The economic slowdown and the development of public policy have limited the attraction of investment in Colombia, according to the Investment Climate 2024 report, prepared by the U.S. Department of State, a document with information through 2023 aimed at U.S. investors planning to invest globally.
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“Although Foreign Direct Investment remained strong in 2023, the Petro administration has promoted the concept of national sovereignty in key economic sectors, which has generated high levels of uncertainty within the private sector”the Report stated.
According to the document, the 0.6% growth of the Colombian economy in 2023 marks “a substantial slowdown after two years of strong post-pandemic recovery”. This is accompanied by a lower dynamism in investment, where “A 25% decline in investment, high interest rates and a deteriorating business climate contributed greatly to the sharp slowdown in growth”.
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Following the tax reform that came into force in 2023, it was indicated that, “The government is also seeking to reform the health, labor and pension systems, raising concerns among investors”However, a domestic market of more than 50 million inhabitants, the abundance of natural resources, and the growth of an increasingly educated middle class, stood out as the main strengths for investing in the country.
Foreign investment.
However, the protection of intellectual property rights, informal employment, insecurity and the presence of illegal groups in legal supply chains, as well as corruption, stand out as the greatest weaknesses in attracting investment in Colombia.
“During the Petro administration in Colombia, investors from various sectors cite the lack of effective and timely consultation with regulatory agencies on decisions that affect them. Interested investors point to concerns about high staff turnover and loss of technical expertise in government agencies, as well as an absence of leadership for almost two years in key regulatory agencies.”the report said.
In the 2024 document, for the first time in 10 years, the State Department failed to include a sentence highlighting Colombia as an attractive destination for foreign investment, as it had been doing since 2015.
Current situation requires concrete actions
The president of the Colombian-American Chamber, AmCham Colombia, María Claudia Lacouture, indicated that the Report of the United States Department of State reflects the country’s need to generate actions that allow the promotion of economic growth and the creation of formal and quality employment. This is not only seen from an economic perspective, but also from the political and social framework that the country is going through, where the agreement of reform bills has influenced the certainty to attract investment and create long-term economic opportunities.
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In this regard, AmCham Colombia calls for fewer messages and more action; moderating political polarization and ensuring full respect for Colombian institutions by all actors, which are essential to guarantee a recovery of private investment.
“We are seeing that we have a challenge of economic growth, which is slowing down and requires concrete solutions that make the most of the country’s potential. Developing joint reactivation work with the private sector is a great opportunity to regain confidence and establish bridges of dialogue.”said María Claudia Lacouture, president of the Colombian-American Chamber, AmCham Colombia.
Foreign investment
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He pointed out that “public-private coordination is a fundamental pillar for democracy and allows the economy to be energized towards new sectors. At AmCham Colombia, we reiterate the importance of working together to reactivate the economy, which the country so badly needs, building consensus that allows for the common good for all Colombians.”
“From the public sector, there is an urgent need to improve budget execution, which reached 36.6% between January and June 2024, lower than the average of 39% recorded during the same period between 2001 and 2023. Economic recovery requires concrete plans and the strategy proposed by the national government around 7 thematic axes is a good start. However, the details of each one in terms of resources, source of financing and achievement of goals are still lacking,” said Lacouture.
It is worth mentioning that the United States stands out as the main investor in Colombia, with Foreign Direct Investment reaching US$ 5,517 million in 2023, 9.4% higher than the US$ 5,044 million recorded in 2022, according to information from the Banco de la República. Maintaining this trend, in the first quarter of 2024, US investment in the country amounted to US$ 1,612 million, a growth of 42.8%, from the US$ 1,129 million reported for the same period in 2022.
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