Colombia WT/TPR/S/18
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I. THE ECONOMIC ENVIRONMENT
(1) Introduction
1. Since itsprevious Trade Policy Review in1990, Colombia hasenjoyed relatively steady
GDP growth anddeclining inflation, despite anumber ofconstraints anddomestic political problems.
Aslowdown in1996 isattributable tohighinterest ratesadopted aspartoftheanti-inflation policy.
There havealsobeenstrong capital inflows, resulting, interalia,fromtheliberalization oftheforeign
exchange régime. Theauthorities havetherefore hadtowalk afinelineineconomic, particularly
monetary, policy, inorder tomaintain international competitiveness while sustaining economic growth
andminimizing inflationary pressures.
2. Regional trade flows have expanded considerably, although theUnited States andthe
EuropeanUnionremainColombia'sprincipaltradingpartners.Understrengthenedregionalagreements,
trade withneighbouring Venezuela hasacquired considerable importance fortheeconomy.
(2) Recent Economic Developments
(i) Composition andgrowth ofGDP andemployment
3. Despite generally lowcoffee output, withaprolonged period ofpoorinternational prices, annual
realGDP growth increased from 2percentin1991 toanaverage ofover5percentforthelast
three years (Table I.1).1Thisperformance wastheresult ofincreased non-traditional exports and
discoveries ofnewoilfields which boosted investment, transport, construction andservice activities.
Forecasts for1996indicate thatgrowth istoslacken slightly, withrealgrowth of4percentexpected.2
Expansion isexpected tobedriven bythemining sector (mainly oil,natural gasandcoal) while
agriculture andindustry areexpected tobeadversely affected bythereduction ineconomic growth
andthehighrealinterest ratesresulting from thecurrent stabilization policy.
4. Since 1989, theshare oftrade ingoods andnon-factor services inGDP hasgrown
by9percentage points reaching 38percentin1994 (Chart I.1). Thisdevelopment isexplained by
thestrong riseoftheshare ofimports inGDP, possibly related torecent trade liberalization efforts,
aswellastheexpansion ofpublic andprivate investment ininfrastructure projects.
5. Between1989and1995,thecompositionofGDPmovedfurthertowardsagricultureandservices
(Table I.2). GDP percapita increased, except in1991 (Chart I.2). Inrecent years most jobswere
created inconstruction andservices, while output growth inmanufacturing wasmainly achieved through
higher labour productivity.3
1Colombia hasnotsuffered greatly from the1995 Mexican crisis because ofitsrelatively tight monetary
policy, small short-term external debtandtheuseofdeposits heldabroad tocover financial needs.
2Government ofColombia. Thishasbeen revised downwards from anearlier estimate of4.9percentin
Departamento Nacional dePlaneación (1995).
3Departamento Nacional dePlaneación (1995).WT/TPR/S/18 Trade Policy Review
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Table I.1
Economic developments, 1989-95
1989 1990 1991 1992 1993 1994 1995
Average annual percentage change
RealGDP growth 3.4 4.3 2.0 3.8 5.3 5.7 5.3
Final consumption 3.7 2.8 0.8 5.1 10.1 7.6 ...
-Public 5.6 3.1 3.2 10.6 3.4 ... ...
-Private 3.2 3.0 1.6 3.0 6.1 ... ...
Gross domestic investment (7.3) (1.2) (8.7) 39.0 27.7 12.7 ...
Fixed capital investment (5.2) (3.3) (6.2) 12.4 36.3 ... ...
Unemployment as%oflabour
force (seven largest cities)9.9 10.6 9.4 9.8 7.8 7.9 8.7a
Price developments
Producer prices ... 29.9 23.1 17.9 13.2 20.7 17.2b
Consumer prices ... 32.4 26.8 25.1 22.6 22.6 19.5
Index: 1987=100
Import prices 109 117 116 118 115 ... ...
Export prices 101 90 88 81 82 ... ...
Trade ingoods andservices Percentage share ofGDP
Exports ofgoods andservices 18.0 20.6 21.3 17.7 17.2 15.5 23.2
Imports ofgoods andservices 13.8 14.8 13.9 15.8 21.0 21.5 33.3
Memorandum:
Population (million) 32.6 33.3 34.1 34.9 35.7 36.3 37.1
GDP percapita (US$) 1,391 1,417 1,417 1,442 1,487 1,545 ...
