Are there justified reasons to ask for VISA to come to Colombia?

Colombian government has a list of countries that need VISA to come to Colombia, in other words, she points World citizens who need VISA to come to Colombia. It sounds discriminatory in these global days where countries work hard to be open to globalization. For instance Colombian government gave free entrance to Chinese in 2006 but after a year she blocked their free entrance due to there were a massive immigration of them (it was about 4,000 Chinese between 2006 and 2007) and illegal activities that government authorities preferred to avoid instead of working on them, from my point of view it was a huge mistake, the benefit to avoid illegal activities due to lazy authorities was low compared with the potential economic benefits lost,  it blocked the economic development. As China there are other countries pointed below that deserve to come to colombia without VISA due to potential economic benefits but as must be, local authorities have to work hard on potential illegal activities that come with immigration. Local authorities such as Police Department and migration offices have to start to develop mechanisms to be according with globalization policies, blocking immigration is not an alternative in these globalization days. This result highlight the lack of deep study to point what countries need VISA and the poor government though about globalization, in other words, Colombian government does not have a serious criteria to ask for VISA and its cost will be huge in competitiveness terms.

Author: Humberto Bernal,  

Economist,

e-mail: zhumber@gmail.com

Twitter: Humberto_Bernal

It can be download @ PDF

100 years ago Colombia started to work on immigration legislation, some important norms were broadcast between 1813 to 1922, Colombian government gave incentives such as wasteland without any charge to foreigner who decided work on colombian lands, moreover government gave monetary support according to family members, the government target was to make more productive the agrarian sector, nevertheless some politicians and some conservative people were interested on avoid immigration to Colombia and it is evidenced through legislation in 1919 where authorities asked for many papers about their health and history about immigrants, fortunately these norms were abolished in 1922. Those who were more favored were people from Western European countries and people from North America due to their economic advances compared with other countries. By those days, unfortunately some politicians and conservative society worked to reduce immigrants from China, Russia, Syria, Japan and other counties, they said that these foreigners brought diseases, the cost of this type of thought and policies was the contribution to low economic development in Colombia. Brazil, Argentina, Chile and Uruguay as many others opened their borderlines to foreigners and the results were so different to those in Colombia. After more than 100 years Colombia is not aware of this big mistake, nowadays immigration norms are similar to those on 1919, for instance 53.6% of countries need VISA to come to Colombia and the criteria to ask for a VISA does not have a deep study, it appears it is done by chance. This note shows some issues about nowadays immigration state in Colombia.

Colombian government and local media broadcast the relevance of globalization, for instance Colombia signed Free Trade Agreements with Mexico, North Triangle countries, Canada, USA, Chile and many others but what does Colombia do for improve this globalization?, the answer is few things in terms of immigration. Figure 1 shows World citizens who have to ask for a VISA to come to Colombia (yellow ones). From 206 countries in the World, there is information of 183 where 53.6% have to ask for VISA to come to Colombia, what sad and shameless indicator for a country that broadcasts the global and economic openness.

Figure 1. Citizens who most ask for VISA to visit Colombia

Source: Colombian Department of Foreign Affairs.

Moreover, the the worst thing about this rigid entrance to Colombia is the absence of a deep study that shows why these citizens have to ask for VISA to come to Colombia. Nevertheless, I tray to find explications about this issue and the results were disappointed: Colombia ask for VISA for those citizens who show low income, low education, lack of job opportunities in their home country and some cases there is no reason such as citizens from United Arab Emirates, Bulgaria, Ukraine and Bahrein. These results came from formal Probit Model where depend variable was zero (0) if citizens (country) do not need VISA to come to Colombia and one (1) if they need VISA, the independent variables were Gross Domestic Product Per capita under PPP theory, corruption index, foreign residents in Colombia, tertiary education index and unemployment rate, all of these indicators are classed by country. Figure 2 shows the relation between probability of need a VISA (Pro= 1) and GDP per capita, one realizes that as citizens have high income, then Colombian government does not ask for a VISA.

Figure 2. Relation probability and GDP per capita

(VISA: Pro = 1; No VISA Pro = 0)

Ln[...]: Natural Logarithm.

Source: Own calculations under World Bank data and Colombia Bureau Of Statistics.

From this work, results shows a group of countries that deserve to come to Colombia without VISA due to they are similar to countries which do not need VISA, they are those in figure 3: China, Qatar, Lebanon, United Arab Emirates, Kuwait, Saudi Arabia, Bahrain, Bulgaria, Mauritius and Ukraine, the reason to select these countries was they have similar value of independent variables in the Probit Model (similar probability of those that do not need VISA), in other words, GDP-per capita, education, unemployment, corruption are similar of countries that do not need VISA to come to Colombia. Of course this type of immigration policy has to come with a strong security program led by Police Department, economic development has driven costs if government is aware of it .

