Nowadays, we live in a global World where transport is cheaper and communication is easier. One can get sales on fly tickets and internet makes international meetings easy. However, there is a big issue still, it is the international migration block. The avoidance of free human movement around the World brings high costs in economic development. For instance, if Colombia society blocks the entrance of foreigners in 1.0%, her GDP will not face an increase between 0.03% and 0.04%, and her FDI will not face an increase between 0.08% and 0.25%. Other countries such as the United States is aware of it, and they are working hard to make a country for everyone in the World. On the other hand, Colombia does not pay attention to this issue, and in some cases Colombian government blocks international immigration without fair reason. Colombian central government has to pay attention on this issue to take advantages of globalization.
Author: Humberto Bernal,
Economist,
e-mail: zhumber@gmail.com
Twitter: Humberto_Bernal
Colombia, as many other countries, has enjoyed the international immigration during XX and XXI centuries. In 1884, Colombia counted with 1,160 foreigners as residents; this volume increased to 26,821 in 1928 according to colombian census. Although Colombia has not been the main place for foreigners such as Brazil, Argentina, Paraguay and Uruguay have, Colombia has showed an important increase of foreigners since 1970. Before 1970, Colombia faced low volume of international immigration, but there were immigrations such as Chines at the beginning of XX century that contributed with Panama Canal construction, Western Europeans and Americans that contributed with local mining, trade and industrial development, Japanese that contributed with agrarian development and Jews that contributed with trade and financial development. In some cases, foreigners found fair wages rates and decided to settle down in Colombia. After 1970, the volume of foreigner in Colombia increased as figure 1 shows. This increase can be explained by better transport system such as airplane and better living conditions in Colombia. However, there were other important reasons that can explain it; for instance, the real wage increased for those who came to work, so the annual real wage growth was about 18% and 20% between 1970 and 1980. This increase was the highest that Colombia has faced ever. There were other reasons such as mining and crude oil extraction, and high FDI inflows that required knowledge that was missed by locals.
Figure 1. Foreigners in Colombia 1925 - 2012
(thousand number of people*)
* It counts residents resisted by local authorities and travelers who decided to settle down in Colombia
(stock of net flow of travelers).
Source: Palgrave International Historical Statistics, Bureau of Statistics (DANE), World Bank and Migration Office Colombia.
The volume of foreigners in Colombia was not smooth between 1960 and 2000, but they contributed to Colombia development indeed. Even though, the volume of foreigners showed a positive trent, there were important jumps during this period. These jumps can be explained by local internal war conflict that terrified foreigners through murders and kidnappings. Nevertheless, foreigners contributed with their knowledge to Colombia development. Table 1 shows the impact of foreigners on Colombia Gross Domestic Product (GDP) and Foreign Direct Investment inflows. For instance, as the number of foreigners increase in 1.0%, then it is expected that Colombia GDP faces an increase in 0.03%, and the foreign capital increases in 0.25%. This results come from an econometric model called 3SLS where there are 87 observations (since 1925 to 2012) and other significative variables that contribute to get these results.
Table 1. Effect of 1.0% of more foreign people on Colombia GDP and FDI into Colombia
(increase in %)
Gross Domestic Product
|
Foreign Direct Investment
|
|
Foreigners in Colombia
|
0.03%
|
0.25%
|
Source: Own calculations 3SLS model Stata 12.1.
Foreigners’ contribution is positive and permanent in the very long run. Foreigners’ contribution is permanent and can be calculated in 0.04% as foreigners increase in 1.0%. Figure 2 shows these results, after foreigners increase in 1.0%, the next 5 years Colombia faces an important increase in her GDP growth, until reaching 0.04% in the very long run. Same scenario is faced by FDI, as the number of foreigners in Colombia increases, in this case the very long run effect is about 0.08%. The conclusion is Colombia can enjoy a better economic conditions as foreigners take Colombia as a home.
Figure 2. Colombia GDP increases because 1.0% of more foreign people in Colombia
(increase in the very long run %)
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