Are Colombians a xenophobic society? or are Colombians a weak democratic society?

The total number of people kidnaped in Colombia between 1964 and 2012 are between 39,059 and 58,112 cases according to different sources. The total number of foreigners kidnaped are at least 1,051 cases between 1971 and 2012, so it means a 2.7% or 1.8% of total people kidnaped in Colombia. Someone who ignores the internal political war in Colombia can conclude that colombians are a xenophobic society that does not deserve the life’s gift. Fortunately, it is not the case; Colombians are splendid hosts. The number of foreigners residents in Colombia have increased in the last 50 years until reaching at least 150 thousands in 2012. This note highlights the principal figures from foreigners kidnaped in Colombia and its decline due to meetings and Peace dialogues between government and guerrilla in Cuba.

Author: Humberto Bernal,  

Economist,

e-mail: zhumber@gmail.com

Twitter: Humberto_Bernal

It can be download @ PDF

Colombia is a country where kidnaping is an activity that news broadcast everyday. Moreover, Colombia is on the first places of countries that face this social disease. The issue is such that there are many sources where people can find information on people kidnaped in Colombia; for instance in Department of Defense in Colombia, Department of Economic Development (DNP), Police Department, Fondolibertad, Cifras y Conceptos and Centro Nacional de Memoria Histórica; these sources are the most important, but one can find information in foreign sources also. Information from these bodies is not equal; for instance, the total people kidnaped is between 39,059 and 58,112 cases through 1964 to 2012 according to source. Therefore, it shows the complexity of this issue. However and fortunately, there is information to remember us the violation of Human Rights in Colombia, country that is part of the World. Moreover, this information lets us remember why we have to protect the Human Rights. This note deals the kidnaping facing by foreigners in Colombia during 1971 to 2012. I have written about this issue in my previous notes, but the information was not properly dealt (see my note of November 3th of 2013). Therefore, I decides to go in deep on this issue to make it clear.

Colombia is a country that has faced many cases of people kidnaped, but they show a decline since meetings in Cuba took place. People  that have been kidnapped in Colombia is about 58,112 between 1964 and 2012; some of these people has been released, others paid to be released, others escaped and others died in captivity!!!. Figure 1 shows the rate of kidnaping in Colombia per 100 thousand of inhabitants; as one can see, the worst period was between 1978 and 2010; the average rate was 4.6 per year; it means per 100 thousand of people, there were approximately 5 people kidnaped each year; it is fair to remember that Colombia has approximately 47 million inhabitants. However, since meetings between Government and Guerrilla started, the number of people kidnapped showed a deep decline fortunately; the rates were 0.7 in 2011 and 2012; it means 305 cases in 2011 and 305 cases in 2012. Moreover, according to Fundación País Libre, FARC did not kidnap any foreigner in 2012.

Figure 1. Kidnaping rate in Colombia 1964-2012

(rate per 100.000 inhabitants)

Source: DNP, Deprtamnet of Defence Colombia, Cifras y Conceptos, Centro Nacional de Memoria Histórica, Fondolibertad.

In my previous note (November 3th of 2013), I pointed that the number of foreigners kidnaped in Colombia were at least 5,563 cases during 1971 to 2012, but, after making the proper accounts, this number is at least 1,051 cases during this period as figure 2 shows. This information comes from public data broadcasted by Cifras y Conceptos, Centro Nacional de Memoria Histórica and Fundación País Libre. Since 1980, there has been at least 3 cases of foreigners kidnapped, and the worst case was in 1999 when there were 95 cases. By 2012, the foreigners kidnaped were 4.

Figure 2. Foreigners kidnapped in Colombia

1964-2012

(Number of people)

Source: Cifras y Conceptos, Centro Nacional de Memoria Histórica, Fondolibertad and Fundación País Libre.

Foreigners live around whole in Colombia, but they were kidnaped around whole Colombia also. Colombia has 1,123 municipalities and at least 250 have faced  the kidnaping of a foreigner. 69% of total foreigners kidnaped between 1971 and 2012 were in small cities  or rural areas as figure 3 shows; these cities do not face high security as Bogotá, Medellín, Cali, Santa Marta, Cartagena and Cúcuta. However, the 31% of foreigners kidnaped took place in “safe” cities such as those pointed few lines above. This information highlights the big issue which Colombia has been passed through.

Figure 3. Foreigners kidnapped by municipality in Colombia 1971-2012

(Share of total foreigner kidnapped* %)

* Total Cases with information: 857 out of 1,051.

Source: Cifras y Conceptos, Centro Nacional de Memoria Histórica, Fondolibertad and Fundación País Libre.

Foreigners kidnaped in Colombia has come from many countries. Figure 4 shows where foreigners kidnaped come from; They are from Venezuela with 16.9% of total foreigners kidnaped between 1971 and 2012, the Unites States with 14.6%, Italy with 6.5%, Spain with 5.5%, and Germany with 5.5%. Others come from China, Costa Rica, Aruba, Australia, Japan and so... The World has 206 countries and foreigners kidnaped in Colombia come from 60 countries!!!. It means it is a World’s problem, it is not Colombians’ problem just.

