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Colombia 2002-2013

This document summarizes key economic and social indicators in Colombia from 2002-2013 under the administrations of Alvaro Uribe and Juan Manuel Santos. It shows that security, investment, and social policies implemented during the Uribe administration led to improved confidence, economic growth, and reductions in poverty and violence. GDP and exports increased substantially while unemployment, poverty, homicides, and kidnappings decreased significantly from 2002 levels. Colombia transitioned from a fragile state in 2002 to a stable country with strong growth and investment under the leadership and policies of Presidents Uribe and Santos.

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 Colombia: 2002-2013 Remarks by Alvaro Uribe November 2013
The Colombian evolution Uribe Administration Santos Administration Indicator 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Nominal GDP US$ billion 115 143 169 202 224 231 276 311 377 386 GDP Real Growth Y/y% 4.7 5.7 6.9 7.5 2.5 0.3 4.7 5.9 4.0 3.9 Nominal Fiscal Balance % GDP -1.0 0 -0.7 0 0.2 -2.7 -3.1 -2.1 0 -1.0 Central Government Balance %GDP -4.4 -4.7 -4.1 -3.4 -2.7 -2.3 -4.1 -3.7 -2.4 -2.4 Unemployment 12.1 10.3 11.8 9.5 9.0 12 11 10 9 9 Current Account Balance % GDP -1.0 -1.3 -1.7 -2.8 -3.0 -2.2 -3.2 -3.2 -3.3 -3.4 Trade Balance US Million -17 -14 -1.7 -2.9 -2.0 -45 -967 -93 781 -1614 FDI US Million 2.739 10.192 6.295 9.028 10.596 7.207 6.760 13.234 15.900 13.000 External Reserves 12.149 14.100 15.000 20.000 23.282 24.517 26.900 31.400 37.400 41.000 Government Debt % GDP 46.7 42.7 39.2 35.3 35.8 38.1 37.5 37.7 36.5 36.5
The triggers of the Colombian transformation
Colombia’s Picture in 2002 Security 28.837 homicides 2.882 kidnappings 69 homicides per 100.000 habitants 1.645 terrorist attacks 350 mayors out of their municipalities 158 municipalities without police Economy Average Economic Growth 1994-2001: 2.1% GDP per Capita: US$2.377 Investment as % of GDP: 16.5% Exports: US$11.975 million FDI: US$2.100 million Inflation: 6.99% Fiscal balance: -3.2% Social Unemployment: 16.2% Health Coverage: 25 million Colombians Pension affiliates: 4.5 million Poverty: 57% Education Coverage: Primary 97%, High school: 57%, University: 24% Mobil Phone Lines: 4.6 million Internet coverage: 1.9 million Eleven years ago Colombia was a fragile state… The Colombian Paradox: a long and stable democracy in a permanent threat from terrorist groups, drug dealers and organized crime…
Colombia faced an Confidence Deficit Confidence Deficit The elusive quest for peace Many governments exhausted all their political capital attempting to reach peace through political dialogue…the result was military strengthening from illegal armed groups and a rapid growth in their criminal activities (68% thought the country was going in a negative track) Terrorist Groups (Guerrillas and Paramilitaries) had created a sense of defeat in the Colombian people Fear impacted in the Colombian people Mindset The lack of investment The drain of human capital The sense of danger in Colombian roads The expansion of massive kidnappings created an emotional domino effect
Facing the problem VISION Our vision was to build a Comunitary State:  CONFIDENCE was our main goal  Without Confidence: • No investment • Unemployment • Lack of opportunities • Brain Drain (Young people wanted to leave without a return ticket)  Three main Policies:  Democratic Security  Investment with fraternity  Social cohesion  For the First Time a National Development Agenda had Security as a driver of Development (Security = Investment = Social Cohesion)  No more a debate between left and right
Policy Vision WE INTRODUCED A COMPREHENSIVE POLICY FRAMEWORK… Social Cohesion Investment with fraternity Democratic Security Confidence Security as a Democratic Value Security for all Confront all criminal organizations Security without martial law Security with freedoms and human rights protection Security in coordination with the people Investment Target Security: Human Legal Political Sound Macroeconomics Incentives Access to markets Competitiveness factors: •Infrastructure •Regulation •Connectivity •Logistical chain Social Cohesion Highest quality in education Universal healthcare Access to Finance Stable Jobs and entrepreneurial spirit Connectivity
Security as a development cornerstone Innovation in Security Recovering Security 1. Macro Vision and Detailed Follow up: • Daily commitment to monitor security in every region • Citizens had the President Mobile Phone Number 2. Early Victories : • Road caravans • Massive kidnappings are over 3. Strategic Force Integration • All Forces working together • Share success 4. National Informant Network • Citizens became active in denouncing criminals • Reward Mondays 5. Commander in Chief assumes responsibility • The Granda Story • Operation Fenix: Fire the Air Force Commander • Operation Jaque: The pressure for a humanitarian exchange and the final outcome 6. Smart Weapons: • The importance of strategic warfare 7. Extradition: • The decision to extradite the Paramilitary Kingpins
A viable country for long term investment We made Colombia a viable country for FDI due to a multiplicity of factors… Structural Elements Political Stability Sound Macroeconomic Management Human, Political and Legal Security Competitive elements Investment incentives Access to markets (Canada, EU, EEUU, MERCOSUR, etc) Free Trade Zones Logistical advantages Legal stability agreements Comparative elements Investment Grade Stable institutions Growing internal demand Complementary Human Capital New World Class Sectors incentives Strong financial system
Social Cohesion was our ultimate objective Social Cohesion National Learning System –SENA-Conditional Education Coverage and quality Cash Transfers Access to Finance (Banca de Oportunidades, Micro-Credit) Financial Sector Downscaling Public Utilities Coverage Rural Development Breaking the communication and technology gap
