Colombia and the International Crisis

BOGOTA – Just five months ago, Colombia’s government was assuring its citizens that they were protected from the international crisis. Now, analysts predict that the economy will barely grow 1% this year, and that is the best case scenario. This bleak forecast marks the end of Colombia’s longest cycle of growth in three decades, leaving the country in the same fragile situation as that of many other developing economies.

Of course, a deteriorating economy is not exclusive to Colombia. Since the middle of last year, the International Monetary Fund has been reducing its projections for growth across Latin America. Last October, the Fund estimated that growth in the region would reach 3.2% this year; now, it says that growth will barely be positive. And, most likely, the worst is yet to come: if the Obama administration does not succeed in stabilizing the United States economy in the coming weeks, Latin America will most likely face even steeper declines.

The good news for Colombia is that it is better off than many of its neighbors. Although projecting concrete figures is a sterile exercise in these worrisome times, most analysts predict that Colombia’s economic performance this year will be inferior to Peru’s, but similar to Chile’s and Brazil’s and better than that of Argentina, Venezuela, and Mexico, a country expected to contract by more than 2%.

This comparatively benign situation reflects Colombia’s relatively favorable macroeconomic conditions. Although the country was never as protected from the global downturn as its authorities claimed, the country benefits from some factors that do help ease the damage inflicted by the international crisis, especially with regard to the availability of foreign currency in these times of restrictions on external financing.