Colombia

Politics:

• Analysis

  Colombia politics: Colombia in 2013: the key issues

  Colombia begins 2013 with strong economic fundamentals and the potential to continue to outperform other peers in Latin America, but it also faces risks that could damage economic growth and the political environment. Peace talks with the leftist guerrillas of the Fuerzas Armadas Revolucionarias de Colombia (FARC), relations with Nicaragua, the economic situation of key trading partners, and the government's capacity to boost the execution of public works and improve business and consumer confidence are some of the key issues for the country in the new year.

  Notwithstanding these challenges, described below, the Economist Intelligence Unit's baseline scenario assumes that moderate progress at the bargaining table with the FARC and slightly more supportive external conditions, in combination with effective domestic policymaking, will contribute to Colombia's continued progress.

  Negotiations with the FARC

  With peace talks with the FARC dominating the government's agenda, a collapse of the process would drastically weaken the president, Juan Manuel Santos, and thereby undermine his re-election chances. (By law, Mr Santos must disclose if he will run for re-election in 2014 by November 2013, at the latest.) Yet even if the talks continue, as we expect, risks to Mr Santos's political standing are high. The FARC may try to prolong the negotiations and use the process to gain visibility internationally. This could lead to a stalemate or encourage the government-pressed for results as the presidential and congressional races approach-to accept partial agreements that might be advantageous to the FARC and/or not count with broad political and popular backing. The credibility of the negotiations could deteriorate if the FARC's military offensive-which is likely to resume when the unilateral truce it declared in November comes to an end in late January 2013-increases the public perception that internal security has worsened under Mr Santos. Also, the FARC's political activism has the potential to spark social tensions. The authorities claim the group has been behind protests by indigenous groups in rural areas and by students and leftist political organisations in cities (most visibly, the Marcha Patriotica, or the Patriotic March, a movement led by a leftist former senator, Piedad Cordoba), which have frequently ended in riots. The guerrillas' involvement in drug-trafficking not only poses a major obstacle to their full demobilisation, but is likely to continue to fuel violence as the rebels dispute the control of this illegal business with the "bandas criminales" ("bacrim", or organised criminal bands). Our forecast is that the government and the FARC will make enough progress at the bargaining table to keep the peace process alive. Yet with no final settlement and with violence persisting, Mr Santos's political position will suffer, although he will have enough backing in Congress for his reform agenda, which will include initiatives that form part of the peace talks. The scope of such reforms will be limited by Mr Santos's falling approval ratings, as well as the rising voice of the opposition, most visibly led by former President Alvaro Uribe (2002-10), once Mr Santos's main political sponsor but now his main detractor.

  Relations with Nicaragua

  Mr Santos's approval ratings suffered a major setback after the November 2012 ruling by the International Court of Justice (ICJ) in The Hague in favour of Nicaragua in a territorial dispute involving the sea around the San Andres archipelago. A broad majority of Colombians believe that their government should reject the ruling in spite of potential military conflict with Nicaragua. Yet Mr Santos has taken a non-confrontational approach and has said the ruling will be eventually enforced, though only after an agreement is reached with Nicaragua to ensure that the archipelago's fishermen will be able to maintain their activity in both nations' waters. Our forecast is that there will not be a military confrontation between the two countries, but by implicitly accepting the ICJ ruling, Mr Santos will see his popularity continue to erode.

  International environment

  Assuming that the US economy (the US is Colombia's main trading partner) grows at a similar rate than in 2012 (around 2%), Colombian exports to that country will benefit from stable demand in the context of broader duty-free access under a bilateral free-trade agreement in place since mid-2012. While a similar agreement with the EU (Colombia's second-largest trading partner) will probably take effect from the first half of 2013, the continuation of recession in much of the EU (even if a milder one than in 2012) will keep demand for Colombian products subdued. The sharp economic slowdown that we expect for Venezuela in 2013 will restrict Colombia's agricultural and industrial sales to that market, which have been dynamic in recent months. Overall, however, we forecast that Colombia's exports will grow on the back of an economic rebound in China (which will support higher commodity prices for key Colombian products, such as oil and coal) and strong growth in most of Latin America (which will support manufacturing exports). A deterioration of conditions in the US (for example, if lawmakers there fail to reach a satisfactory resolution to the "fiscal cliff" problem) or the EU, or an unexpected slowdown in Latin America, are the major risks to this forecast.