Oil and gas a success case In 2002 it was believed that by 2009 Colombia oil production will not be able to attend national demand In 2003 the oil and gas sector restructuring was designed ECOPETROL undertook a strategy shift to become a more competitive and professional corporation The National Hydrocarbon Agency was created From 2002 to 2010 successful exploration passed from 40% to 61.4% Between 2002 and May 2010 447 new fields were explored In 2007 ECOPETROL was capitalized by 10% through local capital markets. 486.000 Colombians bought shares Between 2002 and 2010 341 exploration and production contracts were signed Seismic exploration in the country (Onshore, Offshore and 2 dimensions) increased by more than 250% Colombia is currently close to produce 1 million oil barrels per day Success triggers Security: Investment, exploration Government Reform: New ECOPETROL and ANH Investment target policies: New players and new exploration and production contracts The case of the oil sector in Colombia: Change is possible
Results oriented administration Indicator 2002 2010 Homicides 28.838 15.000 Kidnappings 2.882 228 Homicides per 100K Habitants 69 35 Terrorist attacks 1.645 250 Municipalities without mayors presence 350 0 Municipalities without police 158 0 Our policy achievements generated a turning point Indicator 2002 2010 Average Economic Growth 2.1% 4.3% GDP per Capita 2377 5300 Invest % GDP 16.5% 24.6% Exports US$ 11.000 US$ 39.000 FDI US$ 2.100 US$ 7.000 Inflation 6.9% 2.5% Indicator 2002 2010 Unemployment 16.2% 11.6% Health Coverage 25.1 million 43.1 million Pension affiliates 4.5 million 7.1 million Poverty 57% 38% Education coverage (Primary, Hs, University) 97% 57% 24% 100% 79.4% 35.5% Mobile phone users 4.6 million lines 41 million lines • Reached the highest economic growth in more than 20 years • The largest education, health and connectivity coverage in its history • The largest poverty reduction in Colombian history • The biggest FDI rates in history • The lowest violence records in 30 years • Expanded the middle class • Highest exports in Colombian History • Paramilitary groups dismantled • FARC structure severely dismantled • Per Capita income more than doubled
Colombia’s investment climate and public-private relations
Colombia has mixed results in Business Climate Indicators  Colombia in comparison to the Region best and worst performers… Indicator Brazil Chile Mexico Colombia Peru Venezuela Starting a Business (Proceadures) 15 8 6 9 6 17 Starting a Business (Days) 120 22 9 14 27 141 Days for Construction Permits 411 155 105 50 188 395 Hours devoted to pay taxes (Hours per year) 2.600 316 404 208 380 864 Days to enforce a contract 616 480 415 1.346 428 510 Enforcing Contracts (Cost % Claim) 16.5 28.6 32 47.9 35.7 43.7 Cost to export US$ per Container US$1.730 US$745 US$1.420 US$1.770 US$860 US$2.590
Colombia in the Doing Business Report Colombia is one of the best regional performers in the Doing Business Report. Its performance has been consistent over the last four years, although a reduction in the ranking has been the characteristic Country DB 2013 DB 2012 DB2011 DB2010 Mexico 48 53 35 41 Peru 43 41 36 46 Colombia 45 42 39 38 Chile 37 39 43 53 Argentina 124 113 115 113 Uruguay 89 90 124 122 Ecuador 139 130 130 127 Brazil 130 126 127 124 Venezuela 180 177 172 170
Colombia risk perception Colombia is perceived by the financial markets as a low risk country…
Public – Private sector relations in Colombia The Colombian government and the private sector have been working closely in strategic areas… Security Partner with communities to denounce criminal activities. Financial services Forest Guards Families Cajas de compensación Cooperatives Infrastructure Work with the private sector to expand telecommunication coverage Banca de oportunidades (Corresponsales no bancarios) Dorado Airport and others Second Generation road concessions Energy Port Development in Cartagena, Barranquilla and others Ecopetrol IPO ANH with a new partnership vision Mining Concessions
Characteristics of the Colombian entrepreneur Colombia’s private sector leadership counts with valuable trends and principles… Highly prepared to deal with adversity Trends Well educated professional Result based manager Socially Conscious Politically non radical Policy awareness Supports access to markets through FTA’s
Public –Private institutional governance The relation between public and private sector has positive characteristics that favor a sustainable institutional Characteristics ANDI and other representative groups actively participate in policy Open policy dialogue with representative groups discussions Government executes market oversight through specialized agencies Government and private sector discuss employment policies like minimum wage, among others The National training system is managed according to private sector demand Congress and the Judicial System have respect towards privates sector initiative environment…
Investor confidence policies 2002-2013 The relation between public and private sector has positive characteristics that favor a sustainable institutional Investor Confidence Free Trade Zones Tax Incentives Legal stability agreements Human and infrastructure security Dialogue with investors Constant Market development reforms Access to markets Drop double taxation agreements Internal competitiveness agenda environment…
Colombia’s current challenges and opportunities
Colombia’s main challenges Colombia faces challenges that will determine the future of institutional and investment Security Maintain Macro-Vision and Micro-Management Continue dismantling all terrorist organizations Continue dismantling drug cartels apparatus Strengthen Citizen Security agendas with local authorities Economic Face new trends of currency appreciation Maintain and increase FDI flows (Security, incentives and stability rules) Fiscal Policy to face new countercyclical challenges Increase tax collections Expand new trade markets through FTA’s Social Cohesion Fight labor informality and create quality jobs Insure education and health quality Expand vocational training coverage Create Entrepreneurial Family Transfers program Political Judicial reform Strengthen Democratic Center Improve local institutional capacity New law implementation (Victims and land) Prevent the emergence of populist movements climate…