Figure 4. Foreigners kidnapped by source country in Colombia 1971-2012

(Share of total foreigner kidnapped* %)

* Total Cases with information: 1,051.

Source: Cifras y Conceptos, Centro Nacional de Memoria Histórica, Fondolibertad and Fundación País Libre.

Someone who is not aware of Colombian conflict can point that Colombians are a xenophobic society that do not deserve enjoy the life’s gift, but it is not the case fortunately. Colombians enjoy being hosts; there are many films that highlight how Colombians make a big effort to make conformable foreigners’ stay in Colombia; for instance, Mi gente linda, mi gente bella. Moreover, foreigners residents in Colombia have increased in the last 50 years; there are approximately 150 thousand foreigners registered in Colombia in 2012, but this number increased to 650 thousand if foreigners not “registered” are taken into account. Therefore, why are foreigners kidnaped in Colombia?, the answer is because Colombia faces an internal political war, and this activity gives power of negotiation and finical sources for supporting this irrational political war. Therefore, we are looking forward to ending this internal war to enjoy Colombia as must be.

Banana Republic VIII: where is money going?, 49 years facing high unemployment rates and GINI above 0.5, it’s time to rethink monetary channels

Money is for making transaction easier, to make accounts easier, and to store it for future consumption. This is pointed by economic books; however, after studying the monetary theory and reading monetary cases around the World, one tends to add this function also: printing money has to be managed to achieve fair income distribution; therefore, it  is time to work on microeconomic issues about printing money.

Nowadays, there is topic about the Monetary Authorities duties. Most of Centrals Banks around the World have to look after for low inflation and fair economic development, but they put strong effort in the first duty, low inflation. Colombia is in this list, Central Bank of Colombia has been working hard to get this trophy, and they won it. However, the cost was a high unemployment rate; it was 9.6% in 2012 and 9.0% in September of 2013. In Colombia, when monetary authorities go to show their results in front of colombian Congress, they broadcast good indicators such as positive monetary supply growth rates, monetary policies that mitigate the GDP cycles, lower inflation rate and so. Of course, colombian Central Bank is full of professional of best skills; most of them have a Magister and PhD studies in many subjects, so their results have many filters to be consistent. This note shows indicators that support monetary authorities under aggregate view such as inflation, but Central Bank’s results in terms of economic development are critical. It is time to think on improving money channels (ways to supply money); to align fair economic development, money has to make their job through supporting the supply of public goods such as water, energy, transport, pensions and health. It does not mean irresponsible money supply, so it means  new channels to give the printing money. Microeconomic theory can be used to reach this target.

Author: Humberto Bernal,  

Economist,

e-mail: zhumber@gmail.com

Twitter: Humberto_Bernal

It can be download @ PDF

Central Bank in Colombia is on charge of keeping low inflation, but ensuring economic development (Art. 372 and 373 Colombia Constitution). Unfortunately, Monetary Policy has working on reducing the inflation rate without huge contribution to keep unemployment rate low. The inflation rate between 1970 and 1990 showed an annual average of 22.3% and unemployment rate showed an annual average of 10.1%; from 1991 to 2012 the annual average inflation rate showed a decline until 11.4%, but the average unemployment rate increased to 11.8%. Therefore, it is a clear evidence of laking of awareness from monetary authorities about the social cost in terms of unemployment in a country that faces unfair income distribution and high indicators of extreme poverty. This note points the efficiency of Monetary Policy in aggregate terms, but inefficiency in terms of economic development.

Monetary Policy has been mismanaged because unemployment in Colombia has been above 7.0% since 1964. From 1964 to 2000 the money supply in Colombia showed a declining trend as a share of colombian Gross Domestic Product (GDP) as figure 1 shows; this share went from 10.8% in 1970 to 5.5% in 2000; it means relative fewer notes and coins to make transactions throughout this period, so people faced lacking of monetary liquidity. This economic policy brought a high unemployment rate during this period; unemployment rate was between 7.0% and 19.9%. Therefore, Monetary Authorities forgot working on fair economic development, or they did not take into account the correct economic tools to fight against poverty and unemployment. Economic development, under monetary view, means aggregate and individual impact due to monetary policy. If one  reviews the Central Bank researcher's work, one finds lot work on monetary impact on aggregate variables, mainly financial aggregate variables, but null works on monetary impact on public goods. This fact is because Central Bank just gives cheap money to financial system, and financial system works on how to make private profits with public money without its social cost!!!.

Figure 1. M1 as percentage of GDP in Colombia

 1924 - 2012

(Annual data %)

Source: Central Bank of Colombia and Bureau of Statistics Colombia (DANE). Own calculations.

Although money supply started to increase as  a share in GDP since 2001, it has not been enough to sort out unemployment rate in Colombia. Since 2001 the share of M1 (money supply) in GDP in Colombia has showed an increase; it went from 5.6% in 2001 to 11.0% in 2012; however, the unemployment rate is above of 9.6% still. The problem is the printing money has showed positive rates, but they has been lower since 2003 as figure 2 show.

