Colombia country brief

Introduction

Australia and Colombia enjoy expanding relations, based on trade and investment and cooperation on a range of international issues, including the environment, agricultural trade, climate change, transnational crime and disarmament.  Australia will open an Austrade-managed Consulate General in Bogota in 2012.

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 and may stand for one consecutive re-election. 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 constitutional and institutional stability based on strict separation of powers between the executive, the legislature and the judiciary, and the relative weak influence of military in government affairs.

Political outlook

President Juan Manuel Santos, of the conservative-liberal Social Party of National Unity (UP), has enjoyed widespread approval since his election in June 2010 for his handling of the economy, international relations and the fight against corruption and insurgency.  While Santos has maintained his predecessor’s (Uribe’s) tough stance on security and strong ties with the US, he has also focused on an agenda of social and economic reform.  The next national elections will be held in 2014.

A key foreign policy priority is to diversify the country’s trade and investment links, both within the region and towards the Asia Pacific and Europe. Santos continues efforts to improve Colombia’s international engagement and image abroad, such as through hosting the Sixth Summit of the Americas in April 2012. Relations with Colombia’s neighbours Ecuador and Venezuela have continued to improve since diplomatic ties were restored and trade ties renewed following a dispute in 2008.

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. Rivalry between the conservative right and the free-thinking left 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 National Front in which the two main political parties, the Liberal and Conservative Parties, agreed to rotate the presidency and share cabinet positions. Presidential rotations continued until 1974 when the power sharing agreement lapsed.

During the 1960s, several guerrilla groups emerged due to continued social, economic and political problems, including the FARC, the now demobilised M-19, the Ejército Nacional de Liberación (ELN), the Ejército Popular de Liberación (EPL) and the indigenous-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.

This situation was further complicated by the emergence of various right-wing paramilitary groups which took up arms against the guerrillas. Over time, many of these groups too became involved in drug trafficking and other areas of organised crime, and have been the target of accusations of serious human rights abuses, including in concert with the military.

President Uribe's victory in 2002 elections was a sign of public dissatisfaction with the Pastrana Government and its inability to bring security to the country. Violent crime and kidnappings, while still high, reduced significantly under President Uribe and the broader security situation improved markedly. Under the “law on peace and justice”, negotiations with the main right-wing paramilitary groups led to over 40,000 paramilitaries demobilising and giving up their arms, although some right wing groups consolidated their membership and continue to be involved in organised crime.

Under Uribe, the FARC suffered some significant setbacks in its guerrilla campaign as its control of areas of the Colombian countryside diminished. A 2008 raid by elite Colombian troops was successful in releasing 15 more long-term hostages, including the high-profile French-Colombian national and former Senator, Ingrid Betancourt, and three American contractors. The raid was a significant blow to the FARC, as Betancourt and the US hostages were a powerful bargaining tool. In the same year, FARC leader Manual Marulanda died from a heart attack and a controversial incursion into Ecuador by Colombian forces resulted in the death of senior FARC figure Raul Reyes.

However, the incursion led to Ecuador and Venezuela breaking off diplomatic ties with Colombia. While relations with both countries were initially renewed, President Uribe’s decision to present evidence to the Organisation of American States (OAS) that FARC guerrillas were using the Venezuelan border as a safe-haven resulted in Venezuelan President Chávez re-ordering the expulsion of Colombian diplomats from Venezuela. These problems added to regional tensions over the US military presence in Colombia.

Despite real progress under Uribe, President Santos inherited a difficult security situation, particularly in rural areas, bordering Venezuela and Ecuador, affected by the conflict and by violence related to the drugs cartels and guerrilla groups. While the FARC is significantly weakened, it continues to show its strength, especially in the oil rich south-east and the coal basins in the north-east, and there is no imminent end to the conflict. Other criminal groups, known collectively as ‘BACRIM’ are in control of much of the drug trafficking in northern Colombia and are beginning to rival the FARC as the largest threat to security in the country.

International Relations

After many years focused on internal developments, Colombia is projecting itself as open for business and as a global partner for cooperation across areas including trade and investment, security, technology, education, and energy which have become frontiers under President Santos for Colombia to expand and deepen its international engagement both bilaterally and multilaterally.