Economic sectors with Growth Potential There are 4 sectors with a big potential among many other… Oil and gas: Colombia has been growing its production reaching 1 million barrels per day. New exploration will expand… Mining: Colombia’s mining potential continues to grow expanding opportunities in sectors like emeralds, gold, cooper, nickel, Iron, coal, among others Agribusiness: Food demand in the world would trigger new opportunities in the Colombian rural areas. These opportunities ought to be faced with a genuine agribusiness model that integrates small producers and industrialized structures Services and creative industries: The constant expansion of the middle class and the per capita income will boost the service sector and turn the country into a larger consumer of creative content in T.V, Cinema, magazine, radio, arts, jewelry, design, etc. The Big Four Sectors
Opinions about specific sectors Infrastructure Requires a profound interaction with local capital markets in order to achieve long term financing Access to finance for infrastructure development is critical Government Procurement must turn more expedite The sector has a growing potential for investment, considering Colombia's growth and the need to improve logistical networks Oil and mining Environmental licenses must be more expedite without affecting effective oversight. Labor conditions and social investment are crucial for the sector to build a community in areas of operation. Sector must become a leader in environmental standards. Partnership agreements with the government are positive operational conditions. Creative sectors Advertising services exports are 1.5 times bigger that tobacco exports Creative services exports are bigger than natural gas exports Arts and craft exports are bigger than electrical energy exports Content consumption will boost advertising, music, animation and other industries Reflections on some market conditions…
Economic Growth Colombia must reach a growth rate above 5% to achieve its social cohesion goals Economic growth will require structural reforms in the taxing, investment, pension, judicial and labor system Colombia requires and significant constant investment rate to expand markets and finance its social safety net Certainty will be the mantra of long term investment. Certainty depends on the institutional architecture of the country
Peace talks in Colombia 1. Defining peace:  Colombian National Seal has two important concepts: Liberty and Order  A peaceful country requires the right exercise of individual liberties and a general environment of institutional and social order  In 2002 Colombia lacked both Concepts:  28.000 homicides  2.800 Kidnappings  1.645 terrorist attacks  350 Municipalities without mayors  Our Democratic Security Policy was built to restore institutional order and protect the exercise of individual liberties. It was a policy for peace not a policy for war. The great evidence is that by 2010 homicides were reduced 50%, kidnappings 80% and terrorist attacks by 90%
Peace talks in Colombia 2. Our Democratic Security Policy was based on Strong Hand and Big Heart  We conceived Universal Demobilization for all members of illegal armed groups  We confronted all illegal armed groups with the same determination and open the door for peace processes. Under clear conditions defined in the Peace, Truth and Reparation Law  The peace process with AUC was based on:  Cease of illegal activities  International verification (OAS)  Incarceration  Anyone who did not cooperate or continued with illegal activities will lose the privileges and be extradited if any extradition request existed  No eligibility for those accused for crimes against humanity or crimes different than political delinquent practices
Peace talks with FARC  Prevent Big Failures today:  Negotiation without seizure of criminal activities  Negotiating Policy with weapons on the table clearly affects Colombian Democratic Values.  Allowing political participation to individuals responsible for crimes against humanity is a wrong message for our democracy  No imprisonment  Allowing dictatorial regimes that affect liberties and support FARC, as guarantors is a bad signal
Peace talks in Colombia  The Peace process that I would support: What Colombia thinks 68% of Colombians are not willing to pardon crimes committed by terrorist organizations 78% of Colombians are against no prison sanctions for terrorists 72% of Colombians are against political participation by terrorist groups My opinions No impunity for crimes against humanity Justice, peace and reparation Immediate release of kidnapped people Unilateral cease of criminal activities. My opinions International verification of disarmament No policy agenda on the table Reinsertion agenda
Colombia in the regional context
Regional opportunities Policy Changes since 1980 match four range of opportunities Population Close to 600 million people Average age between 24 and 28 Per Capita Income in PPP close to US$10.000 Poverty reduction 64% of our population is a expanding middle class During the last decade 40 million people have left the poverty line Life expectancy has increased from 65 to 75 years Child mortality has been reduced by 50 per cent Literacy rates are above 94%. Mobile phone penetration has increased by 78 per cent Internet access has increased by 33% Healthcare coverage has increased by 50 percent water and sanitation coverage has reached 80%. Commodities in time of Demand 10 percent of the World oil reserves 6 percent of the World Gas reserves Almost 50 percent of the World cooper reserves 50 per cent of the World silver reserves 13% of the World iron reserves 26% of the World fertile land 24% of the World beef supply Bio Reserves 20 per cent of the World Biodiversity is concentrated in the Amazon ring Almost 50% of the World potable water supply 57% of the world primary forest