Figure 2. M1 annual quarterly growth rate in Colombia 

1932 - 2013

(Data smoothed, %)

      Source: Central Bank and Bureau of Statistics Colombia.  Own calculations.

The Central Bank of Colombia shows excellent financial aggregate results, but low economic development results.The Central Bank can show excellent aggregate indicators such as positive money supply growth rates, an increasing supply money as a share of GDP; moreover, they can show that the monetary policy is contra-cycle as figure 3 shows; it means as the economy starts a downturn, the monetary authorities take an active job to mitigate it. However, their impact on economy is biased; this monetary policy goes to support private financial system mostly. Economic crisis are alerts that economic development is in danger, but just supporting the financial sector does not make strong difference; therefore, Monetary Policy have to work on key economic variables to take advantage of economic crisis. These key variables are poverty indicators, public transport, water supply, energy supply and so. 

Figure 3. Real monetary supply (M1) per capita cycle in Colombia 1932 - 2013

(quarterly data)

Source: Central Bank of Colombia and Bureau of Statistics Colombia (DANE). Own calculations.

In conclusion, Colombian Central Bank has working properly to reduce inflation rate. They know the monetary impact from macroeconomic view, and work on financial system to mitigate economic crisis. However, they do not pay enough attention to reaching economic development. Socioeconomic indicators related with income distribution are same as 49 years ago; they have changed marginally. It is a call for working on the impact of monetary supply on public goods from a microeconomic view. Of course, high corruption has to be taken as a restriction in this type of microeconomic models.

Inflation-Unemployment policy in a country under internal war: Colombia case

Colombian unemployment rate has been between 7.0% and 19.9% in the last 49 years. This high unemployment rate is partially explained by the economic policy of inflation reduction taken since 1991 by Central Bank of Colombia. Under fair economic scenario, it would be tolerable an increasing unemployment in order to reduce the inflation rate, but it is so costly under an internal war conflict such in Colombia. Of course, the Central  Bank of Colombia made her job properly; the inflation rate faced an important reduction until reaching 2.4% in 2012, but unemployment increased to reach 9.6% in 2012. This high unemployment rate has feeded the terrorism partially because Colombia faces high unfair income distribution; people have to live on and terrorism well payed is an option in a country were security is poor. This note shows how unemployment pushed up the cases of kidnapping in Colombia during 1964 to 2012. The lesson has to be learned, Monetary Policy and Governments (central and locals) have to work hard to reduce unemployment rate for a successful Peace Meetings ending. On the other hand, in a country with low security and a bulk of population in poverty state, this type of terrorism is an alternative to live on.

Author: Humberto Bernal,  

Economist,

e-mail: zhumber@gmail.com

Twitter: Humberto_Bernal

It can be download @ PDF

The unemployment rate in Colombia has shown high values since decade of 1960 as figure 1 shows; this rate has been between 7.0% and 19.9%; the lowest value was reached in 1981 and the highest value was in 2000. The Central Bank’s economic policy since 1991 has been targeted to reduce the inflation rate, but it has brought high cost in terms of high unemployment rates; for instance, taking annual information since 1964 from these two variables, one finds as the inflation faces a reduction of 1.0%, the unemployment rate faces an increase of 0.14%; it means more people under unemployment state because this economic policy. Although this policy brought successful results because the inflation rate went from 32.4% in 1990 to 2.4% in 2012, the cost has been high compared with its benefits. This note highlights that inflation targeting in Colombia (get low inflation) brought costs in terms of feeding the terrorism in Colombia. Therefore, it is not advisable taking strong economic policies to reduce inflation when a country faces an internal war. 

Figure 1. Unemployment rate in Colombia 1964-2012

(%)

Red line: Average unemployment rate.

Source: Bureau of Statistics Colombia (DANE).

Kidnapping people in Colombia

Unfortunately Colombia has faced one of the highest rates of people kidnapped around the World; one can say that she takes the firsts places around the World. The number of people kidnapped in Colombia since 1964 is 52,150 people!; the number of people kidnapped increased dramatically in 1978 and 1994; the annual number of people kidnapped went from 122 cases  in 1978 to 3,706 in 2000 as figure 2 shows; unfortunately, nowadays this number is 305 per year. 

Figure 2. Total population kidnapped in Colombia 1964-2012

(Number of people, annual flow)

Source: DNP, Departement of Defece Colombia, Fundación Páis Libre, Cifras y Conceptos and Centro Nacional de Memoria Histórica.