Figure 3. Countries which deserve No VISA to come to Colombia

(According to Probit model)

Source: Own calculations under World Bank data and Colombia Bureau Of Statistics.

The unfair immigration policy in Colombia is evidenced with Chinese people, in 2006 colombian government gave free entrance to Chinese people who wanted do tourism and business but in 2007 they abolished this norm due to high immigration and illegal activities such as traffic of people. Government took the easy exit through asking VISA to Chinese but the cost from this decision will be faced in future economic development, most of Chinese people are hard working and creative, of course there are exceptions that local authority has to deal through high quality job. This decision from my point of view was taken due to lazy authorities to do their proper job, hopefully it could be sorted through right government decisions. 

China’s new economic growth and her impact on colombia economic activity

China as a region composed by China mainland, Hong Kong, Macao and Taiwan, she is in her New Economic Growth. China has faced an important development since 1978 and in deep since 1998. At the beginning of this era, they invested their obligatory saving in capital and then they got high human productivity and private rights close to market mechanism. Colombia has not been absent from this “Economic Growth Miracle”, Chinese residents in Colombia increased from 519 in 1960 to  5,122 in 2010, trade indicator increased from 0.06% in 1962 to 11.92% in 2012 and FDI as stock from China increased from US$240.6 thousand at chained prices of 2012 in 1968 to US$76.9 million in 2012, moreover Colombia’s GDP cycle will be explained by China’s GDP cycle about 29% in the next four years. Unfortunately, Colombian government does not pay attention to this positive economic relation, it is evidenced by works from international agencies where Colombia is not in the poll of Latin American countries that has strong relations with China. In addition, the lack of Chinese banks in Colombia is other evidence of poor government work on this issue, foreign banks after immigration are the first step to develop economic relations between countries. Finally, China’s GDP growth is a variable that is taking into account to forecast the Colombian economic growth rate of 3.2% in 2013.

Author: Humberto Bernal,  

Economist,

e-mail: zhumber@gmail.com

Twitter: Humberto_Bernal

It can be download @ PDF

Since China had deep economic reforms in 1978 and 1998 her impact on Colombia economy has not been trivial. China faced a transformations in her agrarian productivity, private property and economic openness through structural reforms and their effects on Colombia economy can be evaluated through higher Chinese as residents in Colombia, higher FDI from China in Colombia and higher international trade between these countries. One can divide this China’s New Economic Growth in three periods as many authors do, first one between 1948 and 1978; second between 1978 and 1998; finally from 1998 to present. Through the first two periods Chinese worked on local infrastructure and local private property, the last period they have been working in international economy, therefore the main results from China and Colombia relationship come from this last period. This note highlight few economic facts due to China and Colombia relation since 1960 and points an issue to work on to get Colombia inside China’s economic agenda.

Since 1978 China has been working hard in building political and economy relations around World and Colombia has not been absent. The president of Colombia Julio Cesar Turbay (1978-1982) opened a close relation with China through Colombian embassy in China, the ambassador was Julio Mario Santo Domingo (colombian magnate). Of course, there were immigration of Chinese to Colombia before 70’s, they came in huge volume at the beginning of twenty century as workers in Panama Canal and as workers in railroads, therefore they settled close to Atlantic coast in cities such as Santa Marta, Barranquilla and Cartagena. 

Chinese in Colombia are about 5,122 of people in 2010, they started to come to Colombia in huge volume since 1960 as figure 1 shows, they came to Colombia to search economic opportunities (better standard of living due to economic environment in China, they faced the Great Leap Famine between 1959-1961) and as a bridge between China and the United States. The volume of Chinese in Colombia increased in high magnitude after 2006 due to abolition of VISA to get in. Those Chinese who decided to take Colombia as a home work on hotels and restaurants mainly, for instance there was about 11.5% of Chinese residents in Colombia working in this sector between 2005 and 2010, there were others working in transport and communication, they were about 3.13% of residents between 2005 and 2010 and there were 1.1% working in education between 2005 and 2010, this last share can be higher at the end of 2012 due to Colombia and China set up agreements in Expo Shanghái 2010, there is a program for students and teachers in both countries through exchange. In Colombia and other countries, it is under Confucius Program. However, since 2010 there has been outflows of Chinese from Colombia, it can be explained by deceleration of Colombian economy and better economic environment in Peru, Brazil and Chile. 

Figure 1. Chinese residents in Colombia 1960-2010

(number of people)

Source; World Bank Data, Bureau of Economic Statistics (DANE) and Migration Colombia.

