Colombia Country Brief
Introduction
Australia and Colombia share a good and expanding relationship. We cooperate on a range of international issues including agricultural trade reform, the environment, transnational crime and disarmament. Australia and Colombia work together to pursue free and fair agricultural trade through our joint membership of the Cairns Group. Colombia hosted the Cairns Group Ministerial Meeting in 2005. Colombia's role in the Asia-Pacific has increased in recent years. Colombia is now a full member of the Pacific Basin Economic Council (PBEC) and a member of two APEC working groups. It is seeking full membership of APEC. Like Australia, Colombia also participates in the Forum for East Asia-Latin America Cooperation (FEALAC). FEALAC's sixth Political, Cultural and Education Working Group meeting was held in Bogotá in March 2009.
Colombia re-opened its Embassy in Australia early in 2008. The Australian Ambassador to Chile is accredited to Colombia on a non-resident basis. Australia established an Honorary Consulate in Bogotá in 1989 and maintains an Australian Federal Police Liaison Office in Bogotá working under the auspices of the Canadian Embassy. Austrade maintains a 'virtual office' in Bogotá, to promote trade and investment opportunities and service Australian business interests.
Colombia's Minister of Trade, Industry and Tourism, Mr Luis Guillermo Plata, visited Australia in March 2009, accompanied by an official and business delegation. The visit provided an opportunity to expand commercial links with Colombia and resulted in agreement to conclude a Memorandum of Understanding to strengthen bilateral trade and investment.
An Australian Parliamentary delegation visited Colombia in August 2008. The delegation met with President Uribe and Foreign Minister Bermudez, as well as their Colombian Parliamentary counterparts. A Colombian Parliamentary Delegation visited Australia in June 2009.
Political Overview
Background
Colombia has a democratically elected representative government with a strong executive. The President, who is the head of state, is elected for a four-year term. Changes to the Constitution in 2004 allow the incumbent President to stand for one re-election. In May 2009, the Colombian Senate approved a bill providing for a referendum to remove Presidential term limits in the Constitution, which would allow President Uribe to run for a third term in the May 2010 election. The lower house had cleared the bill in a different form in 2008. If reconciled, the measure would need to be reviewed by the Constitutional Court before being put to referendum.
The legislature is a bicameral Congress consisting of a 102-member Senate and a 166-member Chamber of Representatives, with all members directly elected for four-year terms.
In recent decades, Colombia has enjoyed virtually uninterrupted constitutional and institutional stability, with only limited influence from the military. There is a strict separation of powers between the executive, the legislature and the judiciary.
Political Outlook
The current President, Alvaro Uribe, won the 2002 presidential elections on a conservative independent campaign platform. His rise changed the traditional balance of the three main political parties, the centre left Partido Liberal (PL), the leftist Polo Democratico Alternativo (PDA) and the conservative Partido Social Conservador (PSC). Uribe left the PL to run for his first term, and a new party coalesced around his leadership. He also won the support of other minor parties and many of his former PL colleagues. In congressional elections in March 2006, PL reflected this change, giving the Uribe Government a clear majority in both the Congress and Senate.
Mr Uribe was re-elected to the Presidency in the first round of the elections held in May 2006, with 62 per cent of the vote, and he will remain in power until 2010. President Uribe's supporters have been pushing for reforms to the constitution which would allow him to run for president for a third consecutive term. A recent Gallop Poll indicated that although approval ratings for the Government have dropped, 80 per cent of Colombians are in favour of President Uribe presenting as a candidate in 2010. Colombia’s House of Representatives passed a measure on 1 September 2009, which will allow a referendum on whether a President can serve three terms. The Senate passed a similar bill on 19 August 2009. The measure will now go to the Colombian constitutional court for approval. President Uribe has not indicated whether he would run for a third term, should the referendum be approved.
President Uribe is continuing the disciplined macroeconomic policies initiated during his first term aimed at improving public finances, reducing inflation and boosting growth, along with his tough policies on security and drugs. Relations within the region and particularly with the United States are likely to remain Colombia's foreign policy priorities. The strong relationship with the United States has delivered significant political and economic benefits, but an FTA negotiated with the United States has not yet been approved by the US Congress. The Uribe Government has invested much political capital in its strong alliance with the United States. Colombia is also increasingly focussing on strengthening relations and seeking economic opportunities with the broader Asia Pacific region.
Colombia has recently drawn attention from its neighbours in the region regarding its decision to allow the United States access to Colombian military bases in an effort to combat narco-terrorism. The issue was discussed by the leaders of UNASUR countries at an ad-hoc summit in Bariloche, Argentina on 28 August 2009.
