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: 2022-11-24

The Republic of Colombia has the fourth largest economy in Latin America, after Brazil, Mexico, and Argentina, and the third largest population with approximately 51.5 million inhabitants. The country boasts five major commercial hubs: Bogota, Medellin, Cali, Barranquilla, and Cartagena. In contrast to many Latin American countries with 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 for U.S. firms to have one partner (agent, distributor, or representative) cover the entire country. 

Colombia is a country of micro and small businesses. According to the Ministry of Labor, these businesses represent more than 90 percent of the national productive sector and 80 percent of employment. The country has a relatively low English proficiency level with most day-to-day business being conducted in Spanish.   Colombia also has a relatively open business environment, ranking 67th out of 190 economies for overall ease of doing business in the World Bank’s most recent Doing Business study for 2020.
Colombia’s gross domestic product (GDP) totaled USD 314.4 billion in 2021 according to the Economist Intelligence Unit (EIU). Economic growth has recovered robustly from the pandemic, with growth of 10% in 2021 and 5% projected for 2022. Many economic forecasts suggest 2023 could see a deceleration in in economic expansion. Inflation is also a continuing worry, running at 10% in mid-2022.  The Government of Colombia estimates that it will be 8.5 percent at the end of 2022 and 5.6 percent at the end of 2023. This is well above Colombia’s Central Bank target of 3 percent. The Bank has implemented monetary tightening to reduce inflation which they expect to produce results in early 2023. In the short term, inflation is expected to remain high due to global supply chain issues and spiking international energy prices.
As of June 2022, the Government of Colombia stated its debt was projected to be 56.5 percent of GDP by the end of 2022, 10.5 percentage points below what was projected a year earlier and a reduction of 1.5 percent in its debt compared to the end of 2021. After the COVID-19 crisis, GDP reached pre-pandemic levels after seven quarters. The unemployment rate has also shown a faster recovery. 91 percent of the employment that was lost in the pandemic has been recovered. 

According to Colombia’s Ministry of Commerce, Industry, and Tourism (MinCIT), foreign direct investment (FDI) in Colombia was USD 7.2 billion in 2021, an increase of 4.8 percent from the prior year. FDI in the first quarter of 2022 was USD 1.342 billion, which is an increase of over USD 200 million compared to the fourth quarter of 2021. The price of Colombia’s leading exports, oil and gas saw sharp increases in the first half of 2022.  Oil production saw a high of one million barrels per day in 2015, but has declined to about 740,000 barrels a day in 2022.  Despite this decline, the energy sector has been an important source of revenue. According to the EIU, the rising price of oil in 2021 increased export values by 52 percent, or USD 13.3 billion, and represented a third of total exports. 

According to the Colombia Oil Association (COA), oil and gas investments grew by 51 percent in 2021, to USD 3.1 billion, of which USD 520 million went to exploration and USD 2.6 billion went to production. COA estimated that investments in the domestic oil and gas sector will grow another 42 percent in 2022, to USD 4.4 billion, of which USD 1.13 billion will go to new exploratory wells to find natural gas reserves in the Caribbean Sea. 

For Colombia’s trade worldwide, the EIU estimated that merchandise exports from Colombia amounted to USD 42.7 billion in 2021, a rebound from USD 32.3 billion in 2020. Merchandise imports totaled USD 56.7 billion in 2021, compared with imports of USD 41.2 billion in 2020. The services balance reached a USD 6.5 billion deficit in 2021 but is expected to decrease in 2022 to USD 5.8 billion.  

Business with the United States

U.S.-Colombia trade was negatively impacted by the COVID pandemic in 2020 but rebounded dramatically in 2021 and the first half of 2022 In 2021, U.S. exports to Colombia were USD 16.7 billion and Colombian exports to the United States were USD 13.2 billion with a trade balance slightly more favorable to the United States than prior to the COVID-19 pandemic. Total trade increased by almost 30% that year.   This recovery has shown signs of accelerating with U.S. exports to Colombia, with bilateral trade up 50% in the first half of 2022 over 2021 levels. 

The United States was also Colombia’s main foreign investor, investing USD 1.7 billion in 2021 and USD 1 billion in the first three months of 2022, almost doubling its investment during the same period in 2019. The United States is the number one provider of foreign travelers, with 24 percent of the total of international tourists in Colombia in 2021. Currently, the nearly 450 U.S. companies that do business in Colombia generate nearly 100,000 direct and indirect jobs, mainly in sectors such as manufacturing, mining, financial and insurance services, science and technology, and wholesale trade. (Colombia’s Ministry of Commerce, Industry and Tourism). 

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. Relative to the Colombian peso’s long-run average, the peso has been under pressure due to Colombia’s deficit and political uncertainty. Even with the hawkish monetary policies in early 2022 and spiking oil prices, gains are likely to be offset by competing U.S. policy for monetary tightening. According to Bloomberg, the peso is set to match or nearly reach its record low value set during the pandemic. In the first quarter of 2022, the United States remained Colombia’s top origin of imports, but only USD 500 million more in imports than from China.

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. However, in 2020, a Chinese state-owned company won a bid to develop the first line of the capitol’s metro and in 2021 others have won smaller infrastructure and mining contracts. A Chinese state-owned company was also a key contender in a bid for a Public Private Partnership to manage dredging Colombia’s main river but ultimately withdrew its offer. ProColombia noted that Chinese state-owned companies are actively pursuing 38 initiatives and operate about 100 companies in Colombia.

Political Situation 
Former President Ivan Duque ran a pro-business administration with center-right policies. His government was a strong ally of the United States. His term ended 7 August 2022. Under the Duque Administration, Colombia became a more prominent player on the world stage. It was designated a Major Non-NATO Ally of the United States, and received an international commendation for its policy to accept more than two million Venezuelan refugees while publicly confronting Venezuelan president Nicolas Maduro and Russia’s invasion of Ukraine. 

On August 7, 2022, Gustavo Petro was inaugurated as Colombia’s new President.  Some of his first steps in office have included proposed changes to Colombia’s tax system and potential policy shifts affecting the petroleum and mining sectors that could impact U.S. commercial interests.  During his campaign, President Petro also focused on the need for greater rural development and land reforms, as well as ambitions to accelerate Colombia’s shift to renewable energy.