Colombia - Country Commercial Guide
Market Overview

Discusses key economic indicators and trade statistics, which countries are dominant in the market, and other issues that affect trade.

Last published date: 2021-11-08

The Republic of Colombia is the fourth largest economy in Latin America, after Brazil, Mexico, and Argentina, and has the third largest population with approximately 50.8 million inhabitants. The COVID-19 pandemic and related social unrest in 2021 introduced new risks to doing business in Colombia. However, Colombia will remain an important market for U.S. companies looking to pursue public-private partnerships and concessions in large infrastructure projects. Colombia also has a relatively open business environment, placing 67th out of 190 economies for overall ease of doing business in the World Bank’s annual Doing Business study for 2020. The country’s current President, Ivan Duque, is a pro-business political moderate and a strong ally of the United States. His term is expected to end on August 7, 2022.  In 2022, the U.S. and Colombia will celebrate two important milestones: the 10th anniversary of the U.S.-Colombia Free Trade Agreement and the bicentennial of the establishment of diplomatic relations.

 Colombia’s gross domestic product (GDP) totaled $271 billion in 2020, according to the World Bank. Although 2020 was the first time Colombia’s economy contracted in more than two decades, declining 6.8 percent from the previous year, largely due to the effects of COVID-19 and lower oil prices. The economy has rebounded strongly in 2021, with some forecasts suggesting economic growth could exceed 7% in 2021 and 3.5% in 2022.  Despite this progress, social unrest and road blockades in April and May 2021 are estimated to have cost the economy about $3 billion. Colombia’s National Administrative Department of Statistics (DANE) reported that the sectors most impacted by the pandemic and domestic unrest included construction, hospitality, retail, hotels and mining.

The pandemic has also impacted U.S.-Colombia trade. In 2020, American exports of goods and services to Colombia totaled $16.7 billion, a decline of 24% over 2019 levels.  Colombia’s exports to the United States were $13.2 billion, a contraction of 30% from 2019.  By mid-year 2021 bilateral trade has begun to recover, with U.S. goods exports returning to pre-pandemic levels, while Colombia’s exports were still about 10% below 2018 levels. The United States has run a trade surplus with Colombia since 2014

For Colombia’s trade worldwide, the Economist Intelligence Unit estimated that merchandise exports, from Colombia amounted to $33.1 billion in 2020, down from $42.4 billion in 2019. Merchandise imports totaled $41.7 billion in 2020, (yielding a trade deficit of $.6 billion), compared with imports of $50.8 billion in 2019. The services balance remained in deficit at $4 billion in 2020, compared with a $3.9 billion deficit in 2019. According to Colombia’s Ministry of Commerce, Industry, and Tourism (MinCIT), foreign direct investment (FDI) in Colombia was $6.8 billion in 2020, a decrease of 35 percent from 2019, primarily the result of the COVID-19 pandemic and related economic crisis.

In 2020, the government passed significant stimulus measures to support workers and firms amid the pandemic. Some measures were extended in the national budget for 2021, which allocated COP 59 trillion (USD 15.3 billion) for investment projects and COP 53 trillion (USD 13.7 billion) for social spending. Significant stimulus measures included a reduction in withholding contributions, payroll subsidies for firms affected by a 20 percent or more decline in revenue, reductions in bank lending rates, credit guarantees for small and medium-sized businesses, grace periods for loan repayments and expedited tax refunds to low-risk taxpayers.

