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February 5, 2015

Columbia, Fast Developing

A few years ago, before leaving Europe for a long mission in Colombia, I remember all the warnings given to me by officials about my stay and how to behave in Bogotà and Medellin. The reality on the ground is far away from all the warnings received a priori my mission. Colombia is not anymore the drug & terror country. As it turns out, the country will become a regional power in the following decades.

As you may know, the devil is in the detail and Colombia is welcoming back its citizens from abroad. Several Colombians are coming at home from London and New York, mainly from the financial (private equity group) and bank sectors. Nevertheless, other opportunities abound in other domain such as mining, energy, consumer, infrastructure.

In the mining field :

the country has started a new era with the creation of the mining agency in 2012 and a new mining code. These "restructurations" are aimed at attracting more foreign investments and selling rights to develop unexplored mineral pitch. Colombian authorities have put their priorities in exploration such as phosphate, potassium, magnesium, platinium, uranium, iron and coltan beside the existing gold, copper and coal explorations. As the Financial Times wrote last year, the country has to decide whether it turns into a mining country or it remains a country with mining. This is one of the challenge ahead for Colombia.

Colombian President Juan Manuel Santos
The oil industry :

has seen its production doubling between 2006 and 2012. Colombia has become the fourth biggest oil exporter in Latin America but new oil fields seem to be hard to discover in the country. This is why exploration will continue to be crucial to the industry in the following years. New technologies are requested to better perform these exploration, in other words, Colombian oil firms should use new technologies rather than the 1960's one ! Investing in new technologies is another key challenge for the country.

A free Colombia ?

A few weeks ago, the Colombian Ambassador to the US took the floor at the CSIS (Center for Strategic and International Studies) told that there's something new in his country which is called hope !  Peace talks between the Government and the FARC (Revolutionary Armed Forces of Colombia) began in October 2012 in Norway. A peace deal will ignite faster economic growth in Colombia. At present time, the situation is more critical because of the deadly attack on police and the bombing of oil infrastructures. Nevertheless, the bilateral negotiation is still ongoing and the last round was held on March 11th. Colombian government negociators need concrete results to deliver to President Santos and not act of violence. This is why the first step should be an agreement on land reform and how to redistribute fields and land title (system corrupted for decades).

The recent death of the venezuelian President, Hugo Chavez, could influence the path towards a resolution of the conflict because Chavez commit itself with dedication -as a facilitator- in favour of peace in Colombia.     
Housing market :

As you may know, housing is an important sector in any economy. Housing market in Colombian cities is quite robust with peak prices in the three main cities : Bogotà, Medellin and Cartagena. Bogotà has seen a steep rise in housing price. Medellin is still growing and borough such as Poblado became the gem for foreign investors looking for a retirement home. Last but not least, Cartagena, still bullish because of the caribean shores, the weather and tourism.

Foreign investors acting into the colombian housing market are from Venezuela, United States, Mexico and Chile. Before 2015, there are still great real estate opportunities (but no more bargain prices) in Medellin and Bogotà.

Colombian FTA (Free Trade Agreement) :

The latin american country has open its market to two hungry consumers : Europe and United States. Last June 2012, a Free Trade Agreement was signed in Brussels between the EU and Colombia. A few conditions were applied to the agreement such as Colombia's compliance with labor rights, including freedom of workers to unionize, as well as environmental regulations. 

Commercial US-Colombian bilateral relations can be described with an Obama's quote : "in Latin America alone, over the past decade, tens of millions of people have stepped out of poverty and into the middle class. Sothey are now in a position to start buying American products".

Regional power ? (geostrategy) :

Colombia can be described as fast developping country which will step up towards a regional power status within the next two decades. Our thoughts are confirmed by the CIA in its book the world in 2030.

As it turns out, the country is opening up to tourism, foreign investment and experiences enviable rates of economic growth. During the last few years, we've witnessed a surge in foreign investment combined with a domestic credit boom that allow us to describe Colombia as a kind of "new Brazil".

About The Author - Roberto De Primis is a business intelligence analyst with an M.A. in Political Science. from E.M. Solvay Business School. Writing from Brussels, he is the founder of Eurintelligence, linking economics, and finance with politics.  (EconMatters author archive here.)

The views and opinions expressed herein are the author's own, and do not necessarily reflect those of EconMatters.

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