  Economic policy

  The unexpectedly sharp decline of GDP growth in the third quarter of 2012 (2.1% year on year and -0.7% quarter on quarter) was in part due to volatile international conditions and one-off domestic factors (such as a labour strike affecting coal output), but it was also the result of domestic issues, such as the foreign-exchange policy and low budget execution. The economic authorities have limited capacity to curb the peso's appreciation, which has hurt the competitiveness of the tradeable goods sector. We assume that the Banco de la Republica (Banrep, the central bank) and the Santos administration will continue to try to indirectly limit the peso's strength, though with only moderate success. As for public spending, the inauguration in January 2012 of new mayors and governors slowed budget execution at the regional level, but this is expected to speed up in 2013. However, there are additional risks that could keep public spending in Bogota, the capital city, which accounts for a quarter of the country's GDP, subdued. The style of the city's mayor, Gustavo Petro (a demobilised guerrilla leader governing on a leftist platform) could continue to hamper not only the execution of public works but also private construction, as his administration has drastically delayed the approval of building permits and in other cases has restricted new development within certain areas of the city. While our basic assumption is that the central government will increase the pace of execution of public works, the obstacles to progress could persist in 2013. In this case, poor public investment would to drag down GDP growth. Moreover, the private sector would continue to be affected by a deficient transportation infrastructure, which remains, by far, the country's main hindrance to business competitiveness.

  Consumer and business confidence

  Economic authorities also have a significant challenge ahead of them in their goal to improve consumer and business confidence, which is currently dampened by volatile international conditions and, on the domestic front, by credit restrictions, the slow execution of government programmes and newly created red tape. Banrep has adopted a looser monetary policy stance, which could continue in the first half of 2013, but there is a risk that negative expectations continue to deter consumers and business from borrowing and banks from lending. However, our baseline scenario is that credit to the private sector will recover, thus fomenting private demand, which in conjunction with the acceleration in public-works execution and more benign international conditions will drive GDP growth of above 4% in 2013.

  December 28, 2012

• Background

  Colombia: Political forces at a glance

  Political outlook: Political forces at a glance

  Government: The centre-right president, Juan Manuel Santos, began his four-year mandate in August 2010. His broad "National Unity" coalition gives him almost 90% of the votes in the bicameral Congress (legislature), which consists of a 166-member Chamber of Representatives (the lower house) and a 102-member Senate (the upper house). Mr Santos's centre-right Partido Social de Unidad Nacional (Partido de La U), founded in 2004 and composed of dissidents from the traditional parties-the centre-right Partido Conservador (PC) and the centre-left Partido Liberal (PL)-is the largest party in both chambers of Congress. The coalition is made up of the PC, PL, the centrist Cambio Radical (CR) and, most recently, the Partido Verde (PV), whose candidate Mr Santos defeated in the June 2010 run-off election. The coalition has displayed significant discipline, voting according to the executive's plans. This reflects Mr Santos's abilities as a negotiator and power-broker. The coalition is likely to remain in place until the May 2014 presidential election, but parties will run independently at the March 2014 legislative poll. The leftist Polo Democrático Alternativo (PDA)-which has been weakened by significant defeats in the October 2011 regional election and corruption cases involving its leadership-is the only opposition to the Santos government in the legislature.

  Parliamentary forces, 2010
  (no. of seats)
  Party	Chamber of Representatives	Senate
  Partido Social de Unidad Nacionala	48	28
  Partido Conservador (PC)a	36	22
  Partido Liberal (PL)a	38	17
  Partido Cambio Radical (CR)a	16	8
  Partido de Integración Nacional (PIN)	11	9
  Polo Democrático Alternativo (PDA)	5	8
  Partido Verde (PV)	3	5
  Other Parties	9	5
  Total	166	102
  a Pro-Santos forces.
  Source: Congreso de la República de Colombia.

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  Next elections: Legislative, March 2014; presidential, May 2014; municipal and regional, October 2015.

