Colombia: A Politically Stable Country
Generally, Colombia is a politically stable country. For years, the Colombian government has been trying to combat terrorist groups in Colombia. In 2016, it signed a peace deal with Revolutionary Armed Forces of Colombia (FARC), the country’s largest guerilla group, ending the 52 years conflict. Even though some dissident FARC groups remain, the government has made progress towards enhancing the country’s political stability. Foreign businesses looking to operate in Colombia can thus enjoy reduced business disruption.
In the Corruption Perception Index 2018, Colombia ranked 99th out of 180 countries. The high corruption level may result in inefficient business practices for Qian Hu. This contributed to Colombia’s low rank of 49th in terms of its economic freedom (Heritage Foundation, 2019). To improve economic freedom and foster foreign trade relations, Colombia has Free Trade Agreements (FTA) and/or Bilateral Investment Treaties (BIT) with over 40 countries to date. As such, ornamental fish businesses can take advantage of the FTAs/BITs Colombia has with countries that it’s home country does not have an FTA/BIT with, to export its fish at lower tariff rates.
Colombia’s GDP growth increased from 1.35% in 2017 to 2.66% in 2018. According to economist Ricardo Bonilla, this “disappointing economic growth” has resulted in a large fiscal deficit. This situation was worsened by the introduction of the financing law in 2018 which saw a decrease in corporate tax rates and an increase in income tax for high earners. In addition to the increasing efforts against tax evasion, the government sold some state-owned assets to reduce the deficit . However, more structural improvements in its finances are required to sustainably reduce the deficit. Despite that, in 2019, Colombia’s economic growth is estimated to be at 3.3%. Other than construction, all sectors grew in the first quarter of 2019. Furthermore, it has a decreasing interest rate since 2017, and it stabilised to 4.25% in 2019.
Colombia’s tax burden is already relatively lower compared to other Organisation of Economic Co-operation and Development (OECD) countries, the reduction in tax rates make it more appealing for companies to expand there. With the lower and stable interest rate, companies could take up loans for rental or purchase of lands for its breeding farms. However, they need to keep in mind the government’s fiscal deficit and the possibility of inflation and weakened currency strength. The population growth rate in Colombia has been steadily decreasing for the past decade, dropping to 0.97% in 2018. As such, it is slowly transitioning to become an ageing population. Fortunately, 68.38% of Colombians are between the age of 15-64, the working age population, as of 2018.
However, Colombia has distinct social classes. Social stratification was originally implemented to improve social and economic equality, as the poor receive subsidies while the rich pay more for the utilities; however, Colombia remains the second most unequal country in Latin America. People from lower strata struggles to land a well-paid job and has less access to education, health and etc since those are catered towards the rich. Moreover, their social and physical mobility is limited, resulting in further segregation amongst different strata and area stigmas. Foreign businesses would thus need to be aware of this class consciousness and invest more in human resources to manage potential clashes between strata, which may cause business disruption.
Colombia is the only South American country with access to both the Carribean and the Pacific ocean. Companies can thus make use of Colombia’s strategic location to export goods to the Americas and Europe. Generally, Colombia has a tropical climate, which results in a high frequency of heavy rains, leading to frequent landslides and coastal, river and urban floods. In 2017 and 2018, these natural hazards caused the death of hundreds of Colombians and also affected people’s livelihoods. In addition, Colombia also experiences hazards such as cyclones, earthquakes, extreme heat and volcanic eruptions. As a matter of fact, among countries in South America, extreme hazard events occur most often in Colombia; 84% of Colombians and 86% of assets are exposed to at least two hazards . In the event of a hazard, the fish farms could be destroyed/damaged, which could lead to high restoration costs for the ornamental fish industry.
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