality. At 0.578 the Gini coefficient is Latin America’s worst after Guatemala. Bettering that is essential to sustained and prolonged growth.

Also true. It's nice to go beyond the rah-rah attitude that the vast majority of editorials have about Colombia. The FTA is no magical being, and has multiple effects, some of which are negative. Like everywhere else, Colombia would benefit from a focus on diversification and explicit acknowledgment of potential problems even while enjoying the benefits of the boom.


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