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  June 21, 2012

• Structure

  Colombia: Political structure

  Official name

  Republic of Colombia

  Form of government

  Democratically elected representative system with a strong executive

  Head of state

  The president, elected for a four-year term; (consecutive) re-election is possible for a second term

  The executive

  The president heads the cabinet

  National legislature

  Bicameral Congress; the 102-member Senate (the upper house) and 166-member Chamber of Representatives (the lower house) are both directly elected for four-year terms

  Legal system

  A national Supreme Court and a Constitutional Court; regional, municipal and district courts

  National elections

  The next legislative election is due in March 2014 and the next presidential election is due in May 2014

  National government

  Juan Manuel Santos, of the Partido Social de Unidad Nacional (Partido de la U) won the June 2010 presidential run-off election and began his term in office on August 7th 2010. Mr Santos has a healthy majority in Congress, backed by the Partido Conservador (PC), the Cambio Radical (CR), Partido Liberal (PL) and Partido Verde (PV)

  Main political organisations

  Following the March 2010 congressional election, the Partido de la U, PC, CR and PL vote with the government. The PV joined the coalition in 2011. The Partido de Integración Nacional (PIN) is on the far right, and the Polo Democrático Alternativo (Polo) represents the left

  President: Juan Manuel Santos

  Vice-president: Angelino Garzón

  Key ministers

  Agriculture: Juan Camilo Restrepo

  Commerce, industry & tourism: Sergio Díaz-Granados

  Culture: Mariana Garcés Córdoba

  Defence: Juan Carlos Pinzón

  Education: María Fernanda Campo

  Environment: Juan Gabriel Uribe

  Finance: Mauricio Cárdenas

  Foreign affairs: María Ángela Holguín

  Health: Alejandro Gaviria

  Housing: Germán Vargas Lleras

  Interior: Fernando Carrillo

  Justice: Juan Carlos Esguerra

  Labour: Rafael Pardo Rueda

  Mines & energy: Federico Renjifo

  Technology & communications: Diego Molano Vega

  Transport: Cecilia María Álvarez

  Central bank president

  José Darío Uribe

  December 12, 2012

• Outlook

  Colombia: Key developments

  Outlook for 2013-17

  • Peace negotiations between the administration of the president, Juan Manuel Santos, and the country's left-wing guerrillas will dominate the political scene, with Mr Santos risking his re-election chances if the process fails completely.
  • The main thrust of economic policy under Mr Santos will be to consolidate macroeconomic stability, encourage foreign investment and promote more inclusive growth to reduce inequality and encourage job creation.
  • From an estimated 4.4% in 2012, GDP growth will accelerate in 2013-17 (to an annual average of 4.9%), helped by improvements to the business environment and by strong investment growth.
  • A steady consolidation of the public finances will lead to a gradual reduction of the overall public debt, to 25.6% of GDP in 2017.
  • After embarking on slight monetary easing in 2012, the Banco de la República (Banrep, the central bank) is likely to raise policy rates later in the forecast period, as growth picks up and interest rates in OECD countries begin to rise.
  • The peso will remain strong in 2013-17, reflecting continued positive interest rate differentials with developed countries and ongoing large inflows of foreign direct investment (FDI) into the hydrocarbons and mining sectors.
  • The small trade and transfers surpluses will be insufficient to offset a rising income deficit and a slight services deficit, keeping the current-account deficit at an average of 3.5% of GDP in the outlook period

  Review

  • The leftist Fuerzas Armadas Revolucionarias de Colombia (FARC) guerrillas announced a 60-day unilateral ceasefire (including halting the attacks against the country's infrastructure and its armed forces) starting on November 20th.
  • In one of the worst acts of violence in Colombia in recent years, ten peasants were murdered in the Antioquia province, presumably by one of organised criminal bands (formed by ex-paramilitaries) that operate in the region.
  • In a controversial ruling, the International Court of Justice (ICJ) reaffirmed Colombia's land rights over the San Andrés archipelago but determined new maritime borders with Nicaragua that reduce Colombia's territorial sea.
  • The liquidation process of Interbolsa-Colombia's second-largest stock brokerage, with a 30% market share-has prompted an investigation to determine if illegal practices were responsible for the firm's collapse.
  • The central bank cut its intervention interest rate by 0.25 percentage points, to 4.5%, upon signs of a cooling of GDP growth amid volatile international conditions and weakening domestic demand.