Foreigners have not been absent in this type of terrorism in Colombia. There are 1,051 (this number was 5,563, but is was fixed according to my weekly note on 10th November of 2013) cases reported of foreigners kidnapped in Colombia since 1970; it means 10.1% of total people kidnapped since 1970. The worst years for foreigners in Colombia were between 2005 and 2010 when the annual rate of foreigners kidnapped were between 239 people and 918 people. The main foreigners kidnapped came from Venezuela with 17.0% of total foreigners kidnapped since 1970, the United States with 14.8%, Italy with 6.5%, Germany with 5.6%, and Spain with 5.5% as figure 3 shows. Fortunately, this rate has shown a decline since 2011 when the Pace Meetings start taking place; the number of foreigners kidnapped in 2011 were 10, and 4 in 2012. Of course, just one kidnaped is clear evidence of lacking of security and strong lacking of understanding of Human Rights in a society. This information comes from public data broadcasted by private and public colombian agencies Cifras y Conceptos and Centro Memoria Histórica; these two agencies have accurately information from 1970 to 2010; and Fundación País Libre has partial information for 2011 to 2012.

Figure 3. Source country of foreigners kidnapped in Colombia 1970-2012

(% of total foreigners kidnapped)

Source: DNP, Departement of Defece Colombia, Fundación Páis Libre, Cifras y Conceptos and Centro Nacional de Memoria Histórica.

Relation between unemployment and people kidnapped in Colombia

It is a clear evidence that as the inflation rate shows a decline due to monetary policies, the unemployment rate shows an increase. This evidence comes from many countries and Colombia is into this group. The issue is Colombian economic authorities started to work on low inflation rate while the country faced the worst internal war, so it was such put out fire with gas!. The increase in unemployment rate pushed low income people to do terrorism acts such as kidnaping. It is fair to remember that income distribution in Colombia is unfair in deep; people in poverty state are 32.7% of total population in 2012, and a GINI coefficient of 0.539 in 2012; by 1990 these indicators were worse!!. Therefore, when the costs of low inflation are taking into account, the people kidnapped have to be in this account. An econometric model shows that the reduction of inflation in 1.0% points brings an increase of unemployment rate of 0.14% points, but an increase in unemployment rate of 1.0% pushes up the kidnapping rate in 0.48% points; figure 4 shows the relation between unemployment and kidnapping in Colombia; it is clear evidence of a positive relation. These result have to be taken into account to a successful Peace Meetings because there are approximately 8,500 people in guerrilla troops in 2013 who can fell in this type of terrorism. Therefore, there is a strong challenge for Labour Minister, Central Bank of Colombia and private firms for giving job opportunities to colombians if we are really interested to achieve a Colombia in peace.

Figure 4. Total population kidnapped and people under unemployment state in Colombia 1964-2012

(Variables under natural logarithm)

Source: Bureau Os Statistics Colombia, DNP, Departement of Defece Colombia, Fundación Páis Libre, Cifras y Conceptos and Centro Nacional de Memoria Histórica. Own calculations Stata 12.1.

Foreigners’ contribution to Colombia economy: their monetary value

Technology in service to improve global security is a tool that let thinking in human free mobility around the World; countries in European Union and other main countries are working hard to achieve this target. INTERPOL is the international agency in charge to guarantee high security standards around the World. Colombians have faced high restriction on free mobility around the World, but things are changing in favor of colombians because of technology improvements. However, Colombia contribution to this target is poor; there is not a clear colombian policy for asking VISAS, there are huge foreigners in Colombia without clear status because lacking of immigration offices around Colombia, and many government paper to fill out; moreover, there are null researches on foreign contribution to Colombia economy. This note gives the starter of quantification of foreigners contribution to Colombia economy. 

Author: Humberto Bernal,  

Economist,

e-mail: zhumber@gmail.com

Twitter: Humberto_Bernal

It can be download @ PDF

International free human movement around the World is taking the attention of politicians around the World, and it is fair because free human mobility around it improves our welfare. Fortunately, we are living in a World where technology lets knowing who is who, and it lets working on getting a better World Society. However, this type of technology has to be dealt carefully to achieve better social status. From my point of view, The International Criminal Police Organization (ICPO, INTERPOL) is the organization in charge of keeping World security in high levels as we deserve. Colombia contributes to reach this achievement giving the welcome to INTERPOL strategies as last week was evidenced in the INTERPOL General Assembly in Cartagena (Colombia). From economic point of view, there is a social myth that free human mobility around the World will bring permanent lower salaries and reduction in society welfare; for instance, one can see social protest agains it, and some politicians without strong economic evidence who point restrictions on free mobility. This note, on the other hand, highlights the benefits that foreigners have given to Colombia society; therefore, it is a call for Colombia government to review her immigration policies in order to give a second step to achieve a free World human mobility; the first step was the welcome to INTERPOL strategies.