Most of Chinese in Colombia work as employees, they were 40.6% of total Chinese between 2005 and 2010, those who have business and give employment to Colombians were 23.9% of total Chinese in Colombia and those who has a small business were 35.4% (inside this percentage are those who own Chinese restaurants and hotels). There is Chinese unemployment in Colombia but it is transitory due to they are so laborious and creative, fact that Colombia has to be aware to improve their competitiveness. Most of Chinese in Colombia live in Bogotá with 40.4% of total Chinese between 2005 and 2010, other places enjoyed by them are Pereira and Medellín with 23.4% and 21.3% respectively. There are other places where they live such as Santa Marta, Puerto Colombia, Barranquilla, Cartagena and Tuluá as figure 2 shows. Chinese residents in Colombia are 57% males and 43% females, moreover 19% are single, 76% are married and the others are widower or divorced. Chinese in Colombia are young,  20% are between 1 and 30 years old, 62% are between 1 and 50 years, these information come from last census in 2005. Most of them counts with secondary education, it means 44% of total Chinese residents in Colombia, and those with tertiary education are 13%. 

Figure 2. Chinese residents in Colombia by municipality 2005 - 2010 

(%, percentage of people)

Source; World Bank Data, Bureau of Economic Statistics (DANE) and Migration Colombia.

Big business between China and Colombia

FDI as stock from China in Colombia reached a value of US$76.97 million chained of 2012 prices in 2012, this FDI shows an important positive trend since 1995 and huge volumes since 2000 as figure 3 shows. The first important FDI inflow from China in Colombia was in 1968,  the volume invested was US$53 thousand (US$240.6 thousand at 2012 prices), it appears, this investment was in Social Services activities such as education, health and so. Nowadays, the main economic activities of big Chinese firms are wholesale business, real estate and vehicles business, there are few big firms in crude oil sector; transport and communications; and hotel and restaurants. Some of these big firms are Sinopec International Petroleum, Megafer (Wholesale), Tuluá Motors, International Parts Service Ltda (Vehicle parts), Huawei technologies Co (consumption products and communications) and ZTE (technologies of communications). Tuluá Motors is one of the oldest Chinese firms in Colombia they have financial information since 1995. There are future government projects that will bring huge Chinese FDI and local employment such as the project signed between Hydrochina and Cormagdalena to improve the Magdalena river navigability, however this project goes too slow, theres is no results still, the only information is on government servants traveling to China and social meetings.

Figure 3. China FDI as stock in Colombia* 1968-2012

(US$ million chained of 2012)

*FDI as stock without crude oil investment. Crude oil investment from China was approximately US$373.4 thousand in 2006, it comes from Sinopec Equity.

Source; Central Bank Colombia; Romero, N.1987; De Lombaerde, P. 1997;  and own calculations.

International trade indicator (exports plus imports between Colombia and China as percentage of total exports plus imports from Colombia) between China and Colombia showed a positive trend as figure 4 shows. This trade was tiny in 1962, it was 0.06%, since 1999 it started to take value, it was 1.15% and increased to reach 11.92% in 2012, the main goods exported by Colombia to China were coal, crude oil, iron, steel copper, skins, plastics and chemical products, therefore most of exported products are raw materials, while Colombia imports from China electronic products, electrical equipment, machinery, vehicles, footwear, textiles, organic chemicals, toys and rubber, those products imported by Colombia are finished products mainly. The balance trade in this case is in favor to China, it means the exports value is lower than imported value from Colombia, in 2012 it was US$6.4 million in favor of Chaina.

Figure 4. Trade indicator between Colombia and China 1962-2012

(% of total trade balance in Colombia)

Source; United Nations. Own calculations.

Colombia and China are getting a close relation as other countries in the region do. Colombia’s GDP cycle and China’s GDP cycle is shown in figure 5, as one realizes there is a Contra- Cyclical relation between 1979 to 2003, then the cycle starts to be Pro-Cyclical but in 2012 the cycle differs. It means, at the beginning of 80’s there was no problem due to low economic trade between Colombia and China and low FDI from China into Colombia, but the issue took relevance since 2000 when Colombia started to depend of China in trade and FDI inflows, therefore there is a new Leader Economic Indicator that has to be taken into account by policy makers in Colombia and it is the China’s GDP cycle. I did this homework and results are: the Colombia’s GDP variability will be explained in 29% by China’s GDP variability in the next four years, 20% will be explained by USA’s GDP variability and the rest by other internal and external variables, these results were taken from a Vector Correction Model (VEC) forecasts. 

Figure 5. Colombia and China GDP cycle 1970 - 2012

(normalized series, quarterly data)

Source: IDB and Central Bank Colombia. Own Calculations. Stata 12.1.