The model of transformation The change process is a consequence of the consistency, congruence and sense of urgency that a group of countries have adopted as their policy cornerstone. Brazil, Mexico, Colombia, Chile, Peru and Uruguay represent 70 per cent of the region’s population and 75% of the regional GDP. The strengthening of Liberal Democracy The adoption of an institutional Framework in favor of foreign and national investment The construction of a sound and sustainable social safety net The expansion of export markets and the commercial integration with the World (FTA’s) Construction of strategic infrastructure Better regulatory environment A sound Macroeconomic Administration driven by fiscal and monetary prudence A public administration driven by results The consolidation of an innovation agenda leaded by an improvement in education A well capitalized financial sector and the constant expansion of financial services Today countries like Panama, Dominican Republic, Costa Rica, Salvador, Guatemala, Honduras, Paraguay, as well as most of the Caribbean States, are following that line of behavior
The two regions  The regional current Political But not all the socio-economic models are a success story… Map is a “Tale of two cities” like the Charles Dickens Book… (The ALBA ALBA and the non Alba Model) (Leaders: Venezuela, Ecuador, Bolivia, Nicaragua and Cuba) Anti-U.S Anti-Free Trade Lack of investment Confidence Weak institutions Political Insecurity Ideology driven countries Political Polarization Modern Democratic Center Countries (Brazil, Colombia, Peru, Chile, México, Uruguay, Paraguay, Panamá, Republic Dominican, Costa Rica, etc) Cooperation with the U.S. Pro Free Trade Investment Confidence Independent Institutions Political Stability State Long Term Policies and Mgt by Results Organized Party Systems The Democratic Center takes the lead: • Investment grade countries are in this Group: Mexico, Brazil, Chile, Colombia, Peru and Panama • Countries with more market access through FTA’S are in this group • Countries with more FDI are in this group • Countries with more Middle Class Expansion are in this group. • Better fiscally sustainable social programs: Chile, Mexico, Brasil and Colombia Only the group of Countries in the Democratic Center will become the regional active participants of the Emerging Markets Boom…some of the ALBA Members will see some benefits, but without solid long term development agendas, they will face transitory profits…
The Alba failure Bad policies are deteriorating the political and economic context in the ALBA Countries…. Venezuela Inflation Reduction in oil production Brain drain Social conflict Insecurity Private initiative in Jeopardy Bolivia Loss of citizen support Quality of live deterioration Lack of private initiative Loss in private investment Ecuador Press Liberties in danger Lack of long term private investment Political stability at the expense of higher tensions Oil driven political power Nicaragua Institutional deterioration (Reelection without constitutional authority) Corruption Private initiative: Uncertainty Shameful Chavistas
The regional challenges Despite the changes that have been achieved some important challenges remain… Building Modern Democracies (5 parameters) Security Freedoms and Private Initiative Independent Institutions Social Cohesion People Participation A dynamic Economic transformation Investment Target Policies Maintaining Fiscal and Monetary transformation Integrate commodity and knowledge based economies Expand export markets Create an Entrepreneurship culture (Innovation agenda) Closing Social Gaps Improve education (quality, coverage, vocational) Insure Universal Healthcare Formal Job creation Access to Finance Climate Change, Environment and Energy Sustainability Expand renewable sources Install an energy efficiency conscience Improve waste management Protect the Amazon Ring Reduce Co2 Emissions
Colombia’s great opportunity Colombia has conditions that make the country a stable, credible and profitable investment destination Institutional Stability Political Center prevent radicalism and populism Economic Policy has been stable, credible and transparent Pacific Alliance emerges as an opportunity Stable trade with new partners through FTA’s Investment grade Low risk perception Solid financial system Fiscally viable social agenda Governance guaranteed by institutional independence
The Human Development Index for the largest economies in the region… Country Human Development Index - UNDP ‘02 ‘03 ‘04 ‘05 ‘06 ’07/‘08 ‘09 ‘10 ‘11 ‘12 ‘13 ARGENTINA 34 34 34 34 36 38 49 46 45 N/A 45 BRAZIL 73 65 72 63 69 70 75 73 84 N/A 85 CHILE 38 43 43 37 38 40 44 45 44 N/A 40 COLOMBIA 68 64 73 69 70 75 77 79 87 N/A 91 ECUADOR 93 97 100 82 83 89 80 77 83 N/A 89 MEXICO 54 55 53 53 53 52 53 56 57 N/A 61 PERU 82 82 85 79 82 87 78 63 63 N/A 77 VENEZUELA 69 69 68 75 72 74 58 75 75 N/A 71 2000 2001 2002 2003 2004 2005 2007 2010 2011 2012 2012
Colombia remains stable in the Global Competitiveness Index… Country Global Competitiveness Report - WEF ‘02 ‘03 ‘04 ‘05 ‘06-‘07 ‘07-‘08 ‘08-‘09 ‘09-‘10 ‘10-‘11 ‘11-‘12 ‘12-‘13 13-14 ARGENTINA 64 78 74 76 70 85 88 85 87 85 94 104 BRAZIL 45 54 57 57 66 72 64 56 58 53 48 56 CHILE 24 28 22 27 27 26 28 30 30 31 33 34 COLOMBIA 61 63 64 58 63 69 74 69 68 68 69 69 ECUADOR 73 86 90 87 94 103 104 105 105 101 86 71 MEXICO 53 47 48 59 52 52 60 60 66 58 53 55 PERU 55 57 67 77 78 86 83 78 73 67 61 61 VENEZUELA 68 82 85 84 85 98 105 113 122 124 126 134
Colombia continues to be on the top 3 Latin American countries in the Doing Business Report… Country Doing Business – WB & IFC ‘06 ‘07 ‘08 ‘09 ‘10 ‘11 ‘12 ‘13 ARGENTINA 93 101 102 112 118 115 116 124 BRAZIL 122 121 126 127 129 127 128 130 CHILE 24 28 36 40 49 43 33 37 COLOMBIA 76 79 66 49 37 39 44 45 ECUADOR 120 123 133 133 138 130 134 139 MEXICO 62 43 42 55 51 35 53 48 PERU 78 65 53 65 56 36 43 43 VENEZUELA 144 164 175 178 177 172 179 180
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Colombia 2002-2013

  • 1.
