2023 US Investment Climate Statements (Part III): "Colombia continues to be an attractive destination for foreign investment in Latin America"

This is the third in a series of five articles examining the US Department of State’s latest report on investment prospects for Argentina, Mexico, Colombia, Spain, and Brazil
 

The latest 2023 Investment Climate Statements report from the US Bureau of Economic and Business Affairs sees great potential in the Colombian economy. Their analysis highlights "improving security conditions in metropolitan areas, a market of 51.8 million people, an abundance of natural resources, and an educated and growing middle class."
However, the report argues that President Gustavo Petro’s focus on domestic sovereignty in key areas of development has fostered "high levels of uncertainty within the private sector", despite direct foreign investment remaining strong.

Colombia’s solid GDP rise has been met with optimism: "The Colombian economy grew by 7.5% in 2022, the highest growth in the hemisphere among OECD countries and the second-highest growth rate within the OECD as a whole. This strong positive growth, for the second consecutive year, is a sign of economic stabilization after the disruptions caused by the COVID crisis and related social unrest."

Petro’s measures have had a considerable impact, according to the US Department of State: "The Colombian government passed a tax reform that came into effect in January 2023, seeking to reactivate the economy, generate employment, and contribute to the fiscal stability of the country. The government also plans health, labor, and pension reforms, which has caused some concerns among investors."

The administration "has made a concerted effort to develop efficient capital markets, attract investment, and create jobs; however, restrictions on foreign ownership in specific sectors still exist." In addition, the informal economy, which employs half of the workforce in urban areas and four-fifths in rural areas, still poses a problem, as per the report.

Another important aspect is related to the decrease in violence in the country. The report states: "Since the 2016 peace agreement between the government and the demobilized Revolutionary Armed Forces of Colombia (FARC), Colombia has experienced a significant decrease in terrorist activity." Nevertheless, "the presence of illicit economies run by armed groups, often entangled in legal supply chains in some parts of Colombia, presents a challenge to the development of reliable, sustainable livelihoods."