Moreover, taking into account this information and local variables shown in table 1, Colombia GDP’s growth depends mainly on China’s GDP growth and USA’s GDP growth. Forecast results for Colombia on 2013 are a Colombia’s GDP growth of 3.2% (government forecast  is between 4.1% and 4.5%, it will be so difficult to reach it while local GDP from industrial sector shows negative growth); Coffee production forecast is 7.2 million of 60kg sacks, crude oil production forecast is about a million of crude oil barrels per day; unemployment will be around 9.6% and the Colombia Stock Price index will face an increase to reach 14,262.9 units. These forecasts take into account a USA’s GDP growth of 1.7% on 2013 (International Monetary Found forecast was 1.9% on April of 2013) and a China’s GDP growth of 7.8% on 2013 ( the IMF forecast was 8.0% on April of 2013).

Table 1. Forecast of main economic variables 2013

(VEC model)

Variable	2012	Forecast 2013
USA GDP growth (%)	2.2%	1.7%
China GDP growth (%)	7.8%	7.8%
Colombia Coffee production  (thousand of 60kg sacks)	8,181	7,248
Colombia Crude oil production (average daily barrels)	969,770	1,040,859
Colombia Stock Price Index  (IBGC)	14,121.3	14,262.9
Colombia Unemployment (%)	10.2%	9.6%
Colombia GDP growth (%)	4.0%	3.2%

Source: Own calculations. Stata 12.1.

Issues to work on by Colombian government

Colombia counts with 12 big firms with Chinese capital on 2012, unfortunately the number of big firms showed a decline since 2006 when there were 23 firms, this decline can be explained by low economic performance in Colombia in the last years compared with economic performance in Peru, Chile and Brazil and poor government policies to attract FDI inflows to Colombia and hold it. For instance, the lack of Chinese banks in Colombia is evidence of poor policy management, foreign banks are the first step to improve FDI inflows from source country and other economic relations such as international trade. For instance, the main investors in Colombia such as Spain counts with BBVA Bank in Colombia, USA counts with City Bank, Chile counts with CorpBanca Bank and Falabella Bank, the UK counts with HSBC Bank and Canada counts with Scotiabank Colombia S.A but there is not private Chinese Bank in Colombia still!!!. Moreover, the absence of colombian government interest on China trade and FDI inflows is evidenced through official agencies such as Inter-American Development Bank (IDB) that broadcast works such as “China’s Emergence in the World Economy and Business Cycles in Latin America” where takes the China’s cycle impact on Mexico, Peru, Brazil, Chile, Argentina’s  GDP cycle but not on Colombia’s GDP cycle.

Economies of scale under agglomeration: basic plastic production case in Colombia

Economies of scale is so interesting issue to deal due to they contribute to achieve efficient uses of resources. I propose a model under this type of economies, this model is developed under diseconomies of scale for each firm but as soon they agglomerate, then they reach economies of scale. The test for this model was through Basic Plastic industry in Colombia and results were those expected, as firms agglomerate they faces a lower Average Cost (lower average price per kg of basic plastic), in quantitative terms as agglomeration index increases in 1.0%, then total cost faces a reduction of 0.04% (ceteris paribus). Of course, if the number of firms exceeds the optimum number, these firms will face financial losses, for instance Bogotá is around her equilibrium point in this industry (the optimum number is about 49), one can say if there are huge number of firms, then the economies of scale is lost and the problem of congestion appears. Under this thought policy makers have to set up strategies to generate efficient conglomerates to take advantages of Free Trade Agreements and work hard to make room in Bogotá due to high concentration of firms that let get them financial losses.

Author: Humberto Bernal,  

Economist,

e-mail: zhumber@gmail.com

Twitter: Humberto_Bernal

It can be download @ PDF

The Working paper can be download @ PDF

Economies of Scale are an important issue to deal under Free trade Agreements (FTAs) to be competitive. Economic models that work on this issue are varied, for instance Bernal (2013) work on this type of models where there is a common good as Basic Plastic. The result of this model is the agglomeration lets achieving economies of scale (in rigorous words External Economies of Scale). This model was tested through Colombia basic Plastic production between 1995 to 2011 with 307 firms in this sector. The data is annual and the total observation were 1,621, it means a unbalanced Panel Model. This note summarizes the main result of this work.

Although Colombia faces hard times due to internal war conflict, there is room to produce added value goods such as Basic Plastics. Production of this good was doing by 119 firms in 2011 where most of them were located in Bogotá, Medellín and Cali as figure 1 shows. Firms that produce this type of basic plastics show a degree of agglomeration that let them to get economies of scale. There are indexes that measure the grade of agglomeration, for instance GINI coefficient according to locations went from 0.597 in 1995 to 0.628 in 2011 for these type of firms in Colombia. I proposed an index where the degree of agglomeration is calculated through taking into account the place (municipality) where firms produce (the formula is shown in the working paper attached). 

Figure 1. Number* of firms that produce basic plastic in Colombia by municipality in 2011

*Total number of firms: 119.

