Colombia reached a hundred billion of Foreign Direct Investment (FDI) stock from 1900 to 2011, moreover there are about 676 multinationals in Colombia with a total of 1,272 affiliates, congratulation!, it is the result of a democratic society who understand the meaning of it and is aware to keep and improve it. However, there is work to do still, for instance a strong work on keeping foreign profits in Colombia through knowing foreign business men needs to make Colombia attractive for this increasing outflows foreign profits. FDI should be an issue in Summits of the Americas meeting where presidents should be aware of pulling up economic growth through high added FDI inflows such as technology affiliates (firms) in the region and better welfare for workers.
Autor: Humberto Bernal,
Economista,
e-mail: zhumber@gmail.com
It can be download at:
The Foreign Direct Investment as stock reached a hundred billion of dollars in 2011, yes it is true 100 with nine zeros more, we got a FDI stock of US$100,165,263,000 in 2011, this is the money volume of FDI stoked in Colombia from 1900 to 2011. This weekly note is the starter (a very short fragment) of my PhD thesis called FDI in Colombia from 1900 to 2010, the target of this long work, more than four years of hard work getting archives numbers, learning about this theory and making a big effort to understand why the FDI can bring us a fair development, I can say this statement is true but FDI should be tied with social criteria, it means business men can take their profits where they want but they should be aware they live in a global economy, where political world map starts to disappear and pops up a social-political order, there are two main targets should be done under this scenario: progress and human welfare, figure 1 unfortunately shows FDI inflows are lower than FDI outflows profits in Colombia since 2009, therefore there is a hard work to do in keeping foreign profits inside Colombia, I think this issue should be dealt in Summits of the Americas meeting that will be hosted in Cartagena (Colombia).
Colombian FDI inflows and its profits 2000 - 2010
(US$ million)
Source: Central Bank, Colombia.
Many colombians point out that too much FDI into mining and oil extraction sectors could bring us an economic dependence of these natural resource, moreover when they will have gone, we will face an economic crisis, it will be true if we do not use the actual economic source for pushing up industrial and commerce sectors through better infrastructure and education for everybody, until now FDI distribution is balanced as figure 2 shows, roughly 50% - 50%, 50% into valued added sector and 50% into natural extraction resources, but more than reach a million oil barrels per day, Colombia must focus on how we can distribute efficiently the profits of actual 900 thousand of oil barrels per day.
Figure 2. Colombian FDI Stock by sector as a share of total FDI stock
1979 - 2010
(%)
Source: Central Bank, Colombia.
Colombian FDI as stock keeps its share of 30% of GDP as figure 3 shows, it means there is an important volume of foreign capital which pulls economic growth, therefore there is not room to improvise with short run decisions which are not going with keeping it into Colombia as above figure 1 shows, making the point Colombia is missing FDI through outflows profits without any central government attention, according with empirical evidence the equilibrium of FDI in a country is between 40% and 100% of GDP, for instance Netherlands, and Switzerland showed a percentage of 80% of their GDP in 2010, the United Kingdom showed a percentage of 41%.
Colombian FDI stock as a share of GDP
2000 - 2010
(%)
Source: Central Bank and Bureau of statistics, Colombia.
If FDI issue is not on the right place with the “right government decisions”, fortunately Colombia counts with a democratic four years system that soon or late will pay attention on this issue. We do not worry, this democratic period will finish on 2014 and a fair democratic party will be take place again, hopefully, with more experience that increase the strength of democracy and the end of world terrorism that undermines the FDI.
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