... Notavailable.
a September.
b Until August 1995.
Source: Government ofColombia; Banco delaRepública ;Departamento Administrativo Nacional deEstadística ;IDBestimates;
International Monetary Fund, Recent Economic Developments (January 1995); andWorld Bank, STARS version (1995).Colombia WT/TPR/S/18
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Table I.2
Structure oftheColombian economy, 1989-1995
1989 1995
Share ofsectors inGDP (%)
Agriculture 16.1 19.7
Industrya37.0 27.4
Services 47.0 49.4
Share ofsectors intotalemployment (%)
Agriculture 1.3 ...
Industrya29.9 ...
Services 68.8 ...
... Notavailable.
a Including construction.
Source: IDBestimates based ondatafrom theLatin America Demographic Center (CELADE); UNPOP; ILODatabase; Programa
Regional delEmpleo para América Latina yElCaribe (PREALC); Departamento Administrativo Nacional deEstadística ;
EIU(1996); andDepartamento Nacional dePlaneación .WT/TPR/S/18 Trade Policy Review
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(ii) Prices
6. Inflation, asmeasured bytheconsumer priceindex, fellgradually from32.4percentin1990
to19.5percentin1995, reflecting theeffects ofeconomic policy tightening, trade liberalization, and
arealappreciation ofthepeso(Table I.1). Thisprocess wasassisted byefforts toreduce wage and
price-indexation intheeconomy through aSocial Pact(Box I.1),involving slower increases inpublic
tariffs andfoodprices, restrictive monetary policy, andpublic spending cuts.4For1996, theinflation
target issetat17percent; further public spending cutsmayberequired tomeet thistarget. The
Government 'slong-term objective, contained intheNational Development Plan(Box I.2),aimsto
bring inflation down to10percentby1998.
4EIU(1996), p.14.Colombia WT/TPR/S/18
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BoxI.1: TheSocial Pact
Inrecent years, wage-indexation based onpast inflation hasbeen viewed asamajor source of
inflationary pressure. Toreduce theundesirable effects ofthistype ofindexation, aSocial Pact on
Productivity, Prices andWages (Pacto deProductividad, Precios ySalarios )wasfirstconcluded between
thepresent Administration andthelabour unions andthebusiness sector inDecember 1994; itwas
renewed inDecember 1995. Notallsectors chose tosigntheSocial Pact(Chapters IVandV).
According tothePact, wages andprices aresetaccording tothenewyearinflation target rather thanpast
inflation figures. Prior toitsintroduction wage indexation hasbeen reflected both intheprivate
(two-year wage contracts) andthepublic (annual increases based onprevious yearinflation) sectors.
Inpractice, thePact seems tohave proven lesseffective than expected inthefight against inflation;
price developments appear tohave exceeded theinflation target of18percentin1995. TheSocial Pact
for1996 fixes aninflation target of17percent. However, theminimum wage istobeincreased bythis
rateplus 2.5percentage points (aworker productivity bonus) oratotal of19.5 percent, which is
equivalent tothe1995 inflation rate; thiscanbeheldagainst thedeclared purpose ofthePact, breaking
withpastinflation inertia.
(iii) Exchange ratedevelopments
7. In1990,Colombiabeganaprogressiveliberalizationofitsforeignexchangerégime;theprocess
wasaccelerated byarapid accumulation ofinternational reserves in1991 (Table I.3). In1991 and
1992, priorimport deposits andforeign exchange licences wereeliminated; theofficial exchange rate
wasabolished;foreignexchangetransactionsweretransferredtotheinter-bankmarket;exportsurrender
requirements wereeased; equal treatment wasintroduced forforeign exchange transactions bydomestic
andforeign firms; individuals werepermitted tokeepassets inforeign currency orabroad; andthe
Central Bank monopoly ondomestic goldtransactions wasended. InJune1991, awithholding tax
inforeign exchange receipts frompersonal services rendered abroad andother transfers wasintroduced
atarateof3percent; thiswasraised to10percentin1992 andsubsequently brought down to
3percentinthelasttaxreform (December 1995) andapplied from January 1996.