Source: Bureau of Statistics (Superintendencia de Sociedades) and own calculations Stata 12.1.

This index is showed for two municipalities in figure 2, Cartagena and Bogotá. Cartagena’s index showed an increase in the last years, this dynamic can be explained by proximity to Mamonal refinery, the high crude oil production in Colombia; the annual production went from 193,199 thousand of barrels in 2006 to 334,068 thousand of barrels in 2011, it meant an annual average growth rate of 11.6% between 2006 and 2011 and finally the low number of agglomerated firms that could let getting high profits that took attention to other firms; the number of firms in Cartagena went to 3 in 2006 to 6 in 2011.

Figure 2. Agglomeration index in Cartagena and Bogotá (1995-2011)

Source: Bureau of Statistics (Superintendencia de Sociedades) and own calculations Stata 12.1.

The Bogotá’s agglomeration index showed a decline in the last years, this decline trend can be explained by the high number of firms in Bogotá, they went from 55 in 2006 to 48 in 2011, as is pointed in the mathematical model (in the working paper attached), as the number of agglomerated firms increased, then the profits decline, moreover if there are lot of agglomerated firms, then profits can be negative. The Cartagena’s agglomeration index showed a band between 0.02 and 0.07 while Bogotá’s agglomeration index showed a band between 0.35 to 0.51.

Two typical cases are the firms Alico S.A. located in Medellín and Tromoplas located in Bogotá, figure 3 shows the negative slope on Cartesian plane, it means these firms took advantages of agglomeration effect, therefore they face lower costs than producing far way without any contact with other firms.

Figure 3. Total cost and agglomeration index relation 

(natural logarithm)

Source: Bureau of Statistics (Superintendencia de Sociedades) and own calculations Stata 12.1.

Finally, the big conclusions from this work are: through agglomeration index [0, 1], 307 firms and a period from 1995 to 2011 that means 1,621 observation, an unbalanced Fixed Effect model was taking into account to test this theoretical model. The Basic Plastic production in Colombia is so close to a homogeneous good, this sector is competitive in price and shows high concentration of production in cities such as Bogotá, Medellín and Cali. The results were those expected, as agglomeration index increases in 1.0%, then total cost for each firm shows a decline in 0.040%. The Fixed Effect model was controlled by production and inputs’ prices.

This work can be interesting to take advantages in global market in these days of global competition through Free Trade Agreements. Police makers can work on setting up locations to generate efficient agglomeration to achieve economies of scale, for instance locations for textile  and cloth industry in Colombia.

Cocaine production as a medium to get out of poverty in a country with no less than 32.7% of population in poverty state

Through 709 municipalities out of 1,122 in Colombia in 2010, one finds that cocaine crops eradication increases the poverty in Colombia in 0.97% points per 1.0% more hectares of cocaine crop eradicated. Cocaine crops are located in municipalities with strong poverty condition (lack of fair education, lack of infrastructure, unfair  health system and lack of security), population finds this economic activity as medium to get out of this state. This poverty condition can be explained by local government corruption specially in mismanagement in public revenues. Cocaine crops has to be dealt as international monopoly managed by United Nations and through local job opportunities in substitutive crops such as fruits and vegetables production (banana production is a great alternative in Colombia). It is difficult that Colombia achieves a state of peace without an international cooperation in legal production of cocaine. Cocaine crops are spread around whole Colombia as poverty state does also.

Author: Humberto Bernal,  

Economist,

e-mail: zhumber@gmail.com

Twitter: Humberto_Bernal

It can be download @ PDF

Poverty in Colombia is well registered by many organizations such as World Bank through GINI index and local government agencies such as Bureau of Statistics (DANE) through GINI index and Unsatisfied Basic Needs (UBN). There are many international and local programs working on this issue, for instance Millennium Development Goals through World Bank and Inter-American Development Bank through huge volume of monetary credits. These programs were set up many years ago and results are poor still, of course there advances but no those expected. These poor advances let local government to take rush initiatives such as giving to people free houses!!!, the problem are not houses, the problem is most of people who got these houses do not contribute to society to deserve them, program could had been great if government would had given the house along fair job opportunities to deserve these houses. These rush initiatives deteriorate economic productivity that is a valuable good in these global days. 

To complement the proper indicators taken by international and local agencies such improving transport infrastructure; and improving health and education coverture, it is important to work on cocaine production legalization through an international agency monopoly managed by United Nations. The coca crops eradication in Colombia were 44,641.3 hectares in 2010 where the main coca growth took place in  municipalities such as Tumaco and Policarpa in the region named Nariño, Puerto Libertador in Córdoba and El Tambo in Cauca as figure 1 shows. In 2011 and 2012 the coca crops eradicated were 34,169.9 and 30,248.4 hectares respectively and the main municipalities were located in the regions such as Nariño, Córdoba, Cauca, Guaviare and Chocó. 