Political History - Guerrilla Warfare and the Peace Process
The deep political divisions shaping Colombia's modern development have strong historical roots, emerging shortly after independence from Spain. Colombia initially declared independence in 1810, but did not secure a lasting separation until 1819, when Simon Bolivar defeated the loyalists at Boyacá. Struggles between the conservative right and the free-thinking left emerged soon after, and this rivalry continued throughout the 19th and early 20th century. The political tension came to a head in La Violencia (1948-1958), a period during which an estimated 250,000 people lost their lives. La Violencia was resolved by the formation of a (bipartisan) National Front in which the two parties agreed to rotate the presidency and share cabinet positions. Presidential rotations continued until 1974 when the National Front lapsed, although the parties have continued to share power.
Several guerrilla groups emerged during the 1960s, including the Fuerzas Armadas Revolucionarias de Colombia (FARC), the now demobilised M-19, the Ejército Nacional de Liberación (ELN), the Ejército Popular de Liberación (EPL) and the Indian-based group Quintin Lame. The FARC and the smaller ELN emerged as the major guerrilla groups. Their struggle has largely lost its ideological flavour and in the 1980s and 1990s the two groups became heavily involved in the lucrative narcotics and kidnapping industries. Although their control of areas of the Colombian countryside has diminished in recent years, they continue to attack the Colombian security forces, especially in the oil rich south-east and the coal basins in the north-east. Kidnapping remains a security risk and the 'industry' has been estimated to be worth US$500 million per year. This situation was further complicated by the emergence of right-wing paramilitary groups who took up arms against the guerrillas, often appearing to work in concert with the military. These groups too became involved in drug trafficking and other areas of organised crime. Now, many paramilitary groups have been disbanded (see below) but some right wing groups consolidated their membership and continue to operate in various parts of Colombia and are largely involved in organised crime.
Mr Uribe's predecessor, President Pastrana, began a peace negotiation process with the FARC in 1998, but this collapsed when, on 20 February 2002, the FARC hijacked a Colombian commercial airliner and kidnapped one of the passengers, who was a Senator. President Uribe's victory in the May 2002 elections was seen as a sign of public dissatisfaction with the Pastrana Government's inability to bring security to much of the country, and his first term focused, with some success, on this objective.
Uribe was re-elected on the basis of his strong leadership, improvements in public security, and economic recovery. Violent crime and kidnappings, while still high, have reduced significantly under President Uribe's ‘democratic security policy'. Since Mr Uribe's election, murder rates in Colombia have reduced by 54 per cent and kidnapping rates by 85 per cent. Under the “law on peace and justice”, which he introduced late in his first term, negotiations with the main right-wing paramilitary groups led to over 40,000 paramilitaries demobilising and giving up their arms. There have also been ongoing cease-fire talks with the ELN. The FARC, while significantly weakened by the Government's military offensive, remains active and unwilling to engage in serious negotiations with the Uribe Government. This seemed possible late in 2006, when negotiations on release of people kidnapped by the FARC and held hostage had been agreed by both sides, but a bombing at a military installation in Bogotá led the Government to call a halt to the process.
In early June 2007, President Uribe began taking steps to release some 193 FARC rebels from prison, in a bid to encourage FARC to reciprocate by releasing a number of high profile hostages, including French-Colombian citizen and former Colombian Senator, Ingrid Betancourt. The FARC dismissed the offer as a ‘farce'. An attempt in November 2007 to have Venezuelan President Hugo Chavez mediate with the FARC to broker the release of 45 high-profile hostages ended badly, with President Uribe calling a halt to the mediation and accusing Mr Chavez of legitimising the FARC. President Chavez responded by branding President Uribe a “liar and a cynic” and vowing to put relations with Colombia “in the freezer”. Despite this, the FARC responded to Chavez's efforts and released former vice-presidential candidate Clara Rojas and former congress-woman Consuelo Gonzalez in January 2008. Four more hostages were subsequently released. On 2 July 2008, following an elite Colombian military and intelligence cooperation, 15 more hostages were released, including Ingrid Betancourt and three American contractors. The release of these hostages was a significant blow to the FARC, as Betancourt and the US hostages were a powerful bargaining tool.
In March 2008, FARC leader Manual Marulanda, died from a heart attack and earlier that month Colombian forces made an incursion into Ecuador which resulted in the death of FARC leader Raul Reyes and sparked both Ecuador and Venezuela to break off diplomatic ties with Colombia. This crisis was defused but had a lasting impact on regional relations. Computers seized from Raul Reyes were found to contain information alleging Chavez' involvement with the FARC.