Foreigners in Colombia and their status

Foreign immigration in Colombia has increased indeed in the last 8 years, but there are many foreigners who do not have status of residents because of lacking of local information, many official papers to fill out and low government coverture to record them. According to last population Census (2005) and colombian residences given in the last 7 years, there are approximately 147,839 foreigners who were living in Colombia in 2012; however, as the net flow of immigrants (arrivals menus departures) is taking into account, there are approximately 622,708 foreigners living in Colombia in 2012; they are under status of tourist, students, short business visit and temporary work. Figure 1 shows the stock of immigration in Colombia from 1925 to 2012; there has been an important increase of foreigners in Colombia in the last years; most of them come from Venezuela, Ecuador, the United Estates, Asia and Europe respectively. This increase can be explained by fair salaries during 1950-1980; the real wage showed an annual average growth of 18% between this period; moreover, better security conditions that are evidenced by low foreigners kidnapped; there were years between 1995 and 2005 that the number of foreigners kidnapped were dozens; nowadays, there are kidnappings, but they are few per year, and they are released in short time. The bulk of these foreigners live in Bogotá, Medellín, Cali, Pereira, Barranquilla, Cartagena, Cúcuta and cities that face low rates of kidnapping; there are few that live outside of these main cities. Finally, there is an important issue that is taking researchers attention and is the emigration of foreigners from countries that used to be attractive for them; for instance, according to World Bank Data, the number of foreigners residents in Brazil, Argentina and in less volume Paraguay show a decline while foreigners has found more attractive Chile and Colombia although the last country face poor security indicators in some regions still. 

Figure 1. Foreign immigration to Colombia 1925 - 2012

(thousand of people, stock of people)

Source: Palgrave International Historical Statistics; Bureau of Statistics Colombia; DAS and Immigration Office Colombia.

The impact of foreigners resident in Colombia

There are huge literature about immigration impact on economies; for instance a good summary was done by Borjas (1995), (1999) and (2008). These researches point that foreigners bring external positives effects on economies, and salaries in local economy can increase because it; it means new foreign skills in production learned by natives let high salaries; however, these researches point also that at the beginning of immigration there is a pressure to reduce salaries, but this effect disappears so quickly because external positive effects take room. Figure 2 shows the foreigners surplus in a economy (green area) under external positive effects; this surplus is the contribution to the economy after foreigners payments; it is from a theoretical point of view, see Borjas (1999).

Figure 2. Foreigners surplus under positive externalities

(Theory perspective)

Vertical axis: real wage,

Horizontal axis: volume of labour,

N: local labour supply,

M: foreign labour supply,

L: total labour supply,

Source: Adapted from Borjas, G (1995) (1999) (2008).

Following Borjas (1999) methodology, the annual foreigners contribution to colombian economy is about 0.005% of Colombia Gross Domestic Product (GDP) between 1925 and 2012; this surplus is without external positive effect. However, as external economies take room, the foreigners contribution increases to achieve about 0.6% of colombian GDP; figure 3 shows the annual foreigners contribution on Colombia economy between 1925 and 2012; for instance, in 2012 the annual foreign per-capita surplus was US$7,818. There were periods when this per-capita surplus was lower; for instance, through decade of 1980 because general salaries showed a low positive rates, and the increase of terrorism in Colombia; the economic crisis of 1999 pushed down this per-capita foreign contribution also; this economic crisis was deep as the 1929 crisis. Therefore, foreigners contribution to Colombia economy is positive; moreover, they bring external positive effects on local productivity, so they deserve more attention from economic and immigration government authorities. 

Figure 3. Foreigners surplus in Colombia 1925 - 2012

(per-capita foreign surplus, US$ at 2012 prices)

Source: Palgrave International Historical Statistics; Bureau of Statistics Colombia; DAS and Immigration Office Colombia. Own Calculations.

References

Borjas, G. 1995. “The Economic Benefits from Immigration”, The Journal of Economic Perspectives, Vol. 9, No.2, pp. 3 - 22.

Borjas, G. 1999. “The Economic Analysis of Immigration”, Handbook of Labour Economics, Vol 3,  Chp 29. Elservier Science.

Borjas, G. 2008. “ International Immigration”, The New Palgrave Dictionary of Economics, Second Edition.

France et sa contribution au développement économique de la Colombie

France, belles et merveilleuses femmes de ce pays!!. French have contributed in huge to Colombia development. French women came to Colombia to improve the education and health in XIX century, and they are working and doing an important job around Colombia still. The Religious Sisters of Charity teach around Colombia through 15 offices. French were part of Simon Bolivar’s troops to achieve the Colombia independence also. Moreover, they designed important buildings around Colombia such as Liévano Palace in Bogotá. Nowadays, there are 3,900 French in Colombia where 49% are females, they settled down in Bogotá, Pereira, Medellín and Cali mainly. There are important French firms in Colombia that contribute with economic development such as L’Oreal, Sodexo and Schlumberger. The international trade has shown a decline because of globalization, WWI and WWII, but Colombia exports a bunch of products as France does also. However, there is an issue to sort out where France can contribute in deep; it is a better income distribution in Colombia as in many other countries also. Of course, this issue is in the Millennium Goals; the idea is to reduce the unfair income distribution to the lowest level ever, and global public policies are the tool to achieve this goal.