Figure 1. Coca crops eradication in Colombia 2010

(hectares)

Source: Departamento para la Prosperidad Social Colombia.

As one can see, cocaine production is taking whole Colombia but mainly in places where Colombia faces high poverty, Chocó, Guaviare, Córdoba are regions with strong poverty living conditions, Colombia faced 32.7% of total population in poverty according to international measures in 2012. The big issue with coca crops eradication is the impact on families income and basic goods, according to government the cocaine production contributed with 0.4% in colombian Gross Domestic Product (GDP) in 2010 and 0.3% in 2011, families take this crop as an option to go out of poverty state. According to econometric model showed in table 1, the cocaine crops eradication lets an UBN increase in 0.97% points, it means more families in poverty in Colombia or worst situation than before eradication. At the end, Colombian families take cocaine crops as option to live on due to lack of proper government opportunities to go out of this state.

Now, lack of opportunities to go out of poverty is due to government corruption, specially in public revenues management. This corruption can be measured thought low political participation. Figure 2 shows the political participation in the last Mayor elections. Colombia counts with 1,122 municipalities where Mayors are elected and 32 regions where Governors are elected and a Country where the President is elected. This map shows the low participation in municipalities with high cocaine crops, for instance total people who voted in Tumaco was 55% of total population with age to vote in 2011 and the UBN was 48.7%. The econometric model lets getting the follow result: as political participation increases 1.0% points (it means great job about mayors duties or low corruption), then UBN faces an expected reduction in 1.22% points. Moreover, the second equation (2) points a strong relationship between Political Participation, Homicide Rate and Displaced People, for instance as homicide rate increases in 1.0% point, then the Political Participation faces a reduction in 0.01% points and an increase of Displaced People in 1.0%, then the Political Participation faces a reduction in 2.07% points. Therefore, low political participation (poor work of mayors in homicide rate and displaced people) lets a higher UBN.

Figure 2. Political Participation

(% of population who voted in 2011)

Source: Federación Nacional de Municipios Colombia.

Table 1. Impact on Unsatisfied Basic Needs and democratic environment in Colombia in 2010

(Model 3LS)

Variable	UBN (1)	Political participation (2)
Tertiary education	-1.07*
Fiscal grade	-0.56*
Ln(Coca crops eradication)	0.97*
Ln(Economic activity)	-2.69*
Political participation	-1.22*
Homicide rate		-0.01*
Ln(Displaced people)		-2.07*
Constant	151.20*	79.02*
Sample size	709	709
Pro(Chi2)	0.00	0.00

* Significative under Bootstrap (1,500 replications)  critical value of 0.05.

Source: Own calculations Stata 12.1.

Annex: Variables meaning

UNB: percentage of families that faced lack of at least a basic good according to international methodology. The information was registered in 2010.

Political participation: percentage of citizens in age to vote that voted in last local elections, it was in 2011. It is expected as this indicator increases the UBN faces a decline.

Tertiary Education: percentage of people who got a tertiary education and live in the municipality. It is expected as this indicator increases the UBN faces a decline.

Fiscal grade: grade according with local government results in 2010. indicator from 0 to 100, as the indicator increases, there are better results. It is expected as this indicator increases the UBN faces a decline.

Coca crops eradication: hectares of coca crops eradicated in 2010. Variable of high interest, as this indicator increases the UBN faces an increase.

Economic activity: indicator that measure the grade of legal economic activity penetration in each municipality (its components are legal taxes payed by legal business), the year taken was 2010. It is expected as this indicator increases the UBN faces a decline.

Homicide rate: murders per 100 thousand of inhabitants in 2010. It is expected as this indicator increases the Political Participation faces a decline.

Displaced people: number of displaced people in 2010 due to internal war conflict. It is expected as this indicator increases the Political Participation faces a decline.

Banana Republic VII: how could Colombia be in OECD group?, please be standing on the ground

Colombian government wants to be part of OECD but society actions says not yet. Colombia is a violent Country with more than 5 million of displaced people and a homicide rate of 31.4 per 100 thousand of inhabitants. Of course, there are Colombians living in municipalities named Genova, Ginevra, Málaga, Milan, Monterrey and San Francisco located in Colombia not in Europe or North America, they are really homonyms, for instance Ginevra (Colombia) faces 338 displaced people between 1998 to 2012, a homicide rate of 24.6, and 23.3% of her population are in poverty. To be part of OECD, colombia society has to work hard instead to show off. To be part of this group means a fair society in Human Rights guarantee and fair income distribution with low unemployment rate. This note also points some mexican indicators that highlight a similar path that Colombia has walked on, unfortunately Mexico can be other Colombia, I point some clue indicators to work on.   