The regions of South and Central America, and the Carribean, are a priority for Colombia.  Its relations are generally good with countries of these regions and tensions with neighbours Venezuela and Ecuador have recently eased. Colombia is an active member of the Association of Caribbean States, the Organisation of American States, and the Forum for East Asia-Latin America Cooperation (FEALAC).

The United States is Colombia’s most important partner. The US-Colombia free trade agreement came into effect on 15 May 2012. It is an additional boost to Colombia’s most significant trading relationship which, in 2011, contributed to 32% of its total global trade. US-Colombia engagement is being further developed following the achivements of “Plan Colombia” through the Colombia-US High Level Partnership Dialogue.

Colombia’s focus on the Asia-Pacific has increased in recent years. It is a member of the Pacific Basin Economic Council (PBEC) and participates in two APEC working groups. It wants full membership of APEC and has expressed an interest in participating in the Trans-Pacific Partnership Agreement (TPP) negotiations. Like Australia, Colombia also participates in the Forum for East Asia-Latin America Cooperation (FEALAC) and is currently the Regional Coordinator of FEALAC for Latin America.

In 2011, 7 per cent of Columbia’s merchandise exports were destined for the Asia-Pacific.  Colombia completed negotiations for an FTA with the Republic of Korea in June 2012. The FTA is Colombia’s first in the Asia-Pacific region and is seen as a further bridge towards greater integration. In May 2012, during a visit to China by President Santos, Colombia and China signed nine agreements, and agreed to a feasibility study for a free trade agreement.

Colombia was elected as a non-permanent member of the UN Security Council for 2011-12, and also seeks membership of the OECD.

Narcotics

Colombia is major global supplier of cocaine, marijuana and heroin. The illicit narcotics trade is estimated to be worth around five to ten per cent of GDP. The cultivation and trafficking of drugs continues to have a negative impact on security, the formal economy and the environment. In particular, the uncontrolled use of fragile tropical and jungle ecosystems to grow cocaine has caused considerable environmental harm, as has the indiscriminate use of chemicals and fertilisers.

Human rights

While human rights abuses continue in Colombia, the situation has improved with an overall lessening of civil conflict and through policy reform. A program of land restitution, commenced by the Santos administration in 2011, will help to address social injustices arising during the country’s civil conflict.  The previous Uribe administration focused efforts on human rights abuses by the military. Historically, the major source of human rights abuses in Colombia has stemmed from 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 occurred. 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.

Australian Ministers and diplomatic officials regularly raise the issue of human rights with Colombian authorities.

Economic overview

Economic and trade policy directions

The Santos administration pursues outward-looking, market-oriented trade and economic policies aimed at attracting foreign direct investment, maintaining macro-economic growth and stability, and improving the business environment.  It is on track toward its goal of reducing unemployment to a single digit figure by 2014, recording 10 per cent in 2011 from an average of 14.67 per cent over the previous decade.  Santos has undertaken to balance the budget by 2014 and pledged to reform the labour market, address corruption and spend more on education.

Colombia remains 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), the G3 (with Mexico and Venezuela) and the Pacific Alliance (with Colombia, Peru and Mexico).  A framework agreement for the Pacific Alliance is expected in 2012, including free trade of goods, services and capital and the movement of people.  Colombia, Colombia and Peru have already integrated their stock exchanges and are working to integrate with Mexico.

Colombia has free trade agreements with the United States, Canada, the European Union Free Trade Association, the European Union and South Korea. Exports to China have increased by 85 per cent since 2006. The US-Colombia FTA will enter into force in the second half of 2012.

Economic outlook

The IMF forecasts Colombia’s GDP to grow 47 per cent in 2012 and 4.4 per cent in 2013. This follows strong growth in 2011 (5.9 per cent) driven by expansion in mining and oil production and fixed investment. Managing inflation is a policy priority against a background of sustained economic growth. The  2011 inflation rate of 3.4 per cent is expected to remain steady through 2012, and fall to 3.1 percent in 2013.  This is well within the 2-4 per cent band set by the central bank of Colombia, Banco de la Republica.  Inflationary pressures will be tempered, at least in part, by increases in production capacity off the back of strong growth in foreign investment.