     Colombia: 2002-2013 Remarks by Alvaro Uribe November 2013
  • 2.
    The Colombian evolution Uribe Administration Santos Administration Indicator 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Nominal GDP US$ billion 115 143 169 202 224 231 276 311 377 386 GDP Real Growth Y/y% 4.7 5.7 6.9 7.5 2.5 0.3 4.7 5.9 4.0 3.9 Nominal Fiscal Balance % GDP -1.0 0 -0.7 0 0.2 -2.7 -3.1 -2.1 0 -1.0 Central Government Balance %GDP -4.4 -4.7 -4.1 -3.4 -2.7 -2.3 -4.1 -3.7 -2.4 -2.4 Unemployment 12.1 10.3 11.8 9.5 9.0 12 11 10 9 9 Current Account Balance % GDP -1.0 -1.3 -1.7 -2.8 -3.0 -2.2 -3.2 -3.2 -3.3 -3.4 Trade Balance US Million -17 -14 -1.7 -2.9 -2.0 -45 -967 -93 781 -1614 FDI US Million 2.739 10.192 6.295 9.028 10.596 7.207 6.760 13.234 15.900 13.000 External Reserves 12.149 14.100 15.000 20.000 23.282 24.517 26.900 31.400 37.400 41.000 Government Debt % GDP 46.7 42.7 39.2 35.3 35.8 38.1 37.5 37.7 36.5 36.5
  • 3.
    The triggers ofthe Colombian transformation
  • 4.
    Colombia’s Picture in2002 Security 28.837 homicides 2.882 kidnappings 69 homicides per 100.000 habitants 1.645 terrorist attacks 350 mayors out of their municipalities 158 municipalities without police Economy Average Economic Growth 1994-2001: 2.1% GDP per Capita: US$2.377 Investment as % of GDP: 16.5% Exports: US$11.975 million FDI: US$2.100 million Inflation: 6.99% Fiscal balance: -3.2% Social Unemployment: 16.2% Health Coverage: 25 million Colombians Pension affiliates: 4.5 million Poverty: 57% Education Coverage: Primary 97%, High school: 57%, University: 24% Mobil Phone Lines: 4.6 million Internet coverage: 1.9 million Eleven years ago Colombia was a fragile state… The Colombian Paradox: a long and stable democracy in a permanent threat from terrorist groups, drug dealers and organized crime…
  • 5.
    Colombia faced anConfidence Deficit Confidence Deficit The elusive quest for peace Many governments exhausted all their political capital attempting to reach peace through political dialogue…the result was military strengthening from illegal armed groups and a rapid growth in their criminal activities (68% thought the country was going in a negative track) Terrorist Groups (Guerrillas and Paramilitaries) had created a sense of defeat in the Colombian people Fear impacted in the Colombian people Mindset The lack of investment The drain of human capital The sense of danger in Colombian roads The expansion of massive kidnappings created an emotional domino effect
  • 6.
    Facing the problem VISION Our vision was to build a Comunitary State:  CONFIDENCE was our main goal  Without Confidence: • No investment • Unemployment • Lack of opportunities • Brain Drain (Young people wanted to leave without a return ticket)  Three main Policies:  Democratic Security  Investment with fraternity  Social cohesion  For the First Time a National Development Agenda had Security as a driver of Development (Security = Investment = Social Cohesion)  No more a debate between left and right
  • 7.
    Policy Vision WEINTRODUCED A COMPREHENSIVE POLICY FRAMEWORK… Social Cohesion Investment with fraternity Democratic Security Confidence Security as a Democratic Value Security for all Confront all criminal organizations Security without martial law Security with freedoms and human rights protection Security in coordination with the people Investment Target Security: Human Legal Political Sound Macroeconomics Incentives Access to markets Competitiveness factors: •Infrastructure •Regulation •Connectivity •Logistical chain Social Cohesion Highest quality in education Universal healthcare Access to Finance Stable Jobs and entrepreneurial spirit Connectivity
  • 8.
    Security as adevelopment cornerstone Innovation in Security Recovering Security 1. Macro Vision and Detailed Follow up: • Daily commitment to monitor security in every region • Citizens had the President Mobile Phone Number 2. Early Victories : • Road caravans • Massive kidnappings are over 3. Strategic Force Integration • All Forces working together • Share success 4. National Informant Network • Citizens became active in denouncing criminals • Reward Mondays 5. Commander in Chief assumes responsibility • The Granda Story • Operation Fenix: Fire the Air Force Commander • Operation Jaque: The pressure for a humanitarian exchange and the final outcome 6. Smart Weapons: • The importance of strategic warfare 7. Extradition: • The decision to extradite the Paramilitary Kingpins
  • 9.
    A viable countryfor long term investment We made Colombia a viable country for FDI due to a multiplicity of factors… Structural Elements Political Stability Sound Macroeconomic Management Human, Political and Legal Security Competitive elements Investment incentives Access to markets (Canada, EU, EEUU, MERCOSUR, etc) Free Trade Zones Logistical advantages Legal stability agreements Comparative elements Investment Grade Stable institutions Growing internal demand Complementary Human Capital New World Class Sectors incentives Strong financial system
  • 10.
    Social Cohesion wasour ultimate objective Social Cohesion National Learning System –SENA-Conditional Education Coverage and quality Cash Transfers Access to Finance (Banca de Oportunidades, Micro-Credit) Financial Sector Downscaling Public Utilities Coverage Rural Development Breaking the communication and technology gap
  • 11.
