Colombia is going straight to Dutch disease economic problem and public servants are doing anything to sort out this issue, Dutch disease is a long run problem, therefore when a economy is in this state, it is too painful to go out in terms of unemployment and slowdown of industry progress. There are three facts that confirm this statement. First: Colombia faces a crude oil boom exports where most of its foreign currencies come from it; second: Colombia faces a FDI inflow that shows as final destination crude oil sector, this FDI shows an increased share in total GDP; and third: there are lot of people who earn their income from crude oil sector, there were 14,089 direct job places given by crude oil sector in 2011. Moreover, crude oil reserves shows a limit of 7 years.
Author: Humberto Bernal,
Economist,
e-mail: zhumber@gmail.com
It can be download in PDF format at:
Colombia will be face a big problem if economic policy continues promoting extraction of crude oil sector without promoting policy for crude oil derivates such as polymers, plastics and more valued products such as computers and technology, moreover Colombian government wants to promote crude oil transport sector to reach a million of crude oil barrels per day without paying attention to economic problem called “Dutch disease”. Dutch disease comes when an economy is intensive and depends too much from extractive industries such crude oil extraction, gas extraction and others, the main problem is when the economy runs out of this natural resource and lots of economic resources depends from this activity, mainly lot of labor force.
Figure 1. Main exports as a share of total exports in Colombia 1926-2011 (%)
Source: Bureau of statistics (DANE), Central Bank and National Planing Department (DNP).
Dutch disease is a long run problem and public servants realize this problem when it is present, too late. To go out from this disease will take long time and it is costly in terms of unemployment and a deep slowdown in development. Colombia is running fast to Dutch disease path without any warning from researches and society in general, crude oil boom is such as narcotic that blast off society without feet on earth and the landing will bring high cost. The evidence of this issue comes up from tree facts. First: Colombia’s exports are manly from crude oil as figure 1 shows, the red area shows how crude oil exports are getting more place inside total exports until reach 49.1% of total exports in 2011. Others products such as coffee, bananas showed a decline as a share of total exports. Total commodities exported from Colombia shares with a 13.4% of GDP in 1999, this share showed an increase until reach 17.1% of GDP in 2011. Therefore, from this paragraph one can point out a conclusion that Colombia gets lot of foreign currency from crude oil exports and this type of export are growing exponentially.
Second: Most of Foreign Direct Investment (FDI) inflows are going to crude oil sector and mining sector, by 2011 Colombia faced US$13,234 million from FDI inflows where 38.4% showed as a final destination crude oil sector and 19.8% showed as a final destination mining sector, this means 58.2% of total FDI inflow are going to extractive sectors in Colombia. Moreover, FDI inflows shows an increasing trend as a share of GDP in Colombia as figure 2 showed, one can see FDI inflows shared 4.0% of GDP and domestic investment shared 19.0% of GDP in 2011, the red area is getting more room as time goes. It is ironic that in 2011 Colombia won a place in OECD FDI countries group due to its foreign investment liberalization, when most of this FDI inflows went to extractive sectors that will bring the seed of Dutch disease if government does anything. To start to prevent of this disease, Colombia must to promote secondary sectors such as polymers, plastics and others which use high added value.
Figure 2. FDI and domestic investment as share of GDP in Colombia 1926-2011 (%)
Source: Bureau of statistics (DANE) and National Planing Department (DNP).
Third and no less important: Nowadays there are lot of people that their income come from crude oil sector as figure 3 shows. There were 11,934 direct jobs that this sector gave in 1995 where Ecopetrol, the main crude oil company in Colombia, shared with no less than 47% of total jobs. Total crude oil jobs increased to 14,089 places in 2011 what means a share of 0.15% of total places in main cities in Colombia in 2011 as green bars shows. Therefore, there are many people who depends of this sector. In addition, Colombia’s crude oil reserves is for 7 year, then what is going on with this people when crude oil runs out after 7 years?, people of 35 and 40 years old who the only thing that known is working on crude oil sector.
Figure 3. Total employment from crude oil sector and its share in total employment according to main cities in Colombia 1995-2010 (places and %)
Source: Bureau of statistics (DANE), Superintendency of Companies and National Planing Department (DNP).
Summarizing, Colombia is going to Dutch disease and public servants do not pay attention to this issue, There are three facts that confirm this statement. First: Colombia faces a crude oil boom exports where most of its foreign currencies come from it; second: Colombia faces a FDI inflow that shows as final destination crude oil sector with an increasing share in total GDP; and third: there are lot of people who earn their income from crude oil sector, there were 14,089 direct job places given by that crude oil sector in 2011.
No comments:
Post a Comment