Name: Republic of Colombia Population: 44.53 million (2009) Capital: Bogota Other major cities: Medellin, Barranquilla, Cali, Cartagena Area: 440,831 sq miles Currency: Peso GDP: US$234 billion (2009) GNI per capita (Atlas): $4,950 (2009) Main exports: Petroleum, coal, minerals, coffee, and flowers Language: Spanish Religion: Predominantly Roman Catholic (90%) Life expectancy: 69 years (men), 77 years (women) WB Development Indicators
President Juan Manuel Santos assumed office in August 2010 with a strong political mandate that gave his national unity coalition a clear majority in Congress. Santos won the second round of the Presidential poll by more than seventy percent of the vote. He campaigned on a continuation of former President Alvaro Uribe’s democratic security and economic policies. The elections demonstrated the maturity of Colombia’s democratic process and reflect a strengthening of political institutions.
On the basis of a strong electoral mandate and congressional majority, the Santos Administration has launched an ambitious reform program. To consolidate the fiscal stance and manage windfalls from commodities production, it has presented to Congress a new fiscal rule, a reform of the royalties system, and a proposal to make fiscal sustainability a Constitutional right. To enhance revenues and promote competitiveness, tax exemptions wee reduced, taxation loopholes closed, and import tariffs were lowered. Legislation has been passed to reduce informality and encourage youth employment. A new legal framework is being introduced to improve the performance of the health system. Finally, to address social injustices arising during the country’s civil conflict, a land titling reform and a law to compensate victims passed in Congress.
Colombia’s economy is relatively diversified by regional standards. The country is well endowed with natural resources, including oil, coal and natural gas. Improved security combined with business-friendly investment rules has led to a surge in foreign direct investment (FDI), particularly in the oil sector. Although no major new discoveries have been made, the country is expecting a commodity boom in the medium-term, giving rise to a range of important economic policy challenges.
Recent Economic Developments and Outlook Prior to 2008, Colombia experienced a period of accelerating and relatively broad-based economic growth driven by a favorable external environment and improved internal security. GDP growth increased steadily from 1.7 percent in 2001 to 6.9 percent in 2007, averaging 4.5 percent. The economic expansion began to slow down prior to the onset of the global economic crisis in late 2008, as monetary and fiscal policies were tightened to address overheating, resulting in a growth rate of 3.5 percent that year. Colombia was not affected too severely by the global crisis compared to the region. GDP is expected to grow 4.9 percent in 2011 compared to 1.5 percent in 2009 and 4.3 percent in 2010
Inequality and Poverty Colombia has one of highest levels of income inequality in Latin America and the Caribbean with Gini coefficient of 0.578 that is above 2003 levels. Although poverty fell from 53.7 to 45.5 percent in 2002-09, income inequality remained high. Encouragingly, there is evidence of an improvement in the equality of opportunities of children between 1997 and 2008, as measured by the World Bank’s Human Opportunities Index, which captures coverage of key services necessary for children in life while adjusting for the fairness in its distribution among the population (coverage corrected for equity). Over the past decade, there have been significant improvements in terms of children’s opportunities to receive health care, preschool attendance, middle and high school completion, and, access to electricity and telephones. While significant challenges remain (in terms of food security, nutrition, education quality, access to water and victimization), improvements in the equality of opportunities are expected to eventually translate into better inequality and poverty outcomes for the next generation of Colombians.
Priorities
Colombia still confronts important challenges that require major reforms if the country is to attain a higher, more sustainable and inclusive path of economic growth.
There is an urgent need to reduce poverty and inequality, to narrow the disparities among regions, to consolidate the peace and development process, to deal with the victims of the conflict, to improve a deficient infrastructure, and to modernize public administration and service delivery.
Key challenges for the private sector includes limited access to finance bottlenecks in infrastructure, quality of education, and identifying new export markets. Achieving a sustainable peace agreement is another priority factor for Colombia’s economic and social development. Colombian authorities are sure that ending violence is a long term challenge that will require efforts from several administrations.
The new Country Partnership Strategy (CPS), which covers the period from July 2011 to June 2016, is based on an enhanced approach that prioritizes the achievement of results, in close alignment with Colombia’s National Development Plan. To that end it incorporates a service package (including financial, analytic and technical assistance services, among others) that leaves behind the traditional project-based approach in order to contribute –in a more selective and efficient way– to the government’s efforts to reach a more equitable and just society.
These activities form part of a comprehensive package of services centered around three strategic themes:
Strategic Elements of the CPS with Colombia 2012-2016
1. Expanding opportunities for social prosperity via enhancements in social promotion, education access and quality, improvements of performance of social services and citizen security.
2. Promoting sustainable growth with greater climate change resilience, through improvements in urban development, enhanced disaster risk management, and improved environmental management.
3. Encouraging inclusive growth with greater productivity, through a better management of fiscal, financial and social risks, greater public sector efficiency, and improved productivity and innovation.
The focus of the work in this area has been on improving the economy’s competitiveness, strengthening the financial system, developing capital markets, and promoting infrastructure development.