8. Between September 1993 andJanuary 1994 surrender requirements were applied. Export
proceeds hadeither tobedeposited incurrent (compensation) accounts abroad, registered withthe
Central Bank; surrendered totheCentral Bankforexchange certificates (certificados decambio )which
could besoldinthefreemarket, withadiscount of12.5percent; orsoldtointermediaries inthe
foreign exchange market. Foreign firms intheoil,coalandnatural gassectors andallfirms established
inthefree-trade zones (Chapter IV)were exempt from foreign exchange surrender requirements.5
9. On24January 1994, theexchange ratewasunified andthesystem ofexchange certificates
wasended.6Toavoid the"dollarization" oftheeconomy, Colombians areprohibited from holding
foreign currency accounts within thecountry.
5IMF (1995), p.118.
6Areference rate(precio deredención deloscertificados decambio quellegaban asumaduración )was
maintained until mid-1995 forthepurchase ofexchange certificates heldbyexporters (EIU, 1995a, p.8).WT/TPR/S/18 Trade Policy Review
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10. Thesoleconstitutional objective oftheCentral Bank (Banco delaRepública )inexchange rate
management istopreserve thepurchasing power ofthenational currency. Following theliberalization
oftheforeignexchangerégime,strongcapitalinflowsledtoanappreciationoftherealeffectiveexchange
rate(REER) which accelerated between 1993 and1994 (Chart I.3).7Tocounter thistrend, in1994
the"crawling peg" ofthepeso against theU.S.dollar wasreplaced byacrawling band witha
14percentage-point width. Theupper andlower limits ofthebandaresetbytheCentral Banktendays
inadvance forindicative purposes.
11. TopreventfurthererosiontoColombia'scompetitiveness,thepresentAdministrationhaspledged
tohalttheappreciation oftheREER.8Political uncertainty contributed toanominal depreciation of
thepesoagainst theU.S.dollar between August 1995andthefirstpartof1996; for1995asawhole,
nominal depreciation against theU.S. dollar wassome 18.8percentagainst 3.3percentin1994.
Given thisrateofdepreciation andtheslight fallininflation, appreciation intheREER washeldto
only5.1percentin1995, substantially lessthanin1994. However, byMay1996, theREER had
depreciated bytheequivalent ofanannual rateof4percent(22.5 percentinnominal terms). Overall,
theCentral Bank hassetthedevaluation ofthecrawling bandat13.6percentfor1996 asawhole,
7Revenues from theexport ofillegal drugs canalsocomplicate themanagement ofexchange ratepolicy.
Forexample, itisreported thathidden U.S. dollar inflows from thistrade fuelled therealeffective exchange
rate(REER) appreciation in1994 (EIU, 1995b, p.19).
8EIU(1995b).Colombia WT/TPR/S/18
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atarget contained intheGovernment 'slatest Social Pact(Box I.1). Themarket exchange ratewill
beallowed tofluctuate freely within +/-7percentofthetarget.
12. Settlements forcommercial transactions withcountries maintaining reciprocal credit agreements
withColombiacanbemadethroughspecialaccounts.TheReciprocalPaymentsandCreditsAgreement,
modified inMarch 1991 andSeptember 1992, governs payments among Latin American Integration
Association (LAIA) partners (Chapter II).9Reciprocal credit agreements aremaintained withother
countries inCentral America andtheCaribbean aswellaswithChina, Hungary andtheRussian
Federation. Since 1990, Colombia 'soverall position inthese agreements hasbecome more
balanced (Chart I.4).
(iv) Public finance
13. In1991fiscal policy wastightened, bothinthelightofexpectations thatthe1990 tradereform
would result inrevenue losses andtocope with aconstitutionally mandated increase insocial
expenditure (Box I.2). Thebaseofthevalue-added tax(IVA) wasbroadened anditsrateincreased
from10percentto12percent. Gasoline prices andelectricity tariffs wereraised. Following arise
9Under thisAgreement, amultilateral clearing system isoperated through accounts maintained among the
centralbanksconcerned.Recentamendmentsrelatetothedefinitionof"automaticpayments"aswellasresidents'
operations. In1994, adispute settlement mechanism wasestablished toresolve central banks 'controversies
onissues related totheAgreement (LAIA Resolution 76,28September 1994).WT/TPR/S/18 Trade Policy Review
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infiscal expenditure duetohighway construction, power projects, military spending andseverance
payments in1992-1993, additional taxreforms, adopted inJanuary 1993, ledtoafurther increase of
twopoints inthegeneral VAT rateto14percentandabroadening ofitsbase, aswellasarisein
themaximum income taxratefrom 30to37.5percent. Asaresult ofthese fiscal reforms,
between 1989and1993theoverall non-financial public sector balance moved fromadeficit equivalent
to2percentofGDP toasurplus of0.05percentofGDP.
