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- GDP (PPP):
- $527.6 billion
- 4.3% growth
- 4.1% 5-year compound annual growth
- $11,189 per capita
- Inflation (CPI):
- FDI Inflow:
Colombia’s economic freedom score is 71.7, making its economy the 28th freest in the 2015 Index. Its overall score is 1.0 point higher than last year, with improvements in six of the 10 economic freedoms, including investment freedom, freedom from corruption, and trade freedom. Recording its highest score ever in the 2015 Index, Colombia has solidified its ranking as the 2nd freest out of 29 countries in the South and Central America/Caribbean region.
Over the past five years, economic freedom in Colombia has risen by 3.7 points as reform has gained momentum. Impressive gains in market openness include double-digit improvements in both investment and financial freedom and an 8.0-point improvement in trade freedom.
Colombia’s relatively open economy has benefited from a petrochemical boom and diminished threat of risk as the government engages in talks with the militant group FARC. This has allowed greater fiscal flexibility while the government implements a reform program to open the country further to trade, investment, and financial flows. Corruption is perceived as widespread.
President Juan Manuel Santos, elected in 2010 and re-elected in 2014, has tried to distance himself from former President Alvaro Uribe. Uribe’s “democratic security” agenda significantly reduced crime and violence and reestablished the state’s presence in rural areas. Uribe also boosted business confidence. Santos has made peace talks with FARC and ELN guerrillas the centerpiece of his government. He has promised that guerrillas will be given no immunity, but the FARC leadership has stated that it will not spend a single day in jail. Santos faces the challenge of delivering peace while ensuring justice for victims of the FARC and ELN. Colombia’s economy depends heavily on exports of petroleum, coffee, and cut flowers. It has replaced Argentina as Latin America’s third-largest economy, surpassed only by Brazil and Mexico. Colombia is a founding member of the Pacific Alliance. Inflation is low, and the poverty rate is decreasing.
Settlement of the 50-year internal conflict could strengthen governance in large areas of Colombia, but drug trafficking and the violence and corruption that it engenders will continue to erode institutions. Corruption occurs at multiple levels of public administration. The courts have demonstrated a degree of independence from the executive, but the justice system remains compromised by corruption and extortion.
Colombia’s top individual income tax rate is 33 percent, and its top corporate income tax rate is 25 percent. Other taxes include a value-added tax and a financial transactions tax. The overall tax burden is equivalent to 16.1 percent of domestic income. Total government expenditures account for 28.3 percent of the domestic economy, and public debt equals 32 percent of gross domestic product.
Incorporating a business takes fewer than 10 procedures, with no paid-in minimum capital required, but completing licensing requirements remains time-consuming. The non-salary cost of hiring a worker is moderate, and regulation of work hours is relatively flexible. In 2014, the government reduced subsidies to coffee farmers in light of higher market prices. Other state subsidies remain below regional averages.
The average tariff rate is 4.4 percent. Colombia is a member of the Pacific Alliance with Chile, Costa Rica, Mexico, and Peru. Foreign and domestic investors are generally treated equally under the law. Following a decade of significant consolidation, private institutions dominate the growing financial sector. Credit is allocated on market terms, and foreign firms receive equal treatment. Access to long-term financing can be difficult.