Colombia faces an economic boom in energy resources sector such as crude oil and coal, these commodities shared with more of 50.0% of total value exported in 2011 and there is a current account deficit still, where most of commodities imported are appliances and few capital to get ready for FTAs. One tends to think that most of citizens enjoy this boom but just few of them do it really, if one sees crude oil income distribution, one realizes that just 7.0% of this income goes to workers and 3.0% and 90.0% goes to government income and capital owners respectively, therefore if Colombia goes through this path, we and our children have to pay this deficit and economy will be exposed to international economic crisis.
Author: Humberto Bernal,
Economist
e-mail: zhumber@gmail.com
This note can be download at:
Nowadays Colombian government broadcast 2011 balance of trade figures and highlight exports showed an increase, the value of commodities exported reached US$56.9 billion in 2011, this is the highest value reached in Colombia that means an annual growth rate of 43.0% in 2011. However, government has not pointed out the main commodities exported are energy resources such as crude oil and coal, moreover they did not tell Colombia faces lack of international competitiveness in their local production as figure 1 shows, since 2004 Colombia has showed a deep deficit in its balance of trade without count exports from energy resources, therefore Colombia is crossing the line to afford their imports with no energy resources, if colombian government does not pay attention to this fact, citizens will face a hard economic pain in the near future.
Figure 1. Balance of Trade 1990-2011
(US$ million)
Source: Central Bank Colombia and Bureau Statistics Colombia (DANE).
The relevance of crude oil and coal exports in colombian economy is huge as figure 2 showed, colombian crude oil and coal exports shared with 54.9% of total exports in 2011, moreover Colombia spend an important share of their foreign income importing home technology such as T.V, computers and other appliances (34.4% of total imports in 2011), it would be excellent if colombians could spent in better technology for production of high valued added goods and services to improve their opportunities through Free Trade Agreements (FTA) as economic theory points when a country faces a energy resources boom, instead locals and government are working with old capital that lets Colombia takes last places in world technology and innovation rank (World Competitiveness Forum and Doing Business rank).
Figure 2. Exports by main component 1990-2011
(share of total exports value %)
Source: Central Bank Colombia and Bureau Statistics Colombia (DANE).
There is nothing to celebrate as government broadcast last week due to exports figures improvement, if one sees figure 3, one realizes that most of energy resources incomes goes to capital owners and just 7.3% of this income goes to labor remuneration, in addition there are not more of 200 firms in 2011 that dig out energy resources in Colombia, most of them are from Canada, USA and Europe and they started to send most of their financial utilities to home headquarters in 2010, just few of these utilities are reinvest into Colombia, therefore Colombia main commodity exported bring us false income distribution, just few people can import these appliances highlighted above; there are few manufacture firms which are improving their technology and the balance of trade debt is increasing to the limit where we and our sons could not be able to pay.
Figure 3. Crude oil income by income distribution 1990-2011
(%)
Source: Bureau Statistics Colombia (DANE).
In conclusion, Colombia faces a energy boom production but income from this activity shows perverse distribution where more of 90.0% goes to owners and just 7.0% goes to workers remuneration, there is a 3.0% that goes to taxes. Most of income from exports activity is spend on appliances such as T.V, laptops and so, instead locals should have to take opportunity to replace old capital and be ready to FTA which are coming, moreover it should be a government plan to incentive high value added products production through low interest rate from private credits, this credit is for those who belongs to low income rank and show valuable projects (1,2,3,4 economic status). Information about private credit benefits should be broadcast on media mainly on T.V.
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