    Oil and gasa success case In 2002 it was believed that by 2009 Colombia oil production will not be able to attend national demand In 2003 the oil and gas sector restructuring was designed ECOPETROL undertook a strategy shift to become a more competitive and professional corporation The National Hydrocarbon Agency was created From 2002 to 2010 successful exploration passed from 40% to 61.4% Between 2002 and May 2010 447 new fields were explored In 2007 ECOPETROL was capitalized by 10% through local capital markets. 486.000 Colombians bought shares Between 2002 and 2010 341 exploration and production contracts were signed Seismic exploration in the country (Onshore, Offshore and 2 dimensions) increased by more than 250% Colombia is currently close to produce 1 million oil barrels per day Success triggers Security: Investment, exploration Government Reform: New ECOPETROL and ANH Investment target policies: New players and new exploration and production contracts The case of the oil sector in Colombia: Change is possible
  • 12.
    Results oriented administration Indicator 2002 2010 Homicides 28.838 15.000 Kidnappings 2.882 228 Homicides per 100K Habitants 69 35 Terrorist attacks 1.645 250 Municipalities without mayors presence 350 0 Municipalities without police 158 0 Our policy achievements generated a turning point Indicator 2002 2010 Average Economic Growth 2.1% 4.3% GDP per Capita 2377 5300 Invest % GDP 16.5% 24.6% Exports US$ 11.000 US$ 39.000 FDI US$ 2.100 US$ 7.000 Inflation 6.9% 2.5% Indicator 2002 2010 Unemployment 16.2% 11.6% Health Coverage 25.1 million 43.1 million Pension affiliates 4.5 million 7.1 million Poverty 57% 38% Education coverage (Primary, Hs, University) 97% 57% 24% 100% 79.4% 35.5% Mobile phone users 4.6 million lines 41 million lines • Reached the highest economic growth in more than 20 years • The largest education, health and connectivity coverage in its history • The largest poverty reduction in Colombian history • The biggest FDI rates in history • The lowest violence records in 30 years • Expanded the middle class • Highest exports in Colombian History • Paramilitary groups dismantled • FARC structure severely dismantled • Per Capita income more than doubled
  • 13.
    Colombia’s investment climateand public-private relations
  • 14.
    Colombia has mixedresults in Business Climate Indicators  Colombia in comparison to the Region best and worst performers… Indicator Brazil Chile Mexico Colombia Peru Venezuela Starting a Business (Proceadures) 15 8 6 9 6 17 Starting a Business (Days) 120 22 9 14 27 141 Days for Construction Permits 411 155 105 50 188 395 Hours devoted to pay taxes (Hours per year) 2.600 316 404 208 380 864 Days to enforce a contract 616 480 415 1.346 428 510 Enforcing Contracts (Cost % Claim) 16.5 28.6 32 47.9 35.7 43.7 Cost to export US$ per Container US$1.730 US$745 US$1.420 US$1.770 US$860 US$2.590
  • 15.
    Colombia in theDoing Business Report Colombia is one of the best regional performers in the Doing Business Report. Its performance has been consistent over the last four years, although a reduction in the ranking has been the characteristic Country DB 2013 DB 2012 DB2011 DB2010 Mexico 48 53 35 41 Peru 43 41 36 46 Colombia 45 42 39 38 Chile 37 39 43 53 Argentina 124 113 115 113 Uruguay 89 90 124 122 Ecuador 139 130 130 127 Brazil 130 126 127 124 Venezuela 180 177 172 170
  • 16.
    Colombia risk perception Colombia is perceived by the financial markets as a low risk country…
  • 17.
    Public – Privatesector relations in Colombia The Colombian government and the private sector have been working closely in strategic areas… Security Partner with communities to denounce criminal activities. Financial services Forest Guards Families Cajas de compensación Cooperatives Infrastructure Work with the private sector to expand telecommunication coverage Banca de oportunidades (Corresponsales no bancarios) Dorado Airport and others Second Generation road concessions Energy Port Development in Cartagena, Barranquilla and others Ecopetrol IPO ANH with a new partnership vision Mining Concessions
  • 18.
    Characteristics of theColombian entrepreneur Colombia’s private sector leadership counts with valuable trends and principles… Highly prepared to deal with adversity Trends Well educated professional Result based manager Socially Conscious Politically non radical Policy awareness Supports access to markets through FTA’s
  • 19.
    Public –Private institutionalgovernance The relation between public and private sector has positive characteristics that favor a sustainable institutional Characteristics ANDI and other representative groups actively participate in policy Open policy dialogue with representative groups discussions Government executes market oversight through specialized agencies Government and private sector discuss employment policies like minimum wage, among others The National training system is managed according to private sector demand Congress and the Judicial System have respect towards privates sector initiative environment…
  • 20.
    Investor confidence policies2002-2013 The relation between public and private sector has positive characteristics that favor a sustainable institutional Investor Confidence Free Trade Zones Tax Incentives Legal stability agreements Human and infrastructure security Dialogue with investors Constant Market development reforms Access to markets Drop double taxation agreements Internal competitiveness agenda environment…
  • 21.
  • 22.
    Colombia’s main challenges Colombia faces challenges that will determine the future of institutional and investment Security Maintain Macro-Vision and Micro-Management Continue dismantling all terrorist organizations Continue dismantling drug cartels apparatus Strengthen Citizen Security agendas with local authorities Economic Face new trends of currency appreciation Maintain and increase FDI flows (Security, incentives and stability rules) Fiscal Policy to face new countercyclical challenges Increase tax collections Expand new trade markets through FTA’s Social Cohesion Fight labor informality and create quality jobs Insure education and health quality Expand vocational training coverage Create Entrepreneurial Family Transfers program Political Judicial reform Strengthen Democratic Center Improve local institutional capacity New law implementation (Victims and land) Prevent the emergence of populist movements climate…
  • 23.