Author: Humberto Bernal,  

Economist,

e-mail: zhumber@gmail.com

Twitter: Humberto_Bernal

It can be download @ PDF.

Last week Colombian government broadcast the intention to be part of Organisation for Economic Co-operation and Development (OECD) group. To be part of this group requires hard work on socioeconomic indicators such as homicide rate, displaced people, government corruption and dependency of primary products. From my point of view, to be part of this group is just a dream as government broadcast. Of course, government said a realizable dream in short run (next years) and from my point of view is a realizable dream but in long run. To be standing on the ground, there are socioeconomic indicators that do not let get the social assets to be part of this group. The main indicator is displaced persons in Colombia due to internal conflict. Table 1 shows the number of people displaced in municipalities with homonyms names in Europe, for instance the municipality Genova located in the region Quindío in Colombia faced a homicide rate of 82.0 per 100 thousand of people in 2011, a displaced people of 812 since 1998, and 22.3% of population faced lack of primary goods. Of course, these indicators are far way of Genova (Italy) that belongs to OECD. Other municipality is Ginevra (Valle) with a homicide rate of 82.0, displaced people of 338, and poverty UNB rate of 11.4%, of course these indicators are far way of Ginevra (Switzerland) does. There are other municipalities that have poor indicators to ask for Colombia be part of OECD such as Málaga located in Santander-Colombia (not in Spain Europe), Milan in  Caquetá-Colombia (not in Italy), Monterrey in Casanare (not in Mexico), San Fransico in Cundinamarca (not in the United States) and Sevilla in Valle (not in Spain). The only similitude between these municipalities in Colombia and OECD members is the name (they are really homonyms).

Table 1. Main indicators for homonyms regions in Colombia

Municipality	Region	Homicide rate*	Internally displaced persons	Poverty UBN**
Genova	Quindío	82.0	812	22.3
Ginevra+	Valle	24.6	338	11.4
Málaga	Santander	5.4	671	14.7
Milan	Caquetá	34.4	7,712	42.9
Monterrey	Casanare	14.3	1,174	26.3
San Francisco#	Cundinamarca (Putumayo)	No information	69 (209)	20.6 (17.9)
Sevilla	Valle	93.0	1,893	16.1

* Rate per 100 thousands of inhabitants 

** UBN: Unsatisfied Basic Needs Method.

+ in spanish the spelling is Ginebra.
# There are three municipalities named San Francisco in Colombia, table shows two, the other does not have information on displaced people.
Source: Municipality Association (Federación Colombiana de Municipios). Own Calculations Stata 12.1.

Colombia has 5,405,629 displaced people in 2012 due to internal war conflict. Figure  1 shows displaced people by municipality since 1998, the colors point the number of displaced people, for instance there are municipalities that have more than 10,000 displaced people (red color!), the municipality that faces the highest value of displaced people is Buenaventura located in Valle del Cauca (near to Pacific Ocean) with 66,928 cases. There are other municipalities that face close values such as Carmen de Bolivar, Santa Marta and Tierralta, they are located close to Atlantic Ocean.

Figure 1. Internal displaced persons in Colombia 1998-2012

(Number of displaced people)

Source: Municipality Association (Federación Colombiana de Municipios). Own Calculations Stata 12.1.

The conclusion: we are in a country that faces a internal war conflict, we are not in Europe Country where violation Human Rights are punished with jail sentence. Colombian government has to be standing on the ground and work hard in the next years to put the end to this conflict and make sure to guarantee Human Rights to all Colombian citizens. 

The main indicators to be part of OECD group

The OECD is an economic group of 34 countries that works on economic indicators that goes with economic development through international trade and fair progress. Figure 2 shows OECD countries by population, the total population is about 1,2 billions of people out of 7 billions in the World.

Figure 2. Population in OECD group

(lMillion of people)

Source: World Bank Data.

Homicide rate

The OECD members showed a homicide rate between 0.6 per thousand of inhabitants and 22.7 in 2010, the minimum value was reached by Norway and the maximum value was reached by Mexico. Mexico is a special case due to drug trafficking cartels are taken violence as medium to reach their objectives such as export cocaine to United States and Europe. Mexico faced a homicide rate of 8.1 in 2007 with a declining trend until 2007, after this year trend changed. The band without Mexico is a homicide rate between 0.6 and 5.2, the last figure is faced by Estonia. On the other hand, Colombia faced a homicide rate of 33.4 in 2010 and 31.4 in 2011, before this year Colombia had faced high rates, She is one of most violent countries in the World, she took 16th place out of 207 countries in 2011.

GINI Index 

GINI index for OECD countries is between 0.230 and 0.521, the minimum value is showed by Sweden while the maximum value is showed by Chile. Colombia shows a GINI index of 0.539 in 2012, this indicator is hard to reduce in Colombia due to internal war conflict that pushes people from their lands as it was pointed above. 

