Colombian Investment

This agreement is one of the so you think Colombia concluded with other countries, which are of three types: (BIT) already mentioned investment protection agreements, agreements against double taxation (ADT) and the treaties of free trade (agreement FTA). So far, Colombia is one of the Latin American countries with less BIT and ADT, below Bolivia and Paraguay, and far from Argentina, Mexico and Brazil with three BIT. Three other BIT are pending review by the Constitutional Court, which are agreements with Switzerland, Chile and the northern triangle (El Salvador, Guatemala and Honduras), while there are ten more in the process of negotiation and two others, waiting to start talks. The Minister of Commerce, Luis Guillermo Plata, declared on this topic: the objective is improving the quality of investment and articulate the policy of productive transformation. These three instruments (TLC, BIT and ADT) are factors that attract investment, because they provide stability in the rules of game, protection of investment and tax benefits. All of the above does not confirm what our reader friend told us about Colombia. However there are two issues that concern and that are the Colombian currency appreciation and the level of inflation anytime soon.

The problem to deal with these problems is that there is a true conflict between the two. So if the Central Bank of Colombia seeks to control inflation through the increase in its benchmark rate, this press more to the peso toward the appreciation, while if it is intended to partly restore the competitiveness of the exchange rate, this would generate higher inflationary pressures. In relation to the value of the Colombian peso against the US dollar, is at its highest value since May 1999, placing around $1.655. The Bank of the Republic, through the Manager of the entity Jose Dario Uribe, already gave their verdict between inflationary pressures and the appreciation of the peso: exporters lose with the revaluation but all Colombians and more poor, lost with inflation. I think that the decision of the Bank of the Republic of prioritizing its fight against inflation (which to some extent is positive for the real exchange rate), is the right decision. Perhaps the same can be completed with measures to help the export sector to recoup some of the lost competitiveness. Surely, overcoming these obstacles with success, Colombia has good growth prospects because his Government’s long-term vision makes the economy has solid foundations that support growth.