Petroleum in Colombia – peace boosts investment

Colombia is Latin America’s fourth-largest economy when measured by gross domestic product, with its largest export being petroleum which accounts for approximately 45% of the country’s overseas sales.

The United States has long been Colombia’s largest trading partner, however, despite its high demand, the petroleum industry in Colombia has been hampered by concerns about safety due to a long-running threat from armed revolutionaries. In November 2016, Colombia signed a historic peace agreement with the FARC, a rebel group formed in 1964 to defend the rights of landless peasants. It is Colombia’s largest rebel group and one of the main parties in a conflict involving other left-wing guerrillas, paramilitaries and the armed forces which have lasted for decades.

After four years of peace talks in Cuba, the peace accord signed last year has led to comprehensive disarmament, and at the end of August members of the FARC began sitting in Congress – becoming a political party after handing over some 7,000 weapons. The party will take part in next year’s general elections.

Such a historic turnaround looks set to create a number of job opportunities as trading with the US increases, foreign investors move in, and petroleum exports continue to increase. The peace deal assumes the security situation is now far better than it has been in the past, with the level of violence dropping significantly, and the guerrilla movements no longer posing a systemic risk to commodities firms. Low commodity prices have been weighing on economic growth and the public finances, however, the implementation of the peace deal, alongside a flexible exchange rate regime and a well-managed monetary policy, meaning the country is in good shape going forward.

The current generation of Colombians is well-educated, with the majority speaking more than one language, and well-placed to capitalise in a commodities-led economic recovery. Colombia is well located at the heart of Latin America, in close proximity to the US, to Brazil, and to Chile and Mexico, giving it a huge potential market for commodities.

Colombia is also one of the world’s biggest producers of coal, and the agricultural sector accounts for a further 7% of GDP, where coffee is the main export – Colombia is the third-largest coffee exporter globally. With peace taking hold, there are therefore many opportunities for growth. Times have been tough, but we now see Colombia as a hugely promising market for commodities growth, with a local talent pool ready and waiting for foreign investors to arrive.