BoxI.2: Development Plan, 1995-1998
TheGovernment 'sNational Development Plan(Plan Nacional deDesarrollo )fortheperiod 1995-1998
(also called theSocial Leap Forward orElSalto Social ),passed through Law188on2June 1995, sets
guidelines foreconomic andsocial policy action. Expenditure onsocial welfare forthepoor covers a
number ofareas including education, health, housing andinfrastructure. InColombia, public social
spending (gasto público social )isapriority element oftheBudget (Article 350oftheConstitution)
except incase ofwarorforreasons ofnational security; nopercentage reduction ispermitted inthe
following year.
Some ofthetargets ofthePlan include thecreation of1.6million jobs; theconstruction of
775,000 houses; landdistribution of1million hectares to70,000 families; extension ofsocial security
benefits to12million people; increasing water supply andsewerage coverage to90percent and
77percentatregional level; construction of2,000 km.ofnewroads andmaintenance of2,300 km.of
theexisting road network. Asprogress inareas such asjobcreation andlanddistribution wasslow in
1995, concern isexpressed withrespect totheoverall feasibility oftheplanwithin thetime limits set.
Implementing thePlan wasestimated tocost anamount equivalent to70percent ofGDP (some
US$44 billion); social spending istopass from 9percent to15percent oftheGDP by1998.
31percentoftheexpenditure istobechannelled toward infrastructure, witheducation taking afurther
25percentandhealth 15percent. Although privatization (Box I.3)isconsidered asanimportant source
ofPlan funding, theGovernment isconsidering recourse tomultilateral lenders, including the
World Bank andtheInter-American Development Bank, which have programmed credits ofsome
US$1.6 billion, andcommercial banks.
14. Tocopewithincreased public spending related, interalia,tothe"Social LeapForward" plan
(Box I.2),ataxreform package wasadopted inDecember 1995. Itincludes afurther increase inVAT
from14to16percent(Chapter IV);areduction inthemaximum income taxratefrom37.5percent
to35percent; anewpresumptive taxongross assets; andother measures toreduce taxevasion.
For1996, theCentral Government deficit (excluding privatization receipts) isexpected toincrease;
butthisriseistobeoffset bysurpluses intherestofthepublic sector (e.g., onsocial security) and
theeffects oftherecent taxreform package. Inaddition, theGovernment plans topropose reforms
ofmunicipal taxation, toincrease electricity tariffs inrealterms andtomodify therégime offiscal
revenue transfers toregional entities.
15. Progress inprivatization appears tohavebeenrelatively slow, mainly duetounforeseen legal
obstacles, nowovercome withthepassage ofLaw226in1995 (Box I.3). Theneedtoredress the
public sector deficit hasgiven newpriority topublic assetsalesin1996.Colombia WT/TPR/S/18
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BoxI.3: Privatization andpublic sector reforms
Between 1990 and1994, atotal of28State enterprises were privatized; nomajor sales orliquidations
tookplace in1995 except forthose concerning certain assets oftheelectricity sector andECOPETROL
forUS$215 million. InColombia, thesaleofState entities proceeds intwostages. Employees, trade
unions, pension funds andco-operatives areoffered shares atapreset minimum price andspecial credit
conditions. Remaining shares aresold inapublic auction. Under a1995 law(Law 226), the
Government isrequired tosubmit totheCongress inthefirsttwomonths ofeach yearalistofthefirms
covered bytheprivatization programme andtheir estimated value.
