Economic overview
After the 6.6% decline in GDP in 2020, the Colombian industry was trying to get back on track, but everything stalled again due to the third wave of Covid, even stronger than the previous ones. With a 10% increase in the poverty and employment tax and could always thousands of businesses closed for the reform, which provided for an increase in VAT and the tax base going to hit above all the middle class, not to be welcomed. As happened in 2019, young people were the protagonists of the street demonstrations.
The government found itself displaced by the paro nacional, the all-out strike, proclaimed by trade unions, student associations, urban and rural collectives. Internal polls commissioned by the executive have shown that discontent is widespread across the board.
Duque. The fiscal sting that would have hit the middle class above all seems to have contributed to increasing the gap between the conservative ruling coalition and the sectors of the economy most affected by the pandemic.
A maneuver that goes against the indications given by CEPAL, the economic commission for Latin America, which invited the governments of the region to focus on the expansion of social assistance policies to cope with the increase in poverty, unemployment and food insecurity caused by the health emergency.
Complicating the situation is also the difficult situation of the more than two million Venezuelan immigrants who arrived in the last five years and the conflict between ELN guerrillas and FARC refugees and the Venezuelan army in the border region between the state of Apure and that of Arauca.
Main sectors of industry
Industry
The main industries from Colombia are: the food industry, the petroleum industry, the textile, clothing and footwear industry, soft drinks, the chemical industry, metal products, cement, cars and mines.
In recent years, the industrial sector has experienced a process of diversification: consumer goods (food and drinks, textiles and clothing) still represent 45% of total industrial production, but the industries producing intermediate and capital goods are in rapid development. The government is encouraging the growth in the number of small and medium-sized enterprises as they are considered an important source of employment.
Agriculture
Colombian agriculture presents a clear differentiation between subsistence crops, grown on small plots with a high use of labor, and export crops (coffee, cotton, rice, sugar cane, tropical fruits) grown on large and modern. The country is the second largest producer of coffee in the world.
Mining sector
Colombia has significant natural resources, and is the world’s leading producer of emeralds. The reserves of silver, gold, uranium, copper, nickel and platinum are also very substantial. Energy resources are considerable, especially the proven ones of oil and natural gas.
Manufacturing sector
The manufacturing sector, including the transformation of coffee (for statistical purposes the local authorities include it in the industrial sector and not in the agricultural sector), closed the first quarter of 1998 with a growth of 10.3%. This value would be even greater if we excluded the item of ” coffee processing ” which recorded a decrease of 8.3%. However, it is worth noting that, in light of the agreements between the Producing Countries, of which Colombia is a part, at the end of the year, Colombian exports should perform better, thus contributing to the improvement of the growth index of the to.
Taxation for businesses in Colombia
Colombia’s tax system for individuals is full of exemptions, with three tax rate brackets, while a single tax rate applies to businesses. The possibilities for future developments are interesting due to the need to attract foreign capital, with tax concessions.
A progressive rate is applied to the income of individuals, for all income (including occasional income) that exceeds the set threshold (equal to 50 minimum monthly salaries). Assets are also considered in the tax base, and the calculation is made for both income and other proceeds of Colombian and non-Colombian origin, which applies both to residents and foreigners who reside, even on a non-continuous basis, for at least 6 months at the within its borders.
Companies with legal personality are subject to a single rate of 33% (subsidized for foreign companies, from 2013 to 25% but negotiations are underway with foreign countries to incentivize investment in Colombia). For the determination of the tax base (which is also subject to numerous types of tax deductions and deductions) a clear distinction is made between those who are resident and those foreign. For the former, all income produced wherever they are are calculated. On the other hand, for non-resident companies only those that are produced in Colombia. The equity tax, introduced in 2012, must be applied to the net tax base, in addition to the ordinary rate, which provided for the application of a rate of 9% until 2015, and then dropped to 8%.
Investing in Colombia
The hydrocarbon sector has always been one of the five “locomotives” of the Colombian economy, both for the value of exports and for domestic demand. Recently, due to the fall in oil prices and the intention of the last governments to further diversify national exports, the situation has partly changed. However, there is still a high potential, also with a view to the possible start of fracking projects (this possibility is currently being debated).
The infrastructure sector is certainly among those with the greatest potential at national level, as well as the one with the greatest need for expansion and modernization. It is estimated that Colombia needs about 35,000 km of new road networks, necessary to connect the most remote areas of the country and increase competitiveness and efficiency in terms of freight transport. This is why the Duque Government’s National Development Plan 2018-2022 gives a central role (as also done by its predecessors), also in terms of resources, to infrastructures. In addition to the road network, there are numerous opportunities for the construction of new airports, for the expansion of existing ones, for the strengthening of urban transport in the main cities.
Renewable energy is another priority sector with the greatest potential, and another pivot of the Duque Government’s 2018-2022 National Development Plan. Thanks to its geographical position, biodiversity and climatic conditions, Colombia enjoys a very important supply basin for clean sources such as solar, wind, hydro and geothermal, which in recent years have allowed a significant development of renewable energy projects.
The tourism sector is experiencing a favorable moment in Colombia, thanks to the constant economic development of the country, the growth of the middle class, the ongoing pacification process and new tourist routes (direct flights to Europe have increased). International tourism is on the rise spurred by the rise of the dollar against the Colombian peso. Hotel infrastructures are sometimes lacking and Colombia has a real need to make a qualitative leap in the international hotel tourism sector. Five-star luxury hotels are under construction in major tourist spots (including Bogota). In Cartagena there are international chains such as Sheraton, Hilton, Marriott and Hyatt. In the next ten years, considering the growing development, Colombia will need at least 25,000 beds in addition to those already available to meet the demand for visitors.