Author: Humberto Bernal,  

Economist,

e-mail: zhumber@gmail.com

Twitter: Humberto_Bernal

It can be download @ PDF

French in Colombia started to come to Colombia before her independence, and they have contributed to economic development. Many French came to Colombia before her independence because they heard about El Dorado Gold Legend; they came to search adventures and wealth also. French supported Colombia independence at the beginning of XIX century through soldiers and scientists. The principal Simón Bolívar doctor was Próspero Révérend; he worked for Republican troops.  At the end of XIX century, they invested huge economic resources for extracting gold and silver from Antioquia mines and Chocó mines; some of these mines were Guarino and Timbiquí. French invested huge economic resource in Panama Canal also, but they did not finish this project; they invested FR$2 billion in Panama Canal (US$10.6 billion at 2012 prices) and invested FR$6 million between 1875-1904 in extraction of gold and silver in Colombia (US$24 million at 2012 prices).

There were few immigration from France to Colombia at the beginning of XX century, but those who came to Colombia improved geography science; they designed many important buildings in Colombia such as Liévano Palace under direction of Gastón Lelarge; this French was so important  in designing many other buildings in Colombia such as National Capitol and the San Pedro Claver church.

French women have had an important role in Colombia development; they came during XIX and they are working  so hard in Colombia still. These Religious Sisters of Charity have contributed with Colombia education and health. Nowadays, they have about 15 local communities around Colombia. 

French citizens in Colombia have increased from 163 in 1843 to 3,900 in 2010 as figure 1 shows. There was an important immigration during Second World War (WWII); after it, the volume of French in Colombia did not show an important increase until 2000; from this year, French have found Colombia enjoyable because the security has improved. The volume of French kidnapped went from 27 cases registered between 1980 and 2000 to 7 between 2001 and 2008. In 2012, there were a French journalist that was kidnapped, but it was released in short time because government and guerrilla have been in a peace process. 

Figure 1. French population in Colombia 1843-2010

(number of people)

Source: Census, World Bank Data and France Embassy.

French in Colombia have settled down in Bogotá with 53.6% of total French in Colombia, Pereira with 10.1%, Medellín with 4.4%, Cali with 2.9% and many others such as Barranquilla and Filandia; figure 2 shows the main French distribution in Colombia. Their age distribution is 25.4% for those French between 1 and 15 years; 56.5% for those between 16 and 65 years old; and 18.1% for those older. Those French females are 48.6% and the others are males. Most of French that live in Colombia reached their university studies; they account 49.3%, and most of them work in education sector. Finally, there are 42.7% that are employees at important firms in Colombia. Unfortunately there are 6 French that are in troubles with Colombia Law. This information come from Census 2005, Immigration Office in Colombia and INPEC.

Figure 2. French in Colombia by municipality 2005-2010

(share of total French %)

Source: Bureau of Economic of Statistics Colombia (DANE).

Big business between France and Colombia

Big business between these two countries started since Colombia independence, and they have brought an important development in Colombia. The Foreign Direct Investment (FDI) as stock went from US$2.8 million at 2012 prices in 1900 to US$1.5 billion in 2012 as figure 3 shows.  The main investment from France in Colombia was the Canal of Panama, but Panama took her path in 1903. However, France invested in gold and silver extraction during last and first years of XIX and XX century; this type of extraction was learned by locals. After this investment,  French invested few resource, but her contribution was mainly in infrastructure and agriculture. After the WWII, they set up important firms in Colombia such as Rallye in 1950 (nowadays through Casino Group in retail sales); Parenco in 1971 (this firm invested huge economic resources in 1993 in crude oil sector); L’Oreal in 1993 (Make up sector); Carrefour in 1997 (in retail sector, but unfortunately this firm left Colombia in 2012-13); and Sodexo Pass 1994 (in eating places). 

Figure 3. FDI as stock from France in Colombia 1900-2012*

(US$ million at chained prices of 2012)

 * The FDI in Panama Canal is not taking into account in this figure. It was about FR$2,000 million in 1887 (US$10.6 billion at 2012 prices).

Source: United Nations. 1965. External Financing in Latin America; Rippy. 1948. French Investment in Latin America; De Lombarde. 1997. La Inversión Extranjera en Colombia; Central  Bank Colombia.

Nowadays, the most important French firms in Colombia are Hocol (Crude oil sector) based in Bogotá; Schlumberger (Electric power sector); and Sofasa (Renault, auto-parts). There are 35 big firms from France in Colombia at the end of 2012; they are located mainly in Bogotá, Medellín and Barranquilla respectively.

In terms of international trade, there are an important contribution to economic development between these two countries, but the trade shows a declined trend. Figure 4 shows that at the end of XIX century the trade between France and Colombia was higher, but the globalization, the WWI and WWII pushed down this trade. It is satisfactory to know that Colombia contributed with France reconstruction after WWII, the value exported was US$103 million when Colombia used to export as much US$7 million (it is the peak of 18.3% in figure 4, this number can be overvalued, but come from official data in 1949). The trade balance between these countries has been in favor of France since 1953. By 2012, the trade balance was US$847.9 million in favor of France. The main exports from Colombia to France are mineral fuels such as coal and crude oil; fruits, flowers and few textiles are important also. Colombia imports from France crude oil refined, machinery for industrial production and organic chemicals. One can say that the trade between these counties is mixed, so they trade high added goods and low added goods.

