Colombia: A great place to do business

Recently my outlook on Colombian politics has tended to be more pessimistic than most people’s. This is probably because I am in the (growing) minority of Colombians who oppose Alvaro Uribe and are skeptical about the long-term impact of his presidency. Rarely do I find myself taking a more optimistic view on an issue than the government-friendly mainstream Colombian media.

For that very reason, I was surprised that the local media ignored many of the promising findings of the World Bank’s annual Doing Business Report, released earlier this week. The report, which evaluates the ease of doing business in 183 countries according to ten measures, actually shows that doing business in Colombia is remarkably easy. Nevertheless, the Colombian media missed that point and instead focused almost exclusively on one of the report’s findings: that the country’s smaller cities were more business-friendly than the larger ones.

To be fair, that is certainly an important finding and it should serve as a wake-up call to larger cities. Manizales, Pereira and Ibague, all smaller cities in or near Colombia’s coffee belt, were the easiest places to do business in Colombia. By contrast, Bogota was 12th, Medellin 16th, Cali 20th and Barranquilla 17th. Some of this bad news is not surprising. Cali, for example, has recently developed a reputation as the most corrupt and dysfunctional of Colombia’s major urban centers. But the rankings should definitely surprise and worry Medellin, Bogota and Cartagena, which take pride in being Colombia’s most global cities.

So, to a degree, the media’s focus on the city rankings is constructive. A healthy sense of competition between cities to make it easier to do business will only help Colombia as a whole in the long run. Nevertheless, the city rankings were only part of the story. In fact, the report’s findings on Colombia suggest that the most cities are doing quite a good job of implementing reforms to improve the local business environment.

In the global rankings of the ease of doing business, Colombia was 37th, up from 49th last year. Although there is room for improvement, it is worth noting Colombia is ranked higher than any other big Latin American economy, including some of the region’s best performers. Chile, long considered Latin America’s most business-friendly country, was 49th this year. Mexico, a large economy with close links to the United States, ranked 51st. Peru, which has experienced rapid economic growth in recent years, was 56th. Brazil, a rising global power and the region’s largest economy, ranked 129th.

This is not to say that the Colombian economy is “better” overall than those countries’ economies. The report looks only at the ease of doing business and does not indicate anything in terms of social, economic or political conditions for average citizens. For example, one of the top reformers according to the report was Tajikistan, a poor and largely undemocratic country. Moreover, even in measuring the ease of doing business, the report does not cover some important factors. For example, it does not cover the area of security, which is still a major concern when doing business in Colombia. If security were included, Colombia’s ranking would certainly suffer. Still, the report is useful for understanding general trends in local business environments and suggests that Colombia is steadily improving in that regard.

In most of the ten areas measured in the report, Colombia’s performance was quite good. The country ranked in the top three in Latin America for eight of the ten categories measured. In fact, in the category of protecting investors, Colombia was 5th worldwide. On the other hand, Colombia ranked extraordinarily poorly in the area of contract enforcement; seventh in the region and 152nd in the world.

Beyond the generally positive area-specific rankings, another piece of good news is that Colombia has been very active in implementing reforms that make it easier to do business. Last year, Colombia implemented positive reforms in eight of the ten areas, more than any other Latin American country. Moreover, when the impact of the reforms is taken into account, Colombia was the seventh-best reformer in the world. Given this trend, we can expect Colombia to continue to rank relatively highly in coming years.

Moreover, most Colombian cities (including big ones) also did quite well, another crucial fact that the media reports ignored. All thirteen of the Colombian cities previously evaluated in Doing Business Reports showed positive reforms in at least one of the areas measured (the World Bank added eight additional Colombian cities to the report this year). In other words, the low rankings of larger cities do not indicate that those cities are doing anything wrong, but instead reflect the facts that smaller cities have taken the lead in implementing reforms and that other small cities others are new to the rankings.

Indeed, by most measures, most of Colombia’s large urban centers are remarkably business-friendly. Take Medellin, for example. Colombia’s second largest city was ranked a disappointing 16th in the domestic city rankings. On the other hand, another recent report by the World Bank ranked it as Latin America’s third most competitive non-capital city. By most accounts Medellín is a good place to do business and it is ranked low among Colombian cities largely because the smaller municipalities are making remarkable progress in improving their business environments.

In short, the local media has misrepresented the report’s findings. As I see it, there are three basic messages to take from the report, all of them quite positive. First, Colombia as a whole is a remarkably easy place to do business. Second, doing business is easier in nearly every Colombian city, except perhaps Cali and Cartagena, than in comparable cities in other Latin American countries. Third, although most Colombian cities are doing a good job of improving the local business environment, some are doing better than others. Specifically, smaller cities are increasingly active in implementing positive reforms to make doing business easier. A little healthy competition is good, but for the most part, the report’s findings should be a reason for national celebration, not local disappointment.

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