Internally displaced people

Internally displaced people in OEDC countries is close to null, Turkey and Mexico are the only countries that started to face this social big problem. Until 2010 Turkey had faced 1,201,000 displaced people while Mexico had faced 120,000 displaced people. Displaced people in Mexico could be explained by drug trafficking cartels violence. On the other hand, Colombia has faced 5,405,629 cases of displaced people since 1985 (these numbers are those resisted but they can be more). Colombia is the mayor country that faced displaced people, after Colombia are Iraq, Sudan and Uganda with a band between 1,000,000 and 4,000,000 of displaced people.

Military expenditure as share of GDP

The OECD countries face a military spending between 0.5% and 7.4% of Gross Domestic Product (GDP) in 2010. The minimum value was faced by Mexico with 0.5% of her GDP and the maximum value was faced by Israel with 7.4% of her GDP. Colombia faced a military spending of 3.8% in 2010 and 4.2% in 2012, this indicator is one that achieves  the expectative to be in OECD group from my point of view, although there are few problems with Human Rights inside the military procedures.

School enrollment, tertiary (% gross)

The School enrollment tertiary gives information about youth that must be in tertiary education, for instance Mexico faced a rate of 28.0% of people in tertiary education, it means for each 100 of people that must be in tertiary education, there are 28 enrolled. The OECD group showed a band between 28% and 103.1% in 2010, the minimum value was faced by Mexico and the maximum by South Korea. The last country shows a really high rate, it is a case to deep study that can be replicated by other countries. Colombia faced an enrollment rate of 39.1%, unfortunately it is lower than the average figure from OECD countries.

Manufactures exports

Manufactures export (% of merchandise exports) is an indicator that shows the high value added by a country for World Society. The OECD countries shows a band between 12.7% and 93.3% in 2010, the minimum value was faced by Chile and the maximum value was face by Israel. Colombia had an index of 22.5% in 2010. Chile as Colombia suffer of primary good trade problem (Enclave economies), Chile exports lot of copper and silver while Colombia exports huge volumes of crude oil, coal and ferronickel. Although Chile is working on adding value to these primary commodities to export finished goods but Colombia faced management corruption in royalties uses.

Net migration

Net migration can measure the desire of be part of birth country. The number of people (net migration) is positive, it means poor desire of be part of the country. For instance, Spain faced an annual net migration of 2,250,005 cases in 2010, it can be explained by her economic crisis and high unemployment rate. The OECD group faced a band between -1,805,238 and 2,250,005 in 2010, the minimum value was faced by Mexico and the maximum by Spain. Colombia faced a net migration of -120,000 in 2010, it means many people found Colombia as a good place to set up a business and family. This indicator gives positive points to Colombia to be part of OECD group due to people find Colombia safer.

Unemployment rate

There is other indicator to take into account, it is unemployment rate but the idea is to calculate the long run unemployment rate to each country in OECD group and Colombia. the World Bank gives information to do it through Long-term unemployment indicator. In Colombia case the long run unemployment rates is 10.0%, it is too high to be in OECD group.

Table 2. Main economic indicator to be part of OECD group

(last information available)

	OECD			Colombia
Indicator	Minimum	Maximum	Average		Checklist
Homicide rate (100,000 inhabitants)	0.6	22.7	1.7*	33.4	X
GINI Index (0-1 index)	0.230	0.521	0.333	0.539	X
Internally displaced persons (number of people)	0	1,201,000	0**	5,405,629	X
Military expenditure  (% of GDP)	0.5	7.4	1.8	4.2	OK
School enrollment, tertiary  (% gross)	28%	103.1%	69.5%	39.1%	X
Manufactures exports  (% of merchandise exports)	12.7%	93.3%	67.4%	22.5%	X
Net migration (number of people)	-1,805,238	2,250,005	421,467	-120,000	OK

*Without Mexico. Without Mexico and Turkey.
Source: World Bank Data, CIA World Factbook and Colombia Bureau of Statistics.

Annex: can Mexico be other Colombia?

Through this information one realizes that Mexico is going to Colombia negative path, for instance the number of displaced people showed an increase from few  people 2009 to more than 100 thousand in 2010, the school enrollment rate is the lowest in OECD countries as the military spending. Mexico is on critical point, she can face same indicators as Colombia if mexican government does not pay attention. From my point of view, Mexico has to invest in Human Rights guarantee, education and military spending. Moreover, Mexico is facing immigration of people who do not have employment, they come back to home country due to Global Crisis in developed countries, therefore, in my opinion, Mexico has to set up an employment program to reduce her unemployment rate that is about 5.3%, it is fair to point that Mexico had an unemployment rate of 2.5% in 2001, after this year the trend has been positive.