• IBRD’s financial response to the crisis was rapid and significant. • In the area of competitiveness, lending was buttressed by substantial technical assistance. • In the area of agriculture and rural development, the program includes the support to small farmer organizations • The Bank played a key coordination and supportive role was in the updating o f poverty measures. • The Bank raised the awareness o f the human challenges confronted by Colombians affected by violence through a unique publication, “Voices.” The book contained stories of the experiences o f individuals directly touched by the conflict.
As a middle-income country, Colombia has the third-largest Bank portfolio in the region behind Mexico and Brazil. And the 7th largest portfolio in the IBRD (measured by level of exposure).
The priorities of the CPS include advances in economic progress specifically focused on the poorest sectors, as well as improving the government’s operational efficiency and transparency.
The Bank supports Colombia’s efforts to reduce poverty and increase economic growth.
This includes a US$500 million development policy loan (DPL) on Promoting an Inclusive, Equitable and Efficient Social Protection System, which main objective is to consolidate past gains and support the reform agenda in areas that need strengthening and consolidation. The objective of this operation aims to strengthen an inclusive, equitable and efficient social protection system.
Some of the characteristics of the current portfolio include:
Fiscal year 2011 closed with US$315 million in approvals.
Total commitments of US$ 2,044 million by June 30, 2011.
Colombian Government total debt at the end of FY11 US$ 7.6 billion.
50 approved projects and 46 analytical studies between 2003 and June 2011.
US$500 millions on disbursements at the end of Fiscal Year 2011
With 22 projects, covering a wide variety of sectors (infrastructure, education, social protection, peace, rural development, environment, governance and budget support), the Bank has built a solid basis in all pillars of the CPS. The grants portfolio has also increased in recent months with 50 active grants and a total of more than US $60 million from various donor sources.
Among them:
Mainstreaming Sustainable Cattle Ranching – US$7million project which main objective is promote the adoption of environment-friendly Silvopastorial Production Systems (SPS) for cattle ranching in Colombia's project areas, to improve natural resource management, enhance the provision of environmental services (biodiversity, land, carbon, and water), and raise the productivity in participating farms.
Second Student Loan Support Project, APL Phase I: US$300 million loan to support the Colombian Institute of Educational Credit and Technical Studies Abroad (ICETEX) finances the access to higher education by students from low-income families.
The ICETEX has put special emphasis on those students that enroll in technical and technological post-secondary education programs.
The educational scholarships allow partial payments at very low interest rates during the period of study, one-year grace period after graduation, a long (but flexible) maturity period of up to 22 years, subsidy of interest rate for the neediest students, advance payments without penalties, the option to postpone any payment for up to two semesters and the option to restructure the loan.
Peace and Development Project: US$30 million aimed at increasing the assets of the vulnerable population in order to reduce displacement risks and restore the livelihoods and social fabric of 20,000 households that are currently displaced by the civil conflict.
Justice Services Strengthening, APL Phase I- US$20 million for Colombia to strengthen the capacity of the Judiciary and the Ministry of Interior and Justice (MIJ) to deliver timely, efficient, effective and quality dispute resolution services to citizens.
Integrated Mass Transit Systems: US$250 million to develop high quality and sustainable rapid transit systems in large and medium cities in Colombia, in order to improve mobility between the most strategic public transportation corridors, as well as improving access for poor people through fare integration.
International Finance Corporation(IFC) IFC is the institution within The World Bank Group which promotes sustainable development for the private sector in development countries. The IFC’s strategy in Colombia is focused in underpinning the essential sectors for the social and economic development, which includes infrastructure, health, education, and public and private associations, to build harbors, roads and airports. The IFC supports modernization and expansion of the Colombian enterprises and encourages access to financing for the micro, small, and medium-sized enterprises. Through their advisory services, the IFC develops programs for royalty management and improvement of their investment climate by simplifying regulation.
The IFC´s investment in the private sector in Colombia is already over US$ 900 million in strategic sectors, which puts Colombia in third place in IFC investments in Latin America, after Brazil and Argentina, and in eighth place among the 114 emerging economies in which IFC invests throughout the world. This shows how important is Colombia in terms of strategy for the entity. For further information, see:www.ifc.org/lac
Multilateral Investment Guarantee Agency(MIGA) MIGA has been working to promote both Colombian investments in neighboring countries and foreign investments in Colombia. The availability of MIGA guarantees is being marketed as a risk mitigation tool for investments in Colombia. MIGA also disseminates information on investment opportunities in Colombia.
Global Environmental Facility(GEF) GEF supports projects in the areas of biodiversity, climate change, international waters, land degradation, ozone depletion, and persistent organic pollutants.
Colombia still confronts important challenges that require major reforms if the country is to attain a higher, more sustainable and inclusive path of economic growth.
As a middle-income country, Colombia has the third-largest Bank portfolio in the region behind Mexico and Brazil. And the 7th largest portfolio in the IBRD (measured by level of exposure).
The educational scholarships allow partial payments at very low interest rates during the period of study, one-year grace period after graduation, a long (but flexible) maturity period of up to 22 years, subsidy of interest rate for the neediest students, advance payments without penalties, the option to postpone any payment for up to two semesters and the option to restructure the loan.
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