  December 12, 2012

Economy:

• Background

  Colombia: Country fact sheet

  Fact sheet

  Annual data	2011a	Historical averages (%)	2007-11
  Population (m)	47.6	Population growth	1.4
  GDP (US$ bn; market exchange rate)	333.2b	Real GDP growth	4.4
  GDP (US$ bn; purchasing power parity)	471.9	Real domestic demand growth	5.4
  GDP per head (US$; market exchange rate)	7,007	Inflation	4.5
  GDP per head (US$; purchasing power parity)	9,924	Current-account balance (% of GDP)	-2.8
  Exchange rate (av) Ps:US$	1,848b	FDI inflows (% of GDP)	3.6
  a Economist Intelligence Unit estimates. b Actual.

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  Background: Since becoming a republic in 1819, Colombia has been plagued by political violence. Power-sharing deals between liberals and conservatives reduced violence in the early 1960s but excluded other political forces, which contributed to the emergence of guerrilla groups. Colombia's economic track record has generally been one of the best in the region in recent decades. After a boom in 2003-07, economic growth cooled off in 2008-09, dragged down by the global economic crisis, but it has since recovered on the back of buoyant investment.

  Political structure: Colombia is a unitary republic. The president heads the executive branch and is elected for a four-year term, with the possibility of being re-elected for a second term. Legislative power is vested in Congress (the legislature), which consists of the Senate (the upper house) and the Chamber of Representatives (the lower house), both elected by popular vote for four years. The Partido Social de Unidad Nacional (Partido de la U)-founded in 2004 by dissidents from the main traditional parties, the Partido Liberal (PL) and the Partido Conservador (PC)-became the majority political force after the March 2010 legislative election. The judicial system is composed of the Constitutional Court, the Supreme Court, the Council of State, the office of the prosecutor-general, tribunals and judges.

  Policy issues: Orthodox, market-friendly policies have been in place since 2000 and underpin stability for investors. Policymaking will focus on boosting economic growth through reforms to fiscal policy and some aspects of the business environment. The government will target social and infrastructure spending to reduce still-high levels of poverty and to boost competitiveness and trade links. Land restitution is set to take place in the forecast period, but significant capacity obstacles persist. The public debt/GDP ratio is set to fall over the medium term, bolstering debt sustainability. Reforms are needed to improve labour flexibility and lower non-wage costs.

  Taxation: The top rate of income tax fell from 38.5% in 2007 to 33% in 2009, and further changes can be expected in the outlook period. Free-trade zone (FTZ) legislation offers investors a lower 15% rate and investor stability contracts are available, shielding new investments from adverse changes in taxes. A 0.4% debit transactions tax will be gradually phased out. Reforms to widen the tax base and eliminate income tax exemptions are in the pipeline.

  Foreign trade: Firm prices for commodity exports (in particular, oil) and increased production compensated for a sharp import rebound in 2010-11. On the back of these trends, the deficit on the current account declined to 3% of GDP in 2011.

  Major exports 2011	% of total	Major imports 2011	% of total
  Petroleum & petroleum products	49.1	Intermediate goods	38.7
  Coal	14.7	Capital goods	35.1
  Coffee	4.6	Consumer goods	18.9
  Leading markets 2011	% of total	Leading suppliers 2011	% of total
  US	37.9	US	28.8
  Netherlands	4.2	China	11.7
  China	3.8	Mexico	7.9
  Ecuador	3.6	Brazil	5.2

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  December 12, 2012

• Structure

  Colombia: Economic structure

  Data and charts: Annual trends charts

  
  

  