Colombia has encouraged increasing levels of foreign direct investment in recent years. Colombia is ranked 39 of 183 economies in World Bank indicators on ease of doing business, an improvement over the previous five years. According to Proexport Colombia, flows of foreign direct investment in Colombia reached US$6,914 million in 2010. The principal sector for investment was petroleum with US$2,861 million, followed by the mining and quarries sector with US$2,066 million.

Bilateral Relationship

Australia and Colombia enjoy expanding relations. Colombia re-opened its Embassy in Australia in 2008. The Australian Ambassador to Colombia is accredited to Colombia on a non-resident basis. Australia maintains an Australian Federal Police Liaison Office in Bogotá and an Austrade managed Consulate-General opened in July 2012 to promote trade and investment opportunities and service Australian business interests. It will also provide consular services, which have previously been provided by an Honorary Consul.

Australia and Colombia work together to pursue free and fair agricultural trade through joint membership of the Cairns Group. We cooperate to advance climate change negotiations as members of the Cartagena Group.

In April 2012, Mr Craig Emerson, Minister for Trade and Competitiveness, led an Australian business delegation to Columbia, where he met with the Colombian ministers responsible for trade, foreign affairs, and mining and energy, and reflected the growing relationship particularly in the area of trade and investment.

In June 2012, Prime Minister Gillard met with President Santos in Brazil during the Rio+20 summit.

Colombia's then-Minister of Trade, Industry and Tourism, Mr Luis Guillermo Plata, visited Australia in March 2009, accompanied by a business delegation. The visit provided an opportunity to expand bilateral commercial links with Colombia and led to the conclusion of a Memorandum of Understanding to strengthen bilateral trade and investment, which then Trade Minister Mr Crean and Mr Plata signed in Geneva on 29 November 2009.

Colombia's then-Minister for Foreign Affairs, Mr Jaime Bermudez, visited Australia in March 2010. The visit further strengthened political and business links, including the formal announcement of the establishment of an Australia-Colombia Business Council.

Parliamentary delegations from Australia and Colombia exchanged reciprocal visits in August 2008 and June 2009 respectively. The then Senate President John Hogg visited Bogota and Cartagena in September 2009 and met with then Vice-President Francisco Santos. Then Vice President Santos also met with Parliamentary Secretary Bob McMullan in December 2009, in the margins of the Cartagena Mine Ban Conference.

Economic and trade relationship

While Australia and Colombia enjoy growing commercial relations in mining, energy and education over the long term, two-way trade has been subject to recent short term fluctuations. Australia's two-way merchandise trade with Colombia totalled around A$79 million in 2011, a decrease of almost 10 percent since 2009.  Australian exports to Colombia totalled A$35 million (down from A$57 million in 2009). Major export items included civil engineering equipment and parts and electrical equipment. Australia's imports from Colombia amounted to $44 million (up from A$32 million in 2009), with coffee being the main import.

Australian businesses already have a major presence in Colombia, particularly in the mining sector. For example, BHP Billiton is the single biggest foreign investor with operations in the Cerrejón Norte coal mine complex and Cerro Matoso nickel mine. Other key Australian companies active in Colombia include; Orica, Xstrata Coal, Ludowici, Runge, Ausproof, QBE Insurance, Qantas, Nufarm, Orica Chemicals, Sedgman Limited, Heldwell Ltd, S&A Capital Investment Bank, Australian Drilling Associates, The Sentient Group, and Redflex Traffic Systems.

Export opportunities

A number of areas, principally in the mining and agriculture 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

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 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 8,803 Colombian students enrolled in Australian educational institutions (a drop of 10.9% from 2010). Australian education fairs in Colombia consistently attract thousands of interested students. Some universities in Australia now offer scholarships to Colombian students. Colombian students are also eligible for the Australia Awards scholarships offered by AusAID and received eight scholarships in 2011 for study in Australia from 2012.

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 for technical cooperation and technology transfer, especially in the sugar cane, dairy, livestock and tropical fruit industries. Demand for bovine genetics offer great potential for Australian breeders of tropical cattle such as Brahman. In February 2008, Austrade worked closely with AQIS and the Colombian sanitary body ICA to finalise protocols allowing the importation of Australian bovine embryos.

Other commercial opportunities

Other prospects include rail and port infrastructure, and information technology. Colombia has also 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, and sport training and development.  

Last updated July 2012