Figure 4. Trade index France-Colombia 1885-2012

(%, trade indicator*)

Source: United Nations; Urrutia. 1970. Own calculations. Compendio de estadísticas de Colombia.

The economic cycles between France and Colombia has changed. Before 1991, they showed a cyclical movement, so as France faced an economic growth, Colombia followed this path; however, in the last years this common movement changed to be contra-cycle. It is expected that France shows an important positive change in her GDP cycle; her cycle can finish 2013 with an upward tendency.

Figure 5. France and Colombia GDP cycle 

1977 - 2013

(quarterly data normalized)

Source: FED ST. Louis and Bureau of Statistics Colombia (DANE). Own calculations Stata 12.1.

Market Power in a country under unfair income distribution: the beer industry in Colombia

The beer industry in Colombia is a prosperous business with a per-capita consumption of 87 liters per year in 2011 and a forecast of 88 liters in 2012 (just people between 15 to 65 years) and a gross profits of US$3.0 billion in 2012, but it shows high grade of Market Power. SABMiller Colombia has approximately 99% of total beer market; there are other beer firms such as Bogotá Beer Company that has low share in the market still (gross profits of US$8.7 million in 2012). An industry that shows a Market Power in a country where the income distribution is awful, it lets government rethinking economic policies in this industry. Of course, increasing taxes is not the solution because it makes undesirable market distortions such as pushing down private incentives to invest and unemployment can face an increase. However, through competition, this industry can contribute to reduce the unfair income distribution; the market that can be useful is monopolistic competition. The duty of government, in this case, is to set economic policies to increase the competition to achieve two targets: better income distribution and better consumer welfare. This note shows how much beer industry is prosperous in Colombia and its demand properties for those who are interested in this sector.

Author: Humberto Bernal,  

Economist,

e-mail: zhumber@gmail.com

Twitter: Humberto_Bernal

It can be download @ PDF

Beer production in Colombia started at the end of XIX century and nowadays is a prosperous business with a gross profit of US$3.0 billions in 2012 where SABMiller is the main player with 99% of the total market. This note shows a brief of beer production-consumption in Colombia during XX century and its demand properties.

One of the main businessman that contributed to beer industry development in Colombia was the German Mr. Kopp. After some issues that were sorted out such as losses and closing down some beer factories because at beginning colombians did not like beer as much as nowadays and the 100% of nationalization because the Second World War (WWII), the beer industry took a prosperous development. After WWII the new local owners decided to expand the business to regions where beer was difficult to supply; for instance, Santa Rosa de Viterbo (Boyacá region) and Ipiales (Nariño region). The beer production went from 984 thousand of hectolitres per year in 1946 to 1,842 thousand in 1947 as figure 1 shows; this volume of production-consumption meant an increase of consumption per capita from 33 liters per capita (just economically active population) in 1946 to 131 in 1960. Nowadays, the per-capita consumption is 87 liters per capita (just economically active people; between 15 to 65 years old).

Figure 1. Beer production-consumption 1936 - 2011

(thousand of hectoliters per year)

Source: Palgrave International Historical Statistics; Oxford Latina American Data and Bureau Of Statistics Colombia (DANE-Encuesta Anual Manufacturera).

The volume of beer is sensitive to economic crisis. One tends to think that beer demand is inelastic under economic crisis, but it is not; for instance as the income shows a reduction of 1.0% (a decline of real GDP per capita), the volume of beer demanded shows a decline between 0.3% and 1.5% (with a punctual decline of 1.0%); this result comes from an econometric model where results are controlled by supply variables such as wages and crude oil price; moreover, figure 2 confirm this result; for instance, the Balance of Payments Crisis during 1955-1960 let a lower consumption of beer; same situations were in economic crisis faced in 1982; 1999 and the last one in 2009.

Figure 2. Beer production-consumption per capita 

1936 - 2011

(liters per year, total production divided by people between 15-65 years old)

Source: Palgrave International Historical Statistics; Oxford Latina American Data and Bureau Of Statistics Colombia.

From this econometric model, one concludes that Beer Price Elasticity of Demand is elastic also. The measure of this elasticity is between 0.2 to 3.0; it means, as price shows an increase of 1.0%, the volume demanded can face a decline between 0.2% and 3.0% (with a punctual decline of 1.6%). This information can be useful for marketing professionals that are interesting in set new business in beer industry. When a product shows a demand that is elastic in price, suppliers face high risk to miss consumers because of competence. Therefore, for those young graduate students in chemistry and business management can be interesting to spend time in developing new lines of beer in Colombia.