  December 12, 2012

• Outlook

  Colombia: Country outlook

  Colombia: Country outlook

  FROM THE ECONOMIST INTELLIGENCE UNIT

  POLITICAL STABILITY: The political scene will be dominated, particularly in the short term, by the peace negotiations between the government of the president, Juan Manuel Santos of the centre-right Partido Social de Unidad Nacional (Partido de la U), and the Fuerzas Armadas Revolucionarias de Colombia (FARC) guerrillas. In his term to date, Mr Santos has achieved important victories, including the adoption of structural fiscal reforms to improve macroeconomic management and a series of landmark laws that have changed the state's stance toward the decades-long internal conflict. These include a victims' law that envisages monetary compensation to the conflict's estimated 4m-5m victims, along with a land reform that aims to return land to displaced owners. However, an end to Colombia's 50-year conflict would require other contentious laws to be approved--including changes to the electoral and military codes--putting pressure on Mr Santos to maintain cohesion within the ruling Unidad Nacional coalition, which controls almost 90% of the seats in Congress. Although tensions between the executive and the legislature have risen in the past year--reflecting a botched judicial reform and a significant fall in the popularity of Mr Santos in the first half of 2012--the president enjoys the support of most political party leaders. This increases the likelihood that the executive's agenda (including legislation necessary to push forward with the peace process as well as other political and economic reforms) will be pushed forward. Despite extreme distrust of the FARC, the public also appears supportive of the peace process, further strengthening Mr Santos's position.

  ELECTION WATCH: The next legislative and presidential elections are set for March and May 2014, respectively. Although the president's re-election chances will depend to a large extent on security issues and progress with peace talks, Mr Santos's position will be boosted by higher fiscal spending on disadvantaged groups. In addition, assuming that the Unidad Nacional coalition--composed of the Partido de la U, the centre-right Partido Conservador (PC), the centre-left Partido Liberal (PL), the centrist Cambio Radical (CR) and the centrist Partido Verde (PV)--remains relatively united until the end of Mr Santos's term, the number of high-profile contenders will be limited, ensuring less competition for the incumbent. Mr Uribe--who is constitutionally barred from running for president ever again--is likely to seek to head a group of right-wing legislators or even run as vice-president on an opposition candidate's ticket. However, this group's electoral appeal will remain limited, as will that of the leftist Polo Democrático Alternativo (Polo), which has been weakened by corruption scandals and is being challenged by other left-wing movements, including the Progresistas, led by Gustavo Petro, the mayor of the capital, Bogotá. Barring a complete failure to reach a peace agreement, the Economist Intelligence Unit expects Mr Santos to retain the presidency in 2014-18.

  INTERNATIONAL RELATIONS: Colombia's external relations will be driven by pragmatic policies, with emphasis on further economic integration with countries along the Pacific Rim of the Americas--particularly Chile, Mexico and Peru--to increase trade and investment flows. The Santos administration will also seek to maintain a conciliatory stance with its neighbours, particularly Venezuela. A recent ruling by the International Court of Justice (ICJ) over the San Andrés archipelago has pitted Colombia against Nicaragua--it recognised the islands as Colombian territory but determined new maritime borders that grant Nicaragua greater claims in the area--and is likely to hurt Mr Santos's popularity in the short term. But the risk of a prolonged conflict is very small. Although military and financial assistance under Plan Colombia (US legislation aimed at curbing drug-smuggling) will gradually decline, the US will remain a key ally, with trade and investment flows between the two countries benefiting from a free-trade agreement (FTA) that came into force in early 2012. Following the implementation of FTAs with Western trade partners (Canada and the EU), Colombia will seek agreements with Asian economies. A trade deal with South Korea was signed recently and formal discussions with Japan are likely within the next year. Although Colombia and China have recently signed several agreements, a full FTA is unlikely in the outlook period.

  POLICY TRENDS: Besides improving the business environment and attracting foreign direct investment (FDI) in infrastructure, mining and the hydrocarbons industry, the main thrust of economic policy under Mr Santos is the consolidation of macroeconomic stability and the promotion of more inclusive growth to reduce poverty and inequality and encourage job creation. However, Mr Santos will face difficult global conditions, especially in the short term, as well as structural bottlenecks that will reduce the effectiveness of policy. Challenges include reforming the tax, pension and health systems, boosting formal employment, improving road and port infrastructure, and enhancing the quality of education, all of which affect competitiveness. Although the president's relatively strong political position increases the chances that a reform to streamline the country's over-complicated tax system will be approved within the next legislative period (ending in June 2013), some of the proposed changes are highly controversial and are likely to be watered down. As a result, certain aspects of Colombia's complex and burdensome tax regime will persist throughout the forecast period. Nevertheless, the country will be better prepared to weather global volatility in the future, reflecting in large part the government's improving fiscal position--including a new sovereign wealth fund from oil royalties--which will allow the implementation of countercyclical spending. Moreover, there is some scope for monetary easing, as shown by a recent rate cut in November by the Banco de la República (Banrep, the central bank).

