Colombia’s net capital inflow fell in the first half of the year as
Colombians living abroad sent less money back home and as foreign
investors took a more selective approach towards this Andean nation.
Colombia reported a net capital inflow of $2.22 billion in the
first half of the year, about half the $4.56 billion inflow reported in
the same period in 2008, the central bank said Friday.
“The credit crunch made foreign investors more cautious towards
Colombia because financial markets were closed in the first months of
the year making more difficult to secure funds,” said Daniel Nino, head
of research at the country’s largest bank Bancolombia.
Foreign investors poured in $4.07 billion in the first half of the
year, down from $4.55 billion in the same period last year. 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, $3.39 billion went to the
oil and mining sectors, up 14% from the same period last year.
International oil companies brought more dollars to seek oil in
unexplored areas as oil prices recover from depressed levels reported
earlier this year, Nino said.
Oscar Ivan Zuluaga, Colombia’s finance minister, predicted that the
country may attract $7 billion in foreign direct investment this year,
much lower than the $10.56 billion reported in 2008 and much lower than
the $10 billion he initially envisioned for 2009.
A drop in remittances also explains the reduction in net capital
inflows. Transfers, for which remittances account for about 80%, fell
11% to $2.4 billion in the first half of 2009 from $2.68 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, Nino predicted.
Meanwhile, foreign portfolio investment showed a net inflow of $46
million in the first half of the year, compared with an outflow of $509
million in the same period last year.
Offshore investors are returning to Colombia taking advantage that
the IGBC stock index has risen 27.2% so far this year, Nino added
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)