Tuesday, June 17, 2014

New challenges for the Colombian economy

Opinion article by: Catalina Tamayo Posada (catalinatamayop1@gmail.com)
Economics student at Universidad EAFIT, Medellin, Colombia.

… Poor countries are poor because those who have power make choices that create poverty.” 

Only two days have passed since the second round of presidential elections where Juan Manuel Santos resulted reelected beating Oscar Ivan Zuluaga, who was Alvaro Uribe’s candidate. The whole country ended up being completely divided by these two candidates which focused their campaigns mainly in the peace process that is being completed in La Habana, Cuba. The peace process between the Colombian Government and the FARC (Fuerzas Armadas Revolucionarias de Colombia, by its Spanish initials) started in 2012 and has not ended up yet. Many issues are under conversations amongst the two parties, but the Colombian people still have too many questions about what is being discussed there because the agreements have been kept in secret. However, one thing can be stated, in case of having a successful process in La Habana, the Colombian economy would be extremely beneficiated. The GDP could grow an additional 2% as a result of the “end of the conflict” (Oficina del Alto Comisionado, 2014). This increase would be translated into greater social investment as well as more employment opportunities, reducing the unemployment rate down to 7% (El País.com.co).

Additionally, the share of the national budget which is currently destined to national defense could be reinvested in education, health, infrastructure, etc. Furthermore, the lands that could not be worked on because of the conflict would be returned to the owners and would be made productive, incentivizing the agricultural sector which needs to be highly reinforced.

Although the peace process appears to have a great impact on Colombian economics, it is not the only issue that deserves attention.

In the last years, Colombia has had an economic model based on the extractive sector. Even though this sector represents a big share of Colombian exports and therefore more royalties, it’s a sector that signifies a huge damage for the environment and makes the economy extremely vulnerable to changes in the global demand for commodities. According to Leonardo Villar, director of Fedesarrollo, “We are approaching to the end of the boom of commodities’ prices”. In other words, the growth of Colombian GDP because of exports of commodities would fall. The challenge here is how to prevent the economy of having a crisis and how to make it grow despite the fact of this inevitable coming drop of international prices of commodities.

The extractive sector shouldn’t be left aside but it clearly shouldn’t be the only motor of the economy. Innovation is, as Joseph Schumpeter would say, “an essential driver of competitiveness and economic dynamics.” Investing in research for innovation should be a priority for the upcoming government. The greatest benefit of innovation is that it can be applied to every sector of the economy: to make more technical the crops, to add value to our own production, to construct highways in less time with more technology, even to make more efficient the governmental institutions. And well, if institutions can actually become more efficient and less bureaucratic with all the processes, maybe our economy could become more competitive and resources could be distributed in more equitable way.


El País.com.co. Analistas sostienen que la paz significaría un fortalecimiento económico del país. Obtenido en: http://www.elpais.com.co/elpais/judicial/noticias/analistas-sostienen-firmar-paz-significaria-fuerte-aumento-crecimiento-economico-p

Oficina del Alto Comisionado-Colombia, ONU. Conflicto cuesta $12 billones al año; en Paz, PIB crecería hasta 2%. Obtenido en: http://www.hchr.org.co/acnudh/index.php?option=com_content&view=article&id=4841:conflicto-cuesta--12-billones-al-ano-en-paz-pib-creceria-hasta-2-&catid=121:proceso-de-paz&Itemid=91

Revista Dinero. Lo que está en juego. Edición N° 445 página 37.

Śledzik, Karol. Schumpeter’s view on innovation and entrepeunership. Obtenido en: http://www.academia.edu/5396861/SCHUMPETERS_VIEW_ON_INNOVATION_AND_ENTREPRENEURSHIP

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