7 MOST SERIOUS ECONOMIC PROBLEMS IN COLOMBIA - CULTURE VOCABULARY - 2025

The economic problems in Colombia are various and each one of them, although it has diminished in recent years, still offers resistance to the progression and development of the country. These include low labor productivity and income inequality.

Colombia is a good example of economic growth, as its recent per capita income growth of 8.8% per year points to the potential for Colombia's convergence to the ranks of the world's richest countries.

However, Colombia's economic growth has been limited by 40 years of a costly and ineffective drug war policy that has failed. The illicit activity of the drug cartel amounts to approximately $ 10 to $ 20 billion a year; and it does not enter the GDP accounting.

Additionally, the FARC (Revolutionary Armed Forces of Colombia) have slowed Colombia's drive toward economic prosperity, opening a dead end that is largely social and political as the economy would prosper.

Colombia during the last decade has experienced a historic economic boom. As of 2015, GDP per capita has increased to more than $ 14,000, and GDP increased from $ 120 billion in 1990 to almost $ 700 billion.

Poverty levels were as high as 65% in 1990, but decreased to less than 24% by 2015.

However, Colombia in the midst of its social and economic progression presents some persistent economic problems that are rooted both in its culture and in its structure and government.

Most important economic problems in Colombia

Drugs

Drug production in Colombia conforms to the theory of a classical French economist, Jean Baptiste Say (1803), who coined the law that supply creates its own demand.

It follows that the production of illicit drugs creates a harmful demand for the user. The demand of drug users together with the supply has created an international black market.

The war on drugs has not suppressed production on the supply side. And on the demand side, policies such as criminalization, incarceration and stigmatization have not suppressed illicit drug use.

Guerrillas

Aid funds from Plan Colombia are being used to combat the FARC (Revolutionary Armed Forces of Colombia).

This Marxist-Leninist guerrilla organization has been playing Robin Hood (taking from the rich and giving to the poor) and has been at war against the Colombian government since 1966.

This period of time is known as La Violencia. The FARC raises its funds through ransoms, kidnappings and taxes on the drug trade in its southern Colombian region.

Many of Colombia's resources have been used to fight this brutal civil war that has lasted almost half a century, with no end in sight.

Agricultural damage

Plan Colombia has instigated the FARC because some pesticides used by them are spreading throughout the countryside to kill the coca plants that cocaine comes from.

However, pesticides are also killing legal crops of small Colombian farmers. Furthermore, pesticides are also damaging the health of farmers, making it even more difficult for them to provide food for their families.

Between delaying agricultural activities and producing disease in farmers, the economy is lagging.

Oil price

The fall in the price of oil is not a surprise, as it is easily predicted by the laws and theories of supply and demand.

However, it is close to impossible to determine when and to what extent a global economic change will take place.

The Minister of Finance and Public Credit of Colombia, Mauricio Cárdenas Santamaría, maintains that the current state of the economy in Colombia has been degraded by the fall in oil but ensures that the transition has not been traumatic thanks to the well-established economic policy framework of the Colombian government.

Inefficient labor productivity

The challenges posed to the Colombian economy are many and broad. Rosario Córdoba Garcés, president of the Private Council for Competitiveness, believes that development will be impossible if Colombia cannot improve its productivity levels.

Today, productivity in Colombia is not increasing as other indicators do; This is the case of the investment rate, which has recently reached 29% of GDP.

According to Ms. Córdoba, “human capital is essential. Labor productivity in Colombia is one of the lowest in Latin America, and that has to do with the quality and coverage of education in the country ”.

Income inequality and poverty

Colombia faces high levels of income inequality and poverty, both driven largely by unemployment and informality.

Labor market reforms are necessary to boost job creation and reduce the proportion of informal workers. This will require better educational outcomes and the reform of restrictive labor market regulations.

The minimum wage should be differentiated by region, while the high level of social security and parafiscal contributions, which work against formal job creation, should be reduced.

The tax system could also be made more progressive, by removing exemptions that largely benefit the wealthiest taxpayers.

Increasing additional income would also allow expansion of social programs.

Education infrastructure and corruption

Government policy should seek to promote productivity throughout the economy, especially through the education and training system.

When an individual has little education and works informally, this affects the economy of the country.

Policies are also needed to further improve transportation infrastructure, increase private investment, reduce barriers to entrepreneurship, improve access to finance, and strengthen the rule of law, to ensure better enforcement of contracts and less corruption.

The lack of higher education and corruption in the country due to easy ways to earn income are one of Colombia's main economic problems.

References

1. "World Economic Outlook Database". International Monetary Fund. August 2017. Colombia.
2. Roberto Steiner and Hernán Vallejo. "The Economy". In Colombia: A Country Study (Rex A. Hudson, ed.). Library of Congress Federal Research Division (2010).
3. 2017 Index of Economic Freedom. The Heritage Foundation - heritage.org/Index
4. Roberto Steiner and Hernán Vallejo (2010). Rex A. Hudson, ed. "Colombia: A Country Study" (PDF). Library of Congress Federal Research Division. pp. 181–4.
5. Kevin Howlett. (2012). Colombian economy, a cause for concern? August 13, 2017, from Colombia Politics Website: colombia-politics.com.