The privatization plans oftheprevious (Gaviria) Administration included 77State-owned entities
operating inseveral sectors. Between 1990 and1994, theIndustrial Development Institute (IFI,
Chapters IVandV)sold itsshares in21industrial firms. Intelecommunications, thegradual
privatization ofthenational telecom company waspostponed after a1992 protest strike. Inthe
transportation sector, thenational Ports Authority (COLPUERTOS) wasliquidated, three ports were
privatized andpublic assets inrailways were sold. Two thermoelectric plants alsowent private.
Under thepresent administration, plans exist toraise US$3.4 billion from theprivatization of
long-distance telephone services, three banks, eight electricity plants, tenmanufacturing concerns, and
other State-owned entities (including those involved incoalandnickel mining).
Following thenewprivatization procedures, inmid-December 1995 alawauthorizing thesaleofState
enterprises valued atUS$2 billion waspassed. Some 28State companies aretobesoldover thenext
three years. For1996 theauthorities expect asset sales ofavalue equivalent to1percentofGDP,
including financial institutions such asaloan company (Concasa )andonebank (Banco Popular );an
insurance company (LaPrevisora );several electric-power plants; andthree airports. Public enterprises
which remain tobesoldcomprise agricultural sector institutions, mining andelectricity companies as
wellasfinancial andtourism facilities (Chapters IVandV).
Between 1990 and1994 theGovernment undertook public sector reforms which, inter alia,have focused
onfostering thedevelopment ofmore effective economic institutions andpolicy instruments (Chapter II).
In1992, 20public entities were eliminated, 12merged andothers were restructured. Thebusiness
procedures inpublic institutions were toalarge extent streamlined .
(v) Balance ofpayments
16. Since 1993, Colombia 'scurrent account hasshifted fromasurplus toasteadily growing deficit
because ofarapid increase inimports, related partly tolargeinvestments intheoilsector, construction
andagriculture, butalsotoautonomous trade andregional liberalization. Export receipts fellwith
lowinternational prices forcoffee andpetroleum, andthere wasalsoadecline inprivate transfer
receipts (Table I.3).
17. Itisexpected thatcurrent account deficits willremain manageable, given therelatively low
levelofexternal debtandifmacroeconomic andstructural policies preserve Colombia 'sattraction for
foreign investment. For1996, thecurrent account deficit isestimated towiden tobetween 5.5and
6percentofGDP, duetoaslowdown ingrowth oftraditional exports, lowworld prices forcoffee,
andastrong increase incapital goods imports. Thedeficit isexpected tobefinanced largely byhigher
direct investment inenergy andinfrastructure, andofficial long-term foreign borrowing. Inthelight
oftheprospect ofincreased oilexports from1997, when newoilpipelines under construction areto
becompleted, thecurrent account deficit isexpected bytheauthorities todecline to4percentofGDP
inthatyear.WT/TPR/S/18 Trade Policy Review
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Table I.3
Balance ofpayments, 1989-95
US$million 1989-90
(average)1991 1992 1993 1994 1995
Merchandise trade balance 1,723 2,959 1,233 -1,657 -2,284 -2,404
Exports 6,555 7,507 7,263 7,429 8,756 10,406
Imports 4,833 4,548 6,030 9,086 11,040 12,810
Service balance -2,514 -2,308 -2,055 -1,595 -1,624 -2,499
-Freight and
insurance-129 -126 -161 -300 -307 -352
-Travel -104 -41 64 61 45 29
-Investment income -2,302 -2,090 -1,996 -1,575 -1,707 -2,367
-Other services 1 -90 -32 -119 -99 -315
Netunrequited transfers 962 1,698 1,734 1,138 862 694
Current account balance 171 2,349 912 -2,115 -3,045 -4,208
Share ofGDP -percent 0.4 5.7 2.1 -4.3 -4.8 ...
Capital account balance 238 -783 166 2,661 3,063 4,468
Non-monetary sector 185 -149 -346 2,681 4,384 4,303
Private sector 13 -115 160 2,713 3,884 2,723
-Direct investment 516 433 740 710 1,516 2,051
-Portfolio
investment88 81 60 203 -65 -313
Government sector 172 -34 -506 -32 500 1,580
Monetary sector 54 -634 512 -20 -1,321 166
Change inreserves
(-=increase)-522 -1,836 -1,092 -206 -167 -350
Errors andomissions 114 270 14 -340 150 90
Index: 1980=100
Terms oftrade 95.2 83.8 74.3 71.9 81.6 90.7
... Notavailable.
