Intro: According to the U.S. Commercial Service website, the Republic of Colombia is the fifth largest economy in Latin America. Its’ 46 million inhabitants places them as the third largest population in that region. Their culture, traditions, and religious beliefs are somewhat compatible with those of most Latina American countries. It is important to note that in comparison to other Latin American countries, Colombian’s are amongst the most educated. Over the past 10 years, Colombia has had extraordinary changes that have help impacted their security improvements, their steady economic growth and their moderate inflation. When trading, Colombia has a competitive advantage over neighboring countries, since they are the only country in South America to have two seacoasts, (Pacific and Caribbean). The country is currently a free market economy and shares commercial and investment ties with the United States, Europe, Asia, and Latin America. Today, Colombia has become the third largest market for U.S. exports in Latin America, (U.S.CommercialService.gov). Political Risk: There are various political risks that one must take into consideration before doing business in Colombia. The first political risk, Drug Gangs and Guerrillas have been part of Colombia for decades and have hurt its image around the world. They are both the ones responsible for most of the violence in Colombia. Another political risk that must be taken into account is the protest and attacks against oil and mining companies. Since the country is safer now, citizens are demanding more jobs at repairs to damaged infrastructure and better living standards. La Nina and the economy are also political risks affecting the country. Heavy rains have ruined crops and destroying key infrastructures and washing away homes. Economically speaking, Colombia has created volatility in the peso currency, which has cause concerns about the economy. These are some of the political risks that a firm must be willing to take in order to do business in Colombia.
Credit Risk Colombia’s credit rating has been raised to investment grade. Last year two Moody’s Investor Service and Fitch Ratings recognized Colombia’s positive economic performance. Colombia was upgraded to “Investment Grade” by two of the worlds top credit-rating agencies. Both agencies believe that Colombians’ rating outlook will remain stable. Colombia seems to be reflecting growth in confidence and wants to demonstrate that they have unique opportunity to grow. They want to invite investor into their country. Even though Colombia has reached this upgrade, they still have a high unemployment rate. The Colombian government believes that by having foreign investors will help reduce the unemployment rate.
Economic Risk In the last two years Colombia’s economy has taken a boom in investment especially in oil and mining sectors. Colombia’s economy is driven by its export market, which means that they are vulnerable to global economic conditions. They have gradually been recovering from the economic down term from 2009. Colombia has bolstered their economic growth, mainly due to their aggressive promotion of free trade agreements. In 2011 their Real GDP grew 5.7% and their inflation ended