Colombia and Peru

Politics and Economy of Colombia and Peru

Team A assignment

Laura Davis, Narisha Foxx, Dennis Rufolo, Morris V. Luke

Span/110

June 28, 2012

Greg Denlea

Politics and Economy of Colombia and Peru

Colombia's consistently sound economic policies and aggressive promotion of free trade agreements in recent years have bolstered its ability to face external shocks. Real GDP is projected to grow by between 5-6% and inflation to end 2011 at less than 4% continuing almost a decade of strong economic performance. All three major ratings agencies have upgraded Colombia's investment grade. Nevertheless, Colombia depends heavily on oil exports, making it vulnerable to a drop in oil prices. Economic development is stymied by inadequate infrastructure, weakened further by recent flooding. Moreover, the 9.2% official unemployment rate is still one of Latin America's highest. The SANTOS Administration's foreign policy has focused on bolstering Colombia's commercial ties and boosting investment at home. The U.S.-Colombia Free Trade Agreement (FTA) was ratified by the US Congfess in October 2011 and is expected to be implemented in mid-2012.

Columbia has signed or is negotiating FTAs with a number of other countries, including Canada, Mexico, Switzerland, the EU, Venezuela, South Korea, Turkey, Japan, and Israel. Foreign direct investment - notably in the oil sector - reached a record $10 billion in 2008, but dropped to $7.2 billion in 2009, before beginning to recover in 2010, and it appears to have reached a record high $13 billion in 2011. Colombia is the third largest Latin American exporter of oil to the US. Inequality, underemployment, and the trafficking of narcotics remain significant challenges, and Colombia's infrastructure requires major improvements to sustain economic expansion. In late 2010, Colombia experienced its most severe flooding in decades, with damages estimated to exceed $6 billion. The rains resumed in 2011, causing further damages to crops and...