Source: Banco delaRepública, Subgerencia deestudios económicos ;IMF, Balance ofPayments Statistics; IMF, International Financial
Statistics (March 1996); andECLAC, Balance preliminar delaeconomía deAmerica Latina yElCaribe (1994).
18. Positive interest ratedifferentials andincreased investor confidence inthewakeofthediscovery
ofnewoilfields (Chapter III)attracted largecapital inflows10despite theimposition in1993and1994
ofanon-interestbearingdepositrequirementonnon-concessionalforeignborrowing.InSeptember1994,
following a3percentappreciation ofthepesoinrealterms, allforeign capital inflows related toreal
estate purchases were prohibited.
10Capital inflows began toincrease inresponse toa1991 taxamnesty, financial liberalization andhigher
interest rates. Theefforts tosterilize these inflows (byinitially avoiding arealappreciation ofthepeso) drove
upinterest rates andfurther encouraged speculative flows. Policies were reoriented towards interest rates
stabilization andcontrol ofmonetary aggregates.Colombia WT/TPR/S/18
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(vi) Policies regarding external borrowing
19. Thepursuit ofprudent fiscal policies helped tolower external indebtness from 45percent
ofGNP in1990 to31percentin1994 (Table I.4). In1994, theauthorities prepaid partofforeign
debtobligations. Despite restrictions introduced in1993, between 1990 and1995, theparticipation
oftheprivate sector intotalexternal debtisestimated tohaverisenfrom17to39percent(Table I.4).11
Table I.4
External debt, 1989-1995 (June)
(US$ million andpercent)
1989 1990 1991 1992 1993 1994 1995 (June)
External debt, total(EDT) 17,587 17,993 17,335 17,237 18,867 21,813 23,295
Debt bycategories:
A.Public sector, total
(long andshort-term)14,275 14,966 14,803 13,981 13,811 14,224 14,917
Long-term debt, total 13,835 14,586 14,464 13,487 13,258 13,567 14,069
Long-term debt, bydebtor:
Central Bank
(Banco delaRepública )592 631 661 635 375 99 162
Central Government 4,944 5,350 5,405 5,589 5,637 5,948 6,219
RestofGovernment
(departmental, local)3,010 3,307 3,161 2,761 2,766 2,953 3,177
Public sector entities 5,238 5,258 5,235 4,500 4,479 4,567 4,509
B.Private sector
(long andshort-term)3,312 3,027 2,532 3,256 5,056 7,589 8,378
Long-term debt 1,280 1,113 981 1,250 2,046 3,905 4,540
Memorandum:
EDT/XGS (percent) 209 181 167 167 158 174 ...
EDT/GNP (percent) 45 45 44 41 37 31 ...
RES/EDT (percent) 23 26 36 44 45 40 ...
... Notavailable.
Source: Banco delaRepública (data asatJanuary 1996); Memorandum shares from World Bank'sWorld Debt Tables.
20. Since September 1993, inresponse torising loan-related capital inflows, policies onprivate
sector external borrowing havebecome increasingly restrictive. Aneffective taxonforeign borrowing,
intheform ofanon-interest-bearing deposit requirement of47percentoftheloanamount, was
introduced bytheCentral Bank. Thedeposit requirement onloans withamaturity offiveyears or
less(later reduced tothree years orless)wasraised intwosteps to93percent, andadeposit of
140percentintroduced onshort-term credits ofuptoonemonth. Credits forimports ofcapital goods,
short-termloansbyBANCOLDEX(ChaptersIIandIV),creditcardbalances,loanstofinanceinvestment
abroad andcredits forpreshipment financing ofgreen coffee, coalandoilareexempt from this
requirement.
111995 estimate provided bytheColombian Government.WT/TPR/S/18 Trade Policy Review
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21. These restrictions significantly raised thecostofcredit ataperiod when demand fordomestic
credit wasrising. Thispressure wasfurther intensified when theCentral Bank increased interest rates
oncertificates ofdeposit. Although deposit interest rateswereagain reduced between theendof1994
andFebruary 1995, inApril 1995, theaverage rateonbank loans wasstill45percent. In
February 1996, foreign borrowing requirements were eased byreducing thematurity required for
non-interest-bearingdepositsandintroducingasingledepositrequirementof50percent.12Nevertheless,
noplans existforeliminating these restrictions onexternal borrowing.
