Colombia is expected to face a high economic growth of 4.5% in 2012 according to main research centers around the World and local ones. Moreover, there is less uncertainty about her economic growth if one takes the economic growth’s standard deviation as a measure, while it was 0.3% in May of 2012, now it is 0.2%. However, most of the other countries will face a lower economic growth in 2012 compared with Colombia figure. Although this information is important for colombians welfare, last week started the talks between colombian guerrilla and colombian government, the media broadcast their speeches and the conclusion is really awesome, at first glance appears that both groups did not have any point in common but a deep attention one realizes that they have more in common that it appears. For instance, both groups are working with same economic figures and both want to work in politics for a better place to live. It can sound rare but through my eyes both groups are complement each other, the following fact points out my statement: while government wants to take the guerrilla out of war conflict, then the guerrilla pretends not want it and while guerrilla points out the real economic problems of the country, then government pretends to ignore them. This is the country nicknamed Macondo as the Nobel Prize Gabriel Garcia Márquez did it in his book “One Hundred Year of Solitude”.
Autor: Humberto Bernal,
Economista,
e-mail: zhumber@gmail.com
The high economic growth in Macondo for 2012
Colombia has faced 4 economic crisis since 1977, the first one was in 1981 due to local bank crisis; the second one was in 1991 due to economic openness; the third one was in 1999 due to high interest rates on mortgage credits; and the last one was in 2009 due to international financial crisis as figure 1 shows. The last crisis finished at the beginning of 2011, more that one year ago, since then Colombia has faced high rates of economic growth, for instance by 2011 the GDP annual growth was 5.9%. This high rate is due to after the end of the economic crisis, economies face high rate due to the boom of investors and consumers’ expectations. However, this boon will start to slow down slightly due to underutilized resources through the crisis are employed right now and Colombia is on same place before crisis. Figure 1 shows that Colombia is starting the path above of long run GDP trend on the second semester of 2012, it means the economic cycle will be above zero.
Figure 1. Colombia GDP normalized cycle since 1977 to 2012
(quarterly data)
After 2 years of crisis in Colombia (under long run GDP trend), Colombia faces challenges to improve their productivity and reaches economies of scale, the other way around this global economy will take colombian business out of market. Now is the time to invest in Colombia, those local and foreign entrepreneurs can take advantages of these high expectations in colombian economy, the main targets have to improve manufacture sector through better technologies to be competitive under Free Trade Agreements already signed.
The high expectation in Colombia can be evidenced by different forecast on economic growth. Table 2 shows the World, Latin America and Colombia forecast for GDP growth. It is expected that Colombia will show a GDP growth of 4.5% in 2012, this forecast is a bit less than before forecast moths before but the uncertainty is less if one compares the standard deviation that reached 0.3% months before and 0.2% this month as table 1 and 2 show. GDP growth forecast for Latin America faced a reduction also, the latest forecast for this region is 3.5% but with less uncertainty. The World economic growth has a forecast of 2.6%, this is less than the forecast months before when it was 3.1%.
Table 1. 2012 GDP growth forecast by different researchers
(%, Mach of 2012)
Source
|
World
|
Latin America
|
Colombia
|
Observations
|
Colombian Central Bank
|
5.1
|
February 2012
|
||
the Economist magazine
|
2.7
|
4.2
|
4.9
|
March 2012
|
Fedesarrollo (Research center)
|
4.7
|
December 2011
|
||
Euromonitor (Research center)
|
3.8
|
4.0
|
4.5
|
December 2011 - March 2012
|
IMF
|
3.3
|
3.6
|
4.5
|
September 2011 - January 2012
|
ANIF (Research center)
|
4.5
|
January 2012
|
||
World Bank
|
2.5
|
3.6
|
4.4
|
January 2012
|
DNP (Government body)
|
4.0
|
December 2011
|
||
Average
|
3.1
|
3.9
|
4.6
|
Sample data
|
Standard deviation
|
0.6
|
0.3
|
0.3
|
Sample data
|
Table 2. 2012 GDP growth forecast by different researchers
(%, October of 2012)
Source
|
World
|
Latin America
|
Colombia
|
Observations
|
Colombian Central Bank
|
4.0
|
July 2012
|
||
The Economist magazine
|
2.2
|
3.1
|
4.4
|
October 2012
|
Fedesarrollo (Research center)
|
4.1
|
October 2012
|
||
Euromonitor (Research center)
|
3.4
|
3.2
|
4.7
|
October 2012
|
IMF
|
3.3
|
3.2
|
4.3
|
October 2012
|
ANIF (Research center)
|
4.5
|
October 2012
|
||
World Bank
|
2.6
|
3.5
|
4.7
|
October 2012
|
DNP (Government body)
|
4.8
|
June 2012
|
||
Average
|
2.9
|
3.3
|
4.5
|
Sample data
|
Standard deviation
|
0.6
|
0.2
|
0.2
|
Sample data
|
The conclusion is Colombia will growth about 4.5% under information of main research centers in the World and local, moreover the uncertainty is less than that one forecasted at the beginning of year. Latin America will face a lower growth than Colombia, it is 3.5% and the World will face a lower economic growth than Latin America, it is 2.9%, therefore it is time for Colombians take advantages in improving their technology to reach economies of scale.
