A (true) story on the amazing rise of Colombia
BCP Securities recently released a report documenting the dramatic rise of the Colombian economy and its vast potential from an investment perspective. Investment stuff aside, this is a pretty remarkable story.
Less than a decade ago, Colombia was on the verge of becoming a failed state. During the 1980s and 1990s, the country was systematically destabilized by the well-funded narco-cartels and insurgency movements. Colombia's judiciary came under open attack in 1985, with the armed assault against the Supreme Court-which left almost half of the justices dead, more than 120 casualties and the country's judicial archives in flames. Newspapermen, political candidates and policemen were gunned down with impunity. Car bombs destroyed major urban centers in Bogota, Medellin and Cali. Trade and commercial routes were systematically cut. Hundreds of people were kidnapped, thousands fled the country and many more were extorted and assassinated in what degraded into a bloody civil war. Businessmen and landowners funded private militias to counter the narco-insurgency that was laying waste to the countryside. Unfortunately, many of these groups eventually became armed brigands, who took the law into their own hands and turned against the population at large. By the end of the 1990s, Colombia was on the verge of collapse. Narco-influence penetrated deep into the political and judiciary systems, the police force was in tatters, and a large swath of the country was officially in the hands of the guerrillas. It was at this time, that the administrations of Presidents Andres Pastrana and Bill Clinton decided to put together a military program, known as Plan Colombia. Under the arrangement, the U.S. government provided $7.5 billion for the acquisition of new helicopters, riverine craft and communications equipment to allow the Colombian military to penetrate deep into the jungle and confront the insurgency. Likewise, the U.S. also provided tactical training to effectively deploy the new equipment in the most effective way. Plan Colombia was a huge success, and it eventually allowed the government to take the initiative against the guerrillas. Fortunately, the transition period has ended, and Colombia is reinvigorated and brimming with life. A tidal wave of capital is pouring in to take advantage of the country's vast natural resources, enormous talent pool and strategic geography. To mark the new beginnings, the country elected a new president, Juan Manuel Santos, who promises to exploit Colombia's full potential and transform it into one of the fastest growing economies of Latin America.The Colombian economy is roaring, with GDP expected to crest over 5% y/y in 2010. Industrial production surged 8.5% y/y in June, up from 7.5% y/y the month before. Construction is on a tear. The Colombian Construction Chamber of Commerce (Camacol) reported that building permits were up 14% year-to-date. A glimpse out of any high window in Bogota will reveal a veritable forest of cranes and building sites. In addition to home construction, major infrastructure projects are transforming the landscape. A new metro rail system in Bogota, the revitalization of the airport and a series of major highways will improve the economy's level of efficiency and productivity. Billions of dollars are also pouring into major investment projects in energy, mining and agriculture. Ecopetrol is modernizing its refinery at Barrancabermeja. Foreign firms are digging new mines, and farmers from Brazil and Argentina are rushing to take advantage of the fertile llanos that lie just a few hours from Bogota. President Santos promised to raise the country's growth rate to 6% y/y by the end of his term, and it looks like the country is right on track.