(3) Developments inMerchandise Trade
22. Since 1993, Colombia hasexperienced agrowing deficit inmerchandise trade forreasons
discussed earlier (section (2)(v) andTable I.3).In1996, traditional exports arenotexpected toperform
inadynamic manner duetolowworld prices forcoffee andtransport constraints foroil.Non-traditional
exports, supported bytheprocess ofdevaluation inrealterms, areexpected togrow by12percent.13
Imports areexpected tobemainly items related toinfrastructure projects, linked toforeign investment.
(i) Composition oftrade
23. Colombia 'sreported merchandise trade structure hasnotchanged significantly (Chart I.5).
Exports remain highly dependent oncertain commodities whose trade weight varies according to
developments inworld prices; inthiscontext, theshare ofcoffee, oilandcoalinthetotaldeclined
byabout 17percentbetween 1989 and1994 (Chart I.5).14Following theopening oftheeconomy,
imports ofconsumer andcapital goods, including transport equipment andparts, rosesharply.
(ii) Direction oftrade
24. TheUnited States remains Colombia 'smajor single trading partner, despite thereduction of
itsshare intrade flows intheperiod 1989-94 (Chart I.6). Theshare oftheEU15 inexports hasrisen
slightly, while thatinimports hasfallen. Trade withLatin American partners, particularly the
Andean Group, hasgreatly expanded.
25. Between 1991and1994, therewasonlyaslight increase intheshare ofimports ofpreferential
origin; which came almost entirely fromAndean andother LAIA countries (Chart I.7);invalue terms,
suchimports morethandoubled toUS$2.5 billion. Thevalue ofimports fromAndean Group countries
(mainly Venezuela andEcuador) more thantripled while theshare ofother LAIA partners decreased.
Theshare ofexports toLAIA andAndean Group partners roseby18percent,mainly duetotherapid
growthofexportstotheAndeanGroupandMexicowithwhichregionaltradeliberalizationcommitments
haverecently beenintensified (Chapter IIandAnnex II.1).
12ElTiempo ,22February 1996.
13Departamento Nacional dePlaneación (1995a) hadearlier estimated non-traditional export growth at
19percent.
14Chart I.5isbased ontheUNSTAT Comtrade database. TheCentral Bank estimates thattheshare ofcoffee,
oilandcoaldeclined byabout 20percentoverthesame period.Colombia WT/TPR/S/18
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26. South American andCaribbean countries nowconstitute theprincipal market forColombia 's
industrial exports (Chart I.6).15In1994, 53percentoftotalexports ofmanufactures and4percent
ofprimary items were directed totheregion. Between 1991 and1994 regional exports ofcertain
industries withhighdomestic value-added, such asbasic chemicals, petrochemicals, machinery,
equipment andautomotive products, experienced overall growth of72percent. According tothe
authorities, between 1989 and1995, theshare ofindustrial exports eligible forduty-free treatment
inthese markets rosefrom 25to43percent. Ifnegotiations currently under way(seeChapter II)
aresuccessful, thisshare could riseto66percentbytheyear2006.
27. Overall, Colombia 'smerchandise trade balance withother Latin American partners has
progressivelyturnednegativesince1992(ChartI.8),changingfromasurplusofaboutUS$56millionto
deficits ofUS$777 million in1993andUS$1.1 billion in1994. Thiswasmainly duetothereversal
ofthetrade balance withVenezuela from aUS$156 million surplus toaUS$615 million deficit16as
wellasgrowing tradedeficits withBrazil, Mexico andPanama. In1995, thedeficit withLatin America
dropped toUS$646 million orbyabout 30percent,asthetradebalance withVenezuela considerably
improved andthesurplus withPeruwidened. However, thetrade deficit withVenezuela isexpected
towiden further because ofthedevaluation oftheVenezuelan currency inMay1995.
15Ministerio deComercio Exterior (1995a).
16Colombia 'strade deficit withVenezuela, itsleading Andean Group trading partner, widened sharply in
recent years asaresult ofVenezuela 'srecession andprice andexchange controls (EIU, 1995b).