By Robert Valencia
In the last couple of weeks, Colombia has been in the spotlight when it comes to the global economy. First, President Obama, in his 2011 State of the Union address, assured that the U.S. would enter into deals that would “keep faith with American workers…to promote American jobs,” while pursuing free trade agreements with countries like Colombia and Panama. These remarks revived the discussion in Colombia on possibly entering into trade agreements with the United States; many hemispheric aficionados consider Bogotá to be Washington’s best friend in Latin America.
The proposed U.S.-Colombia free trade agreement, which has been on the back burner, might open new opportunities for Colombian manufacturers and entrepreneurs who had been greatly affected by the Chávez-Uribe diplomatic impasses. While a trade accord may be distant in the works, another step to a future milestone appears to be taking place: the possibility of Colombia joining the Organization for Economic Cooperation and Development (OECD) which is considered by many to be the “club of the wealthiest countries.”
During his tour across Europe last January, President Juan Manuel Santos formally submitted Colombia’s membership request. If granted, Colombia would become the third Latin American country—after Mexico and Chile—to join this organization. OECD President José Ángel Gurría stated his contentment by saying that “the fact that Colombia has expressed to the council its will to join us is an important event for our organization’s lifetime.” He also has expressed his hopes that Colombia will become a member in a “not so distant future,” and added that, on behalf of the 34 member countries, “they feel much honored by [Colombia’s] interest.”
Presenting its candidacy to the OECD represents not only an aspiration to join a selected group of developed and newly industrialized countries, but Colombia’s challenge to fill several voids. As President Santos himself pointed out: “we are committed to laying out all of the necessary measures to fight against corruption and bribery.”
Evidently, this discourse is fueled by the latest advancements in Colombia’s economy in the last four years: Bloomberg BusinessWeek named Colombia the “world’s most extreme emerging market” due to massive foreign direct investment, a booming stock market, and rising security measures. Additionally, HSBC CEO Michael Geoghegan announced last year that, like the so-called “BRIC,” the economic bloc CIVETS will grab international attention; this group is comprised of Colombia, Indonesia, Vietnam, Egypt, Turkey, and South Africa. According to the HSBC executive, these countries share similar traits such as young, growing populations and diverse economies. Santos admitted that Colombia’s current stability is due to former president Alvaro Uribe’s “democratic security,” which has helped demobilize more than 50,000 armed insurgents and dismantle a handful of drug cartels.
This optimistic sentiment is also coupled with Santos’ recently launched national development plan, which seeks a 6-percent economic growth by the end of his administration while giving Colombia a much more prominent presence in the international arena (starting with the restoration of Colombia’s relationship with Venezuela and Ecuador). However, Bogotá faces several obstacles before reaching a formal membership: Colombia’s GDP per capita hovers at USD 8,900, roughly half of Mexico’s GDP, which is the lowest among the OECD members. In addition, Colombia’s unemployment remains high, economic output is relatively low, and the educational system requires a major overhaul.
In 2010, the same OECD statement cited that, despite Bogotá’s strenuous accomplishments in economic policies, increasing demand for its exports, macroeconomic stability and security, the South American country needs to reduce its high poverty levels and close the inequality gap among its population. In addition, the report noted a weakness in infrastructure that raises business costs and aggravates low productivity, a tax system that does not generate growth and “does little to improve income distribution,” and that the perceived quality of public sector governance is relatively low.
This report outlined some goals for Colombia to achieve if it is to overcome these socioeconomic shortcomings that include: enhancing the distribution of benefits by “improving the functioning of labor and product markets,” investing in infrastructure and skills, and performing the necessary reforms to existing labor regulations. The same report also notes that greater resources for education are also paramount in order to “boost education outcomes of vulnerable groups,” and that effective business competition freed of corrupt linkages can only prosper from “more competition, less regulation, and greater access to finance of smaller companies.”
Certainly, the Santos administration has to do more than just give lip service to his proposed development plans in order to join the OECD, and it might seem unattainable to reach all of these goals within his presidential term. Though Gurría praises Colombia’s current situation as a “result of good policies,” more needs to be done if Colombia is to join the club of developed countries. Now is the time for Santos to lay out plans to improve the job market and the country’s outdated social infrastructure; otherwise, Gurría’s “not-too-distant future” premise will prove far too difficult for millions now living in the Andean nation to easily attain.
This analysis was prepared by COHA Research Associate Robert Valencia