After borrowing heavily during the pandemic, the Duque administration introduced a bill in April 2021 to increase taxes that it asserted were necessary to respond to the COVID-19 economic impact. The bill spurred tens of thousands of people to the streets in protest across the country. The Administration withdrew the bill shortly thereafter, but these actions did little to slow protests and violent civil disobedience, which experts agree was driven by a wider variety of social and economic factors. Less violent protests continued sporadically through August 2021. Associated road blockades and disruptions to the seaport of Buenaventura, which handles more than half of Colombia’s imports and exports, cost the economy an estimated COP 11 trillion (USD 3 billion). U.S. and other international exporters to Colombia reported plans to contract alternate ports of entry to mitigate future disruptions of shipments to Colombia. Standard and Poor’s and Fitch cut their credit ratings for Colombia to non-investment grade in May and July respectively, citing the country’s fiscal deficit, large public debt and mid-term uncertainty. Colombian lawmakers passed a more moderate USD 4 billion annual tax bill in September 2021. The Duque administration insisted the bill is vital at a time of rising debt, an expanding fiscal deficit and amplified social spending in response to the coronavirus pandemic. The Colombian Government also said the bill will alleviate investor fears and recover investment grade credit ratings from Standard & Poor’s and Fitch.

In addition to the impact of COVID-19, the presence of Venezuelan migrants in Colombia, estimated at approximately 1.72 million as of January 2021, will continue to impact the economy and government budget. On February 8, 2021, President Duque announced the Temporary Protection Statute for over 950,000 Venezuelan migrants. Colombia’s Ministry of Finance estimated the cost of Venezuelan migrants to Colombia’s economy, especially the country’s healthcare and education systems, at USD 1.3 billion in 2020, which equals almost one percent of Colombia’s annual economic output.

The U.S.-Colombia Trade Promotion Agreement (TPA), in effect since May 2012, initially gave a boost to U.S. exports to Colombia, but the growth rate has slowed in recent years due to a combination of factors. The Colombian peso returned to its pre-COVID-19 exchange rate at the end of 2020 after a currency depreciation due in part to the collapse of international oil prices earlier in the year.  The Peso depreciated of 12.2 percent between January and July 2021. The performance of the Colombian Peso has often correlated to the rise and fall of oil prices (the country’s principal export). However, in 2021, the two factors diverged with the price of oil rising and the value of the peso weakening. Major contributing factors were a third wave of COVID-19 infections and internal-social unrest.

In 2020, the United States remained Colombia’s largest trading partner in goods, but just barely, surpassing China by only USD 109 million. Whereas U.S. goods exports to Colombia fell 21.3 percent, Chinese exports fell by only 5.5 percent. Colombia saw its deficit with China expand by 19.3 percent or USD 1.1 billion, larger than any other change, whether positive or negative, with any other country in 2020. Colombia’s bilateral services relationship with China is significantly unbalanced, with China exporting 166 percent more than it imports from Colombia. 

In terms of foreign direct investment (FDI), China has been slower to make inroads in Colombia to the same extent it has elsewhere in the region, where Chinese firms are dominant players in energy and infrastructure projects. This scenario is beginning to change.  During the COVID-19 pandemic, the Duque administration accepted assistance from China. During a March 20, 2021 video exchange between President Duque and Xi Jinping, the two celebrated the fourth shipment of Chinese-made vaccines Sinovac against COVID-19.  That same month, Chinese Ambassador to Colombia, as well as the Colombian Deputy Foreign Minister, explicitly mentioned plans to move in the direction of Colombia joining China’s Belt and Road Initiative. Between February and May 13, 2021, Colombia had received 3,587,220 doses from Pfizer and 6,000,004 doses from Sinovac, although the pace since shifted and total receipts from Pfizer, as of September, now exceed those from Sinovac.  In July 2021, the United States donated 2.5 million Johnson & Johnson vaccines and 3.5 million Moderna vaccines to Colombia.

Colombia has five major commercial hubs: Bogota, Medellin, Cali, Barranquilla, and Cartagena. In contrast to many Latin American countries which have only one or two major cities, Colombia offers U.S exporters access to multiple commercial centers, each of which has its own American Chamber of Commerce.  While these cities and many other secondary cities offer unique market opportunities, they are close enough via air routes that it is common to have one partner (agent, distributer, or representative) cover the entire country.