By: Katherin Galindo and Valentina García
Colombia’s center-periphery dynamic entails that certain departments and capitals are emerging as focal points for development and are more attractive to investment, while other areas are lagging behind.
This scenario poses significant challenges to the socio-economic development of these regions and highlights existing inequalities. For this reason, with funding from the Center for International Private Enterprise (CIPE) at Colombia Risk Analysis, we developed a series of risk indexes for the Orinoquía, Pacific, and Caribbean regions. These indexes aim to bridge the knowledge gaps that limit investment in the more remote areas from the country's economic centers.
The Orinoquía region is characterized by its importance in the hydrocarbon sector, agriculture, and tourism. These sectors are significant drivers of progress, employment generators, and attract investment. According to the National Hydrocarbons Agency, Meta, Casanare, and Arauca were the three departments with the highest oil production (76% of total national output) in 2022. Likewise, the Colombian Agricultural Institute ranked Meta and Casanare as the third and fourth departments with the most cattle in the 2023 census. In addition, according to the National Administration of Statistics (DANE), Casanare is the country’s largest rice producer, and Arauca is the second-largest cocoa producer. Tourism is another sector that drives the development of the region. Attractions such as the International Joropo Tournament, the Caño Cristales River, and the cave art in Puerto Carreño suggest the region has ample opportunities to expand its service sector through tourism.
The region, however, faces significant challenges that require urgent attention. At the forefront is the lack of economic diversity.
Over 40% of Meta’s, Casanare’s, and Arauca’s GDP depend on the extractive sector. This dependence increases vulnerability to price fluctuations and poses challenges for sustainable development.
Security is also a significant challenge, exacerbated by the ELN's armed presence in Arauca, widespread extortions and kidnappings in Meta, and territorial disputes between armed groups in Vichada. These problems undermine guarantees for workers, discourage investors, limit the attraction of specialized human talent, and hold back development. In addition, the lack of connectivity due to road disruptions, such as the frequent closures of the Llano road, undermine regional competitiveness, increase operating costs, and discourage investment.
The Pacific is a strategic region with significant opportunities for economic and social development. Its mineral potential, including gold, copper, and other minerals, favors mining activities, especially in Chocó. The border between Nariño and Ecuador has the potential to become a keystone for binational trade. 11% of national port traffic flows through the port of Buenaventura a port that is central to Colombia’s strategy towards Asia-Pacific. The region’s economic diversity is reflected in opportunities such as sugar cane mills and software development in Valle del Cauca, textile and oil palm production in Nariño, and a strong manufacturing sector in Cauca. Together, these characteristics outline a landscape of opportunities for advancing key sectors and promoting comprehensive regional development.
The Pacific lacks land and air connectivity in and between Chocó, Cauca, and Nariño. This hampers trade and investment opportunities, resulting in economic losses and increased logistics costs. The lack of investment in port infrastructure in Tumaco and Buenaventura harms regional competitiveness and prevents the development of industrial centers to provide jobs for locals. The insecurity and illegal migration, due to the presence of illicit groups, not only hinder the growth of the economy but also undermine socio-economic development. The lack of industrialization in Chocó and southern Cauca, coupled with dependence on the primary sector, contributes to the geographic and economic isolation of these territories and provides criminal groups ample opportunities for recruitment.
We see a sharp difference between the coast and mountain regions in the Pacific, where wide risk and development gaps exist.
Overcoming these challenges requires coordinated efforts between the national government, local authorities, and the private sector to attract more investment, improve competitiveness, and diversify the departmental economies, promoting sustainable development.
In the Caribbean, the boom in clean energy generation in La Guajira and Atlántico, as well as established sectors such as cattle ranching in Córdoba, banana production in Magdalena, and tourism in San Andrés, are examples of the region's economic diversity. Port development represents an important opportunity to promote foreign trade, tourism, and the international reach of the department’s private sector. The Caribbean's strategic location, connectivity, and geographic diversity make the region an attractive destination for investment in sustainable tourism, the development of industries such as food canning and processing, and the responsible use of natural energy resources such as solar, wind, and hydrocarbons. In this context, the private sector finds in Colombia’s caribbean a conducive environment for expansion and diversification of its activities in the region. It can capitalize on its competitive advantages.
Nevertheless, the region is not without its own challenges. Limited land and air connectivity affect mobility and access. In order to boost foreign trade, tourism, and the logistics sector, it is essential to improve airport infrastructure and increase port efficiency.
Industrial and logistic concentration in the main capitals (Cartagena, Barranquilla, and Santa Marta) has made other departments more dependent on the primary sector as the main driver of economic activity.
On the other hand, high energy prices and deficiencies in the water supply and sanitation systems affect the competitiveness of productive activities and the citizens' quality of life.
The center-periphery dynamic within these regions and the country complicates the construction of a shared national identity. To overcome these challenges, the national government, local governments, society, and the private sector must work together to promote investment, diversify the economy, and improve the quality of life in Colombia.
Our goal at CIPE and Colombia Risk Analysis is for these indexes to bridge an information gap that exists about Colombia’s region. We also believe that the lack of an in-depth understanding and analysis of the risks also makes it hard for investors to anticipate risks and develop strategies to mitigate them. We hope this effort, will promote informed decision-making as well as overall investment in areas of the country that may be overlooked due to misinformation, prejudice, or ignorance. We don’t think there are similar exercises taking place more broadly in Latin America and we believe having an open methodology will also allow others to replicate the experience in their own countries.
*In 2024, Colombia Risk Analysis will publish the Risk indexes for the Andean and Amazon regions.
Katherin Galindo Ortiz, research coordinator of Colombia Risk Analysis. Valentina García, junior analyst in Colombia Risk Analysis
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