A new era of stability

International investors are especially drawn to economies with stable politics that ensure a safe fiscal environment, in addition to a transparent legal system, essential for predictability and efficient growth. Colombian President Juan Manuel Santos has shown a strong commitment throughout his term since 2010 to ensuring precisely this stable environment for foreign direct investment (FDI).

“Investors can rest assured about the stability of the rules of the game,” explained President Santos in May during an international mining, oil and energy conference that took place in Cartagena de Indias, the fifth-largest city in the Latin American country. “If tomorrow there is a tax reform, it won’t be to increase tariffs but to make collection faster and more efficient.”

Whereas certain other South American countries are becoming progressively protectionist with little regard for the international businesses affected by their policies, foreign investors in Colombia will see the same rules and respect as national ones.

Colombia’s extensive list of partnerships in free trade agreements with countries such as the United States, Canada, and shortly Europe, further demonstrates its commitment to the international market. Additionally, an increase in privatisation in the country, with the private sector accounting for 85 per cent of the GDP, is an opportunity also extended to foreign investors without limitations.

These favourable conditions have already shown results, with FDI steadily on the rise in Colombia, growing by 113 per cent between 2010 and 2011. This increase has been an important factor in the overall growth in the Colombian economy with an average rise in GDP of 5.5 per cent.

Of the FDI, more than 76 per cent was from the oil and mining industry. In fact, the government is eager to increase mining investments, considering the lowering of corporate taxes for companies involved in the sector. 

Furthermore, previous administrations also took key steps to help create the current stable climate. For example, significant economic reform in the 1990s, which included important regulation of the financial sector and the promotion of trade and competition.

Although some investors may have reservations about investing in a country that has gone through turbulent times, the government assures that Colombia is opening a new chapter in political and social stability.

The Santos administration has been particularly well known for its tough stance against the FARC guerrillas as well as against violence related to drug trafficking.

“We are doing everything we can to fight against illegally armed organisations, against violence, drug trafficking and guerrillas, which are becoming weaker and weaker,” states Colombia’s Vice President Angelino Garzón. “We are also fighting against corruption and impunity.”

These improvements have made the country’s largest cities such as Bogotá and Medellín significantly reduce their homicide rates as well as dramatically lowering both terrorist acts and kidnappings.

Mr Garzón notes that these improvements will also go hand in hand with extensive human rights reform.

One of the most noteworthy government actions is the Victims and Land Restitution Law approved last year. This legislation provides reparations to victims of violence during the conflict between the government and guerrillas.

President Santos notes: “Security, stable rules of play, speed and transparency in procedures and processes and respect for human rights are vital.”

Another indicator of stability in the country is the high level of education seen in Colombia, with more than 1.6 million students going to university every day and around 700,000 students doing vocational training in technical fields. The Andean country can boast three of the best 30 universities in Latin America. 

Along with education, the Colombian government sees the importance of investing in culture, innovation and technology, as well as having a strong commitment to the environment. Preparing for a prosperous future is Colombia’s chance to continue on its current road of growth and stability.