    Economic sectors withGrowth Potential There are 4 sectors with a big potential among many other… Oil and gas: Colombia has been growing its production reaching 1 million barrels per day. New exploration will expand… Mining: Colombia’s mining potential continues to grow expanding opportunities in sectors like emeralds, gold, cooper, nickel, Iron, coal, among others Agribusiness: Food demand in the world would trigger new opportunities in the Colombian rural areas. These opportunities ought to be faced with a genuine agribusiness model that integrates small producers and industrialized structures Services and creative industries: The constant expansion of the middle class and the per capita income will boost the service sector and turn the country into a larger consumer of creative content in T.V, Cinema, magazine, radio, arts, jewelry, design, etc. The Big Four Sectors
  • 24.
    Opinions about specificsectors Infrastructure Requires a profound interaction with local capital markets in order to achieve long term financing Access to finance for infrastructure development is critical Government Procurement must turn more expedite The sector has a growing potential for investment, considering Colombia's growth and the need to improve logistical networks Oil and mining Environmental licenses must be more expedite without affecting effective oversight. Labor conditions and social investment are crucial for the sector to build a community in areas of operation. Sector must become a leader in environmental standards. Partnership agreements with the government are positive operational conditions. Creative sectors Advertising services exports are 1.5 times bigger that tobacco exports Creative services exports are bigger than natural gas exports Arts and craft exports are bigger than electrical energy exports Content consumption will boost advertising, music, animation and other industries Reflections on some market conditions…
  • 25.
    Economic Growth Colombiamust reach a growth rate above 5% to achieve its social cohesion goals Economic growth will require structural reforms in the taxing, investment, pension, judicial and labor system Colombia requires and significant constant investment rate to expand markets and finance its social safety net Certainty will be the mantra of long term investment. Certainty depends on the institutional architecture of the country
  • 26.
    Peace talks inColombia 1. Defining peace:  Colombian National Seal has two important concepts: Liberty and Order  A peaceful country requires the right exercise of individual liberties and a general environment of institutional and social order  In 2002 Colombia lacked both Concepts:  28.000 homicides  2.800 Kidnappings  1.645 terrorist attacks  350 Municipalities without mayors  Our Democratic Security Policy was built to restore institutional order and protect the exercise of individual liberties. It was a policy for peace not a policy for war. The great evidence is that by 2010 homicides were reduced 50%, kidnappings 80% and terrorist attacks by 90%
  • 27.
    Peace talks inColombia 2. Our Democratic Security Policy was based on Strong Hand and Big Heart  We conceived Universal Demobilization for all members of illegal armed groups  We confronted all illegal armed groups with the same determination and open the door for peace processes. Under clear conditions defined in the Peace, Truth and Reparation Law  The peace process with AUC was based on:  Cease of illegal activities  International verification (OAS)  Incarceration  Anyone who did not cooperate or continued with illegal activities will lose the privileges and be extradited if any extradition request existed  No eligibility for those accused for crimes against humanity or crimes different than political delinquent practices
  • 28.
    Peace talks withFARC  Prevent Big Failures today:  Negotiation without seizure of criminal activities  Negotiating Policy with weapons on the table clearly affects Colombian Democratic Values.  Allowing political participation to individuals responsible for crimes against humanity is a wrong message for our democracy  No imprisonment  Allowing dictatorial regimes that affect liberties and support FARC, as guarantors is a bad signal
  • 29.
    Peace talks inColombia  The Peace process that I would support: What Colombia thinks 68% of Colombians are not willing to pardon crimes committed by terrorist organizations 78% of Colombians are against no prison sanctions for terrorists 72% of Colombians are against political participation by terrorist groups My opinions No impunity for crimes against humanity Justice, peace and reparation Immediate release of kidnapped people Unilateral cease of criminal activities. My opinions International verification of disarmament No policy agenda on the table Reinsertion agenda
  • 30.
    Colombia in theregional context
  • 31.
    Regional opportunities PolicyChanges since 1980 match four range of opportunities Population Close to 600 million people Average age between 24 and 28 Per Capita Income in PPP close to US$10.000 Poverty reduction 64% of our population is a expanding middle class During the last decade 40 million people have left the poverty line Life expectancy has increased from 65 to 75 years Child mortality has been reduced by 50 per cent Literacy rates are above 94%. Mobile phone penetration has increased by 78 per cent Internet access has increased by 33% Healthcare coverage has increased by 50 percent water and sanitation coverage has reached 80%. Commodities in time of Demand 10 percent of the World oil reserves 6 percent of the World Gas reserves Almost 50 percent of the World cooper reserves 50 per cent of the World silver reserves 13% of the World iron reserves 26% of the World fertile land 24% of the World beef supply Bio Reserves 20 per cent of the World Biodiversity is concentrated in the Amazon ring Almost 50% of the World potable water supply 57% of the world primary forest
  • 32.
    The model oftransformation The change process is a consequence of the consistency, congruence and sense of urgency that a group of countries have adopted as their policy cornerstone. Brazil, Mexico, Colombia, Chile, Peru and Uruguay represent 70 per cent of the region’s population and 75% of the regional GDP. The strengthening of Liberal Democracy The adoption of an institutional Framework in favor of foreign and national investment The construction of a sound and sustainable social safety net The expansion of export markets and the commercial integration with the World (FTA’s) Construction of strategic infrastructure Better regulatory environment A sound Macroeconomic Administration driven by fiscal and monetary prudence A public administration driven by results The consolidation of an innovation agenda leaded by an improvement in education A well capitalized financial sector and the constant expansion of financial services Today countries like Panama, Dominican Republic, Costa Rica, Salvador, Guatemala, Honduras, Paraguay, as well as most of the Caribbean States, are following that line of behavior
  • 33.
