Finance & Markets / March 3, 2020

Investment in Colombia Skyrockets

By Erik Miller

Investment in Colombia is on the up-and-up.

By almost every available metric, now is the time for this emerging market to establish itself as one of Latin America’s strongest economies, and most popular targets for investment. The data speaks for itself.

Foreign direct investment in Colombia was up nearly 70% in January, according to Banco de la Republica, the nation’s central bank. Driven by a strong interest in emerging markets on the part of institutional investors, the country attracted $1.3 billion in the month of January, up from $769 million during January of 2019.

“Firstly, in general there is a growing confidence in the Colombian economy and this is going to create positive feedback that will accelerate growth. This is the confidence of foreigners to make active and portfolio investments outside the mining/energy sectors, along with nationals residing outside Colombia. In the context of lower levels of growth globally, this means that if conditions improve, confidence will improve even more,” said analyst Jorge Castro in an interview with the PanAm Post.

This comes as no surprise to people who have been closely following Colombia’s recent economic growth. In 2019, the IMF downgraded growth forecasts for all leading Latin American economies – except Colombia. A robust GDP growth rate of 3.6% on the year was encouraging news for investors.

The boon to the economy has also come in the form of higher remittance payments from Colombians outside the nation’s borders. One of the largest sources of capital inflows for emerging markets, remittances were at an all-time high last year, as banks continue to offer credit to a growing middle class.

“In spite of a general risk aversion globally, inflows entered emerging economies, and although there is some nervousness, the high level of liquidity at the global level increased investment in these markets,” said Camilo Perez, chief economist at the Bank of Bogota.

Indeed, the country seems to be weathering poor economic conditions. A global economic slowdown, mostly due to trade tensions between the US and China, has exerted downward pressure on growth – pressure that Colombia has been able to avoid.

Notably, there was a decline in investment into the energy and extraction sectors, which have typically been hugely important areas of Colombia’s economy. These sectors posted weak investment growth in 2019 of a mere 5%, while investment in other sectors grew an average of 62%.

This trend hints at the diversification of Colombia’s economy, which will play a key role in attracting foreign investment. Colombia is not only a source of natural resources – it also features a rapidly developing manufacturing, agriculture, and technology sectors. By expanding these areas, Colombia hopes to be one of the first Latin American economies to shake off the reputation of emerging markets as economies dependent on the primary sector.

The dramatic increase of foreign direct investment in Colombia is just one indicator of the country’s meteoric rise to global prominence. The stability of the country’s political situation, its wealth of natural resources, sound financial policy, and the sheer beauty and cultural intrigue of the nation have made Colombia a favorite among investors.

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