Colombia’s net capital inflow totals US$3.84 billion

Colombia’s net capital inflow slowed during the first seven months of
the year as Colombians living abroad sent less money back home and as
foreign investors took a more selective approach toward the Andean
nation.

Colombia reported a net capital inflow of $3.84 billion in the
seven months ended July 31, compared with an inflow of $5.5 billion in
the same period last year, the central bank said Friday.

Foreign investors poured in $4.65 billion in the first seven months
of the year, down 12% from $5.32 billion a year earlier. The bank
measures foreign direct investment by the flow of dollars to the
country, excluding imports of goods and services.

Of the total foreign direct investment, $3.95 billion went to the
oil and mining sectors, up 10% from the same period last year.

Oscar Ivan Zuluaga, Colombia’s finance minister, has said that the
country is likely to attract $7 billion in foreign direct investment
this year, lower than the $10.56 billion reported in 2008 and the $10
billion he had initially forecast for 2009.

A drop in remittances also explains the reduction in net capital
inflows. Transfers, in which remittances account for about 80%, fell
14% to $2.77 billion in the first seven months of the year from $3.22
billion in the same period last year.

Colombians living abroad are sending less money to their relatives
either because they lost their jobs or because they are afraid of doing
so. Remittances will fall to about $4 billion this year, down from
$5.58 billion last year, Daniel Nino, head of research at the country’s
largest bank Bancolombia predicted.

Meanwhile, foreign portfolio investment showed a net outflow of
$952 million in the first seven months of the year, compared with an
outflow of $1.14 million in the same period last year.

In 2008, Colombia attracted a net capital inflow of $8.06 billion,
down from a record $9.09 billion in 2007, as foreigners withdrew funds
from the local capital markets when the financial crisis hit. (Dow Jones)

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