    The two regions  The regional current Political But not all the socio-economic models are a success story… Map is a “Tale of two cities” like the Charles Dickens Book… (The ALBA ALBA and the non Alba Model) (Leaders: Venezuela, Ecuador, Bolivia, Nicaragua and Cuba) Anti-U.S Anti-Free Trade Lack of investment Confidence Weak institutions Political Insecurity Ideology driven countries Political Polarization Modern Democratic Center Countries (Brazil, Colombia, Peru, Chile, México, Uruguay, Paraguay, Panamá, Republic Dominican, Costa Rica, etc) Cooperation with the U.S. Pro Free Trade Investment Confidence Independent Institutions Political Stability State Long Term Policies and Mgt by Results Organized Party Systems The Democratic Center takes the lead: • Investment grade countries are in this Group: Mexico, Brazil, Chile, Colombia, Peru and Panama • Countries with more market access through FTA’S are in this group • Countries with more FDI are in this group • Countries with more Middle Class Expansion are in this group. • Better fiscally sustainable social programs: Chile, Mexico, Brasil and Colombia Only the group of Countries in the Democratic Center will become the regional active participants of the Emerging Markets Boom…some of the ALBA Members will see some benefits, but without solid long term development agendas, they will face transitory profits…
  • 34.
    The Alba failure Bad policies are deteriorating the political and economic context in the ALBA Countries…. Venezuela Inflation Reduction in oil production Brain drain Social conflict Insecurity Private initiative in Jeopardy Bolivia Loss of citizen support Quality of live deterioration Lack of private initiative Loss in private investment Ecuador Press Liberties in danger Lack of long term private investment Political stability at the expense of higher tensions Oil driven political power Nicaragua Institutional deterioration (Reelection without constitutional authority) Corruption Private initiative: Uncertainty Shameful Chavistas
  • 35.
    The regional challenges Despite the changes that have been achieved some important challenges remain… Building Modern Democracies (5 parameters) Security Freedoms and Private Initiative Independent Institutions Social Cohesion People Participation A dynamic Economic transformation Investment Target Policies Maintaining Fiscal and Monetary transformation Integrate commodity and knowledge based economies Expand export markets Create an Entrepreneurship culture (Innovation agenda) Closing Social Gaps Improve education (quality, coverage, vocational) Insure Universal Healthcare Formal Job creation Access to Finance Climate Change, Environment and Energy Sustainability Expand renewable sources Install an energy efficiency conscience Improve waste management Protect the Amazon Ring Reduce Co2 Emissions
  • 36.
    Colombia’s great opportunity Colombia has conditions that make the country a stable, credible and profitable investment destination Institutional Stability Political Center prevent radicalism and populism Economic Policy has been stable, credible and transparent Pacific Alliance emerges as an opportunity Stable trade with new partners through FTA’s Investment grade Low risk perception Solid financial system Fiscally viable social agenda Governance guaranteed by institutional independence
  • 37.
    The Human DevelopmentIndex for the largest economies in the region… Country Human Development Index - UNDP ‘02 ‘03 ‘04 ‘05 ‘06 ’07/‘08 ‘09 ‘10 ‘11 ‘12 ‘13 ARGENTINA 34 34 34 34 36 38 49 46 45 N/A 45 BRAZIL 73 65 72 63 69 70 75 73 84 N/A 85 CHILE 38 43 43 37 38 40 44 45 44 N/A 40 COLOMBIA 68 64 73 69 70 75 77 79 87 N/A 91 ECUADOR 93 97 100 82 83 89 80 77 83 N/A 89 MEXICO 54 55 53 53 53 52 53 56 57 N/A 61 PERU 82 82 85 79 82 87 78 63 63 N/A 77 VENEZUELA 69 69 68 75 72 74 58 75 75 N/A 71 2000 2001 2002 2003 2004 2005 2007 2010 2011 2012 2012
  • 38.
    Colombia remains stablein the Global Competitiveness Index… Country Global Competitiveness Report - WEF ‘02 ‘03 ‘04 ‘05 ‘06-‘07 ‘07-‘08 ‘08-‘09 ‘09-‘10 ‘10-‘11 ‘11-‘12 ‘12-‘13 13-14 ARGENTINA 64 78 74 76 70 85 88 85 87 85 94 104 BRAZIL 45 54 57 57 66 72 64 56 58 53 48 56 CHILE 24 28 22 27 27 26 28 30 30 31 33 34 COLOMBIA 61 63 64 58 63 69 74 69 68 68 69 69 ECUADOR 73 86 90 87 94 103 104 105 105 101 86 71 MEXICO 53 47 48 59 52 52 60 60 66 58 53 55 PERU 55 57 67 77 78 86 83 78 73 67 61 61 VENEZUELA 68 82 85 84 85 98 105 113 122 124 126 134
  • 39.
    Colombia continues tobe on the top 3 Latin American countries in the Doing Business Report… Country Doing Business – WB & IFC ‘06 ‘07 ‘08 ‘09 ‘10 ‘11 ‘12 ‘13 ARGENTINA 93 101 102 112 118 115 116 124 BRAZIL 122 121 126 127 129 127 128 130 CHILE 24 28 36 40 49 43 33 37 COLOMBIA 76 79 66 49 37 39 44 45 ECUADOR 120 123 133 133 138 130 134 139 MEXICO 62 43 42 55 51 35 53 48 PERU 78 65 53 65 56 36 43 43 VENEZUELA 144 164 175 178 177 172 179 180
  • 40.