The Measurement for Colombian Peace Meetings

The internal war conflict in Colombia is feeded by cocaine revenues. The cocaine chain has many links, and the guerrilla is in the first links. It could be possible as soon as the political internal war conflict reaches the end, the place left by guerrilla in cocaine production will be taken by other groups. Therefore, the new legal political group that will come up from the end of internal war conflict along the traditional political groups will have to deal with these new illegal groups. This will be the first challenge of the New Colombia (the Colombia after the political internal war conflict). However, it can take time; meanwhile, how can Colombia society measure the success of the end of political internal war conflict?.  It could be difficult to make a distinction between violence from cocaine fight and violence from political views. Most of the country has points where coca bushes are grown, but there are 110 municipalities in Colombia where both coca bushes have not arrived and the political violence is cruel; this region is inside of Magdalena River Region; it is divided in three regions: High Magdalena, Middle Magdalena and Low Magdalena. Therefore, if the meetings in Cuba are successful, socioeconomic indicator from these municipalities have to improve quickly. This note shows the actual state of main socioeconomic indicators in these regions. 

Author: Humberto Bernal,  

Economist,

e-mail: zhumber@gmail.com

Twitter: Humberto_Bernal

It can be download @ PDF

Magdalena river is the main river in Colombia; it crosses Colombia from Huila-Cauca (south) to Atlántico (North); this river has a long of 1,540 kg; 6.3 million of people live around it; and it can be sailed from the start point of Magdalena Medio (Middle Magdalena) to the end of Magadalena Bajo (Low Magdalena) as figure 1 shows. As a reference point, it can be sailed from Honda town (Tolima) to Barranaquilla city (Atlántico).  This river used to be the main transport media in Colombia at the beginning of XX century; merchants of coffee, tabasco, bananas and others took this river to arrive the final cities. However, from 1970, this river started to show low uses because political internal war conflict. Therefore, the end of the political internal war conflict in Colombia will bring high development in this region; mainly in High Magdalena and Low Magdalena.

Figure 1. Municipalities around of Magdalena river

Source: Cormagdalena and Bureau of Statistics Colombia.

The cocaine production along High Magdalena and Low Magdalena is close to null, but the homicide rate because internal political war conflict is high. It is interesting that the municipalities around Magdalena river show low production of cocain bushes; it could be explained by the geographic position that does not contribute to grow this bush. However, the municipalities around Magdalena river have faced the cruel internal political war conflict; for instance the municipality called Isnos (Huila, High Magdalena) used to face a homicide rate of 68 per 100 thousand of inhabitants, but nowadays it is 19; same cases are for Barrancabermeja, Elias and Aguachica. Therefore, municipalities around Magdalena river can be taken as measure of the end of political internal war conflict; for instance, as the homicide rate and others socioeconomic indicator improve, then we can say that political internal war conflict is through the right path.

The main socioeconomic indicators to measure the success of the end of political internal war conflict in Colombia have to be taken from municipalities around Magdalena river because these municipalities show low production of coca bushes as figure 2 shows. These socioeconomic indicator are Gross Domestic Product (it is approximated through industrial taxes from these municipalities); Tertiary education, Unsatisfied Basic Needs (UBN), Homicide Rate and displaced people as table 1 shows. Through last information, one can see that these socioeconomic indicator are in critical levels; for instance there is low value added to the economy; population that finished their tertiary education and live in these municipalities is not more then 19.3%; and families in poverty state are no less than 17.7% of total families according to each municipality. 

Figure 2. Municipalities by coca bushes production and political internal war conflict

Source: United nations,  Cormagdalena and Bureau of Statistics Colombia.

From 128 municipalities that belong to Magdalena river region, there are just 18 that have been grown coca bushes as figure 2 shows (red color). The main municipalities are San Pablo (Bolivar, Middle Magdalena), Simiti (Bolivar, Middle Magdalena), Cantagallo (Bolivar, Middle Magdalena) and Rio Viejo (Bolivar, Low Magdalena). The total pure cocaine production from these 18 municipalities reached 14.7 tons out of 309 tons in Colombia in 2012.

Table 1. Main socioeconomic indicator around Magdalena river

Variable	High Magdalena	Middle Magdalena	Low Magdalena	Total Magdalena	Total Colombia
Municipalities (number in 2013)	46	15	67	128	1,123
Population (number of people in 2013)	1,366,821	591,440	4,312,552	6,270,813	47,121,089
Added value (% of total GDP 2012)	1.1	3.5	7.8	12.4	100.0
Tertiary education between* (population % in 2010)	1.1 - 14.2	2.1 - 10.8	1.3 - 19.3	1.1 - 19.3	0.2 - 28.2
Poverty UBN between  (families % in poverty in 2010)	17.7 - 71.7	22.3 - 65.9	17.7 - -81.1	17.7 - 81.1	5.4 - 90.0
Cocaine production (tons in 2012)	0	3.4	11.3	14.7	309
Homicide rate between (100,000 per inhabitants in 2011)	3 - 68	2 - 94	3 - 56	--	36.0
Displaced people (number of people between 1998 - 2011)	56,497	85,899	164,084	306,480	2,852,043

* First Low value, then High value. (Low value - High value)

Source: United nations,  Cormagdalena, Bureau of Statistics Colombia and DNP.