On 2 July 2008, following an elite Colombian military and intelligence cooperation, 15 more hostages were released, including Ingrid Betancourt and three American contractors. The release of these hostages was a significant blow to the FARC, as Betancourt and the US hostages were a powerful bargaining tool.
Relations with the paramilitaries have deteriorated recently due to differences over the application of the peace and justice law, including the extradition of former paramilitaries to the United States to face drug charges. The difficult demobilisation process also saw allegations surface in early 2007 of past links of several high-profile politicians and public officials with paramilitary groups, a scandal dubbed ‘paragate' by media commentators. The Colombian authorities have been quick to move against those complicit (and those with any connection) with paramilitary groups, including the arrest and investigation of numerous members of Congress and public officials. While the scandal has called into question the legitimacy of the Colombian Congress, it has not severely affected Mr Uribe's popularity. Congress has also managed to stay relatively cohesive as those removed from their seats are replaced by another member of their Party. Political reform to change this process is currently being debated.
Despite the progress made by President Uribe's administration, the peace process and Colombia's overall security situation remains difficult, particularly in rural areas affected by the conflict and by violence related to the drugs trade and the criminal networks it has spawned.
Narcotics
The illicit narcotics trade has had a significant impact on Colombia. The country continues to be the world's leading source of cocaine, and is a major source of marijuana and heroin.
The commercial worth of the illicit narcotics trade is difficult to gauge, but is thought to be approximately 5-10 per cent of GDP. Significant in value, the trade has negatively affected the economy, with money laundering and contraband goods reducing the effectiveness of macroeconomic controls and distorting the consumer market. In addition, the current drug cartels have sought to exclude the Government from large regions of the country in order to secure areas for growing coca and poppy and for trafficking routes to North American and European markets, although the Uribe Government has had success in extending its authority in regions previously under the control of the FARC/ELN.
The uncontrolled use of fragile tropical and jungle ecosystems to grow coca has caused considerable environmental harm, as has the indiscriminate use of chemicals and fertilisers.
Human Rights
The major source of human rights abuses in Colombia has been the internal armed conflict between the Colombian army, paramilitaries and the guerrillas. Massacres, extrajudicial execution, murder, torture, forced disappearance and kidnapping, threats and forced displacement have been common. This history of violence and insecurity gave rise to considerable international concern regarding the protection of human rights in Colombia. In response, an office of the UN High Commissioner for Human Rights was established in Bogotá in April 1997. While human rights abuses continue, the situation has improved under the Uribe Government, which has made particular efforts in relation to human rights abuses by the military.
Economic Overview
Economic and Trade Policy Directions
President Uribe implemented a number of tough macroeconomic policies during his first term in office that improved public finances, reduced inflation and boosted growth. Disciplined, austere macroeconomic management has continued during Uribe's second term in office. (At nearly 50 per cent of GDP, public debt remains one of Colombia's major weaknesses). The Uribe Government is also nearing the end of its privatisations program. The October 2006 auction of Bancafé marked the sale of the last state-owned retail bank.
Colombia has experienced increasing levels of foreign investment in recent years. According to the national export commission, Proexport Colombia, foreign direct investment in Colombia in 2007 was US$9,028 million. The principal sector for investment was petroleum, with US$3,429 million. Other investment has been directed to the manufacturing, mining, transport and communications sectors. BHP Billiton is a significant foreign investor in Colombia with its 30 per cent share in the Cerrejón Norte coal mine complex and its ownership of the Cerro Matoso nickel mine.
Following the pattern of other Latin American countries keen to take advantage of China's growing economy, President Uribe visited China in April 2005 to promote Colombian coal sales, as well as to discuss financing for an oil pipeline that would run through to the Pacific coast from the east of Colombia. The Colombian delegation to China also sought Chinese investment in several proposed Colombian hydro-electric plants.
Colombia is committed to the Cairns Group and further agricultural liberalisation.
It is at the forefront of the development of regional trade agreements
and groupings such as the Andean Community (with Bolivia, Peru and Ecuador
- Venezuela withdrew in 2006) and the G3 (Colombia, Mexico and Venezuela).
Colombia is also looking to increase its role in the Asia-Pacific region. It is seeking APEC membership, is a full member of the Pacific Basin Economic Council (PBEC) and is a member of two APEC working groups.
Colombia concluded free trade negotiations with the United States on February 27, 2006. However, the US Congress cited concerns about political violence, especially against trade unionists and the lack of investigations and prosecutions and has not ratified the agreement.
