2014 Bogota Blog: Colombia Emerges as Latin America's Third-Largest Economy
The Andean country experienced high levels of foreign direct investment and continued GDP growth last year.
This year, Colombia rose to become Latin America’s third-largest economy and is on track to have the second-highest GDP growth rate among Pacific Alliance countries in 2014. Consulting group Capital Economics reported in March that the Andean country overtook Argentina as the region’s third-biggest economy, behind Brazil and Mexico.
Last year, Colombia’s GDP rose by 4.3 percent and is projected to increase by 4.7 percent in 2014, according to the government. The country also saw record-high levels of foreign direct investment (FDI). In 2013, Colombia received the fourth-largest amount of FDI in Latin America—amounting to nearly $17 billion, an 8 percent increase over the previous year.
Plus, other factors contribute to Colombia’s economic stability. Valerie Cerra, the International Monetary Fund’s mission chief for Colombia, said this week that last year the country saw robust job creation and a decline in unemployment rates to 9.7 percent—the lowest in a decade. Her comments followed an IMF report released this week on Colombia’s economy, which noted:
"A strong policy framework—anchored by an inflation-targeting regime, a flexible exchange rate, a structural fiscal balance rule, and effective financial supervision and regulation—has allowed the authorities to respond adequately to shocks and pursue effective demand management. As a result, real GDP grew at a pace of 4 percent and annual inflation averaged 2.7 percent in the last five years. The authorities have continued to improve the policy framework in recent years, by including a fiscal sustainability principle in the constitution; introducing a structural fiscal balance rule; overhauling the oil and mining royalties system; and implementing a comprehensive tax reform that replaced payroll taxes with a corporate income tax."
However, the report also highlights some remaining challenges, such as bridging the infrastructure gap and increasing social security coverage.
Editor's note: This post originally stated the Capital Economics information was released in February. It was released in March.