Talks between Macondian people
Last week started the talks about the end of colombian armed conflict. The first meeting was in Hurdal (Norway, country where Nobel Prices are given). Both guerrilla and Colombian government gave speeches. The government speech was flat about the economic model in Colombia, of course they do not have to give explications about it to guerrilla but her speech was clear about government targets to reach at the and of this talk, they want a no armed group that participates in politics. On the other hand, colombian guerrilla highlights the economic situation in Colombia. Although they move inside the colombian jungle, they have proper information about colombian economic welfare. Table 3 shows the information given by guerrilla and information taken from government sources. The main conclusion is that both groups are working with same information!!!, there are information that differs marginally but one comes up to same conclusions with both sources: “Colombia faces a strong income inequality and through this environment it will be difficult to be competitive in a global economy”.
A foreigner who had read Gabriel Garcia Márquez’s book “One Hundred Year of Solitude” and heard the talks, his main conclusion had be that both groups are complements for getting a better place for their citizens. The following fact hopes making clear my point of view: while government wants to take the guerrilla out of war conflict, then the guerrilla pretends not want it and while guerrilla points out the real economic problem of the country, then government pretend to ignore it.
Table 3. Economic environment watched by Colombia guerrilla and Colombia government
Indicator
|
Guerrilla (FARC) figures
|
Government figures
|
Income distribution
( GINI )
|
Third worts income distribution by country.
|
GINI = 0.548 in 2011. 12th place in 2012, scale from worst to better distribution. Source: DNP and World Bank.
|
Poverty
|
70% of population,
30 million in poverty and 12 million in extreme poverty.
|
34.1% of population, 15.7 million in poverty and 4.8 million in extreme poverty. Source: DNP and DANE, they are government bodies.
|
Unemployment
|
50% of Labor force divided in unemployment and subemployment.
|
61.0% of labor force in 2012 is divided in unemployment and subemployment. Source: DANE.
|
Displaced people
|
6 million of people.
|
3,875,987 of people from 1997 to 2011. Source: Acción Social, it is a government body.
|
Hectares taken for Oil crude extraction
|
38 million of hectares (33.3% of total hectare in Colombia).
|
37.8 million of hectares (33.1% of total hectares in Colombia). Source: ANH and Ecopetrol, they are government bodies.
|
Hectares taken for mining extraction
|
11 million (9.6% of total hectare in Colombia).
|
5,428,119 of hectares (4.8% of total hectares in Colombia). Source Department of Mines Colombia.
|
Hectares taken for livestock (cows)
|
39.2 million (34.4% of total hectare in Colombia).
|
29.1 million of hectares in 2011 (25.5% of total hectares in Colombia). Source: DANE.
|
Hectares taken for agriculture
|
4.7 million (18.9% of total hectare in Colombia).
|
2.9 million of hectares in 2011 (2.6% of total hectares in Colombia). Source: DANE.
|
Land property concentration
(Land GINI)
|
Land GINI = 0.89.
|
Land GINI = 0.86 in 2009. Source: United Nations Development Programme.
|
Main economic groups in Colombia
|
Sarmiento Angulo; Julio Mario Santo Domingo; Familia Eder; Efromovich; Drummond Ltd.
|
Manuelita investments (Eder family) with 29 societies in 2011; Ardila Lulle Organization with 27 societies in 2011; Santo Domingo organization with 14 societies in 2011; AVIATUR group with 13 societies in 2011. Source: Superintendencia de Sociedades Colombia.
Main private crude oil firms: Pacific Rubiales (23% of production) and OXY (6.6% of production).
Main private mining firms: Drummond Ltd, Cerrejón and Cerro Matoso S.A.
|
Military spending
|
6.4% GDP, Total spending between US$13 billion and US$15 billion.
|
2.3% GDP for 2013 (Includes all bodies such as Military Force, Police, Fiscally, and DAS, the last one is in liquidation), total spending US$9.3 billion for 2013. Source: Department of Finance and DNP.
|
The United States help (Plan Colombia)
|
US$700 million.
|
An annual average of US$425.5 million between 1996 to 2012. Source: U.S. Department of State, function 150 & Other International Programs.
|
Military force (people)
|
330 thousands.
|
439.1 thousands (military and police men). Source Department of Defense Colombia.
|
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