Economic Outlook
The Colombian economy has performed well in recent years with economic growth exceeding the regional average by a substantial margin. However, growth has slowed substantially. The IMF estimates growth more than halved to 2.5 per cent in 2008 and this will slow further to 0 per cent in 2009, before rising to 1.3 per cent in 2010. Colombian financial markets have been affected by the global financial crisis, although debt and interbank markets have continued to function normally.
Colombia's main economic focus in recent years has been addressing high inflation, reducing government debt and encouraging foreign investment. The central bank went through a long period of monetary policy tightening - raising interest rates by 400 basis points since the start of 2006. However, the outlook for lower growth and inflation has allowed the central bank to cut interest rates by 200 basis points since December 2008 and there has been a significant fall in the peso.
There is no doubt that the financial crisis will have a considerable impact on Colombia in the short term. However, the Colombian economy is expected by many analysts to recover more quickly than many others. In addition, the commitment the Colombian Government has shown - and continues to show - in attracting foreign investment and creating a favourable environment for investors should help once a recovery starts to kick in globally.
Bilateral Economic and Trade Relationship
Australia and Colombia enjoy sound bilateral commercial relations in the mining, energy and education sectors. Australia's two-way merchandise trade with Colombia totalled around A$73 million in 2008, of which Australian exports to Colombia totalled A$41 million. Major export items included barley, electrical equipment and specialised machinery and parts. Australia's imports from Colombia amounted to A$32 million, with coffee being the main import.
BHP Billiton's refining plant and coal and nickel mining ventures in Cerrejón Norte, Central and Cerro Matoso are significant Australian investments in Colombia. Sedgman Coal is also involved in coal washing at the Cerrejón Norte mine.
Export Opportunities
A number of areas, principally in the agriculture, mining and telecommunications sectors, have potential to provide further long-term opportunities for Australian investment in Colombia, although much depends on continued improvements in the security situation.
Mining
In addition to its consortium interests in the Cerrejón Norte, Central and Cerro Matoso mines, in April 2006 BHP Billiton acquired exploration and production rights for oil and gas exploration from two offshore blocks in Colombia's Caribbean sector. BHP Billiton holds a 75 per cent interest in each block and is the designated operator.
An Australia Latin America Business Council mining mission to Colombia in November 2007 confirmed the considerable potential to increase trade and investment in the Colombian mining sector. Colombia has the largest coal reserves in Latin America and the Colombian Government is encouraging the development of coal-related infrastructure. Opportunities for Australian business range from infrastructure development, concessions, mine system operation, coal washing and remote mine site catering. Colombia also produces and has significant reserves of gold, silver, platinum and iron ore.
Education
Colombia is second only to Brazil as a source of international students to Australia from South America, with 7,117 enrolments by Colombian students in Australian educational institutions in 2008. Australian education fairs in Colombia consistently attract thousands of interested students. Education-related services exports to Colombia amounted to A$202 million in 2008. Interest in Australia as a quality source of education has grown rapidly since 1996: more than 12,000 Colombian students studied in Australia in the decade to 2007, including one of President Uribe's children (who studied in Sydney). In 2008 the number of Colombian student enrolments in Australian educational institutions was 7,717. To encourage this trend further, some universities in Australia now offer scholarships to Colombian students.
While the majority of Colombian students undertake ELICOS courses (English Language Intensive Courses for Overseas Students) in Australia, there is also a large demand for university and vocational education and training placements.
Agribusiness
There is significant Colombian interest in Australian agribusiness expertise. The agribusiness sector provides potential opportunities for technical cooperation and technology transfer, especially in the sugar cane, dairy, livestock and tropical fruit industries. Bovine genetics offer great potential for Australian breeders of tropical breeds of cattle such as Brahman cattle. Austrade has worked closely with AQIS and the Colombian sanitary body ICA to draft protocols allowing the importation of Australian embryos. Australia hopes to have protocols in place in 2007 to allow for the importation of bovine semen. The 2006 World Brahman Breeder's Congress held in Medellin Colombia attracted several Australian exhibitors and visitors.
Other commercial opportunities
Other prospects include telecommunications services and equipment, rail and port infrastructure, and information technology. Colombia has also recently shown interest in defence related technology through contact with a range of Australian companies.
Colombia's tourist industry on the Atlantic Coast is experiencing growth and opportunities may exist for Australian manufactures of ferries, catamarans and leisure craft.
There is also growing interest in Australian wines, with several brands now available in supermarkets and in restaurants.
Updated 9 September 2009