Colombia today is considered to be one of the world’s great emerging economies. Its growing political stability, decrease in violence, young working population and overall positive economic trend make it a country with interesting prospects. Robert Ward, a global forecasting director for the Economist Intelligence Unit (EIU), categorizes upcoming developing nations into a group called CIVETS. All the countries included in this group — Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa — share several very important characteristics, including positive trends in political, social and economic aspects.
In 2011, a financially troubled year for the world, Colombia achieved a Gross Domestic Product (GDP) growth rate of 5.9%, becoming the 33rd largest economy in the world, according to the International Monetary Fund (IMF). For 2012, the Colombian government forecasts public debt to reach 25% of GDP, an enviable mark compared with many other indebted nations. In addition, the country is experiencing an investment rate of 28% of GDP, the highest level seen in the country in the last decade. In a world where some of the most powerful nations are facing grave challenges, this is a very good position for a country such as Colombia to be in.
While Colombians are proud of today’s economic status, it was not an easy journey. Issues such as violence and economic inequality long hindered the nation’s economic potential and affected the people’s morale. For many years, Colombia placed great emphasis on overcoming these obstacles. According to the Ministry of Defense, the homicide rate in 2011was the lowest it had been in 26 years, with the country experiencing a 12% drop from the previous year. This positive trend brought great optimism for what Colombia’s future may hold. Where violence — headed by factions such as the Revolutionary Armed Forces of Colombia (FARC) — previously caused major safety issues and distribution challenges and repelled investors, today the improvements are noticeable, and the Colombian government is promoting this change proactively in hopes of attracting international interest.
A second and related challenge for Colombia today is economic inequality. Colombia still ranks seventh among countries with the highest degree of economic inequality, but it is seeing a change for the better. The government’s recent decisions to increase public savings, reduce the public deficit and invest in social programs have already resulted in improvements. According to Catalina Crane Arango, the Colombian high presidential counselor for public and private management, the purchasing power of minimum-wage workers has increased significantly over the last decade. In 2000, a minimum-wage worker had to work for 125 months to be able to afford a car; in 2012, a minimum-wage worker could afford a car after 57 months.
The lessening violence and reduction in economic inequality are among many developments driving the positive economic trend in Colombia and giving its citizens hope for a better future. As a result, the country is seeing a great expansion in its entrepreneurial environment. According to the most recent survey by GEM (Global Entrepreneurship Monitor), the world’s largest study of entrepreneurship in Colombia, 20.6% of respondents in Colombia in 2011 reported they had started a company within the last three years. This figure compares to the average result of 11.8% from a selected group of peer countries. Now the Colombian government has the challenge of figuring out how to cultivate and maximize this entrepreneurial potential.
Originally published by Knowledge@Wharton January 2, 2013 as part of The Lauder Global Business Insight Report 2013: Building Blocks for the Global Economy.