  ECONOMIC GROWTH: Colombia will remain one of Latin America's most attractive investment locations in 2013-17, helping to drive solid GDP growth rates. However, economic performance will be weaker than in the boom years of 2004-08 (when growth averaged 5.4% per year), as structural bottlenecks and volatile external conditions limit private consumption and export growth. Although GDP growth in the first half of 2012 remained strong, we expect a notable deceleration in the second half, bringing full-year growth down to an estimated 4.4%, from 5.9% in 2011, reflecting strong external headwinds and weaker domestic demand. GDP growth will accelerate slightly in 2013, to 4.7%, in part as the effects of recent monetary easing take hold, but risks stemming from global financial volatility will persist. Economic performance will gain momentum in 2014-17 (when GDP growth will average 5% per year), in line with modest improvements in addressing infrastructure bottlenecks and a more supportive external environment.

  INFLATION: Prudent macroeconomic management will keep annual inflation within the central bank's target range of 2-4% in 2013-17. Slower credit growth has eased domestic demand pressures this year, and we estimate year-end 2012 inflation at 2.8% (down from 3.7% at end-2011 and 3.1% in October). Although global food prices and demand-side pressures are set to increase in the medium term, a continuing surge in investment (which will gradually boost productive capacity) will help to keep inflation at the mid-point of the range--averaging 3% per year in 2013-17, compared with 4.2% per year in 2007-11. The main risks to our forecasts stem from food supply bottlenecks arising from adverse weather or external disruptions, which would have an effect on overall inflation.

  EXCHANGE RATES: Renewed appetite for emerging-market currencies--fuelled by further monetary easing in the developed world--will continue to put some appreciation pressure on the peso in the short term, but movements in the currency's value will be contained by a more active role by Banrep in purchasing foreign exchange (the central bank has raised the limit on daily purchases from US$20m to over US$35m until March 2013). Excluding major surges in global risk aversion--which would lead the currency to lose ground and will remain a moderate risk throughout the outlook period--we expect the peso to remain stable in 2013, owing to Banrep's intervention, at around Ps1,810:US$1. Despite recent monetary easing (and persistent current-account deficits), Colombia's comparatively high interest rates will continue to attract foreign portfolio inflows, which, combined with strong FDI inflows, will keep the currency strong until 2014. In 2015-17 we expect the peso to weaken slightly against the US dollar, reaching Ps1,840:US$1 by end-2017, as the Federal Reserve (the Fed, the US central bank) finally raises interest rates. Nonetheless, this will not be enough to offset the peso's sustained real appreciation--the real trade-weighted exchange rate is currently 25% over its ten-year average--which hurts Colombia's competitiveness in non-energy sectors.

  EXTERNAL SECTOR: A rising income deficit will produce a widening of the current-account deficit to 3.7% of GDP in 2017, but strong FDI inflows will support the external sector. Growth in exports will be underpinned by expanding oil and mining production--with oil exports accounting for half of total earnings--and by rising demand from newly signed trade deals with non-traditional and traditional partners (boosting mainly non-traditional exports). However, this will be outweighed by firm growth in the import bill, driven by strong investment and private consumption growth, keeping the trade surplus at an average of only 1.4% of GDP in 2013-17. Growth in tourism inflows, as a result of improving security, and services exports (such as business outsourcing) will partly offset a rise in freight costs, leading to a slight narrowing of the services deficit, to 1% of GDP by 2017. By contrast, reflecting growing profit remittances from foreign companies based in Colombia, the income deficit will increase to 5.3% of GDP by 2017 (from under 2.5% of GDP a decade ago). The transfers surplus is forecast to average 1.1% of GDP in 2013-17, sharply down from the 2006-08 average of 2.6% of GDP, as remittances from Colombian emigrant workers remain below their pre-crisis highs. Helped by FDI inflows, international reserves will rise to above US$51bn in 2017, providing ample import cover.

  December 01, 2012

• Forecast

  Colombia: Country forecast summary

  Country forecast overview: Highlights

  • The president, Juan Manuel Santos, and his large ruling coalition, made up of the centre-right Partido Social de Unidad Nacional (Partido de la U), the centre-right Partido Conservador (PC), the centrist Cambio Radical (CR), the centre-left Partido Liberal (PL) and the centrist Partido Verde (PV), will entrench macroeconomic stability and provide general continuity.
  • As the legislative and presidential elections approach in the first half of 2014, however, divisions within the ruling coalition are expected to become more marked, not least because of a growing rift between Mr Santos and his predecessor as president, Álvaro Uribe (2002-10). Mr Uribe, who remains popular, will pose the biggest risk to Mr Santos's re-election, as he is likely to seek an active role in politics (he is barred from running for president, but he could stand for the Senate). That said, the Economist Intelligence Unit's baseline forecast is for Mr Santos to be re-elected.
  • Security issues will remain pivotal during the outlook period, with the government embarking on new peace negotiations with the Fuerzas Armadas Revolucionarias de Colombia (FARC) guerrillas that are set to last until mid-2013. The government is putting all its political capital into reaching an agreement; we therefore expect some progress to be made before the 2014 elections, possibly even providing the FARC with some form of political representation in the short term. However, violence and organised crime associated with drug-trafficking and newly formed groups from demobilised combatants will remain high by international standards.
  • Colombia's non-financial public-sector fiscal deficit will narrow in 2013-17, as structural fiscal reforms approved in 2011 and an increased capacity for countercyclical spending put the public finances on a sounder footing.
  • Amid relatively weak global conditions, GDP growth will average 4.7% annually in 2013-17, a strong expansion by historical and regional standards. Growth will be supported by high levels of investment and robust private consumption, although the external sector will act as a drag on growth. Barring supply-side shocks, inflation should remain moderate in 2013-17, supported by an inflation-targeting framework that aims to keep it within a 2-4% range.
  • Free-trade agreements with the US, Canada, the EU and South Korea will help to bolster trade flows, as well as attracting investment in energy and non-energy sectors. This, combined with a large and increasingly affluent population, will sustain firm levels of GDP growth in the medium and longer term.

  Country forecast overview: Key indicators

  Key indicators	2012	2013	2014	2015	2016	2017
  Real GDP growth (%)	4.4	4.6	4.8	4.7	4.8	4.9
  Consumer price inflation (av; %)	3.2	3.1	3.1	2.9	2.9	3.0
  Non-financial public-sector balance (% of GDP)	-0.5	-0.5	-0.5	-0.4	-0.4	-0.1
  Current-account balance (% of GDP)	-3.4	-3.6	-3.5	-3.8	-4.0	-4.1
  90-day deposit rate (av; %)	5.2	4.9	5.3	5.7	6.1	6.4
  Exchange rate Ps:US$ (av)	1,797	1,800	1,796	1,801	1,811	1,832

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  November 15, 2012

View detailed map

Country Briefing

Land area

1,038,700 sq km

Population

46.4m (2012 World Gazetteer estimate)

Main towns

Population (‘000; World Gazetteer estimate)

Bogotá (capital): 7,539

Medellín: 2,420

Cali: 2,278

Barranquilla: 1,144

Climate

Tropical on coast, temperate on plateaux

Weather in Bogotá (altitude 2,560 metres)

Hottest month, March, 9-21°C; coldest months, July and August, 8-19°C (average monthly minimum and maximum); driest month, February, 51 mm average rainfall; wettest month, October, 160 mm average rainfall

Languages

Spanish (official); many indigenous languages

Measures

Metric system. The following special weights and measures are also used:

libra = 0.5 kg carga = 125 kg

arroba = 12.5 kg vara = 79.8 cm

quintal = 50 kg cuadra = 80 metres

saco = 62.5 kg fanegada = 0.64 ha

Currency

Peso (Ps)=100 centavos; average exchange rate in 2011: Ps1,848:US$1

Time

5 hours behind GMT

Public holidays

January 1st; January 9th; March 19th; April 5th; April 6th; April 8th; May 1st; May 21st; June 11th; June 18th; July 2nd; July 20th; August 7th; August 20th; October 15th; November 5th; November 12th; December 8th; December 25th

March 07, 2012